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Bank holding company BofI Holding, Inc. (AX -1.11%) reported that net income increased by nearly 15% year over year in its fiscal second quarter, helped by higher loan balances and larger net interest margin. 

BofI Holding's quarter by the numbers


2Q 2017

2Q 2016

Growth (YOY)

Net interest income

$76.4 million

$63.2 million


Non-interest income

$16.7 million

$16.2 million


Net income to common shareholders

$32.2 million

$28.1 million


Diluted EPS




Tangible book value per share




Data source: BofI press release. YOY = year over year.

What happened this quarter

  • Gross loan originations grew to $1.7 billion during the quarter, up 4% from a year ago and 45% when compared to the sequential quarter. Net interest margin grew to 4%, an increase of 22 basis points from the prior quarter, largely driven by a special dividend from the Federal Home Loan Bank.
  • Credit quality metrics appear strong, as the bank reported net charge-offs equal to 0.05% of assets. Nonperforming assets stood at just 0.43% of total assets, up modestly from 0.40% a year ago.
  • The company added new loan types to its portfolio as part of its partnership with H&R Block. High-yielding Emerald Advance lines of credit allow consumers to make use of a small line of credit throughout the year to be repaid by tax refund. These loans added about 2 basis points to net interest margin during the quarter, and will play a more important role next quarter.
  • Deposits increased 4.5% from the sequential quarter, and 27.1% year over year. The mix of deposits continues to shift to a more favorable mix of lower-cost funding, as certificates of deposit made up just 14% of total deposits, down from 17% as recently as June 2016. On average, time deposits carried an annualized yield of 2.28%, several times higher than the 0.69% yields of checking and savings accounts.

What management had to say

In the press release, President and CEO Greg Garrabrants said, "Our loan originations were well balanced with contributions from commercial and industrial, multifamily and small balance commercial real estate, and jumbo single family lending. With our continued success diversifying our lending, consumer and commercial deposit, and fee-based businesses, we are well positioned for profitable growth."

On the conference call, Garrabrants took the time to call out short-sellers once again, denouncing short reports as "internet trolls' fake news hit pieces." He said that a "short-selling conspiracy is likely still active," and went on to ask that shareholders be alert for and report any suspicious activity. It was somewhat puzzling, given that BofI Holding shares traded at their highest level in more than a year and within 20% of their all-time highs at the time of his comments.

Looking ahead

The March quarter (BofI Holding's fiscal third quarter) should be buoyed by its relationship with H&R Block. On the conference call, CFO Andy Micheletti indicated that 60% to 70% of its earnings under the partnership is earned in the March quarter. Given expectations for $13 million to $16 million of income from the partnership for the full year, the program could add as much as $11 million to net income next quarter.

The company reported having about $960 million in loan originations in the pipeline at the end of the quarter, largely consisting of single-family jumbo and C&I loans. Throughout the call, Garrabrants was bullish on its loan prospects, indicating that the pipeline for lending activity was strong across its many underwriting verticals.