Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: After reporting its earnings swung from a gain of $0.15 per share in the second quarter of last year to a loss of $0.15 this year, Bancorp (NASDAQ: TBBK ) saw its stock fall more than 12% and at the time of writing remains down over 10.5%.
So What: The reason for the dip in earnings at Bancorp didn't come from its core operations, as its net interest income -- the difference between what it earns from loans versus what it pays out on deposits and other forms of borrowing -- as well as its noninterest income -- what it collects on fees -- each rose.
But as a result of its previous disclosed note the FDIC, one of the Federal bank regulators, handed down an order to Bancorp to enhance its controls related to the Bank Secrecy Act (BSA), it incurred $9.2 million worth of one-time costs. On the day this was first announced in June, Bancorp saw its stock fall 30%.
In addition, Bancorp also noted its provision for loans and lease losses -- what it expects to lose from its loans -- rose more than 60%, from $9.5 million to $15.5 million. Through the first six months of 2014 its provision for loan and lease losses has more than doubled from $15 million last year to $32.8 million this year.
Now what: Thanks to the increased expected losses in both the first and second quarters, as well as the charges related to the enhanced controls required by the FDIC, through the first half of the year Bancorp has reported a loss of $0.14 per share versus earnings per share of $0.34 through the six months of 2013.
Regional banks can often make for great investments, and Bancorp is now trading at a very reasonable price to tangible book value multiple of 1.0.But the fact remains it has experienced a number of troubling things over the last month -- driven by the regulatory requirements -- and investors should be well aware of its missteps and trouble.
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