Bank on It — Online

The internet revolution has changed everything about the way consumers conduct their financial affairs. Online banks give people access to regular bank services such as checking and savings accounts, CDs and loans. One of the pioneers in online banking is Axos Financial (NYSE: AX). Axos’ stock dropped last year due to the company’s rising expenses. For example, since Axos pays higherthan-average rates on deposits, rising interest rates have caused its interest expense to soar. However, its longterm growth story is still intact. Axos has had a busy year: It changed its name from Bank of Internet USA, made acquisitions such as Nationwide’s deposit base, and invested heavily in its new proprietary banking platform, Universal Digital Bank (UDB), which combines all of its products and services into one unit, allowing for more cross-selling and customized solutions for customers. Axos’ low-cost business model gives it a big advantage over its brick-and-mortar peers. For example, Axos generated a 15 percent return on equity in the most recent quarter — well above the industry benchmark. Plus, with less than $10 billion in assets, Axos is a rather small banking institution — with lots of room to grow. On a year-over-year basis, net income increased by nearly 23 percent, and the bank’s loan and lease portfolio has increased by more than 14 percent. (The Motley Fool owns shares of and has recommended Axos Financial.)