TBBK 10-K & 10-Q changes, risk factors and insider trading
Bancorp, Inc. · Nasdaq · National Commercial Banks · CIK 1295401 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “We are dependent upon digital delivery channels for our banking and fintech services, and are subject to the risks associated with those channels.”
New heading “The development and use of artificial intelligence (“AI”) presents risks and challenges that may adversely impact our business.”
New heading “Ineffective liquidity management could adversely affect our financial condition and results of operation.”
New heading “Regulatory and Compliance”
New heading “We are subject to and may be affected by extensive government regulation or material changes in the regulatory landscape.”
New heading “Our enterprise-wide risk management framework, processes and strategies must be effective.”
New heading “We will be subject to heightened regulatory requirements and experience adverse business consequences if our total assets exceed $10 billion as of December 31 of any calendar year.”
New heading “We operate in highly competitive markets, and our partnership marketing strategy has been adopted by other institutions with which we compete.”
New heading “Periods of weak economic, slow growth, and/or inflationary conditions in the U.S. economy have had, and could have significant adverse effects on our business performance, growth prospects, and operating results.”
New heading “Changes in interest rates could reduce our income and asset valuations, and adversely affect our business, results of operations and financial condition.”
New heading “Fintech Solutions Business”
New heading “There is a significant concentration of deposits and non-interest income that are sourced through partner relationships in our Fintech Solutions business.”
New heading “Agreements between the Bank and its partners related to marketing and servicing fintech loans may subject the Bank to unique compliance, oversight, and other risks.”
New heading “Credit Solutions Business”
New heading “The quantitative models we use to manage certain accounting and risk management functions may not be effective, which may cause adverse effects on our results of operations and financial condition.”
New heading “Agreements between the Bank and its partners to market and service Bank-originated consumer loans may subject the Bank to credit, fraud and other risks, as well as claims from regulatory agencies and our partners that, if successful, could negatively impact the Bank's current and future business.”
New heading “We are exposed to credit risks specific to the population of real estate bridge loans, including risks related to the real estate collateral value and risks related to the execution of the properties’ business plan.”
New heading “Interruptions or failures in our technology solutions, or those of our third-party service providers, could impact or interrupt our ability to service our customers, clients and partners.”
New heading “Cybersecurity risks, including the loss of data or disruption in our operations, could result in a loss of customers, cause disclosure of confidential information, adversely affect our operations, cause reputational damage, and create significant legal and financial exposure.”
New heading “We are subject to risks associated with the third-parties to whom we outsource many essential services, including risks related to our agreements and oversight of their activities.”
New heading “Our financial statements are based in part on assumptions and estimates made by our management. Our earnings may decrease if amounts realized vary significantly from our estimates, or from updates to assumptions.”
New heading “Changes in accounting policies or accounting standards, or changes in how accounting standards are interpreted or applied, could materially affect how we report our financial results and condition.”
New heading “If we fail to maintain effective internal control over financial reporting, our ability to accurately and timely report our financial results may be impacted, which could result in a loss of investor confidence and adversely impact our stock price and our business.”
New heading “We have historically returned capital to shareholders through share repurchase programs. There can be no assurances that this will continue into the future or that this is the optimal use of our capital.”
Removed heading “Risk Factors Summary”
Removed heading “Risks Relating to Our Business and Industry”
Removed heading “Risks Related to Our Specialty Lending Business Activities”
Removed heading “Risks Relating to Our Payments Business Activities”
Removed heading “Risks Relating to Taxes and Accounting”
Removed heading “Risks Related to Ownership of Our Common Stock”
Removed heading “Periods of weak economic and slow growth conditions in the U.S. economy have had, and may continue to have, significant adverse effects on our assets and operating results.”
Removed heading “Recent developments in the banking industry related to specific problem banks could have a negative impact on the industry as a whole and may negatively impact stock prices and result in additional regulations that could increase our expenses and otherwise affect our operations.”
