Why The Bancorp Inc. Shares Slid

An unexpected surprise in its first-quarter results sends The Bancorp screaming lower. Find out if this dip is a buying opportunity or all the more reason to keep your distance.

Sean Williams
Sean Williams
Apr 24, 2014 at 12:00AM

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: Shares of The Bancorp (NASDAQ:TBBK), a banking products and services provider to retail and commercial markets, as well as small and mid-sized business within the U.S., dipped as much as 17% after reporting its first-quarter results after the closing bell last night.

So what: For the quarter, The Bancorp saw revenue increase a robust 20% to $53.6 million on the heels of a 26% increase in non-interest income and a 17% jump in net interest income. Outstanding loans also grew by 17% from the year-ago period. Where the wheels fell off the wagon was when it reported an adjusted profit of just $0.01 per share, down 95% from the $0.20 per share recorded during this quarter last year, and well below Wall Street's forecast of $0.28 per share. As noted by CEO Besty Cohen, "an additional loan loss provision of $11.8 million principally related to newly identified adversely classified loans" adversely affected its bottom line.

Now what: Overall, it wasn't as terrible of a quarter as it might appear on the surface. There were a few mild concerns, such as a rise in the number of commercial and construction loan charge-offs and a sizable increase in the number of loans 90 or more days past due collecting interest from the year-ago quarter (189 versus 110). However, there were also a number of positives, including a five basis point improvement in net interest margin from the prior year, a 5% improvement to book value, and the aforementioned robust revenue growth. While the loan loss surprise wasn't pleasant for shareholders, it's likely a one-time event, meaning if the stock continues to drop it could actually become a bargain for investors seeking a small-cap bank with double-digit growth potential.