SOURCE: BofI Holding, Inc.

BofI Holding, Inc.

February 03, 2011 12:59 ET

BofI Holding, Inc. Announces Second Quarter Net Income of $4.9 Million

Loan Portfolio Passes $1.0 Billion Mark

SAN DIEGO, CA--(Marketwire - February 3, 2011) - BofI Holding, Inc. (NASDAQ: BOFI) ("BofI"), parent of Bank of Internet USA (the "Bank"), today announced financial results for the second quarter of its 2011 fiscal year which ended December 31, 2010. BofI net income was $4,927,000 for the three months ended December 31, 2010 compared to $5,548,000 earned for the three months ended December 31, 2009. Excluding the after-tax impact of gains and losses related to investment securities, net income for the quarter ended December 31, 2010 would have been $4,917,000, up $606,000, or 14.1% compared to adjusted net income of $4,311,000 for the quarter ended December 31, 2009. The increase in earnings after excluding investment securities activities was primarily the result of increased net interest income and increased mortgage banking income. The average balance of interest-earning assets for the quarter ended December 31, 2010 increased $230.2 million compared to the average balance for the second quarter last year. Leading the growth of Bank assets was the loan portfolio average balance which increased $310.2 million compared to the average for the quarter ended December 31, 2009. Earnings attributable to BofI's common stockholders were $4,850,000 or $0.45 per diluted share for the current quarter, compared to $5,375,000 or $0.61 per diluted share for the quarter ended December 31, 2009.

For the six months ended December 31, 2010, net income was $9,759,000 compared to net income of $9,256,000 for the six months ended December 31, 2009. Net income attributable to common stockholders was $9,605,000 or $0.89 per diluted share compared to net income of $8,910,000 or $1.02 per diluted share for the six months ended December 31, 2010 and 2009, respectively.

"Our loan portfolio surpassed the billion dollar mark this quarter as the combined performance of our new mortgage units exceeded last quarter's strong results," said Greg Garrabrants, President and Chief Executive Officer. "Our multifamily and single family portfolio businesses combined to originate $141.8 million, up 111.6% over the $67.0 million originated last quarter. Our mortgage bank increased gain on sale income to $1.8 million, up 28.6% over the $1.4 million in gain on sale income earned in the first quarter ended September 30, 2010. The net interest margin for the second quarter ended December 31, 2010 was 3.72%, also up from the 3.55% recorded in the first quarter of fiscal 2011."

"As the market has normalized, the Bank has been able to successfully evolve its asset generation model to focus on direct originations of high credit quality mortgage loans. We continue to see increasing demand for our single and multifamily portfolio lending products and believe that future origination of these products will lead to sustainable, high-quality asset growth at attractive spreads. In preparation for our expected growth, the Bank has made significant investments in our information systems, broadening our executive talent base and increasing our risk management capabilities. By way of example, in December we completed the conversion of more than 30,000 Bank customers to our new Online Banking platform. In the first six months of fiscal 2011, we invested more than $1.7 million in new computer technology, software, network enhancements, telephone systems and other infrastructure. We split the role of Chief Credit Officer and Chief Risk Officer and added a compliance officer and two additional internal auditors. I believe that our current significant investments in infrastructure and our executive and risk management teams will allow the Bank to increase its asset size and profitability without future proportionate investment."

Other Highlights:

--  Loan portfolio passed the $1.0 billion mark and increased 52.7%
    compared to December 31, 2009
--  Deposits grew by $238.5 million, or 27.2% compared to December 31, 2009
--  Asset quality remains strong with total non-performing assets of 1.25%
    of total assets at December 31,  2010
--  Tangible book value increased to $12.95 per share, up $1.62 compared
    to December 31, 2009
--  Total assets reached $1,660.8 million up 23.5% compared to
    December 31, 2009

Quarter Earnings Summary

For the three months ended December 31, 2010, net income was $4,927,000 compared to net income of $5,548,000 for the three months ended December 31, 2009. Net income attributable to common stock holders was $4,850,000 or $0.45 per diluted share compared to net income of $5,375,000 or $0.61 per diluted share for the three months ended December 31, 2010 and 2009, respectively.

Net interest income increased $1,147,000 in the quarter ended December 31, 2010 due to a 17.8% increase in average earning assets primarily from loan originations and loan pool purchases. Our net interest margin decreased 30 basis points in the quarter ended December 31, 2010 compared to December 31, 2009, as the earning rates on loans decreased 45 basis points and rates on securities decreased 138 basis points partially offset by a decrease in the rates paid on deposits and borrowings of 53 basis points. The loan loss provision was $1,600,000 for both quarters ended December 31, 2010 and December 31, 2009. There was no change in the loan loss provision as charge-offs remained relatively flat.

Non-interest income was $1.9 million for the three months ended December 31, 2010 of which $1.8 million resulted from mortgage banking. The non-interest income for the three months ended December 31, 2009 was primarily the result of a gain on sale of securities of $6.5 million, gains of $454,000 in first mortgages originated for sale and an OTTI loss of $4.1 million. The increase in mortgage banking income was due to the increase in the origination volume of loans held for sale from $30.7 million to $79.1 million for the quarters ended December 31, 2009 and 2010, respectively.

