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$$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.
(Full disclosure…I bought this stock a few years ago. I liked the write up then, and I recycled some of it in this write up. I like the stock even more now.)
Whenever I go to Vegas, I always find a college football game I really like and make a wager on it that I like to call a “rubber band” bet. A “rubber band” bet means you take a wad of cash out of your pocket, wrapped in a rubber band, and throw it down at the betting window. You don’t care how much money is in the wad because you know in 3 hours you will get back double whatever it is. So goes the story of the “rubber band” game.
If we didn’t have banks, everyone would be walking around with wads of cash wrapped in rubber bands. However, now that I think about it, that’s not such a bad thing. I mean why do we need banks anyway? Well…we need banks, but we really don’t need the actual buildings on the corner of North and Main St anymore. We can all access our accounts online and get our monies at any ATM all over the world.
I guess Piggy Banks don’t quite cut it anymore. But with the crap interest rate you get on your savings accounts you might as well keep you quatloops in a piggy bank. What about those buildings we call banks? They are roach motels. Look what happens in those joints:
The first banks were probably the religious temples of the ancient world, and were probably established sometime during the third millennium B.C. Banks probably predated the invention of money. Deposits initially consisted of grain and later other goods including cattle, agricultural implements, and eventually precious metals such as gold, in the form of easy-to-carry compressed plates. Temples and palaces were the safest places to store gold as they were constantly attended and well built. As sacred places, temples presented an extra deterrent to would-be thieves. There are extant records of loans from the 18th century BC in Babylon that were made by temple priests/monks to merchants. By the time of Hammurabi's Code, banking was well enough developed to justify the promulgation of laws governing banking operations.
We’ve come a long way baby. You don’t need bricks and mortar to be a bank. Twenty years ago, a customer had a handful of neighborhood banks to choose from to store his deposits. Today, that customer can choose a neighborhood bank, or can choose an online account from either on online bank like Everbank or Bank of Internet or from an online account offering from a large multiservice bank. As consumers become more accustomed to making financial transactions over the internet, online accounts will continue to gain increasing market share. Just set up shop online. Take deposits online and make loans online. Voila, you are a bank!
Today I bought Bank of Internet USA (BOFI) at $67.97 per share. I will sell it in 4 to 6 weeks at $78.23. Here’s why I like BOFI:
First of all look at this chart:
BOFI stock is up 200% over the low of the last 52 weeks. That’s some pretty serious price momentum. What is even more amazing is that its PE is only 23. The average PE’s for Savings and Loan banks is 18, so BOFI is a little expensive, but not so much when you consider its growth. Remember, banks are BAA - AACK. But this bank never left. Bank of the Internet didn’t make any of those ridiculous toxic secondary mortgage delivery commercial bank loans that completely ruined the credit markets a few years ago. Oh no no no. This bank does what a bank is supposed to do. It takes deposits. It makes small loans to needy retail customers and it collects a spread on the rates…just like they did in Babylon. Only this time, there are no toilets to clean, weeds to pull, parking lots to maintain and old coffee to throw out.
At Bank of Internet doesn’t think in terms of geography – they are your neighborhood bank wherever you are. Due to the fact that they don't have the overhead and high marketing costs associated with a branch network, they pass the savings on to the consumer. Bank of Internet constantly delivers financial solutions tailored to fit your needs and enhance your banking experience.
It offers a variety of consumer banking services, focusing primarily on gathering retail deposits over the Internet and originating and purchasing multifamily and single-family mortgage loans. Bank of Internet USA offers products through its websites at www.bankofinternet.com and www.ApartmentBank.com. Retail deposit products include certificates of deposit, online checking accounts with check images, bill payment, high interest savings accounts, ATM or Visa Check Cards, money market savings accounts, and ATM fee reimbursement anywhere in the world.
Look what happened to online shopping and Amazon.com last Christmas…they had the biggest year ever. People are finally getting comfortable with the internet and learning how to do stuff. I just bought a pair of pants on Ebay because my other pants somehow got too tight. I bought them for 25 bucks! The internet is awesome.
Anyway, BOFI was not significantly impacted by the financial crisis and they were able to secure depressed mortgages during the crisis that actually had decent fundamentals. Just on those transactions alone, BOFI will improve their balance sheet, and valuation, tremendously. There was garbage all over the place, and BOFI was out there getting some steals. BOFI has one of the best-performing loan books of any bank in the entire country, due to conservative underwriting. BOFI has one of the lowest non-performing asset ratios in the entire industry. So I guess it does a lot of good to have a parking lot and a branch manager with a nice desk to lend out money to people who don’t pay you back.
