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BofI Holding, Inc. Announces Record Net Income

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BofI Holding, Inc. (NASDAQ:BOFI) ("BofI"), parent company of
BofI Federal Bank (the "Bank"), today announced financial results for
the third fiscal quarter ended March 31, 2017. Net income was a record
$41.0 million, an increase of 14.1% over net income of $35.9 million for
the quarter ended March 31, 2016. Earnings attributable to BofI's common
stockholders were $40.9 million or $0.63 per diluted share for the third
quarter of fiscal 2017, an increase of 14.2% from $35.8 million or $0.56
per diluted share for the third quarter ended March 31, 2016.

Adjusted earnings, a non-GAAP measure, which excludes the after-tax
impact of gains and losses associated with our securities portfolio,
increased 13.5% to $40.9 million for the quarter ended March 31, 2017
compared to $36.0 million for the quarter ended March 31, 2016.

Third Quarter Fiscal 2017 Financial Summary:

  Three Months Ended  
March 31
(Dollars in thousands, except per share data)   Q3 Fiscal 2017   Q3 Fiscal 2016   % Change
Net interest income $ 88,559   $ 69,557 27.3%
Non-interest income $ 23,168 $ 23,316 (0.6)%
Net income $ 40,994 $ 35,914 14.1%
Adjusted earnings1 $ 40,871 $ 35,995 13.5%
Net income attributable to common stockholders $ 40,917 $ 35,837 14.2%
Diluted EPS   $ 0.63   $ 0.56   12.5%

1 See "Use of Non-GAAP Financial Measures"

For the nine months ended March 31, 2017, net income was a record $102.2
million, an increase of 14.1% over net income of $89.6 million for the
nine months ended March 31, 2016. Earnings attributable to BofI's common
stockholders were $102.0 million or $1.57 per diluted share for the nine
months ended March 31, 2017, an increase of 14.1% from $89.3 million or
$1.39 per diluted share for the nine months ended March 31, 2016. Record
earnings for the nine months ended March 31, 2017 were primarily the
result of growth in both the Bank's loan and lease portfolio and its fee
income businesses.

"Strong loan production across our single family mortgage, multifamily
mortgage, C&I lending businesses and consumer lending resulted in a
12.5% increase in earnings per share and a 21.6% increase in book value
per share year-over-year," explained Greg Garrabrants, President and CEO
of BofI. "Despite ongoing investments across our enterprise, we
maintained a strong efficiency ratio of 31.73% this quarter, below our
long-term target of 35%-36%. Our ability to grow loans and deposits and
increase net interest income in a rising rate environment is a testament
to the diversity and scalability of our efficient, direct banking model."

The Bank has a long-term agreement with H&R Block, Inc. to offer
co-branded financial products to H&R Block customers. This was the first
tax season that the Bank purchased H&R Block-branded Refund Advance
loans at a discount. The discount accretion from Refund Advance
purchases was included in interest income and was the primary reason the
net interest margin for the quarter ended March 31, 2017 increased to
4.24% compared to 3.85% last year.

"We completed another successful quarter with a strong net interest
margin," stated Andrew Micheletti, Executive Vice President and Chief
Financial Officer. "Excluding the impact from H&R Block seasonal loan
products, including the new Refund Advance, and excess liquidity related
to tax refunds, our net interest margin would have been 3.93%. Overall
credit quality remains strong this quarter, as evidenced by one basis
point of net recoveries on average loans and only 39 basis points of
non-performing assets to total assets at the end of this quarter. The
increase in our loan loss provision this quarter was driven almost
entirely by reserves for Refund Advance loans, which has had credit
losses below our projections."

