Disclosure: We are short shares of BOFI.
BOFI trades at 3.5x book despite unsustainable return on equity, increasing competition, and unusually severe exposure to interest-rate risk.
They profited from distressed mortgage-backed securities and a steep yield curve, but as the curve flattens and old bonds mature, their returns will come back down to earth.
Their valuation is at a big premium compared to its peers, already pricing in high returns and rapid growth. But in the past few quarters, their organic account growth has been negative.