Removed heading “Risk management processes and strategies must be effective, and concentration of risk increases the potential for losses.”
Removed heading “We operate in highly competitive markets, and our affinity group marketing strategy has been adopted by other institutions with which we compete.”
Removed heading “As a financial institution whose principal medium for delivery of banking services is the internet, we are subject to risks particular to that medium and other technological risks and costs.”
Removed heading “Our operations may be interrupted if our network or computer systems, or those of our third-party service providers, fail.”
Removed heading “We face cybersecurity risks, which could result in a loss of customers, cause disclosure of confidential information, adversely affect our operations, cause reputational damage and create significant legal and financial exposure.”
Removed heading “We and the Bank are subject to and may be affected by extensive government regulation.”
Removed heading “Any additional future FDIC insurance premium increases will adversely affect our earnings.”
Removed heading “We are subject to extensive government supervision with respect to our compliance with numerous laws and regulations.”
Removed heading “Our reputation and business could be damaged by our entry into any future enforcement matters with our regulators and other negative publicity.”
Removed heading “We are subject to risks associated with the third parties to whom we outsource many essential services, including risks related to our agreements and oversight of their activities.”
Removed heading “Legislative and regulatory actions taken now or in the future, including as a result of the new U.S. administration, may increase our operating costs and impact our business, governance structure, financial condition or results of operations.”
Removed heading “A downgrade of the U.S. credit rating could negatively impact our business, results of operations and financial condition.”
Removed heading “Inflation could negatively and materially impact our business directly or indirectly by its impact on our borrowers.”
Removed heading “Increased scrutiny with respect to environmental, social and governance (“ESG”) practices may impose additional costs on the Company or expose it to new risks.”
Removed heading “Climate change or government action and societal responses to climate change could adversely affect our results of operations.”
Removed heading “Risks Related to Our Specialty Lending Business Activities”
Removed heading “Changes in interest rates and loan production could reduce our income, cash flows and asset values.”
Removed heading “The Bank’s allowance for credit losses may not be adequate to cover actual losses.”
Removed heading “Our lending limit may adversely affect our competitiveness.”
Removed heading “Revised accounting standards require current recognition of credit losses over the estimated remaining lives of loans.”
Removed heading “The Bank may suffer losses in its loan portfolio despite its underwriting practices.”
Removed heading “Environmental liability associated with lending activities could result in losses.”
Removed heading “Agreements between the Bank and third parties to market and service Bank-originated consumer loans may subject the Bank to credit, fraud and other risks, as well as claims from regulatory agencies and third parties that, if successful, could negatively impact the Bank's current and future business.”
Removed heading “We have entered into agreements with third party marketers and servicers for consumer fintech loans which we have begun originating, and which present credit and other risks.”
Removed heading “Risks Relating to Our Payments Business Activities”
Removed heading “There is a significant concentration in prepaid and debit card fee income which is subject to various risks.”
Removed heading “We may depend in part upon wholesale and brokered certificates of deposit to satisfy funding needs.”
Removed heading “We derive a significant percentage of our deposits, total assets and income from deposit accounts generated by diverse independent companies, including those which provide card account marketing services, and investment advisory firms.”
Removed heading “We are subject to tax audits, and challenges to our tax positions or adverse changes or interpretations of tax laws could result in tax liability.”
Removed heading “The appraised fair value of the assets from our commercial loans, at fair value or collateral from other loan categories may be more than the amounts received upon sale or other disposition.”
Removed heading “A failure to implement and maintain effective internal control over financial reporting could result in material misstatements in our financial statements which could require us to restate financial statements, cause investors to lose confidence in our reported financial information and have a negative effect on our stock price.”
Removed heading “The price of our common stock may decline or otherwise become volatile.”
Removed heading “An investment in our common stock is not an insured deposit.”
Removed heading “Future offerings of debt, which would be senior to our common stock upon liquidation, and/or preferred equity securities which may be senior to our common stock for purposes of dividend distributions or upon liquidation, may reduce the market price at which our common stock trades.”