Non-interest expense, or operating expense, which is comprised primarily of compensation, data processing and internet expenses, occupancy and other operating expenses, was $6.2 million for the three months ended December 31, 2010, up from $4.5 million for the three months ended December 31, 2009.

Total salaries, benefits and stock-based compensation was $3,586,000 for the quarter ended December 31, 2010 compared to $1,778,000 for the quarter ended December 31, 2009. Of the increase in total compensation expense, 26% was attributable to mortgage origination commissions paid to employees, 26% was attributable to additional staffing in mortgage lending units, and 48% related to all other staffing. The Bank's staff increased from 64 to 140 full-time equivalents between December 31, 2009 and 2010. Professional services, which include accounting and legal fees, increased $31,000 for the quarter ended December 31, 2010, compared to the quarter ended December 31, 2009. The increase in professional services was primarily due to legal fees for loan acquisition contracts and foreclosed assets. Advertising and promotional expense increased $82,000 for the three-month ended December 31, 2010 compared to December 31, 2009 due to increases in lead acquisitions for our single family loan origination programs and increased advertising for our multifamily origination program. The costs and losses associated with the maintenance and sale of the real estate owned ("REOs") and repossessed RV's decreased $543,000 for the three-month period ending December 31, 2010 compared to the three-month period ended 2009. This was due to a reduction in volume in REO's. The cost of our FDIC and OTS standard regulatory charges increased $85,000 this quarter due to higher average deposit and borrowing balances for the period ended December 31, 2010. Other general and administrative expense increased $143,000 for the three-month period ended December 31, 2010 compared to the period in 2009, primarily due to an increase in loan volumes, Bank customers and the number of employees.

Balance Sheet Summary

Our total assets increased $239.7 million, or 16.9%, to $1,660.8 million, as of December 31, 2010, up from $1,421.1 million at June 30, 2010. The increase in total assets was primarily due to an increase of $228.4 million in loans held for investment. Total liabilities increased a total of $232.0 million, primarily due to an increase in deposits of $148.2 million and an increase in borrowings of $81.0 million in borrowings from the Federal Home Loan Bank of San Francisco.

Conference Call

A conference call and webcast will be held on Thursday, February 3, 2011 at 5:00 PM Eastern / 2:00 PM Pacific. Analysts and investors may dial in and participate in the question/answer session. To access the call, please dial: 800-390-5202, conference ID # 8933453; international callers should dial: 719-325-2354, using the same conference ID number. The conference call will be webcast live and may be accessed at BofI's website, http://www.bofiholding.com. For those unable to listen to the live broadcast, a replay will be available shortly after the call on BofI's website for 30 days.

About BofI Holding, Inc. and Bank of Internet USA

BofI Holding, Inc. (NASDAQ: BOFI) is the holding company for Bank of Internet USA, a nationwide savings bank that operates primarily through the Internet. The Bank provides a variety of consumer and wholesale banking services, focusing on gathering retail deposits over the Internet, and originating and purchasing single and multifamily mortgage loans, and purchasing mortgage-backed securities. BofI operates its Internet-based bank from a single location in San Diego, California. For more information on Bank of Internet USA, please visit http://www.bankofinternet.com.

For up-to-date company information and facts and figures about BofI Holding, Inc. visit www.bofiholding.com or contact Greg Garrabrants, President and Chief Executive officer, at (858) 350-6203 or email greg.garrabrants@bankofinternet.com

Safe Harbor Statement

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This release includes forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by phrases such as BofI or its management "believes," "expects," "anticipates," "foresees," "forecasts," "estimates" or other words or phrases of similar import. All such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These risks and uncertainties include, but are not limited to, our ability to execute our business plans, the impact on our business of further declines in the economy or potential legislative and regulatory reforms, as well as other risks and uncertainties, including but not limited to those detailed from time to time in our filings with the Securities and Exchange Commission. Forward-looking statements are not guarantees of future performance and should not be relied upon as representing management's views as of any subsequent date. BofI does not undertake any obligation to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.

                    BofI HOLDING, INC. AND SUBSIDIARY
                SELECTED CONSOLIDATED FINANCIAL INFORMATION
                          (Dollars in thousands)

                                        December 31,  June 30, December 31,
                                           2010        2010        2009
                                        ----------- ----------- -----------
Selected Balance Sheet Data:
Total assets                            $ 1,660,835 $ 1,421,081 $ 1,345,313
Loans - net of allowance for loan
 losses                                   1,003,250     774,899     657,181
Loans held for sale                          16,658       5,511       7,568
Allowance for loan losses                     6,884       5,893       5,449
Securities - trading                          4,428       4,402       4,971
Securities - available for sale             197,789     242,430     263,207
Securities - held to maturity               368,196     320,807     345,692
Total deposits                            1,116,370     968,180     877,828
Securities sold under agreements to
 repurchase                                 130,000     130,000     130,000
Advances from the FHLB                      264,000     182,999     223,992
Subordinated debentures                       5,155       5,155       5,155
Total stockholders' equity                  137,592     129,808     102,618





