In an earnings preview earlier this week, I highlighted three metrics that matter more than BofI Holding's (NYSE:AX) stock price. The bank released earnings after market hours on Jan. 29; with the announcement we have learned yet again that the company is growing in those same three key areas like wildfire. After-hours trading is limited, but despite the good news, right now the stock price is actually down.
This is just another reminder not to get caught up in what the market is doing moment by moment, and instead focus on the things that are important to the business at hand. With that in mind, let's take a closer look at BofI Holding's earnings.
Three key metrics looking even better
Even with the dilution from share offerings over the past several years, management has done a tremendous job of using that cash to grow per-share earnings. This quarter was no exception -- EPS jumped 38% on strong loan and deposit growth. Loan assets are up 55% compared to one year ago, while loan originations in the quarter increased 37%. Simply put, these are strong results.
On the deposit side, the company added more than $1.6 billion in new deposits since the year-ago period, an increase of almost 67%. While this is generally a good thing, there's an important balance that needs to be maintained between deposits and loans. Deposits are critical because they help provide the capital that can be loaned, but if they continue to grow at a faster rate than loans are issued, then the interest costs of the deposits could become detrimental.
But, growing the deposit base could mean reduced dilution for shareholders, since less capital would be needed to fund loans. It will be interesting to see how management handles this balance going forward. Will it lead to management being less reliant on secondary stock offerings to fund loans?
BofI Holding's book value is also growing, with tangible book value per share up 7.5% from the prior quarter. Since last year, tangible book value per share has increased 36%. However, the share price hasn't kept up:
Banking on growth
Looking back, it's obvious that Mister Market doesn't value BofI Holding's growth momentum as much at the start of this year as it did one year ago. For now, investors should keep their focus on the reality at hand: BofI Holding is well run, growing like crazy, and profitable. We can't control the market, but we can choose to invest in great companies -- and it's easy to argue that BofI Holding is one right now.