Removed heading “Stimulus programs may result in potential liability or losses.”
Removed heading “Severe weather, natural disasters, geopolitical events, public health crises, acts of war or terrorism or other adverse external events could harm our business.”
Largest changes
“Catastrophic events over which we have no control, including severe weather, natural disasters, geopolitical events, public health crises, trade disputes, acts of war or terrorism and other adverse external events could have a significant impact on our ability to conduct business. …”see in full comparison
“We have policies and procedures designed to prevent violations of the extensive federal and state laws and regulations that we are subject to, however there can be no assurance that such violations will not occur. …”see in full comparison
“Control deficiencies or material weaknesses in our internal controls over financial reporting may be discovered in the future and could result in material weaknesses, cause us to fail to meet our periodic reporting obligations or result in material misstatements in our financial statements. Any such failure could also adversely affect our liquidity, our access to capital markets, the perceptions of our creditworthiness, and we may be unable to maintain compliance with applicable securities laws and the rules and listing standards of the NASDAQ. …”see in full comparison
“A successful penetration or circumvention of system security could cause serious negative consequences, including deterrence of potential customers or loss of existing customers, thereby impairing our ability to grow and maintain profitability and, possibly, our ability to continue delivering our products and services through the internet. …”see in full comparison
“We may also face residual risk related to our participation in the SBA Paycheck Protection Program (“PPP”) program established by the Coronavirus Aid, Relief, and Economic Security Act of 2020. Participation in the SBA PPP and any other programs or stimulus packages may give rise to claims, including by governments, regulators or customers or through class action lawsuits, or judgments against us that may result in the payment of damages or the imposition of fines, penalties or restrictions by regulatory authorities, or result in reputational harm. …”see in full comparison
“a loss of confidence in the security of our systems, products and services, litigation exposure, regulatory fines, penalties, or regulatory enforcement action; and increases to our costs and/or other financial losses Any such consequences could adversely impact our results of operations and financial condition. In addition, we may not have adequate insurance coverage to compensate for losses from a cybersecurity event. …”see in full comparison
Full comparison: every changed paragraph (304)
Risk Factors Summary
Risks Relating to Our Business and Industry
Periods of weak economic and slow growth conditions in the U.S. economy have had, and may continue to have, significant adverse effects on our assets and operating results.
Recent developments in the banking industry related to specific problem banks could have a negative impact on the industry as a whole and may negatively impact stock prices and result in additional regulations that could increase our expenses and otherwise affect our operations.
We cannot assure you that we will be able to accomplish our strategic goals as necessary to meet our financial targets.
We may have difficulty managing our growth which may divert resources and limit our ability to expand our operations successfully.
Risk management processes and strategies must be effective, and concentration of risk increases the potential for losses.
We operate in highly competitive markets, and our affinity group marketing strategy has been adopted by other institutions with which we compete.
As a financial institution whose principal medium for delivery of banking services is the internet, we are subject to risks particular to that medium and other technological risks and costs.
Our operations may be interrupted if our network or computer systems, or those of our third-party service providers, fail.
We face cybersecurity risks, which could result in a loss of customers, cause disclosure of confidential information, adversely affect our operations, cause reputational damage and create significant legal and financial exposure.
Failure to comply with personal data protection and privacy laws can adversely affect our business.
We and the Bank are subject to and may be affected by extensive government regulation.
Any additional future FDIC insurance premium increases will adversely affect our earnings.
We are subject to extensive government supervision with respect to our compliance with numerous laws and regulations.
Our reputation and business could be damaged by our entry into any future enforcement matters with our regulators and other negative publicity.
We are subject to risks associated with the third parties to whom we outsource many essential services, including risks related to our agreements and oversight of their activities.
Legislative and regulatory actions taken now or in the future, including as a result of the new U.S. administration, may increase our operating costs and impact our business, governance structure, financial condition or results of operations.
A downgrade of the U.S. credit rating could negatively impact our business, results of operations and financial condition.
