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Three Takeaways From BofI Federal Bank’s Earnings Report

BofI Holding Inc., the holding company for La Jolla-based BofI Federal Bank, reported earnings July 27 for the three months ending June 30, which for BofI was the fourth quarter of its 2017 fiscal year. Here are three takeaways:

1. Earnings were up. BofI said its net income was $32.5 million in the three months ending June 30, 9.5 percent over what it earned in the fourth quarter of its fiscal year 2016. Earnings were up to 50 cents per share, compared with 46 cents per share a year ago.

Net interest income was up to $78.53 million, an increase of 13.6 percent from the same three months in 2016, when it was about $69.16 million. Net non-interest income was down from $17.02 million a year ago to $13.53 million in the three months ending June 30, a decrease of 20.5 percent.

2. No federal probe is ongoing, CEO Greg Garrabrants said. His comment was in response to rumors of a federal money-laundering investigation into the bank. Garrabrants announced during the bank’s earnings call Thursday that the U.S. Securities and Exchange Commission had confirmed the agency is not investigating BofI.

A story published by a New York city tabloid earlier this year alleged the SEC — plus the Office of the Comptroller of the Currency, which the SEC oversees, and the Justice Department — was looking into the bank in response to allegation of improper practices by a former employee, who had sued the company after being fired.

But no “enforcement actions” against BofI are forthcoming, Garrabrants said the bank was told by the SEC, adding that he foresaw no impact to the business as a result of lawsuits or short sellers’ intimations of legal trouble brewing.

3. For banks, more assets means more regulations, and BofI has begun preparations for the day it accumulates $10 billion. That milestone will come with heightened governmental oversight. As of June 30 the bank’s total assets had topped $8.5 billion, up 11.9 percent from a year ago.

“By starting the process early, we believe the incremental cost will be more easily absorbed over an extended period of time,” Garrabrants said.

The bank is planning to run through a simulation of the stress test required of banks of that size by the Dodd-Frank Act in 2018, he said during the call.

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