There's really only one branch of Bank of Internet USA, but the bank is everywhere. One of the few banks in the country to be based entirely online, Bank of Internet USA doesn't have tellers or notaries to finish a home loan transaction. The method of banking might be a sign of what's to come everywhere. Think about it…when was the last time you actually WENT to a bank?
Bank of Internet USA, which opened on July 4, 2000, gets around much of the hardware of modern banking by essentially outsourcing. If a customer takes out a home loan from Bank of Internet USA, the bank hires an appraiser to look at the house and a notary from a title company close to where the customer lives to finish the paperwork. Don’t make a face. You probably work for a company that outsourced its people. You know when you call the 800 number and someone named “Buster” picks up the phone and tries to use American slang but has a peculiar accent? That’s right. You just called the Philippines.
Most banks have online components today, but they combine that with the classic banking practice of branches with tellers and other employees. The Internet model is cheaper. The company saves on salary, real estate and office space costs. Bank of Internet USA passes those savings on to their customers who bank with the company in all 50 states.
Even though most people have e-mail addresses and a lot of people shopped online in the late '90s when the idea for Bank of Internet was coming together, BOFI faced a lot of skeptics. Today, those apprehensions have dissolved with the click of a mouse.
We have reached The Tipping Point for Consumer and Business Banking Customers
• Consumers are disenchanted with traditional banks
· Cost structure of business and consumer accounts are significant concerns
• Technology has removed final barriers to branchless banking (remote deposit capture, reload networks, enhanced ATMs for depositing of cash)
• Ubiquity of mobile and smart phones
• Consumers can feel connection and relationship via electronic media (phone, video, chat, social)
Great idea, no? Does it make money? YES!
On August 7, 2013, BOFI Holding, Inc. (NASDAQ: BOFI) ("BOFI"), parent company of BOFI Federal Bank (the "Bank"), today announced financial results for the fourth quarter and the fiscal year ended June 30, 2013. Net income was a record $11,132,000, an increase of 30.0% over net income of $8,565,000 for the quarter ended June 30, 2012. Earnings attributable to BofI's common stockholders were $11,055,000 or $0.78 per diluted share for the fourth quarter of fiscal 2013, an increase of 35.0% from $8,187,000 or $0.64 per diluted share for the fourth quarter of fiscal 2012.
Other Highlights:
• Total assets reached $3,090.8 million, up $703.9 million or 29.5% compared to June 30, 2012
• Loan portfolio grew by $536.4 million or 31.2% compared to June 30, 2012
• Loan originations increased by $743.1 million, up 53.2% compared to the year ended June 30, 2012
• Deposits grew by $476.9 million, or 29.5% compared to June 30, 2012
• Asset quality remains strong with total non-performing assets of 0.66% of total assets and non-performing loans equal to 0.80% of total loans at June 30, 2013
BOFI’s profitability has been growing fast, and its valuation is very cheap given those historical trends. If these earnings trends are sustainable this is a cheap bank. Of course these earnings trends are sustainable. What is going to reduce them? Interest rates are creeping up again. This trend will continue for at least the next 18 months. What’s good about this is that as these rates creep up, the banks charge more for their loans, but don’t necessarily pay more for their deposits. Spreads increase…and earnings increase.
Deposits have been growing at a ridiculous rate. Online savings accounts, however, are a new phenomenon, and as customers become more comfortable managing their finances over the internet, depositors will increasingly shift funds from local banks to online accounts offering higher interest rates. Younger bankers will adapt much more easily, and this is where the new customers are coming from. It’s not coming from the old bags! BOFI has also embarked on initiatives to accelerate this trend, such as teaming up with independent financial advisers to provide attractive banking options to customers. They use Skype for personal banking if they have to! Here’s what you have:
Full service branchless banking platform with structural cost advantages vs. traditional banks
• Superior growth and ROE relative to large and small competitors
• Solid track record of allocating capital to businesses with best risk-adjusted returns
• New business initiatives will generate incremental growth in customers, loans and profits
• Robust risk management systems and culture has resulted in lower credit, counterparty and regulatory risks
So what does this mean about where its stock price is gonna go? ANAL-ysts project earnings in the year ending June 2014 of $3.52/share. Well alright. Let’s take the ANAL-yst’s projection and multiply it by today’s PE of 23. That computes to a stock price of $80.96. BOFI has been beating estimates by an average of 5% each quarter, so tack on a few more bucks to take the stock price up to $80.96 x 1.05 = $85.01. This is all well past my target sale price. This is a growing business in a growing space that’s cheap cheap cheap. I love this stock.