New lines of business, and new products and services may result in exposure to new risks and the value and earnings related to existing lines of business are subject to market conditions.
Potential acquisitions may disrupt our business and dilute stockholder value.
Inflation could negatively and materially impact our business directly or indirectly by its impact on our borrowers.
The loss or transition of key members of our senior management team or key staff in the Bank's divisions, or our inability to attract and retain qualified personnel, could adversely affect our business.
Increased scrutiny with respect to environmental, social and governance (“ESG”) practices may impose additional costs on the Company or expose it to new risks.
Climate change or government action and societal responses to climate change could adversely affect our results of operations.
Risks Related to Our Specialty Lending Business Activities
Changes in interest rates and loan production could reduce our income, cash flows and asset values.
We are subject to lending risks.
The success of our SBA lending program is dependent upon the continued availability of SBA loan programs, our status as a Preferred Lender under the SBA loan programs, our ability to comply with applicable SBA lending requirements and our ability to successfully manage related risks.
The Bank’s allowance for credit losses may not be adequate to cover actual losses.
Our lending limit may adversely affect our competitiveness.
Revised accounting standards require current recognition of credit losses over the estimated remaining lives of loans.
The Bank may suffer losses in its loan portfolio despite its underwriting practices.
Environmental liability associated with lending activities could result in losses.
A prolonged U.S. government shutdown or default by the United States on government obligations could harm our results of operations.
Agreements between the Bank and third parties to market and service Bank-originated consumer loans may subject the Bank to credit, fraud and other risks, as well as claims from regulatory agencies and third parties that, if successful, could negatively impact the Bank's current and future business.
We have entered into agreements with third party marketers and servicers for consumer fintech loans which we have begun originating, and which present credit and other risks.
Risks Relating to Our Payments Business Activities
Regulatory and legal requirements applicable to the prepaid and debit card industry are unique and frequently changing.
Changes in rules or standards set by the payment networks, or changes in debit network fees or products or interchange rates, could adversely affect our business, financial position and results of operations. The potential for fraud in the card payment industry is significant and could adversely affect our business and results of operations.
There is a significant concentration in prepaid and debit card fee income which is subject to various risks.
If our prepaid and debit card and other deposit accounts generated by third parties were no longer classified as non-brokered, our FDIC insurance expense might increase.
We may depend in part upon wholesale and brokered certificates of deposit to satisfy funding needs.
We derive a significant percentage of our deposits, total assets and income from deposit accounts generated by diverse independent companies, including those which provide card account marketing services, and investment advisory firms.
We face fund transfer and payments-related risks.
Unclaimed funds from deposit accounts or represented by unused value on prepaid cards present compliance and other risks.
Risks Relating to Taxes and Accounting
We are subject to tax audits, and challenges to our tax positions or adverse changes or interpretations of tax laws could result in tax liability.
The appraised fair value of the assets from our commercial loans, at fair value or collateral from other loan categories may be more than the amounts received upon sale or other disposition.
A failure to implement and maintain effective internal control over financial reporting could result in material misstatements in our financial statements which could require us to restate financial statements, cause investors to lose confidence in our reported financial information and have a negative effect on our stock price.
Risks Related to Ownership of Our Common Stock
The price of our common stock may decline or otherwise become volatile.
An investment in our common stock is not an insured deposit.
Future offerings of debt, which would be senior to our common stock upon liquidation, and/or preferred equity securities which may be senior to our common stock for purposes of dividend distributions or upon liquidation, may reduce the market price at which our common stock trades.
The Bank’s ability to pay dividends is subject to regulatory limitations which, to the extent we require such dividends in the future, may affect our ability to pay our obligations and pay dividends.
Anti-takeover provisions of our certificate of incorporation, bylaws and Delaware law may make it more difficult for holders of our common stock to receive a change in control premium.
Our Amended and Restated Bylaws provide that certain courts in the State of Delaware or the federal district courts of the United States will be the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
General Risks
Stimulus programs may result in potential liability or losses.
