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Compass Point initiates BofI Holding with 'buy'

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Compass Point initiates BofI Holding with 'buy'

Initiation

Compass Point Research & Trading LLC analyst Jesus Buenoinitiated coverage of BofIHolding Inc. at "buy" with a 12-month price target of$27.50.

His 2016, 2017 and 2018 EPS estimates are $1.84, $2.11 and$2.32, respectively.

Bueno noted that BofI generates a more than 19% return ontangible common equity. He noted that following a lawsuit from a formerinternal auditor in October2015, the company's stock price has declined approximately 38%. Thelawsuit alleged that the company followed improper lending procedures. However,the analyst noted that since the disclosure, regulators have approved twoportfolio acquisitions for the company. The company has alsocompleted regulatory examinations and filed its financial statements with theSEC in a timely manner. The analyst believes that all these steps reflect thatregulators are comfortable with the company's operations.

Bueno believes the decline in the company's stock pricecreates an attractive entry point. He expects the company to generatebelow-average loss rates and above-average loan growth as it is focused onjumbo mortgages, a niche market that larger banks have exited. The companyreported more than 30% loan growth as compared to 13% average loan growth forits peers over the last year.

In addition, based on the company's loan portfolio, theanalyst thinks the company is protected from increasing rates in the near-term.Furthermore, he thinks the gradual increase in interest rates will help thecompany reduce its reliability on CD funding.

Downgrade

Casey Orr, a Sandler O'Neill & Partners LP analyst,downgraded Moultrie, Ga.-based Ameris Bancorp to "hold" from "buy"but increased the company's 12-month price target to $38 from $36.

She also increased her 2016 and 2017 EPS estimates to $2.27and $2.49, from $2.26 and $2.45, respectively, based on a favorable mortgagebanking environment.

Orr lowered her rating for the company following thecompany's strong market performance over the last several months. AmerisBancorp saw its stock price increase approximately 39% since reaching its52-week low in the start of 2016. The analyst thinks the company, which is nolonger trading at a discount compared to its peers, outperformed based on therecently strong financial performance.

The company's return on tangible common equity of 17% ishighest among its peers. However, based on lower tangible common equity ratioand higher mortgage revenues contribution, the analyst does not feel that thecompany merits a premium valuation.