Internet-based bank holding company BofI Holding (NASDAQ:AX) is not like most other banks. Since the name BofI stands for "Bank of Internet," one thing that obviously makes the bank unique is its online-only business model. However, there are a lot of less-obvious things about BofI Holding that you might find interesting.
1. BofI Holding operates eight different brand names
As the name suggests, Bank of Internet is the most recognizable banking brand operated by BofI Holding, but there are several others. For example, Annuitants Federal Bank, or AnFed bank, purchases structured settlements and lottery prize annuity payments. BofI Advisor offers investment products. And NetBank specializes in checking and savings accounts for people who have trouble getting approved by other banks.
2. BofI's checking and savings accounts pay more than other banks
Because it operates without the cost of maintaining branches, BofI can pass this savings on to its customers, in the form of more generous interest rates on deposit products. As of this writing, BofI advertises an APR of 0.61% on its flagship savings account and up to 1.25% APR on its Rewards Checking account. Compare this with the U.S. savings account average of 0.06%.
3. The bank is growing -- fast
BofI isn't an enormous financial institution. With just over $8 billion in assets, the bank is about the size of City National Bank of Florida or Bank of Baroda. If you haven't heard of those, well, that's kind of the point. However, the bank has grown rapidly and continues to do so. In fact, over the past year alone, BofI's deposits have grown by more than 27% and its net income has grown by nearly 15%. Shareholders have done well as a result -- EPS has grown at an annualized 32% rate since 2011, and book value per share has more than tripled.
4. But, it has done so safely
Despite the bank's rapid growth rate in recent years, it has not sacrificed asset quality. In fact, its net charge-off rate is just 0.01% -- a small fraction of its peer group average. Its non-accrual loan percentage is also 37% below that of peers.
5. And, BofI is more profitable than peers
Thanks to the low-overhead business model of operating without physical branches, BofI is much more efficient and profitable than most other banks. In fact, BofI's return on assets (ROA) and return on equity (ROE) are in the 93rd and 95th percentile, among peers of similar size. BofI's efficiency ratio is less than half of its peer group's average (lower is better).
6. The business model has changed in recent years
In the early days of online banking, BofI's business model (and that of most of its competitors), was centered around time deposits, such as CDs. Frequently used banking products like checking and savings accounts were more of an afterthought. In fact, as recently as mid-2013, time deposits made up 50% of BofI's deposit base. Now, the vast majority of BofI's deposits are in the form of checking and savings accounts. And the shift didn't cost the bank its time deposits -- rather, checking and savings deposits just grew dramatically, by 616% and 302%, respectively, over a three-and-a-half-year period.
7. Business banking has grown tenfold since 2013
Business banking is another area that's evolved dramatically for BofI in recent years. In fact, business banking deposits have grown more than tenfold since the end of 2013.
8. BofI recently scored a big partnership
BofI Holding has had a relationship with H&R Block (NYSE:HRB) for a few years now, but this relationship was greatly expanded for the 2017 tax season that's currently under way. Specifically, BofI has agreed to provide up to $700 million in funding for refund anticipation loans for H&R Block customers. This creates an excellent opportunity to cross-sell other banking products to H&R Block's nearly 20 million customers who file their tax returns through the company's 10,000 U.S. branches each year.
9. BofI has received several "best of" awards
Because of its higher-than-average interest rates and excellent online platform, BofI has been the recipient of several industry honors in recent years. To name a few:
- Bank of Internet USA received a "Best Banks of 2017" award from GOBankingRates.com, the second consecutive year it made the site's "Best Online Banks" list.
- The bank was also named "Best Online Bank" by Money Magazine for 2016, and the bank's Rewards Checking account was named "Best Checking Account."
- The bank was named one of NerdWallet's 2016 Best Banks and Credit Unions.