BofI (NASDAQ: BOFI) stock doesn't fit anybody's definition of "cheap."

To be more precise, it's trading at 2.9 times tangible book value (TBV). That's undeniably expensive for any bank; generally, you hope to see that ratio closer to 1.2 to 1.5 times TBV.

But you pay up for quality. Here's why it's worth it.

Value is what you get

Look at basically any typical bank growth, profitability, or credit quality metric, and BofI knocks it out of the park. Let's start with growth. BofI increased its loan portfolio by 15% year over year (and broader assets up 11% to $10 billion), and on the flip side, boosted deposits by 17% year over year to $8 billion. Diluted earnings per share grew by 27% in tandem with net income (which increased by 25%) -- a good sign that the company isn't diluting current shareholders to purchase growth. That growth is also increasingly diversified. While 49% of BofI's loans and leases are single-family mortgages and 21% multifamily (its historic bread and butter), 17% are now commercial and industrial, and the company also has a small but rapidly growing auto loan segment.

Image source: Getty Images.

To get that kind of growth, you wouldn't be shocked to see the company letting some profitability go on the margins. Instead, net interest margin increased to 4.8% from 4.2% in the year-ago quarter. That's impressive growth, although not entirely unexpected given that interest rates have been increasing. BofI's efficiency ratio last quarter was 32.4%. A bank is doing really well if it's under 50%. That's how powerfully BofI's branchless system functions to reduce costs. What this all means at its core is that BofI isn't sacrificing margin for market share. That's a great sign of a business with an underlying advantage (in this case, low costs) that can help it continue to grow profitably.

Of course, all of this doesn't mean much if credit quality is poor. Fortunately, BofI doesn't have that problem, either -- it's getting these yields with high-quality borrowers, with the average FICO score for single-family jumbo loans at 713, agency conforming loans at 751, and auto loan at 773. The company reported a 0.02% net charge-off rate and a 0.39% nonperforming asset to total asset ratio last quarter.

Most lenders can do well when the economy's growing and the credit cycle is favorable, but the real question is how they do when things sour. Fortunately, BofI doesn't have a problem there, either -- the highest its nonperforming loan ratio got during and after the financial crisis was 1.5% in 2010, a number far below most other banks. Even in the worst of times, things were just fine at BofI.