Here’s what the boss had to say:
Greg Garrabrants, President and Chief Executive Officer: ""Although it is gratifying to report our sixth consecutive quarter of record earnings, I am most proud of our significant progress in diversifying our deposit base. We achieved significant growth in consumer and business checking account balances and successfully entered the prepaid sponsorship marketplace. In addition to significantly improving our deposit mix this fiscal year, we continue to diversify our lending businesses and develop new sources of fee income making our business more resilient to changes in market conditions. Diluted earnings per share for the fiscal year ended June 30, 2013 grew 24.0% compared to fiscal 2012. The Company's return on average common stockholders' equity for fiscal 2013 increased to 17.57%, up from 16.95% for fiscal 2012 while also achieving 31.2% net loan growth and 29.5% asset growth during fiscal 2013. Our strong loan quality improved even more with net charge offs to average loans declining to 14 basis points for fiscal 2013, down from 35 basis points for fiscal 2012. Non-performing assets to total assets also decreased to 66 basis points at June 30, 2013, down from 77 basis points at June 30, 2012."
"Our Bank is well positioned for future growth with a robust loan pipeline including increased jumbo and multifamily mortgages as well as increased C & I loans when compared to the pipeline at the end of our March 31, 2013 quarter," continued Mr. Garrabrants. "To help fund our expected future growth, we anticipate the close of our announced acquisition of approximately $200 million in low-rate consumer deposits from the Principal Bank by the end of next quarter. Our Bank is also well positioned to deploy capital to grow our loan portfolio. The Bank's Tier 1 capital ratio was 8.63% at June 30, 2013 before considering $14.0 million in cash available at the holding company and before considering the approximately $43 million of common stock the holding company can issue 'at-the-market' through our ATM public offering commenced in March 2013."
Even though you may never be able to find it on the corner of Main Street, you can take this stock pick to the bank!
I am HUGE!!
$$$MR. MARKET$$$
$$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.
(Full disclosure…I bought this stock a few years ago. I liked the write up then, and I recycled some of it in this write up. I like the stock even more now.)
Whenever I go to Vegas, I always find a college football game I really like and make a wager on it that I like to call a “rubber band” bet. A “rubber band” bet means you take a wad of cash out of your pocket, wrapped in a rubber band, and throw it down at the betting window. You don’t care how much money is in the wad because you know in 3 hours you will get back double whatever it is. So goes the story of the “rubber band” game.
If we didn’t have banks, everyone would be walking around with wads of cash wrapped in rubber bands. However, now that I think about it, that’s not such a bad thing. I mean why do we need banks anyway? Well…we need banks, but we really don’t need the actual buildings on the corner of North and Main St anymore. We can all access our accounts online and get our monies at any ATM all over the world.
I guess Piggy Banks don’t quite cut it anymore. But with the crap interest rate you get on your savings accounts you might as well keep you quatloops in a piggy bank. What about those buildings we call banks? They are roach motels. Look what happens in those joints:
The first banks were probably the religious temples of the ancient world, and were probably established sometime during the third millennium B.C. Banks probably predated the invention of money. Deposits initially consisted of grain and later other goods including cattle, agricultural implements, and eventually precious metals such as gold, in the form of easy-to-carry compressed plates. Temples and palaces were the safest places to store gold as they were constantly attended and well built. As sacred places, temples presented an extra deterrent to would-be thieves. There are extant records of loans from the 18th century BC in Babylon that were made by temple priests/monks to merchants. By the time of Hammurabi's Code, banking was well enough developed to justify the promulgation of laws governing banking operations.
We’ve come a long way baby. You don’t need bricks and mortar to be a bank. Twenty years ago, a customer had a handful of neighborhood banks to choose from to store his deposits. Today, that customer can choose a neighborhood bank, or can choose an online account from either on online bank like Everbank or Bank of Internet or from an online account offering from a large multiservice bank. As consumers become more accustomed to making financial transactions over the internet, online accounts will continue to gain increasing market share. Just set up shop online. Take deposits online and make loans online. Voila, you are a bank!