                    BofI HOLDING, INC. AND SUBSIDIARY
                SELECTED CONSOLIDATED FINANCIAL INFORMATION
              (Dollars in thousands, except per share data)

                              At or for the Three     At or for the Six
                                 Months Ended            Months Ended
                                 December 31,            December 31,
                            ----------------------  ----------------------
                               2010        2009        2010        2009
                            ----------  ----------  ----------  ----------
Selected Income Statement
 Data:
Interest and dividend
 income                     $   22,584  $   21,866  $   43,673  $   43,643
Interest expense                 8,461       8,890      16,878      18,102
                            ----------  ----------  ----------  ----------
Net interest income             14,123      12,976      26,795      25,541
Provision for loan losses        1,600       1,600       3,200       3,600
                            ----------  ----------  ----------  ----------
Net interest income after
 provision for loan losses      12,523      11,376      23,595      21,941
Non-interest income (loss)       1,927       2,751       4,049       1,742
Non-interest expense             6,240       4,492      11,439       7,769
                            ----------  ----------  ----------  ----------
Income before income tax
 expense                         8,210       9,635      16,205      15,914
Income tax expense               3,283       4,087       6,446       6,658
                            ----------  ----------  ----------  ----------
Net income                  $    4,927  $    5,548  $    9,759  $    9,256
                            ==========  ==========  ==========  ==========
Net income attributable to
 common stock               $    4,850  $    5,375  $    9,605  $    8,910
Per Share Data:
Net income:
Basic                       $     0.45  $     0.64  $     0.90  $     1.07
Diluted                     $     0.45  $     0.61  $     0.89  $     1.02
Book value per common
 share                      $    12.95  $    11.33  $    12.95  $    11.33
Tangible book value per
 common share               $    12.95  $    11.33  $    12.95  $    11.33
Weighted average number of
 shares outstanding:
Basic                       10,767,447   8,422,688  10,665,500   8,302,318
Diluted                     10,868,583   9,035,686  10,764,675   8,914,177
Common shares outstanding
 at end of period           10,236,045   8,189,544  10,236,045   8,189,544
Common shares issued at
 end of period              10,884,680   8,809,466  10,884,680   8,809,466
Performance Ratios and
 Other Data:
Loan originations for
 investment                 $  141,816  $   26,647  $  208,836  $   35,083
Loan originations for sale      79,062      30,685     139,685      55,691
Loan purchases                  23,391      54,331     104,060      55,964
Return on average assets          1.26%       1.68%       1.29%       1.40%
Return on average
 stockholders' equity            14.84%      24.63%      15.07%      21.02%
Interest rate spread (1)          3.53%       3.84%       3.45%       3.77%
Net interest margin (2)           3.72%       4.02%       3.64%       3.95%
Efficiency ratio                 38.88%      28.56%      37.09%      28.48%
Capital Ratios:
Equity to assets at end of
 period                           8.28%       7.63%       8.28%       7.63%
Tier 1 leverage (core)
 capital to adjusted
 tangible assets (3),(4)          8.10%       7.64%       8.10%       7.64%
Tier 1 risk-based capital
 ratio (3),(4)                   13.18%      12.54%      13.18%      12.54%
Total risk-based capital
 ratio (3),(4)                   13.86%      13.21%      13.86%      13.21%
Tangible capital to
 tangible assets (3),(4)          8.10%       7.64%       8.10%       7.64%
Asset Quality Ratios:
Net annualized charge-offs
 to average loans
 outstanding                      0.49%       0.90%       0.55%       0.93%
Nonperforming loans to
 total loans                      1.64%       0.90%       1.64%       0.90%
Nonperforming assets to
 total assets                     1.25%       0.93%       1.25%       0.93%
Allowance for loan losses
 to total loans at end of
 period                           0.68%       0.81%       0.68%       0.81%
Allowance for loan losses
 to nonperforming loans          41.17%      90.14%      41.17%      90.14%


(1) Interest rate spread represents the difference between the annualized
    weighted average yield on interest-earning assets and the weighted
    average rate paid on interest-bearing liabilities.

(2) Net interest margin represents annualized net interest income as a
    percentage of average interest-earning assets.

(3) Reflects regulatory capital ratios of Bank of Internet USA only.

(4) The Bank's Ratios for Tier 1 Capital to assets, Tier 1 Capital to
    risk-weighted assets and Total Capital to risk-weighted assets at
    December 31, 2010 were reduced from 7.91% to 7.64%, 16.18% to 12.54%
    and 17.01% to 13.21% at December 31, 2009, respectively to reflect
    consolidation of  the BIRT Re-securitization trust at the Bank level.
    Previously, the BIRT Re-securitization trust was consolidated into
    BofI Holding, Inc. parent of the Bank.

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