Market Overview

BofI Holding, Inc. Reports Record Third Quarter 2018 Net Income

Share:

EPS up 27% and Loan Portfolio up 14.9%, Year-over-Year

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, 2018. Net income was a record
$51.3 million, an increase of 25.0% from $41.0 million for the quarter
ended March 31, 2017. Earnings attributable to BofI's common
stockholders were $51.2 million or $0.80 per diluted share for the third
quarter of fiscal 2018, an increase of 25.1% from $40.9 million or $0.63
per diluted share for the third quarter ended March 31, 2017.

Third Quarter Fiscal 2018 Financial Summary:

 

Three Months Ended
March 31

 
(Dollars in thousands, except per share data)   Q3 Fiscal 2018   Q3 Fiscal 2017   % Change  
Net interest income $ 116,683   $ 88,559 31.8 %
Non-interest income $ 23,525 $ 23,168 1.5 %
Net income $ 51,253 $ 40,994 25.0 %
Net income attributable to common stockholders $ 51,176 $ 40,917 25.1 %
Diluted EPS   $ 0.80     $ 0.63     27.0 %

"Strong loan production across our multifamily, small balance commercial
real estate, and C&I lending businesses and record quarterly fee income
resulted in a 27% year-over-year increase in earnings per share and a
17% increase in book value per share," explained Greg Garrabrants,
President and CEO of BofI. "Despite ongoing investments across our
organization, we maintained a strong efficiency ratio of 32.4% and a
22.8% return on average common stockholders' equity this quarter."

"We continue to deploy excess capital with the acquisition of a
specialty software and services business from Epiq in April. While we
did not acquire any deposits in this transaction, the addition of
proprietary software and the trustee and fiduciary services team
provides incremental fee income and enhances our commercial deposit
franchise going forward," stated Mr. Garrabrants.

"We completed another successful tax season with our long-term partner,
H&R Block," stated Andy Micheletti, Executive Vice President and Chief
Financial Officer of BofI. "This was the first tax season that the Bank
was the exclusive originator of H&R Block-branded Refund Advance loans.
Our exclusivity and growth in Refund Advance loans led to an increased
net interest margin of 4.77% for the quarter ended March 31, 2018
compared to 4.24% last year. "

"Overall credit quality remains strong, as evidenced by two basis point
of net charge-offs on average loans and only 39 basis points of
non-performing assets to total assets at the end of this quarter,"
stated Mr. Micheletti. "The increase in our loan loss provision this
quarter was driven almost entirely by reserves for Refund Advance loans.
The majority of Refund Advance loans have been repaid and credit losses
are tracking in line with our expectations."

For the nine months ended March 31, 2018, net income was a record $115.3
million, an increase of 12.8% over net income of $102.2 million for the
nine months ended March 31, 2017. Earnings attributable to BofI's common
stockholders were $115.1 million or $1.78 per diluted share for the nine
months ended March 31, 2018, an increase of 13.4% from $102.0 million or
$1.57 per diluted share for the nine months ended March 31, 2017.
Earnings for the quarter and for the nine months ended March 31, 2018
were primarily related to increased net interest income from loan growth
and revenues related to seasonal H&R Block-branded products.

Other Highlights:

  • Total assets reached $9,982.3 million, up $1,282.3 million or 14.7%
    compared to March 31, 2017
  • Loan and lease portfolio grew by $1,044.0 million or 14.9% compared to
    March 31, 2017
  • Loan and lease originations for the three months ended March 31, 2018
    were $2,491.3 million, up 94.0% compared to the quarter ended
    March 31, 2017
  • Deposits grew by $1,164.1 million, or 17.1% compared to March 31, 2017
  • Asset quality remains strong with total non-performing assets of 0.39%
    of total assets at March 31, 2018
  • Return on average common stockholders' equity was 22.84% for the three
    months ended March 31, 2018
  • Efficiency ratio was 32.40% for the quarter ended March 31, 2018
  • Tangible book value increased to $14.49 per share, up $2.05 per share
    compared to March 31, 2017

Third Quarter Fiscal 2018 Income Statement Summary

During the quarter ended March 31, 2018, BofI earned $51.3 million or
$0.80 per diluted share compared to $41.0 million, or $0.63 per diluted
share for the quarter ended March 31, 2017. Net interest income
increased $28.1 million or 31.8% for the quarter ended March 31, 2018
compared to March 31, 2017, due to $1,438.5 million growth in
average-earning assets, interest income from Refund Advance loans and
higher interest rates.