Today I bought Bank of Internet USA (BOFI) at $67.97 per share. I will sell it in 4 to 6 weeks at $78.23. Here’s why I like BOFI:
First of all look at this chart:
BOFI stock is up 200% over the low of the last 52 weeks. That’s some pretty serious price momentum. What is even more amazing is that its PE is only 23. The average PE’s for Savings and Loan banks is 18, so BOFI is a little expensive, but not so much when you consider its growth. Remember, banks are BAA - AACK. But this bank never left. Bank of the Internet didn’t make any of those ridiculous toxic secondary mortgage delivery commercial bank loans that completely ruined the credit markets a few years ago. Oh no no no. This bank does what a bank is supposed to do. It takes deposits. It makes small loans to needy retail customers and it collects a spread on the rates…just like they did in Babylon. Only this time, there are no toilets to clean, weeds to pull, parking lots to maintain and old coffee to throw out.
At Bank of Internet doesn’t think in terms of geography – they are your neighborhood bank wherever you are. Due to the fact that they don't have the overhead and high marketing costs associated with a branch network, they pass the savings on to the consumer. Bank of Internet constantly delivers financial solutions tailored to fit your needs and enhance your banking experience.
It offers a variety of consumer banking services, focusing primarily on gathering retail deposits over the Internet and originating and purchasing multifamily and single-family mortgage loans. Bank of Internet USA offers products through its websites at www.bankofinternet.com and www.ApartmentBank.com. Retail deposit products include certificates of deposit, online checking accounts with check images, bill payment, high interest savings accounts, ATM or Visa Check Cards, money market savings accounts, and ATM fee reimbursement anywhere in the world.
Look what happened to online shopping and Amazon.com last Christmas…they had the biggest year ever. People are finally getting comfortable with the internet and learning how to do stuff. I just bought a pair of pants on Ebay because my other pants somehow got too tight. I bought them for 25 bucks! The internet is awesome.
Anyway, BOFI was not significantly impacted by the financial crisis and they were able to secure depressed mortgages during the crisis that actually had decent fundamentals. Just on those transactions alone, BOFI will improve their balance sheet, and valuation, tremendously. There was garbage all over the place, and BOFI was out there getting some steals. BOFI has one of the best-performing loan books of any bank in the entire country, due to conservative underwriting. BOFI has one of the lowest non-performing asset ratios in the entire industry. So I guess it does a lot of good to have a parking lot and a branch manager with a nice desk to lend out money to people who don’t pay you back.
There's really only one branch of Bank of Internet USA, but the bank is everywhere. One of the few banks in the country to be based entirely online, Bank of Internet USA doesn't have tellers or notaries to finish a home loan transaction. The method of banking might be a sign of what's to come everywhere. Think about it…when was the last time you actually WENT to a bank?
Bank of Internet USA, which opened on July 4, 2000, gets around much of the hardware of modern banking by essentially outsourcing. If a customer takes out a home loan from Bank of Internet USA, the bank hires an appraiser to look at the house and a notary from a title company close to where the customer lives to finish the paperwork. Don’t make a face. You probably work for a company that outsourced its people. You know when you call the 800 number and someone named “Buster” picks up the phone and tries to use American slang but has a peculiar accent? That’s right. You just called the Philippines.
Most banks have online components today, but they combine that with the classic banking practice of branches with tellers and other employees. The Internet model is cheaper. The company saves on salary, real estate and office space costs. Bank of Internet USA passes those savings on to their customers who bank with the company in all 50 states.
Even though most people have e-mail addresses and a lot of people shopped online in the late '90s when the idea for Bank of Internet was coming together, BOFI faced a lot of skeptics. Today, those apprehensions have dissolved with the click of a mouse.
We have reached The Tipping Point for Consumer and Business Banking Customers
• Consumers are disenchanted with traditional banks
· Cost structure of business and consumer accounts are significant concerns
• Technology has removed final barriers to branchless banking (remote deposit capture, reload networks, enhanced ATMs for depositing of cash)
• Ubiquity of mobile and smart phones
• Consumers can feel connection and relationship via electronic media (phone, video, chat, social)
Great idea, no? Does it make money? YES!
On August 7, 2013, BOFI Holding, Inc. (NASDAQ: BOFI) ("BOFI"), parent company of BOFI Federal Bank (the "Bank"), today announced financial results for the fourth quarter and the fiscal year ended June 30, 2013. Net income was a record $11,132,000, an increase of 30.0% over net income of $8,565,000 for the quarter ended June 30, 2012. Earnings attributable to BofI's common stockholders were $11,055,000 or $0.78 per diluted share for the fourth quarter of fiscal 2013, an increase of 35.0% from $8,187,000 or $0.64 per diluted share for the fourth quarter of fiscal 2012.
