Market Overview

BofI Holding, Inc. Announces Record Net Income for Fiscal 2018, up 13.1%

Share:

Net Income for the Fourth Quarter of Fiscal 2018 up 14.0%
Year-over-Year

BofI Holding, Inc. (NASDAQ:BOFI) ("BofI"), parent company of
BofI Federal Bank (the "Bank"), today announced unaudited financial
results for the fourth fiscal quarter ended June 30, 2018. Net income
was $37.1 million, an increase of 14.0% over net income of $32.5 million
for the quarter ended June 30, 2017. Earnings attributable to BofI's
common stockholders were $37.0 million or $0.58 per diluted share for
the fourth quarter of fiscal 2018, an increase of 14.1% from $32.5
million or $0.50 per diluted share for the fourth quarter ended June 30,
2017.

Fourth Quarter Fiscal 2018 Financial Summary:

  Three Months Ended
June 30,
 
(Dollars in thousands, except per share data)   2018   2017   % Change
Net interest income $ 87,048   $ 78,527 10.9 %
Non-interest income $ 16,977 $ 13,533 25.4 %
Net income $ 37,117 $ 32,548 14.0 %
Net income attributable to common stockholders $ 37,040 $ 32,471 14.1 %
Diluted EPS   $ 0.58     $ 0.50     16.0 %
 

For the fiscal year ended June 30, 2018, net income was a record $152.4
million, an increase of 13.1% over net income of $134.7 million for the
twelve months ended June 30, 2017. Earnings attributable to BofI's
common stockholders were $152.1 million or $2.36 per diluted share for
the twelve months ended June 30, 2018, an increase of 13.1% from $134.4
million or $2.07 per diluted share for the twelve months ended June 30,
2017. Record earnings for the fiscal year ended June 30, 2018 were the
result of growth in the Bank's loan and lease portfolio, growth in fee
income and a reduced income tax rate. Operating expenses increased due
to higher levels of loan originations and deposit activities and due to
non-operating expenses including re-branding and purchase accounting
amortization.

"We generated strong loan growth in the fourth quarter, led by robust
loan originations in jumbo single family mortgage, multifamily, and C&I
lending," stated Greg Garrabrants, President and Chief Executive Officer
of BofI. "Our multi-year investments to diversify of our lending are
paying off, as reflected in ending loan balances increasing $368 million
in the fourth quarter and $1.06 billion in fiscal 2018. Demand for loans
remains strong, as evidenced by our $1.2 billion loan pipeline at
June 30, 2018."

"Non-interest expense for the quarter was elevated due to expenses
related to Epiq, expenses related to RSUs, deal-related expenses, and
investments in rebranding, technology, and personnel," said Andy
Micheletti, Executive Vice President and Chief Financial Officer of
BofI. "Our efficiency ratio for fiscal 2018 was 39.58%."

He continued, "Credit quality remains healthy. Non-performing loans to
total loans was 37 basis points at June 30, 2018, down from 38 basis
points at June 30, 2017. Excluding charge-offs related to the H&R Block
tax product loans, our net annualized charge-off ratio was 2 basis
points in the fourth quarter of 2018 and 2 basis point for fiscal year
2018."

Other Highlights:

  • Total assets reached $9,539.5 million, up $1,037.8 million or 12.2%
    compared to June 30, 2017
  • Loan and lease portfolio grew by $1,057.8 million or 14.3% compared to
    June 30, 2017
  • Loan and lease originations for investment for the three months ended
    June 30, 2018 were $1,361.6 million, up 19.3%, or 77.2% annualized,
    compared to the quarter ended June 30, 2017
  • Deposits grew by $1,085.8 million or 15.7% compared to June 30, 2017
  • Asset quality remains strong with total non-performing assets of 0.43%
    of total assets and non-performing loans and leases equal to 0.37% of
    total loans at June 30, 2018
  • Net interest margin was 3.71%, excluding average excess cash balances
    associated with short-term H&R Block products, the net interest margin
    was 3.80%
  • Tangible book value increased to $13.99 per share, up 8.1% compared to
    June 30, 2017

Fourth Quarter Fiscal 2018 Income Statement Summary

During the quarter ended June 30, 2018, BofI earned $37.1 million or
$0.58 per diluted share compared to $32.5 million, or $0.50 per diluted
share for the quarter ended June 30, 2017. Net interest income increased
$8.5 million or 10.9% for the quarter ended June 30, 2018 compared to
June 30, 2017, primarily due to the $1,101.4 million growth in
average-earning assets.

