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BofI Federal Bank Launches Health Care Finance Unit

BofI Holding Inc., parent of BofI Federal Bank, continues getting larger as it expands its repertoire of loan offerings.

Last month the San Diego-based lender, now with about $3 billion in total assets, announced it launched a health care finance unit that is part of its commercial and industrial lending division. That division in itself may cause a few raised eyebrows among bankers because BofI is thrift, or a savings and loan, not a commercial bank.

While BofI maintains a mortgage focus, it has been moving into business lending in recent years, and intends to grow that part of its portfolio even more this year.

“We see lots of opportunity on the C&I side,” said CEO Greg Garrabrants in a recent call with stock analysts.

At the end of March, the thrift reported holding $68.5 million in C&I loans, up from about $48 million at June 2012. That’s paltry compared with its total loan portfolio of $2.2 billion, but Garrabrants noted that as of April it had $77 million in new loans in the pipeline, including $25 million in new health care related loans.

BofI had another record quarter for the one ended March 31, its fiscal 2013 third quarter, generating net income of $10.4 million, up 35 percent from the like quarter of FY 2012.

For the nine months, BofI reported net income of $29.1 million, up 39 percent for the like period of last year.

The main reason for BofI’s increased profits is it simply grew in loans. Over the year, it increased by $600 million or 38 percent. The lending is still mainly concentrated on single family houses and apartments, but also lends on jumbo mortgages, cars, and RVs.

Formerly called Bank of Internet USA, the thrift does all of its business online and doesn’t maintain any branches.

In other key metrics in the past quarter, total assets grew to $2.96 billion while quality remains strong. Total nonperforming assets at the end of March stood at 0.71 percent, down from 0.76 percent in March 2012.

Deposits were up by $527.5 million or 33 percent over the year, and thanks to its great profits, BofI’s capital ratio also improved. Total risk-based capital at March 31 stood at 14.78 percent, above the 10 percent level to be considered well-capitalized, and above 14.05 percent in the like quarter of last year.

Given all that positive news it’s no wonder BofI’s shares have been rising. In fact, the stock more than doubled in the past year to above $40. As of May 13, it was at $40.64 resulting in a market capitalization of $530 million.

Andrew Liesch, an analyst with Sandler O’Neill + Partners LP, continues to recommend a buy on the stock, traded under BOFI on Nasdaq. Because of the better than anticipated results, he recently raised its 12-month target price to $45, up from his earlier projection of $40.

• • •

San Diego Trust Bank Sets Shareholders Meeting: San Diego Trust set the special shareholders meeting on its sale to Irvine-based Pacific Premier Bancorp for June 21 at 5:30 p.m. at SDTB’s headquarters office at 2550 Fifth Ave., better known as the Mr. A’s building.

The transaction, first announced by the banks in early March, calls for PPB to pay an aggregate $30.6 million for the $240 million asset bank, or 1.19 times the bank’s tangible book value.

According to the prospectus on the deal, SDTB began working with its financial advisor, Keefe Bruyette & Woods in April 2012 to find possible buyers.

From April to October, SDTB and KBW had discussions with at least 20 potential parties, with nine of these including PPB entering into confidentiality agreements. Of those nine, five proposals were deemed inferior to PPB.

Real negotiations didn’t begin until late summer of last year and continued into the rest of the year. One unnamed local bank was still talking with SDTB as of January but wouldn’t budge on its offer, which prompted SDTB’s board to focus on striking a deal with PPB.

The document also makes it clear that both SDTB’s board and PPB’s board were aware of the compensation agreements that SDTB had with CEO Mike Perry. Those agreements call for Perry to receive nearly $1 million directly after the sale is officially completed, either in the third or fourth quarter of this year, and another $5.9 million Perry would get on a deferred basis.

The largest part of the golden parachute (Perry’s leaving) is a supplemental executive retirement plan that calls for annual payments of about $278,000 for 10 years after he retires. That could be at 65, but if he decides to retire earlier he’ll receive a smaller unstated amount.

SDTB officers and directors own about 519,000 shares of the stock, or 24 percent. The sale requires a simple majority to pass.

• • •

Small Change: Todd Bulich, the owner of a commercial tenant and buyer firm, was named to the board of directors of North Island Credit Union … Jeffrey Ball, CEO of Friendly Hills Bank in Whittier, was named the 2013-14 chairman of the board of directors for the California Bankers Association … First PacTrust Bancorp, with six offices in the county and now headquartered in Irvine, passed $2 billion in assets in March, up from $1.7 billion in the first quarter of 2012 … Chase Bank opened a branch in the Bird Rock neighborhood of La Jolla, its 100th in the county, just behind Wells Fargo Bank with 104.

Send any news about locally based financial institutions to Mike Allen via email at mallen@sdbj.com. He can be reached at 858-277-6359.

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