The loan and lease loss provision was $16.9 million for the quarter
ended March 31, 2018 compared to $4.9 million for the quarter ended
March 31, 2017. The increase in the provision is primarily the result of
additional provision for Refund Advance loans consistent with increased
originations in the loan product and overall portfolio loan growth.

For the third quarter ended March 31, 2018, non-interest income was
$23.5 million compared to $23.2 million for the three months ended
March 31, 2017. The $0.4 million increase year over year was the result
of a $1.7 million increase in mortgage banking income, $0.2 million
increase in gain on sale – other income, a $0.1 million reduction of
unrealized loss on securities, partially offset by a $0.8 million
decrease in prepayment penalty fee income, a $0.4 million decrease in
realized gain (loss) on securities and net decreased banking service
fees and other income of $0.4 million.

Non-interest expense or operating costs increased $10.0 million to $45.4
million for the quarter ended March 31, 2018 from $35.4 million for the
three months ended March 31, 2017. The increase was mainly a result of
an increase in salaries and related expense of $4.6 million as a result
of staffing increases to support growth in lending and information
technology infrastructure development. Other operating expense increases
include an increase in advertising and promotional of $2.2 million and
an increase of $1.5 million in other and general expense. The increases
in the other operating costs are primarily to support loan and deposit
growth, as well as data processing, software and marketing initiatives.

Balance Sheet Summary

BofI's total assets increased $1,480.6 million, or 17.4%, to $9,982.3
million, as of March 31, 2018, up from $8,501.7 million at June 30,
2017. The increase in total assets was primarily due to an increase in
cash of $847.5 million and loan portfolio growth of $690.2 million on a
net basis, primarily from portfolio loan originations of $4,561.2
million less principal repayments and other adjustments of $3,871.0
million. Investment securities decreased $99.6 million primarily due to
sales and principal repayments. Total liabilities increased by $1,393.2
million, or 18.2%, to $9,060.7 million at March 31, 2018, up from
$7,667.4 million at June 30, 2017. The increase in total liabilities
resulted primarily from growth in deposits of $1,064.3 million and an
increase in FHLB borrowings of $328.0 million. Stockholders' equity
increased by $87.4 million, or 10.5%, to $921.7 million at March 31,
2018 from $834.2 million at June 30, 2017. The increase was primarily
the result of $115.3 million in net income, $9.2 million of vesting and
issuance of RSUs and stock-based compensation expense, partially offset
by $35.2 million in stock repurchases and $0.2 million of dividends
declared on preferred stock.

The Bank's Tier 1 core capital to adjusted average assets ratio was
9.40% at March 31, 2018.

Conference Call

A conference call and webcast will be held on Thursday, April 26, 2018
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 Saturday, May 26, 2018, at BofI's website and
telephonically by dialing toll-free number 877-660-6853, passcode
13678714.

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
$10.0 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.

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,
2018
June 30,
2017
March 31,
2017
Selected Balance Sheet Data:
Total assets $ 9,982,320 $ 8,501,680 $ 8,700,031
Loans and leases—net of allowance for loan and lease losses 8,064,716 7,374,493 7,020,700
Loans held for sale, at fair value 28,301 18,738 14,696
Loans held for sale, lower of cost or fair value 6,770 6,669 7,607
Allowance for loan and lease losses 62,054 40,832 42,525
Securities—trading 8,327 8,421
Securities—available-for-sale 173,186 264,470 368,229
Total deposits 7,963,757 6,899,507 6,799,631
Securities sold under agreements to repurchase 20,000 35,000
Advances from the FHLB 968,000 640,000 961,000
Subordinated notes and debentures and other 54,528 54,463 54,450
Total stockholders' equity 921,653 834,247 800,304
 
