BofI Holding's (BOFI) Q4 Earnings Lag on Higher Provisions

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BofI Holding, Inc.BOFI reported a negative earnings surprise of around 4.9% in fourth-quarter fiscal 2018 (ended Jun 30). Earnings per share of 58 cents lagged the Zacks Consensus Estimate by 3 cents. However, results compare favorably with the year-ago figure of 50 cents.

Higher expenses and provisions were on the downside. Nonetheless, organic growth was recorded, with significant rise in loans and deposit balances. Moreover, strong capital position was witnessed.

Net income attributable to common stockholders came in at $37 million compared with $32.5 million reported in the prior-year quarter.

For fiscal 2018, earnings per share came in at $2.36 per share comparing favorably with the year-ago earnings of $2.07 per share. Yet, the reported tally lagged the Zacks Consensus Estimate of $2.51. Net income available to common shareholders was $152.1 million, up 13.2% year over year.

Revenues Rise, Loans & Deposits Go Up, Costs Escalate

For fiscal 2018, the company reported net revenues of $439.4 million, up 15.2% year over year. However, the figure missed the Zacks Consensus Estimate of $443.3 million.

Total revenues (net of interest expense) jumped 13% year over year to $104 million in the quarter, driven by higher interest and dividend income, along with non-interest income. Yet, revenues were below the Zacks Consensus Estimate of $107.8 million.

BofI Holding's net interest income was $87 million, up 10.9% year over year, mainly due to rise in average-earning assets. Nonetheless, net interest margin contracted 9 basis points (bps) year over year to 3.71%.

The company's non-interest income advanced 25.9% year over year to $17 million. The rise primarily stemmed from increase in banking service fees and other income. These were partially offset by lower mortgage banking income and reduced realized gain on sales of securities.

However, non-interest expenses flared up 38.1% year over year to $49.7 million. This mainly resulted from a rise in almost all components of expenses.

As of Jun 30, 2018, total loans rose 13.5% year over year to $8.4 billion, while deposits climbed 15.9% year over year to $8 billion.

Credit Quality: A Concern

During the reported quarter, credit metrics deteriorated. As of Jun 30, 2018, net annualized charge-offs to average loans and leases was 0.70%, up 50 bps year over year. Non-performing assets to total assets was 0.43%, up 8 bps.

Allowance for loan and lease losses to total loans and leases at the end of the period were 0.58%, up 3 bps. Provision for loan losses was $3.9 million compared with 0.2 million in the year-ago quarter.

Steady Capital and Profitability Ratios

The company's capital ratios demonstrated a steady position. As of Jun 30, 2018, return on average equity was 17.05%, and return on average assets was 1.68% compared with 17.78% and 1.68%, respectively, recorded in the comparable quarter last year.

Tier 1 Capital ratio came in at 13.34% compared with 14.75% in the year-earlier quarter. Total capital ratio was 14.84% compared with 16.38% reported in the prior-year quarter. Common equity Tier 1 capital ratio was 13.27%, down from 14.66% as of Jun 30, 2017.

Stockholders' equity was up 15.1% year over year to $960.5 million as of Jun 30, 2018. The uptrend chiefly allied with retention of net income.

Our Viewpoint

BofI Holding's improved top line and a better balance sheet during the June-end quarter impress us. Nevertheless, uncertain economic situation might hurt the company's performance in the future. Though its inability to control expenses and deteriorating credit quality may hamper near-term profitability, improvement in loans and deposit balances remains a favorable factor.

BofI Holding, Inc. Price, Consensus and EPS Surprise

BofI Holding, Inc. Price, Consensus and EPS Surprise | BofI Holding, Inc. Quote

Currently, BofI Holding carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Performance of Other Banks

Texas Capital Bancshares Inc. TCBI reported earnings per share of $1.38 in second-quarter 2018, in line with the Zacks Consensus Estimate. Results compared favorably with 97 cents recorded in the prior-year quarter. Results were driven by rise in revenues.

Driven by top-line strength, Synovus Financial's SNV second-quarter 2018 results reported a positive earnings surprise of 4.5%. Adjusted earnings of 92 cents per share beat the Zacks Consensus Estimate of 88 cents. Also, the reported figure came in 52.6% higher than the prior-year quarter tally.

People's United Financial Inc. PBCT reported net earnings of 32 cents per share in second-quarter 2018, in line with the Zacks Consensus Estimate. Moreover, the reported figure climbed 33.3% year over year. Results benefited from an improvement in net interest income, and decline in expenses and provisions.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: SNV , TCBI , PBCT

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