Severe weather, natural disasters, geopolitical events, public health crises, trade disputes, acts of war or terrorism or other adverse external events could harm our business.
Management's Discussion & Analysis (MD&A)
New heading “Executive Summary”
New heading “Financial Highlights”
New heading “Net Interest Income”
New heading “Growth of Fintech Lending”
New heading “Interest Income”
New heading “Interest Expense”
New heading “Net Interest Margin”
New heading “Investment Securities”
New heading “Total Loan Portfolio”
New heading “Fintech Programs”
New heading “Portfolio Estimated Maturities”
New heading “Portfolio Performance”
New heading “Asset Quality Ratios”
New heading “Liquidity and Capital Resources”
New heading “Interest Rate Sensitivity Analysis”
New heading “Allowance for credit losses on loans”
Removed heading “Nature of Operations”
Removed heading “Recent Developments”
Removed heading “Key Performance Indicators”
Removed heading “Results of KPIs”
Removed heading “Critical Accounting Estimates”
Removed heading “Net Income: 2024 compared to 2023”
Removed heading “Volume and Rate Analysis”
Removed heading “Provision for Credit Loss on Trust Preferred Security”
Removed heading “Interest-earning Deposits”
Removed heading “Investment Portfolio”
Removed heading “Commercial Loans, at Fair Value”
Removed heading “Non-accrual Loans, Loans 90 Days Delinquent and Still Accruing, OREO and Modified Loans”
Removed heading “Premises and Equipment, Net”
Removed heading “Subordinated Debentures”
Removed heading “Other Long-term Borrowings”
Removed heading “Other Liabilities”
Removed heading “Shareholders’ Equity”
Removed heading “Off-balance Sheet Commitments”
Removed heading “Contractual Obligations and Other Commitments”
Removed heading “Impact of Inflation”
Largest changes
“The management of rate sensitive assets and liabilities is essential to controlling interest rate risk and optimizing interest margins. An interest rate sensitive asset or liability is one that, within a defined time period, either matures or experiences an interest rate change in line with general market rates. Interest rate sensitivity measures the relative volatility of an institution’s interest margin resulting from changes in market interest rates. …”see in full comparison
“The Company ranks its qualitative factors in five levels: minimal, low, moderate, moderate-high, and high-risk. The individual qualitative factors for each portfolio segment have their own scale based on an analysis of that segment. A high-risk ranking results in the largest increase in the ACL calculation with each level below having a lesser impact on a sliding scale. The qualitative factors used for each portfolio are described below in the description of each portfolio segment. …”see in full comparison
“While we do not have a traditional branch system, we believe that our core deposits, which include our demand, interest checking, savings and money market accounts, have similar characteristics to those of a bank with a branch system. The majority of our deposit accounts are obtained with the assistance of third-parties and as a result have historically been classified as brokered by the FDIC. …”see in full comparison
“Except for SBLOC, IBLOC and other loans as noted above, for purposes of determining the pool-basis reserve, the loans not assigned an individual reserve are segregated by product type, to recognize differing risk characteristics within portfolio segments, and an average historical loss rate is calculated for each product type. Loss rates are computed by classifying net charge-offs by year of loan origination, and dividing into total originations for that specific year. This methodology is referred to as vintage analysis. …”see in full comparison
“Management estimates the ACL quarterly, and except for SBLOC, IBLOC and other loans uses relevant internal and external historical loan performance information, current economic conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the initial basis for the estimation of expected credit losses over the estimated remaining life of the loans. …”see in full comparison
Full comparison: every changed paragraph (394)
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides information about the Company’s results of operations, financial condition, liquidity and asset quality and provides comparisons between our results of operations for fiscal years 20242025 and 2023.2024. For discussion and comparison of fiscal years 20232024 and 2022,2023, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on 10-K10-K, as amended, for the fiscal year ended December 31, 2023,2024, filed with the SEC on FebruaryApril 29,7, 2024.2025. This information is intended to facilitate your understanding and assessment of significant changes and trends related to our financial condition and results of operations. This MD&A should be read in conjunction with the audited interim consolidated financial statements and notes thereto contained in this Annual Report on Form 10-K.