The loan and lease loss provision was $3.9 million for the quarter ended
June 30, 2018 compared to $0.2 million for the quarter ended June 30,
2017. The increase was primarily due to growth in the loan and lease
portfolio during the quarter ended June 30, 2018 and higher loss
recoveries in the quarter ended June 30, 2017.

For the fourth quarter ended June 30, 2018, non-interest income was
$17.0 million compared to $13.5 million for the three months ended
June 30, 2017. The increase year over year was the result of an increase
banking service fees and other income of $3.0 million, primarily due to
bankruptcy trustee services, and an increase in gain on sale – other of
$2.4 million, due to increased sales of structured settlements and
lottery receivables, partially offset by a decrease in mortgage banking
income of $1.0 million and a decrease in realized gain on sales of
securities of $1.0 million.

Non-interest expense or operating costs increased $13.7 million to $49.7
million for the quarter ended June 30, 2018 from $36.0 million for the
three months ended June 30, 2017. The increase was mainly a result of an
increase in compensation expense of $7.5 million related to staffing
added since June 30, 2017, an increase in advertising and promotional of
$1.7 million, an increase in other general and administrative expenses
of $1.4 million, an increase in data processing and internet expense of
$1.3 million and an increase in depreciation and amortization of $1.1
million. The increases in staffing, data processing and internet, and
depreciation expense were incurred primarily to support growth of the
Bank's operations as well as the addition of Epiq operations. The
increase in advertising and promotional expense were primarily related
to increased deposit marketing and lead generation costs.

Our effective tax rate was 26.43% for the three months ended June 30,
2018 compared to 41.75% for the three months ended June 30, 2017. The
decrease in our effective income tax rate for the three months ended
June 30, 2018 was primarily due to the tax benefit associated with the
federal rate reduction under the Tax Cuts and Job Acts of 2017 and tax
credits received during fiscal 2018.

Full Year Fiscal 2018 Highlights

  • Net income reached a record $152.4 million, an increase of 13.1%
    compared to the fiscal year ended June 30, 2017
  • Loan and lease originations and purchases for investment for the
    fiscal year ended June 30, 2018 were $5,922.8 million up 32.8%
    compared to the year ended June 30, 2017
  • Net interest margin increased to 4.11% for the fiscal year ended
    June 30, 2018 from 3.95% for the fiscal year ended June 30, 2017
  • Return on average assets remained strong at 1.68% for the fiscal year
    ended June 30, 2018
  • BofI was named a top five performing large thrift in the U.S. for the
    tenth consecutive year by SNL Financial/S&P Global Market Intelligence

Balance Sheet Summary

BofI's total assets increased $1,037.8 million, or 12.2%, to $9,539.5
million, as of June 30, 2018, up from $8,501.7 million at June 30, 2017.
The loan and lease portfolio increased $1,057.8 million on a net basis,
primarily from portfolio loan and lease originations and purchases of
$5,922.8 million less principal repayments and other adjustments of
$4,865.0 million. Investment securities decreased $92.5 million
primarily due to sales and repays partially offset by purchases. Total
liabilities increased by $911.6 million, or 11.9%, to $8,579.0 million
at June 30, 2018, up from $7,667.4 million at June 30, 2017. The
increase in total liabilities resulted primarily from growth in deposits
of $1,085.8 million. Stockholders' equity increased by $126.3 million,
or 15.1%, to $960.5 million at June 30, 2018 from $834.2 million at
June 30, 2017. The increase was primarily the result of $152.4 million
in net income and $10.4 million of vesting and issuance of RSUs and
stock-based compensation expense, partially offset by $35.2 million of
stock repurchases, $1.1 million unrealized gain in other comprehensive
income, net of tax, and $0.3 million of dividends declared on preferred
stock.

The Bank's Tier 1 core capital to adjusted average assets ratio was
8.88% at June 30, 2018.

Conference Call

A conference call and webcast will be held on Tuesday, August 7, 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 Friday, September 7, 2018, at BofI's website and
telephonically by dialing toll-free number 877-660-6853, passcode
13681340.

