BOFI FY2015.Q3 Earnings Quick Take

Bank of the Internet earnings are out and they have exceeded analyst expectations both in net revenue and net income. Book value is up to $32.03 per share.

Here is a quick note from the company in their press release:

“Strong loan growth, continued efficiency improvements and a stable net interest margin resulted in another quarter of record earnings,” stated Greg Garrabrants, President and Chief Executive Officer. Mr. Garrabrants continued, “Our deposit growth outpaced loan growth for a second consecutive quarter, with checking and savings account balances increasing by approximately 80% year-over-year and business banking deposits increasing to over half of our deposit base. This quarter marked our thirteenth consecutive quarter of record earnings. Looking forward, we believe our prospects for continued earnings growth are strong based on our near record loan pipeline, our opportunities to expand our business and consumer deposit base and our continued diversification and expansion of our lending and fee income businesses. Additionally, our announced transaction with H&R Block, that is pending regulatory approval, is expected to provide significant additional fee income, low cost deposits, and product distribution opportunities.”

Here are my quick takes for the FY 2015.Q3 earnings:

Net Income

$1.35 EPS (FY 2015.Q3 actual)
$1.28 EPS (FY 2015.Q3 estimate)
$1.00 EPS (FY 2014.Q3 actual)
+44.5% YoY

Net Revenue

$59.03 M (FY 2015.Q3 actual)
$58.26 M (FY 2015.Q3 estimate)
$40.9 M (FY 2014.Q3 actual)
+44.3% YoY

Key Metrics

Tangible book value: $32.03 per share (FY 2015.Q3 actual) vs. $23.51 per share (FY 2014.Q3 actual) [+36.2%]

Total assets: $5,528.5 M (FY 2015.Q3 actual) vs. $3,850.8 M (FY 2014.Q3 actual) [+73.5%]

Loan portfolio growth YoY: $1,539.9 M, +49.7%

Loan originations: $1,058.2 M (FY 2015.Q3 actual) vs. $696 M (FY 2014.Q3 actual) [+52.0%]

Deposit growth YoY: $1,535.8 M, +54.2%

Non-performing asset ratio: 0.65% (FY 2015.Q3 actual) vs. 0.50% (FY 2014.Q3 actual)

Non-performing loans ratio: 0.72% (FY 2015.Q3 actual) vs. 0.60% (FY 2014.Q3 actual)

My Take

Another quarter another home run delivered by Bank of the Internet. They beat analyst expectations and are growing at a tremendous clip by any valuation method (Book Value, Earnings, Revenue, etc.). The only blemish (minor one at that) would be the non-performing assets/loans ratio creeping up year over year (but down sequentially). However, the market is not too impressed as by traditional banking valuation (price to book) they are still pretty high at TTM of about 2.84.

This shouldn’t be too much of a concern for long term investors as BOFI is still undervalued given it’s tremendous growth rates, relatively small market cap ($1.41 B) and valuation in terms of P/E. We’ll need to keep an eye on non-performing assets/loans and the growth rate going forward.

A good gauge of the potential of BOFI is with Capital One’s acquisition of ING Direct, an online banking business wing of ING back in 2012 for $9B. They however had $80B in deposits and 7 million customers.

BOFI is currently trading at $91.31 per share, down 1.52% in market trading.


Thanks HopJockey, Grat write-up!