The MD&A is organized in the following sections:
Overview
Executive Summary
The Bancorp’s balance sheet has a risk profile enhanced by the special nature of the collateral supporting its loan niches, and related underwriting. Those loan niches have contributed to increased earnings levels, even during periods in which markets have experienced various economic stresses. Real estate bridge lending is comprised of workforce housing which we consider to be working class apartments at more affordable rental rates, in selected states. We believe that underwriting requirements provide significant protection against loss, as supported by loan-to-value (“LTV”) ratios based on third-party appraisals. SBLOC and IBLOC loans are collateralized by marketable securities and the cash value of life insurance, respectively, while SBA loans are either SBA 7(a) loans that come with significant government-related guarantees, or SBA 504 loans that are made at 50-60% LTVs. Additional detail with respect to these loan portfolios is included in the related tables in “Financial Condition.” In 2024, we began originating consumer fintech loans, which are short-term loans made with the assistance of third party marketers and servicers. We believe that the nature of certain such loans, such as credit cards secured by deposits, or other aspects of these lending programs, also enhance their risk profile. The earnings impact of our payment businesses also positively impact our risk profile.
Nature of Operations
We are a Delaware financial holding company and our primary, wholly-owned subsidiary is The Bancorp Bank, National Association. The vast majority of our revenue and income is currently generated through the Bank. In our continuing operations, we have five primary lines of specialty lending in our national specialty finance segment:
SBLOC, IBLOC, and investment advisor financing;
leasing (direct lease financing);
SBLs, primarily SBA loans,
non-SBA commercial real estate bridge loans; and
consumer fintech lending.
SBLOCs and IBLOCs are loans that are generated through affinity groups and are respectively collateralized by marketable securities and the cash value of insurance policies. SBLOCs are typically offered in conjunction with brokerage accounts and are offered nationally. IBLOC loans are typically viewed as an alternative to standard policy loans from insurance companies and are utilized by our existing advisor base as well as insurance agents throughout the country. Investment advisor financing are loans made to investment advisors for purposes of debt refinance, acquisition of another investment firm or internal succession. Vehicle fleet and, to a lesser extent, other equipment leases are generated in a number of Atlantic Coast and other states and are collateralized primarily by vehicles. SBA loans are generated nationally and are collateralized by commercial properties and other types of collateral. Our non-SBA commercial real estate bridge loans, at fair value, are primarily collateralized by multifamily properties (apartment buildings), and to a lesser extent, by hotel and retail properties. These loans were originally generated for sale through securitizations. In 2020, we decided to retain these loans on our balance sheet as interest-earning assets and resumed originating such loans in the third quarter of 2021. These new originations are identified as real estate bridge loans, consist of apartment building loans, and are held for investment in the loan portfolio. Prior originations originally intended for securitizations continue to be accounted for at fair value, and are included on the balance sheet in “Commercial loans, at fair value.”
In the second quarter of 2024, we initiated our measured entry into consumer fintech lending, by which we make consumer loans with the marketing and servicing assistance of existing and planned new fintech relationships. While the $454.4 million of such loans at December 31, 2024 did not significantly impact income during the year, such lending is expected to meaningfully impact both the balance sheet and income in the future. We expect that impact will be reflected in a lower cost of funds for related deposits and increased transaction fees.
