With an improving earnings picture and a solid outlook for the industry, this stock climbed to Zacks Rank # 1 (Strong Buy) on January 29, 2014.
About the Company
Founded in 2000, The Bancorp (TBBK) is a financial company that provides private label banking and technology solutions for non-bank companies ranging from entrepreneurial start-ups to those on the Fortune 500.
The company is headquartered in Wilmington, DE. and Gibraltar, and has additional offices in Philadelphia, King of Prussia, Chicago, Crofton, Minneapolis, Orlando, and Sioux Falls.
TBBK’s private-label programs focus on four main business segments: Healthcare Solutions, Payment Solutions, Payment Acceptance and Institutional Banking.
Additionally, TBBK offers a full array of lending services, including Commercial Lending, Fleet Management and Leasing, 1031 Exchange Services and Government Guaranteed Lending.
During Q3 of 2013, Prepaid Cards segment accounted for 35% of the revenue, while Community Bank segment accounted for 22%.
Excellent Results and Improving Fundamentals
The Bancorp reported its Q4 results on January 23, 2014. Net income for the quarter increased 40% to $7.3 million compared to $5.2 million in prior-year quarter. Revenues increased to $50.5 million compared to $40.3 million in Q4 2012. Net earnings came in at $0.19 per share, significantly ahead of the Zacks Consensus Estimate of $0.13 per share.
Non-interest income increased 40% to $21.2 million, from $15.1 million in Q4 of 2012, while the net interest income increased 15% to $25.4 million from $22.1 million. The results were aided by TBBK’s leadership position in the prepaid card industry, which was a primary vector of growth.
Positive Earnings Estimates Revisions
As a result of improving outlook for the company, analysts have been revising their estimates for the first quarter and the fiscal year 2014. Zacks consensus estimates for the current quarter and the fiscal year now stand at $0.27 and $0.98 per share, up from $0.21 and $0.90 per share, 30 days ago.
Solid Industry Outlook
Small regional and community banks are in a great position to benefit from rising long-term rates and steepening yield curve. Furthermore, as a result of stringent regulations and increased oversight, most banks now have much better capital and liquidity position compared to the position a few years ago. Financials have been one of the best-performing sectors this year, and the situation is likely to continue in the coming months.
Further, TBBK’s strong focus on fee business, which now accounts for almost 50% of the revenue, will keep the earnings growth momentum strong going forward.
The Bottom Line
TBBK is a Zacks Rank No. 1 (Strong Buy) stock. It also has a longer-term Zacks recommendation of "Outperform." Additionally, a Zacks Industry rank of 89 out of 265 (top 34%) indicates a strong likelihood of continued strength in the short to medium term, compared with other industries.
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