Other Highlights:

  • Total assets reached $8,700.0 million, up $996.4 million or 12.9%
    compared to March 31, 2016
  • Loan and lease portfolio grew by $986.0 million or 16.3% compared to
    March 31, 2016
  • Loan and lease originations and purchases for the three months ended
    March 31, 2017 were $1,561.0 million, up 25% compared to the quarter
    ended March 31, 2016
  • Deposits grew by $751.6 million, or 12.4% compared to March 31, 2016
  • Asset quality remains strong with total non-performing assets of 0.39%
    of total assets at March 31, 2017
  • Return on average common stockholders' equity was 21.10% for the three
    months ended March 31, 2017
  • Tangible book value increased to $12.44 per share, up $2.21 per share
    compared to March 31, 2016

Third Quarter Fiscal 2017 Income Statement Summary

During the quarter ended March 31, 2017, BofI earned $41.0 million or
$0.63 per diluted share compared to $35.9 million, or $0.56 per diluted
share for the quarter ended March 31, 2016. Net interest income
increased $19.0 million or 27.3% for the quarter ended March 31, 2017
compared to March 31, 2016, due to interest and discount amortization
from our seasonal loan products, Emerald Advance and Refund Advance, as
well as the $1.1 billion growth in average-earning assets.

The loan and lease loss provision was $4.9 million for the quarter ended
March 31, 2017 compared to $2.0 million for the quarter ended March 31,
2016. The increase in the provision is primarily the result of
additional provision for our Refund Advance product, loan growth and a
change in the mix of loans, partially offset by net recoveries of $0.2
million during the three months ended March 31, 2017.

For the third quarter ended March 31, 2017, non-interest income was
$23.2 million compared to $23.3 million for the three months ended
March 31, 2016. The decrease year over year was the result of decreases
in mortgage banking income of $2.0 million and a $0.8 million decrease
in gain on sale – other due to decreased sales of structured
settlements, partially offset by increased banking service fees and
other income of $1.2 million, primarily due to increased fees related to
seasonal H&R Block-branded products and service fee income, and a $1.1
million increase prepayment penalty fee income.

Non-interest expense or operating costs increased $6.0 million to $35.4
million for the quarter ended March 31, 2017 from $29.4 million for the
three months ended March 31, 2016. The increase was mainly a result of
an increase in salaries and related expense of $4.3 million related to
staffing added since March 31, 2016, an increase in advertising and
promotional of $0.7 million, an increase of $0.4 million in other
general and administrative costs, an increase in occupancy and equipment
of $0.3 million, and an increase of $0.2 million in depreciation and
amortization. The increases in operating costs are primarily to support
loan and deposit growth, as well as data processing and software
initiatives.

Balance Sheet Summary

BofI's total assets increased $1,100.7 million, or 14.5%, to $8,700.0
million, as of March 31, 2017, up from $7,599.3 million at June 30,
2016. The loan portfolio increased $666.0 million on a net basis,
primarily from portfolio loan originations and purchases of $3,317.9
million less principal repayments and other adjustments of $2,651.9
million. Loans held for sale decreased $32.1 million. Investment
securities decreased $95.6 million primarily due to sales and principal
repayments. Total liabilities increased by $984.0 million, or 14.2%, to
$7,899.7 million at March 31, 2017, up from $6,915.7 million at June 30,
2016. The increase in total liabilities resulted primarily from growth
in deposits of $755.6 million. Stockholders' equity increased by $116.7
million, or 17.1%, to $800.3 million at March 31, 2017 from $683.6
million at June 30, 2016. The increase was primarily the result of
$102.2 million in net income and $6.1 million in unrealized gain in
available-for-sale securities in other comprehensive income.

The Bank's Tier 1 core capital to adjusted average assets ratio was
9.11% at March 31, 2017.

Conference Call

A conference call and webcast will be held on Tuesday, April 25, 2017 at
5:00 PM Eastern / 2:00 PM Pacific. Analysts and investors may dial in
and participate in the question/answer session. To access the call,
please dial: 877-407-8293. The conference call will be webcast live and
may be accessed at BofI's website, http://www.bofiholding.com.
For those unable to listen to the live broadcast, a replay will be
available until Thursday, May 25, 2017, at BofI's website and
telephonically by dialing toll-free number 877-660-6853, passcode
13659349.

About BofI Holding, Inc. and BofI Federal Bank

BofI Holding, Inc. is the holding company for BofI Federal Bank, a
nationwide bank that provides financing for single and multifamily
residential properties, small-to-medium size businesses in target
sectors, and selected specialty finance receivables. With approximately
$8.7 billion in assets, BofI Federal Bank provides consumer and business
banking products through its low-cost distribution channels and affinity
partners. BofI Holding, Inc.'s common stock is listed on the NASDAQ
Global Select Market under the symbol "BOFI" and is a component of the
Russell 2000® Index, the S&P SmallCap 600®
Index, and the KBW Nasdaq Financial Technology Index. For more
information on BofI Federal Bank, please visit bofifederalbank.com.

