Bank of the Internet earnings are out and they have exceeded expectations once again! EPS and “net revenue” beat analyst estimates. Book value is up to $33.92 per share.
Here is a quick note from the company in their press release:
“We achieved our fourteenth consecutive quarter of record earnings through strong loan originations, fee income growth, and disciplined expense management,” stated Greg Garrabrants, President and Chief Executive Officer. “Continued growth in our jumbo single family mortgage portfolio, record production from our C&I lending group and strong deposit growth were contributing factors to our increased net interest income this quarter. We further diversified our funding mix, with checking and savings accounts increasing to approximately 82% of our total deposits at June 30, 2015 compared to 74% a year ago. Our net interest margin increased to 3.97% this quarter including the one-time dividend received from the FHLB and would have been 3.85% without the one-time dividend, equal to last quarter and within our target range. Lastly, our efficiency ratio improved to 31.65% this quarter, or 32.47% without the one-time dividend, as our cost management program’s focus shifted to vendor cost reduction and productivity improvement.”
Here are my quick takes for the FY 2015.Q4 and FY 2015 full year earnings:
Net Income
$1.54 EPS (FY 2015.Q4 actual)
$1.38 EPS (FY 2015.Q4 estimate)
$1.09 EPS (FY 2014.Q4 actual)
+41.2% YoY
$5.37 EPS (FY 2015 actual)
$3.85 EPS (FY 2014 actual)
+39.5% YoY
Net Revenue (Net Interest Income)
$55.29 M (FY 2015.Q4 actual)
$53.67 M (FY 2015.Q4 estimate)
$45.2 M (FY 2014.Q4 actual)
+36.5% YoY
$198.95 M (FY 2015 actual)
$159.6 M (FY 2014 actual)
+24.6% YoY
Key Metrics
Tangible book value: $33.92 per share (FY 2015.Q4 actual) vs. $25.27 per share (FY 2014.Q4 actual) [+34.2%]
Total assets: $5,823.7 M (FY 2015.Q4 actual) vs. $4,403.0 M (FY 2014.Q4 actual) [+32.3%]
Loan portfolio growth YoY: $1,395.8 M, +39.5%
Loan originations: $1,281.4 M (FY 2015.Q4 actual) vs. $898.9 M (FY 2014.Q4 actual) [+42.6%]
Deposit growth YoY: $1,410.4 M, +46.4%
Non-performing asset ratio: 0.55% (FY 2015.Q4 actual) vs. 0.46% (FY 2014.Q4 actual)
Non-performing loans ratio: 0.62% (FY 2015.Q4 actual) vs. 0.57% (FY 2014.Q4 actual)
My Take
What if I told you that there existed an investment, a financial institution of sorts that was growing rapidly, but was still under the radar? That there was a company that repeatedly beat analyst estimates on their earnings quarter after quarter after quarter. What if I told you that there existed a bank that had no branches, no ATMs, no greeters, no lines, but was still able to grow assets to $5.8 Billion, >30% year over year? Would you believe me?
Bank of the Internet Holdings (NASDAQ:BOFI) delivers yet another stellar quarter. Growth any way you look at it (EPS, Book Value, etc.) is accelerating. Even with the enormous growth the company is undervalued if you look at it from an income perspective trading at about 23 P/E. From a price to book perspective it is still high at 3.41 (TTM) but the book value growth rate supports these levels in my opinion.
Although execution seems all around great per usual, we must keep an eye on the non-performing assets/loans which has creeped up YoY (although still much lower than big banks like Wells Fargo). As deposits and loans grow we expect this ratio to increase but the company must keep this under control. Another potential risk is the concentration of loans in California. According to Jason Hall on fool.com (http://www.fool.com/investing/general/2015/07/28/will-bofi-h…) BOFI is still largely regional in terms of its mortgage business. Thus many of their loans are based in California which a majority of the loans being of the jumbo variety due to the high housing prices.
With all that being said, even with the small bump today, BOFI’s market cap is only $1.8 B. If they can continue to execute and grow (no reason they can’t), shareholders will be rewarded handsomely over the next few years.
BOFI is currently trading at $117.21 per share in regular market activity.