Other Highlights:
• Total assets reached $3,090.8 million, up $703.9 million or 29.5% compared to June 30, 2012
• Loan portfolio grew by $536.4 million or 31.2% compared to June 30, 2012
• Loan originations increased by $743.1 million, up 53.2% compared to the year ended June 30, 2012
• Deposits grew by $476.9 million, or 29.5% compared to June 30, 2012
• Asset quality remains strong with total non-performing assets of 0.66% of total assets and non-performing loans equal to 0.80% of total loans at June 30, 2013
BOFI’s profitability has been growing fast, and its valuation is very cheap given those historical trends. If these earnings trends are sustainable this is a cheap bank. Of course these earnings trends are sustainable. What is going to reduce them? Interest rates are creeping up again. This trend will continue for at least the next 18 months. What’s good about this is that as these rates creep up, the banks charge more for their loans, but don’t necessarily pay more for their deposits. Spreads increase…and earnings increase.
Deposits have been growing at a ridiculous rate. Online savings accounts, however, are a new phenomenon, and as customers become more comfortable managing their finances over the internet, depositors will increasingly shift funds from local banks to online accounts offering higher interest rates. Younger bankers will adapt much more easily, and this is where the new customers are coming from. It’s not coming from the old bags! BOFI has also embarked on initiatives to accelerate this trend, such as teaming up with independent financial advisers to provide attractive banking options to customers. They use Skype for personal banking if they have to! Here’s what you have:
Full service branchless banking platform with structural cost advantages vs. traditional banks
• Superior growth and ROE relative to large and small competitors
• Solid track record of allocating capital to businesses with best risk-adjusted returns
• New business initiatives will generate incremental growth in customers, loans and profits
• Robust risk management systems and culture has resulted in lower credit, counterparty and regulatory risks
So what does this mean about where its stock price is gonna go? ANAL-ysts project earnings in the year ending June 2014 of $3.52/share. Well alright. Let’s take the ANAL-yst’s projection and multiply it by today’s PE of 23. That computes to a stock price of $80.96. BOFI has been beating estimates by an average of 5% each quarter, so tack on a few more bucks to take the stock price up to $80.96 x 1.05 = $85.01. This is all well past my target sale price. This is a growing business in a growing space that’s cheap cheap cheap. I love this stock.
Here’s what the boss had to say:
Greg Garrabrants, President and Chief Executive Officer: ""Although it is gratifying to report our sixth consecutive quarter of record earnings, I am most proud of our significant progress in diversifying our deposit base. We achieved significant growth in consumer and business checking account balances and successfully entered the prepaid sponsorship marketplace. In addition to significantly improving our deposit mix this fiscal year, we continue to diversify our lending businesses and develop new sources of fee income making our business more resilient to changes in market conditions. Diluted earnings per share for the fiscal year ended June 30, 2013 grew 24.0% compared to fiscal 2012. The Company's return on average common stockholders' equity for fiscal 2013 increased to 17.57%, up from 16.95% for fiscal 2012 while also achieving 31.2% net loan growth and 29.5% asset growth during fiscal 2013. Our strong loan quality improved even more with net charge offs to average loans declining to 14 basis points for fiscal 2013, down from 35 basis points for fiscal 2012. Non-performing assets to total assets also decreased to 66 basis points at June 30, 2013, down from 77 basis points at June 30, 2012."
"Our Bank is well positioned for future growth with a robust loan pipeline including increased jumbo and multifamily mortgages as well as increased C & I loans when compared to the pipeline at the end of our March 31, 2013 quarter," continued Mr. Garrabrants. "To help fund our expected future growth, we anticipate the close of our announced acquisition of approximately $200 million in low-rate consumer deposits from the Principal Bank by the end of next quarter. Our Bank is also well positioned to deploy capital to grow our loan portfolio. The Bank's Tier 1 capital ratio was 8.63% at June 30, 2013 before considering $14.0 million in cash available at the holding company and before considering the approximately $43 million of common stock the holding company can issue 'at-the-market' through our ATM public offering commenced in March 2013."
Even though you may never be able to find it on the corner of Main Street, you can take this stock pick to the bank!
I am HUGE!!
$$$MR. MARKET$$$
$$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.
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