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Interview With The President And CEO: Bank of Internet USA (BOFI) - Gregory Garrabrants

67 WALL STREET, New York - May 2, 2012 - The Wall Street Transcript has just published its U.S. Banking Report: An Investor's Guide offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Money Center Bank Balance Sheets - Dodd-Frank Act, Volcker Rule and Durbin Amendment - Cost Reduction and Consolidation Activity - Macroeconomic Cyclical Recovery

Companies include: 1st United (FUBC); BBCN Bancorp (BBCN); Bar Harbor Bankshares (BHB); Central Pacific Financial (CPF); and many more.

In the following brief excerpt from the U.S. Banking Report: An Investor's Guide, expert analysts discuss the outlook for the sector and for investors.

Gregory Garrabrants is President and Chief Executive Officer of BofI Federal Bank, a federally chartered savings institution with more than $2.2 billion of total assets. He has been President and CEO of BofI Federal since 2007. Before joining the company, Mr. Garrabrants was a Senior Vice President and the Head of Corporate Business Development at the nation's seventh-largest thrift. He earned a juris doctorate, magna cum laude, from the Northwestern University School of Law and an MBA, with the highest distinctions, from the Kellogg Graduate School of Management at Northwestern University. He has a B.S. in industrial and systems engineering and a minor in economics from the University of Southern California, where he graduated with high honors. He is a Chartered Financial Analyst and Member of the California Bar.

TWST: Please begin with a brief introduction to the company, including some highlights from its history and an overview of its current operations.

Mr. Garrabrants: We are a federally chartered, OCC-regulated branch of bank that distributes a variety of financial products through our branchless distribution networks. So that includes our direct-to-consumer, online channel. It includes our affinity relationships and our relationships with broker/dealers. So each of those affinity relationships, such as our relationship with Costco on the mortgage side, our relationship with the American Senior Association, which is the second-largest senior association in the country behind AARP, are all distribution outlets for a variety of very attractive financial products. Our business model is so attractive because we have about half the operating cost of a typical bank as a result of the diverse and efficient nature of our distribution channel and our ability to operate without high-cost branch locations.

Because of our lower-cost structure, we are able to offer a variety of products to consumers that are better than those offered by a traditional bank while providing superior customer service. To give you an example, we have a checking account, which provides for unlimited ATM reimbursement at any ATM in the country, no minimum balance and no monthly fees. It pays up to 1.25% APR, depending on the behavior that you exhibit with the account. If you use a debit card more than a certain number of times, you achieve that interest rate, there are merchant rewards, there is no overdraft fees and no NSF fees, so you truly have a free checking account. While the rest of the banking industry is looking to increase fees to their existing customers, we were going in the opposite direction, because we believe offering more convenient products at a lower cost will result in more loyal customers choosing BofI over traditional banks. As people become more comfortable performing banking services through mobile devices, tablets and desktop computers, we will continue to take market share.

TWST: In this current environment, where loan growth has been slow for everybody for the past couple of years, which segments of BofI's business and which product offerings are experiencing the best growth or have proven to be the most resilient? How are you positioning the company to take advantage of what you believe to be opportunities for growth?

Mr. Garrabrants: We had exceptional loan growth over the last several years. That is the result again of the way we structure our business model. The growth has generally been in single-family jumbo mortgages and in multifamily loans. Those have both been significant sources of growth. We also have a specialty lending division that provides a variety of financing options for borrowers whom we may not want to lend to directly but whom we may lend to on a senior secured basis by providing lines of credit with much higher, more collateral protection. We have recently started a warehouse lending business, and that is going extraordinarily well.

TWST: Being a branchless Internet bank, how are some of the regulatory changes happening right now impacting BofI? Any differently than a traditional bank?

Mr. Garrabrants: I think in some respects, we are. I'll give you several examples of the favorable aspects of some of these regulatory changes. One favorable outcome is a very strong focus from the Consumer Financial Protection Bureau on a variety of practices that they believed were harmful to consumers. For example, reverse order clearing on checks drove overdraft fees. We do not have those concerns because our products are very consumer friendly. The Consumer Financial Protection Bureau would love our checking products because of the transparency of the product and its low cost to the consumer. We do not rely on things like dormancy fees and other items under significant scrutiny for any substantial part of our income.

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