First Internet Bancorp stock ripped 12% higher to US$29.46 after its Q2 report, a sharp move for a regional online bank that has spent the past year wrestling with credit issues. The market is cheering one thing above all else: credit stress finally looks as if it is easing, with non performing loans and delinquencies moving lower while the bank still produced US$0.27 in earnings per share on US$41.1m of revenue. The question now is whether this one day surge reflects a genuine shift in risk or just relief buying after a long grind. Is First Internet Bancorp now priced like a recovery story, or is the market already assuming the hard work is done? Compare the share price to book value, earnings power, and credit risk in the valuation analysis for First Internet Bancorp.

Q2 2026 Earnings Summary

• Revenue (Q2 2026 vs. Q2 2025): US$27.71m vs. US$19.94m (up about 39%)
• Net Income (Q2 2026 vs. Q2 2025): US$2.37m vs. US$0.19m (a sharp improvement from near break even to a modest profit)
• Basic EPS (Q2 2026 vs. Q2 2025): US$0.27 vs. US$0.02 (meaningfully higher earnings per share off a low base)
• Net Interest Margin (NIM, Q2 2026 vs. Q2 2025): 2.39% reported versus 2.04% a year earlier (a wider margin year on year as funding costs shifted)

Tired of scrolling through paragraphs of earnings commentary and raw figures? See First Internet Bancorp’s full story in clean visuals that highlight its recent profitability shift and overall financial picture in the company report for First Internet Bancorp.

First Internet Bancorp: Bull Case Faces Real Credit Test

The optimistic story on First Internet Bancorp is that digital deposit partnerships and tighter underwriting are finally turning a credit problem into a controlled risk while margins rebuild. Q2 gives some backing to that. Non performing loans fell to US$60.1m, 1.58% of total loans, with non accruals and delinquencies both moving lower for a second quarter. Provision expense eased to US$13.4m from US$16.3m as early stage delinquencies dropped, which supports management’s claim of better monitoring and earlier borrower engagement. On the earnings engine, revenue grew 23% year on year with pre provision net revenue up faster and fully taxable equivalent net interest margin stepping up to 2.47%. Lower funding costs from runoff in higher cost CDs toward fintech deposits are starting to show in the numbers. For the bull case, the key milestone is clear: credit stress is no longer building and the margin story is at least visible in current results.

Bear Case: Credit Scars And SBA Dependence Still Bite

Skeptics argue that First Internet Bancorp still carries heavy credit baggage and relies on fragile fee pools such as SBA gain on sale. Q2 does not fully clear that concern. Net charge offs were US$16.9m, with franchise finance alone at US$11.6m, and nearly US$7m of that already reserved. That shows prior problems were real and still working through the system. Provision for credit losses remains high at US$13.4m despite the improvement in delinquencies, so earnings are still closely tied to workout progress. Gain on sale revenue fell quarter on quarter as SBA originations softened, which underlines how sensitive noninterest income is to that market. Management kept full year EPS guidance and trimmed full year net interest income guidance slightly while leaning more on lower expenses and higher noninterest income. Bears will say this points to limited room for error if credit or SBA activity weakens again.

After such heavy net charge offs and a relatively low allowance for bad loans, it is fair to ask if First Internet Bancorp’s recent progress is just the visible part of the risk story. Review the full risk analysis for First Internet Bancorp which shows 1 important warning sign

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.