INBK

First Internet Bancorp ($INBK): Management 25% Discount Buying and $1B Blackstone Deal Signal Bottom Recovery?

11/18/2025 15:16

First Internet Bancorp ($INBK) is drawing investor attention as recent insider purchases by management and directors signal potential bottom-fishing amid the online bank's stock decline. First Internet Bancorp, established in 1999, operates as a digital-first bank specializing in small business lending and franchise financing. Without traditional branch networks, the company provides deposit and lending services through online and mobile platforms, particularly recognized for expertise in single tenant lease financing. As a small-cap stock with a market capitalization of $151 million, this bank has carved out niche markets through innovative digital banking services. The most notable development is consecutive insider purchases in October and November. Director Ann Dee bought 1,110 shares at $17.94 per share on October 30, followed by President Nicole Lorch's purchase of 2,000 shares at $17.96 per share on November 17. These purchase prices represent approximately 25% discounts to current trading levels around $24. Notably, Lorch's transaction was part of systematic buying including employee stock purchase plans and dividend reinvestment programs, suggesting long-term conviction rather than opportunistic buying. However, these insider purchases come against a backdrop of serious credit challenges. $INBK has missed analyst expectations for seven consecutive quarters since Q2 2024. Particularly in Q1 2025, adjusted earnings plummeted 81% year-over-year to 11 cents per share from 59 cents, driving the stock to one-year lows. Rising nonperforming loans and increasing net charge-offs have raised persistent concerns about credit quality. The turning point may lie in the major transaction with Blackstone announced in September 2025. $INBK agreed to sell nearly $1 billion of single tenant lease financing loans to Blackstone, with plans to move $550 million in deposits off-balance sheet. This transaction is expected to play a crucial role in improving asset structure and securing liquidity. The deal with a global asset manager like Blackstone provides positive validation of $INBK's asset quality and business model. Q3 results showed some improvement signs. Adjusted revenue increased 30% year-over-year to $43.5 million, driven by higher asset yields and lower funding costs. CEO David Becker emphasized decisive actions to improve credit profiles in small business lending and franchise finance portfolios, highlighting reduced delinquencies and strong loan pipelines supporting future earnings growth. Key metrics for investors to monitor include achievement of the 1% return on assets (ROA) target. While $INBK's current ROA remains below this goal, completion of the Blackstone transaction and credit portfolio cleanup could drive profitability improvements. Additionally, stabilization trends in nonperforming asset ratios and net charge-off rates warrant close observation, as improvements could serve as powerful catalysts for share price recovery. Risk factors remain present. Analysts from Piper Sandler and Hovde Group have expressed concerns over rising nonperforming assets and ongoing net charge-offs. Current analyst consensus maintains 'hold' ratings with a median price target of $27, implying 12% upside potential, though prolonged credit issues could pose additional downside risks. In an optimistic scenario, balance sheet cleanup following Blackstone transaction completion and credit loss stabilization could drive rapid profitability recovery. If insider buying timing aligns with actual bottoming, significant share price appreciation could occur within 12 months. Conversely, persistent credit problems requiring additional capital raises could materialize existing shareholder dilution concerns. The most likely baseline scenario involves gradual recovery. Structural improvements from the Blackstone transaction should gradually stabilize credit metrics with visible earnings improvements expected from late 2025. Insider purchases appear to reflect these recovery expectations, potentially offering attractive opportunities for patient investors.