About BofI Holding, Inc. and BofI Federal Bank

BofI Holding, Inc. ("BOFI") 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 $9.5 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 new initiatives. 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)

     
(Dollars in thousands)   June 30,
2018
June 30,
2017
June 30,
2016
Selected Balance Sheet Data:
Total assets $ 9,539,504 $ 8,501,680 $ 7,599,304
Loans and leases—net of allowance for loan and lease losses 8,432,289 7,374,493 6,354,679
Loans held for sale, at fair value 35,077 18,738 20,871
Loans held for sale, lower of cost or fair value 2,686 6,669 33,530
Allowance for loan and lease losses 49,151 40,832 35,826
Securities—trading 8,327 7,584
Securities—available-for-sale 180,305 264,470 265,447
Securities—held-to-maturity 199,174
Total deposits 7,985,350 6,899,507 6,044,051
Securities sold under agreements to repurchase 20,000 35,000
Advances from the FHLB 457,000 640,000 727,000
Subordinated notes and debentures and other 54,552 54,463 56,016
Total stockholders' equity 960,513 834,247 683,590
 
Capital Ratios:
Equity to assets at end of period 10.07 % 9.81 % 8.99 %
BofI Holding, Inc:
Tier 1 leverage (core) capital to adjusted average assets 9.45 % 9.95 % 9.12 %
Common equity tier 1 capital (to risk-weighted assets) 13.27 % 14.66 % 14.42 %
Tier 1 capital (to risk-weighted assets) 13.34 % 14.75 % 14.53 %
Total capital (to risk-weighted assets) 14.84 % 16.38 % 16.36 %
BofI Federal Bank:
Tier 1 leverage (core) capital to adjusted average assets 8.88 % 9.60 % 8.78 %
Common equity tier 1 capital (to risk-weighted assets) 12.53 % 14.25 % 14.00 %
Tier 1 capital (to risk-weighted assets) 12.53 % 14.25 % 14.00 %
Total capital (to risk-weighted assets)   13.27 %   14.97 %   14.75 %
 

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 Fiscal year ending
June 30, June 30,
(Dollars in thousands, except per share data)   2018   2017 2018   2017
Selected Income Statement Data:
Interest and dividend income $ 118,898 $ 98,543 $ 475,074 $ 387,286
Interest expense 31,850   20,016   106,580   74,059  
Net interest income 87,048 78,527 368,494 313,227
Provision for loan losses 3,900   200   25,800   11,061  
Net interest income after provision for loan losses 83,148 78,327 342,694 302,166
Non-interest income 16,977 13,533 70,941 68,132
Non-interest expense 49,673   35,980   173,936   137,605  
Income before income tax expense 50,452 55,880 239,699 232,693
Income tax expense 13,335   23,332   87,288   97,953  
Net income $ 37,117   $ 32,548   $ 152,411   $ 134,740  
Net income attributable to common stock $ 37,040 $ 32,471 $ 152,102 $ 134,431
 
Per Share Data:
Net income:
Basic $ 0.58 $ 0.50 $ 2.36 $ 2.07
Diluted $ 0.58 $ 0.50 $ 2.36 $ 2.07
Book value per common share $ 15.24 $ 13.05 $ 15.24 $ 13.05
Tangible book value per common share $ 13.99 $ 12.94 $ 13.99 $ 12.94
 
Weighted average number of shares outstanding:
Basic 64,087,138 64,970,915 64,552,725 64,850,114
Diluted 64,087,138 64,970,915 64,552,725 64,850,114
Common shares outstanding at end of period 62,688,064 63,536,244 62,688,064 63,536,244
Common shares issued at end of period 65,796,060 65,115,932 65,796,060 65,115,932
 
Performance Ratios and Other Data:
Loan and lease originations for investment $ 1,361,597 $ 1,141,710 $ 5,922,801 $ 4,182,701
Loan originations for sale $ 288,832 $ 291,056 $ 1,564,165 $ 1,375,443
Loan and lease purchases $ $ $ $ 276,917
Return on average assets 1.56 % 1.55 % 1.68 % 1.68 %
Return on average common stockholders' equity 15.67 % 15.89 % 17.05 % 17.78 %
Interest rate spread1 3.34 % 3.55 % 3.79 % 3.74 %
Net interest margin2 3.71 % 3.80 % 4.11 % 3.95 %
Efficiency ratio 47.75 % 39.08 % 39.58 % 36.08 %
 
Asset Quality Ratios:
Net annualized charge-offs to average loans and leases 0.70 % 0.20 % 0.19 % 0.06 %
Non-performing loans and leases to total loans and leases 0.37 % 0.38 % 0.37 % 0.38 %
Non-performing assets to total assets 0.43 % 0.35 % 0.43 % 0.35 %
Allowance for loan and lease losses to total loans and leases at end
of period
0.58 % 0.55 % 0.58 % 0.55 %
Allowance for loan and lease losses to non-performing loans and
leases
  157.40 %   143.81 %   157.40 %   143.81 %

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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