Why BOFI Created A Phantom 'Full Service Branch' In The Nevada Desert

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  • No longer branchless, BOFI has created a purported "full service" brick and mortar federal branch in the Nevada desert.
  • Our visit to the location found a microscopic Regus virtual office believed to be staffed by a single BOFI employee. The "full service" branch, in my opinion, is a phantom.
  • Through the H&R Block bank acquisition, BOFI has expanded into the highly controversial tax refund transfer space which has been the source of intense regulatory scrutiny.
  • Specifically affirmed by the BOFI/H&R Block program management agreement, BOFI appears to be booking hundreds of millions of dollars worth of loans through its phantom branch to "export" Nevada law.
  • I believe the legitimacy of BOFI's H&R Block products, a key growth driver, could be at risk and potentially subject to a sudden halt.

Amidst a torrent of recent promotional press releases, Bank Of The Internet (NASDAQ:BOFI) has curiously omitted a major announcement. BOFI, the "branchless" internet wonder-bank, has opened its first physical branch location. BOFI is, in fact, no longer branchless! Mysteriously, however, the existence of this new branch has not been disclosed in the company's SEC filings or investor relations materials. Instead, its existence only recently emerged on the FDIC's website:

The FDIC reports that last August, BOFI opened a purported "full service brick and mortar" branch in the Nevada desert. A significant development, why would BOFI keep the existence of its first branch a secret from investors? With the bank's promoters having compared BOFI to the Tesla Motors (NASDAQ:TSLA) or Amazon (NASDAQ:AMZN) of the banking industry, I initially thought that this "branch" was a prototype in the spirit of Apple's (NASDAQ:AAPL) foray into retail stores (below). Perhaps the new branch is part of a dynamic effort to reinvent traditional banking?

Wanting to take a tour, we decided to visit BOFI's first brick & mortar branch to see its potentially revolutionary branch banking concept for ourselves. Expecting to be awed, we instead found... well, anything but a full service federal branch.

The Phantom Desert Branch

BOFI's "full service branch" is located on the 8th floor of 200 S. Virginia Street in Reno, Nevada. Getting off the elevator, customers are greeted by a Regus "virtual office" location offering shared and tightly compacted housing for dozens of small businesses. Walking up to the communal reception area and thinking there must be a mistake, we asked where the BOFI Federal Bank branch was. While the receptionist was not aware of a bank branch, she did indicate that there was a BOFI representative officing there.

After a brief wait, an individual who would only introduce herself as "Kim" emerged. Kim

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In-Depth ResearchNo affiliation with Aurelius Capital Management.

Disclosure: I am/we are short BOFI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Additional disclosure: I am/we are short BOFI and have no present position in HRB. All information for this article was derived from publicly available information. Investors are encouraged to conduct their own due diligence into these factors. Additional disclosure: This article represents the opinion of the author as of the date of this article. The information set forth in this article does not constitute a recommendation to buy or sell any security. This article represents the opinion of the author as of the date of this article. This article contains certain "forward-looking statements," which may be identified by the use of such words as "believe," "expect," "anticipate," "should," "planned," "estimated," "potential," "outlook," "forecast," "plan" and other similar terms. All are subject to various factors, any or all of which could cause actual events to differ materially from projected events. This article is based upon information reasonably available to the author and obtained from sources the author believes to be reliable; however, such information and sources cannot be guaranteed as to their accuracy or completeness. The author makes no representation as to the accuracy or completeness of the information set forth in this article and undertakes no duty to update its contents. The author may also cover his/her short position at any point in time without providing notice. The author encourages all readers to do their own due diligence.

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