Reviewing First Internet Bancorp (NASDAQ:INBK) and First Merchants (NASDAQ:FRME)

First Internet Bancorp (NASDAQ:INBK) and First Merchants (NASDAQ:FRME) are both finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their dividends, institutional ownership, profitability, risk, earnings, analyst recommendations and valuation.

Valuation and Earnings

This table compares First Internet Bancorp and First Merchants”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
First Internet Bancorp	$123.73 million	1.82	-$35.17 million	$1.70	15.18
First Merchants	$1.05 billion	2.42	$226.00 million	$3.23	12.57

First Merchants has higher revenue and earnings than First Internet Bancorp. First Merchants is trading at a lower price-to-earnings ratio than First Internet Bancorp, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

First Internet Bancorp has a beta of 0.87, meaning that its share price is 13% less volatile than the S&P 500. Comparatively, First Merchants has a beta of 0.87, meaning that its share price is 13% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for First Internet Bancorp and First Merchants, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First Internet Bancorp	1	3	2	0	2.17
First Merchants	0	2	3	0	2.60

First Internet Bancorp presently has a consensus price target of $30.62, suggesting a potential upside of 18.66%. First Merchants has a consensus price target of $46.00, suggesting a potential upside of 13.33%. Given First Internet Bancorp’s higher possible upside, analysts plainly believe First Internet Bancorp is more favorable than First Merchants.

Profitability

This table compares First Internet Bancorp and First Merchants’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
First Internet Bancorp	4.27%	4.32%	0.28%
First Merchants	17.56%	9.14%	1.15%

Dividends

First Internet Bancorp pays an annual dividend of $0.24 per share and has a dividend yield of 0.9%. First Merchants pays an annual dividend of $1.48 per share and has a dividend yield of 3.6%. First Internet Bancorp pays out 14.1% of its earnings in the form of a dividend. First Merchants pays out 45.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. First Merchants has raised its dividend for 13 consecutive years. First Merchants is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider and Institutional Ownership

65.5% of First Internet Bancorp shares are held by institutional investors. Comparatively, 73.9% of First Merchants shares are held by institutional investors. 6.2% of First Internet Bancorp shares are held by company insiders. Comparatively, 1.8% of First Merchants shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Summary

First Merchants beats First Internet Bancorp on 12 of the 16 factors compared between the two stocks.

About First Internet Bancorp

First Internet Bancorp operates as the bank holding company for First Internet Bank of Indiana that provides commercial, small business, consumer, and municipal banking products and services to individuals and commercial customers in the United States. The company accepts non-interest bearing and interest-bearing demand deposit, commercial deposit, savings, money market, and Banking-as-a-Service brokered deposit accounts, as well as certificates of deposit. It also offers commercial and industrial, owner-occupied and investor commercial real estate, construction, residential mortgage, home equity, line of credit and home improvement, small installment, term, and other consumer loans, as well as single tenant lease financing, and public and healthcare finance; franchise finance; and small business lending. In addition, the company is involved in the purchase, manage, service, and safekeeping of municipal securities; and provision of public and municipal lending and leasing products to government entities. Further, the company offers corporate credit card and treasury management services. First Internet Bancorp was founded in 1998 and is headquartered in Fishers, Indiana.

About First Merchants

First Merchants Corporation operates as the financial holding company for First Merchants Bank that provides community banking services. The company offers a range of financial services, including time, savings, and demand deposits; and consumer, commercial, agri-business, public finance, and real estate mortgage loans. It also provides personal and corporate trust; brokerage and private wealth management; and letters of credit, repurchase agreements, and other corporate services. The company operates banking locations in Indiana, Illinois, Ohio, and Michigan counties. It also offers its services through electronic and mobile delivery channels. First Merchants Corporation was founded in 1893 and is headquartered in Muncie, Indiana.