Capital Ratios:
Equity to assets at end of period 9.23 % 9.81 % 9.20 %
BofI Holding, Inc:
Tier 1 leverage (core) capital to adjusted average assets 9.36 % 9.95 % 9.47 %
Common equity tier 1 capital (to risk-weighted assets) 14.83 % 14.66 % 14.50 %
Tier 1 capital (to risk-weighted assets) 14.91 % 14.75 % 14.59 %
Total capital (to risk-weighted assets) 16.74 % 16.38 % 16.36 %
BofI Federal Bank:
Tier 1 leverage (core) capital to adjusted average assets 9.40 % 9.60 % 9.11 %
Common equity tier 1 capital (to risk-weighted assets) 14.97 % 14.25 % 14.04 %
Tier 1 capital (to risk-weighted assets) 14.97 % 14.25 % 14.04 %
Total capital (to risk-weighted assets)   15.98 %   14.97 %   14.88 %
 

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,
    2018   2017 2018   2017
Selected Income Statement Data:
Interest and dividend income $ 144,880 $ 106,962 $ 356,176 $ 288,743
Interest expense 28,197   18,403   74,730   54,044  
Net interest income 116,683 76,361 281,446 234,699
Provision for loan and lease losses 16,900   4,862   21,900   10,862  
Net interest income after provision for loan and lease losses 99,783 72,261 259,546 223,837
Non-interest income 23,525 23,168 53,964 54,601
Non-interest expense 45,434   35,448   124,263   101,626  
Income before income tax expense 77,874 55,661 189,247 176,812
Income tax expense 26,621   30,423   73,953   74,621  
Net income $ 51,253   $ 32,300   $ 115,294   $ 102,191  
Net income attributable to common stock $ 51,176 $ 40,917 $ 115,062 $ 101,959
 
Per Share Data:
Net income:
Basic $ 0.80 $ 0.63 $ 1.78 $ 1.57
Diluted $ 0.80 $ 0.63 $ 1.78 $ 1.57
Book value per common share $ 14.65 $ 12.55 $ 14.65 $ 12.55
Tangible book value per common share $ 14.49 $ 12.44 $ 14.49 $ 12.44
 
Weighted average number of shares outstanding:
Basic 64,095,777 64,982,389 64,707,940 64,809,926
Diluted 64,095,777 64,982,389 64,707,940 64,809,926
Common shares outstanding at end of period 62,552,868 63,390,389 62,552,868 63,390,389
Common shares issued at end of period 65,516,157 64,798,821 65,516,157 64,798,821
 
Performance Ratios and Other Data:
Loan and lease originations for investment $ 2,232,463 $ 1,044,107 $ 4,561,204 $ 3,040,990
Loan originations for sale $ 258,840 $ 239,931 $ 1,275,333 $ 1,084,387
Loan and lease purchases $ $ 276,917 $ $ 276,917
Return on average assets 2.08 % 1.94 % 1.72 % 1.72 %
Return on average common stockholders' equity 22.84 % 21.10 % 17.55 % 18.48 %
Interest rate spread1 4.40 % 4.00 % 3.94 % 3.81 %
Net interest margin2 4.77 % 4.24 % 4.25 % 4.02 %
Efficiency ratio 32.40 % 31.73 % 37.05 % 35.13 %
 
Asset Quality Ratios:
Net annualized charge-offs to average loans and leases 0.02 % (0.01 )% 0.01 % 0.01 %
Non-performing loans and leases to total loans and leases 0.37 % 0.47 % 0.37 % 0.47 %
Non-performing assets to total assets 0.39 % 0.39 % 0.39 % 0.39 %
Allowance for loan and lease losses to total loans and leases at end
of period
0.76 % 0.65 % 0.76 % 0.65 %
Allowance for loan and lease losses to non-performing loans and
leases
  204.18 %   138.09 %   204.18 %   138.09 %

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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