January 27, 2023

For many investors, investing during a bear market means staying away from small-cap stocks. That could be a mistake, as these stocks often take the lead when the market reverses. And…spoiler alert…the market always reverses.



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Nevertheless, quality still matters, and it matters even more when you invest in small-cap companies. With that in mind, The Bancorp (NASDAQ: TBBK) is a regional small-cap bank that appears to be well-positioned for whatever happens in 2023.

This article introduces you to The Bancorp and explains why it might deserve a spot on your 2023 watchlist.

An emerging name among regional banks

The Bancorp may not be a household name when it comes to regional banks, but that could change. The company operates as the financial holding company for The Bancorp Bank. That bank offers a portfolio of banking products and services consisting of fintech solutions, institutional banking, commercial loans and real estate bridging loans.

While you may not have a credit or debit card named The Bancorp, chances are it endorses one of the many private label companies you’ve heard of and may get offers. The company is the largest issuer of prepaid cards in the United States.

In August 2022, the Bank Director 2022 Ranking Banking study ranked The Bancorp Bank as the number one bank among those with assets between $5 billion and $50 billion. The bank’s position was measured by its return on equity and assets, asset quality, capital adequacy and total shareholder return.

A profitable bank that shows growth

In its most recent quarter, The Bancorp missed analyst expectations for revenue and earnings. But some context is important. The company has reported higher year-over-year (YOY) revenue and profit in the first three quarters. For the first three quarters, the company is ahead of 2021 revenue growth by 5% and earnings per share (EPS) by 10%.

TBBK Stock is one for the watchlist

As we enter the 2022 home stretch, it’s a good time to take a critical look at your portfolio. Removing underperforming stocks is often the easy part. Replacing them is quite another matter.

The consensus in the financial media is that there will be a recession of unknown length and severity in 2023. Of course there are also people who think we are already in it. Either way, investors are likely to see higher interest rates in 2023. This makes financial stocks attractive.

But the risk of financial stocks comes from the credit side of the company. That’s another reason to look at The Bancorp. The company has a history of having a loan portfolio with low credit losses

TBBK shares are not heavily covered by analysts. However, the two analysts who are followed by MarketBeat give the stock a buy rating with a price target that gives investors the potential for a 26% upside. That kind of profit, along with a P/E ratio of only about 13x earnings and a forward P/E ratio of about 12x, compensates for the lack of a dividend and makes The Bancorp one to have on your watchlist for 2023 .

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