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10 Bank Stock Picks: Heroes vs. Zeros

6. BOFI Holding, Inc.

Shares of BOFI Holding, Inc. (BOFI) of San Diego closed at $16.54 Friday, for a 36% return since Sept. 3, 2010.

The company had $2.1 billion in total assets as of Sept. 30, running its deposit gathering and lending operations online through its BOFI Federal Bank subsidiary, which was formerly known as Bank of Internet USA.

BOFI on Wednesday priced a public offering of 750,000 common shares at $16.00, saying that the proceeds would be used "for general corporate purposes and possible future acquisitions and growth opportunities. "

The company raised $7 million through a convertible preferred share offering in November, after raising $13.2 million in preferred equity during its fiscal fourth quarter, which ended Sept. 30.

BOFI reported net income attributable to common stock of $6.4 million for its fiscal first quarter of 2012 ended Sept. 30, or 58 cents a share, increasing from $4.8 million, or 45 cents a share, a year earlier. Third-quarter net interest income increased 43% year-over-year, to $18.2 million, as the company grew its loan portfolio 65% year-over-year, to $1.4 billion.

Noninterest income more than doubled year-over-year to $4.6 million in the fiscal first quarter, "primarily due to gain on sale of agency mortgage loans which increased to $2.1 million compared to $1.4 million for the quarter ended September 30, 2010," but also due to a $2.7 million gain on the transfer of $72.3 million in portfolio loans to held-for-sale.

BOFI's net interest margin during the fiscal first quarter was 3.65%, increasing from 3.55% a year earlier. The ROA for the fiscal first quarter was 1.28%.

Sandler O'Neill analyst Andrew Liesch rates BOFI a buy, with a $19 price target, saying in early November that although the company's shares trade at a "substantial premium to other U.S. thrifts on a book value basis," the premium "is well deserved given its superior credit quality, solid operating efficiency, positive earnings outlook and balance sheet growth prospects."

The shares trade for 7.4 times the consensus 2012 EPS estimate of $2.24 among analysts polled by FactSet, and for 1.2 times tangible book value, according to SNL Financial.

Both analysts covering BOFI rate the shares a buy.
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