Use of Non-GAAP Financial Measures

In addition to the results presented in accordance with GAAP, this
report includes non-GAAP financial measures such as adjusted earnings.
Adjusted earnings exclude realized and unrealized gains and losses
associated with our securities portfolios. Excluding these gains and
losses provides investors with an understanding of BofI's core lending
and mortgage banking business. Non-GAAP financial measures have inherent
limitations, are not required to be uniformly applied and are not
audited. Readers should be aware of these limitations and should be
cautious as to their use of such measures. Although BofI believes the
non-GAAP financial measures disclosed in this report enhance investors'
understanding of its business and performance, these non-GAAP measures
should not be considered in isolation, or as a substitute for GAAP basis
financial measures. Below is a reconciliation of GAAP net income to
adjusted earnings:

  Three Months Ended   Nine Months Ended
March 31,   March 31,
(Dollars in thousands)     2017       2016       2017       2016  
Net income $ 40,994   $ 35,914 $ 102,191   $ 89,564
Realized securities losses (gains) (312 ) 14 (2,924 ) (919 )
Unrealized securities losses (gains) 98 125 1,001 392
Tax (provision) benefit   91     (58 )   812     220  
Adjusted earnings1   $ 40,871     $ 35,995     $ 101,080     $ 89,257  

1. The non-GAAP adjusted earnings calculation does not
exclude FHLB special dividends due to their repeated occurrence.

Forward-Looking Safe Harbor Statement

This press release contains forward-looking statements that involve
risks and uncertainties, including without limitation statements
relating to BofI's financial prospects and other projections of its
performance and asset quality, BofI's ability to grow and increase its
business, diversify its lending, the outcome and effects of pending
class action litigation filed against the Company, and the anticipated
timing and financial performance of offerings, initiatives or
acquisitions. These forward-looking statements are made on the basis of
the views and assumptions of management regarding future events and
performance as of the date of this press release. Actual results and the
timing of events could differ materially from those expressed or implied
in such forward-looking statements as a result of risks and
uncertainties, including without limitation changes in interest rates,
inflation, government regulation, general economic conditions,
conditions in the real estate markets in which we operate and other
factors beyond our control. These and other risks and uncertainties
detailed in BofI's periodic reports filed with the Securities and
Exchange Commission could cause actual results to differ materially from
those expressed or implied in any forward-looking statements. You are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this press release. All
forward-looking statements are qualified in their entirety by this
cautionary statement, and BofI undertakes no obligation to revise or
update any forward-looking statements to reflect events or circumstances
after the date of this press release.

The following tables set forth certain selected financial data
concerning the periods indicated:

BOFI HOLDING, INC. AND SUBSIDIARY
SELECTED CONSOLIDATED FINANCIAL INFORMATION

(Unaudited – dollars in thousands)

 
  March 31,   June 30,   March 31,
      2017     2016     2016  
Selected Balance Sheet Data:
Total assets $ 8,700,031 $ 7,599,304 $ 7,703,605
Loans and leases—net of allowance for loan and lease losses 7,020,700 6,354,679 6,034,700
Loans held for sale, at fair value 14,696 20,871 42,682
Loans held for sale, lower of cost or fair value 7,607 33,530 59,988
Allowance for loan and lease losses 42,525 35,826 36,931
Securities 376,650 472,205 497,536
Total deposits 6,799,631 6,044,051 6,048,031
Securities sold under agreements to repurchase 35,000 35,000 35,000
Advances from the FHLB 961,000 727,000 858,000
Subordinated notes and debentures and other 54,450 56,016 54,138
Total stockholders' equity 800,304 683,590 653,289
 
Capital Ratios:
Equity to assets at end of period 9.20 % 8.99 % 8.48 %

BofI Holding, Inc.:

Tier 1 leverage (core) capital to adjusted average assets 9.47 % 9.12 % 8.99 %
Common equity tier 1 capital (to risk-weighted assets) 14.50 % 14.42 % 14.29 %
Tier 1 capital (to risk-weighted assets) 14.59 % 14.53 % 14.40 %
Total capital (to risk-weighted assets) 16.36 % 16.36 % 16.32 %
BofI Federal Bank:
Tier 1 leverage (core) capital to adjusted average assets 9.11 % 8.78 % 8.62 %
Common equity tier 1 capital (to risk-weighted assets) 14.04 % 14.00 % 13.83 %
Tier 1 capital (to risk-weighted assets) 14.04 % 14.00 % 13.83 %
Total capital (to risk-weighted assets)     14.88 %     14.75 %     14.63 %
 
BOFI HOLDING, INC. AND SUBSIDIARY
SELECTED CONSOLIDATED FINANCIAL INFORMATION

(Unaudited – dollars in thousands, except per share data)

 
  At or for the Three Months Ended   At or for the Nine Months Ended
March 31, March 31,
      2017       2016     2017       2016  
Selected Income Statement Data:
Interest and dividend income $ 106,962 $ 84,282 $ 288,743 $ 231,446
Interest expense   18,403     14,725     54,044     39,590  
Net interest income 88,559 69,557 234,699 191,856
Provision for loan and lease losses   4,862     2,000     10,862     7,800  
Net interest income after provision for loan and lease losses 83,697 67,557 223,837 184,056
Non-interest income 23,168 23,316 54,601 49,325
Non-interest expense   35,448     29,408     101,626     79,771  
Income before income tax expense 71,417 61,465 176,812 153,610
Income tax expense   30,423     25,551     74,621     64,046  
Net income $ 40,994   $ 35,914   $ 102,191   $ 89,564  
Net income attributable to common stock $ 40,917 $ 35,837 $ 101,959 $ 89,332
 
Per Share Data:
Net income:
Basic $ 0.63 $ 0.56 $ 1.57 $ 1.39
Diluted $ 0.63 $ 0.56 $ 1.57 $ 1.39
Book value per common share $ 12.55 $ 10.28 $ 12.55 $ 10.28
Tangible book value per common share $ 12.44 $ 10.23 $ 12.44 $ 10.23
 
Weighted average number of shares outstanding:
Basic 64,982,389 64,485,865 64,809,926 64,195,582
Diluted 64,982,389 64,486,816 64,809,926 64,203,207
Common shares outstanding at end of period 63,390,389 63,060,732 63,390,389 63,060,732
Common shares issued at end of period 64,798,821 64,177,770 64,798,821 64,177,770
 
Performance Ratios and Other Data:
Loan and lease originations for investment $ 1,044,107 $ 857,557 $ 3,040,990 $ 2,673,577
Loan originations for sale $ 239,931 $ 250,876 $ 1,084,387 $ 1,155,329
Loan and lease purchases $ 276,917 $ 140,109 $ 276,917 $ 140,493
Return on average assets 1.94 % 1.95 % 1.72 % 1.82 %
Return on average common stockholders' equity 21.10 % 22.59 % 18.48 % 19.99 %
Interest rate spread1 4.00 % 3.55 % 3.81 % 3.77 %
Net interest margin2 4.24 % 3.85 % 4.02 % 3.97 %
Efficiency ratio 31.73 % 31.66 % 35.13 % 33.08 %
 
Asset Quality Ratios:
Net annualized charge-offs to average loans and leases (0.01 )% 0.01 % 0.01 % (0.02 )%
Non-performing loans and leases to total loans and leases 0.47 % 0.39 % 0.47 % 0.39 %
Non-performing assets to total assets 0.39 % 0.31 % 0.39 % 0.31 %
Allowance for loan and lease losses to total loans and leases at end
of period
0.65 % 0.61 % 0.65 % 0.61 %
Allowance for loan and lease losses to non-performing loans and
leases
    138.09 %     154.06 %     138.09 %     154.06 %
_________________________

1.

 

Interest rate spread represents the difference between the
annualized weighted average yield on interest-earning assets and
the annualized weighted average rate paid on interest-bearing
liabilities

2.

Net interest margin represents annualized net interest income
as a percentage of average interest-earning assets

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