The majority of our deposits and non-interest income are generated in our fintech segment, or Fintech Solutions Group, which consists of consumer transaction accounts accessed by Bank-issued prepaid or debit cards and payment companies that process their clients’ corporate and consumer payments, ACH accounts, the collection of card payments on behalf of merchants and other payments through our Bank. The card-accessed deposit accounts are comprised of debit and prepaid card accounts that are generated by companies that market directly to end users. Our card-accessed deposit account types are diverse and include: consumer and business debit, general purpose reloadable prepaid, pre-tax medical spending benefit, payroll, gift, government, corporate incentive, reward, business payment accounts and others. Our ACH accounts facilitate bill payments and our acquiring accounts provide clearing and settlement services for payments made to merchants which must be settled through associations such as Visa or Mastercard. Consumer transaction account banking services are provided to organizations with a pre-existing customer base tailored to support or complement the services provided by these organizations to their customers, which we refer to as “affinity or private label banking.” These services include loan and deposit accounts for investment advisory companies through our Institutional Banking department. We typically provide these services under the name and through the facilities of each organization with whom we develop a relationship. In 2024, we began offering loans through credit sponsorship with third parties, in our fintech segment.
Recent Developments
On December 31, 2024, the Company's wholly owned subsidiary, The Bancorp Bank, National Association (the “Bank”), closed on the sale of an $82 million REBLs portfolio, collateralized by apartment buildings. The sale included a $32.5 million classified loan, which was current with respect to monthly payments. The Bank provided financing to a third party purchaser, which provided a 25% payment guaranty. The leverage and guaranty provided were consistent with market terms, and the Bank’s general underwriting standards for similar loans. The resulting weighted average look-through LTVs, of the related mortgaged properties are no more than 57% as-is and 55% as-stabilized, which are further supported by the 25% payment guaranty. The look-through LTVs are the weighted average of LTVs multiplied by the leverage provided by the Company, based upon appraisals performed within the past 15 months. There was no loss of principal in connection with the sale, although $1.3 million of accrued interest was reversed in connection therewith. We believe that the sale is an indication of the liquidity of the portfolio, as further evidenced by “as is” and “as stabilized” LTVs, respectively, of 77% and 68% for total special mention and substandard REBL loans, based upon appraisals performed within the past 12 months.
Primarily as a result of the aforementioned $32.5 million substandard loan in that sale, total substandard loans decreased 14%, to $134.4 million at December 31, 2024, from $155.4 million at September 30, 2024. Substandard loans were further reduced on January 2, 2025, on which date a $12.3 million substandard loan was repaid without loss of principal, as a result of the sale of the underlying apartment building collateral in Plainfield New Jersey. In January 2025, two loans totaling $9.8 million were transferred to non-accrual and were accordingly classified as substandard.
As noted in the third quarter earnings release, a significant portion of the REBL portfolio was reviewed during that quarter by a firm specializing in such analysis, which resulted in no additional Special Mention or Substandard determinations. Additionally, the 100 basis points of Federal Reserve rate reductions may provide cash flow benefits to floating rate borrowers. Underlying property values as supported by the LTVs noted above, also continue to facilitate the recapitalization of certain loans from borrowers experiencing cash flow issues, to borrowers with greater financial capacity. At December 31, 2024, special mention real estate bridge loans amounted to $84.4 million which was unchanged from September 30, 2024.
The majority of the Company’s real estate owned is comprised of an apartment complex, with a balance as of December 31, 2024 of $41.1 million. That property is under agreement of sale with a sales price that is expected to cover the Company’s current balance plus the forecasted cost of improvements to the property. The purchaser has increased the total of earnest money deposits to $1.6 million, from $500,000, in consideration of extending the closing date to March 21, 2025. The Company believes that the purpose for the extension is to allow time for this sale to be included in a larger transaction. There can be no assurance that the purchaser will consummate the sale of the property, but if not consummated, the earnest money deposits of $1.6 million would accrue to the Company.
Key Performance Indicators
In 2024, we recorded net income of $217.5 million compared to $192.3 million in 2023, with pre-tax income increasing to $292.2 million in 2024 from $256.8 million in 2023. The increases primarily reflected higher net interest income, excluding the impact of consumer fintech loan credit enhancement, which had a correlated amount of provision for credit losses on consumer fintech loans. The increase in net interest income reflected net loan growth and the cumulative impact of Federal Reserve rate increases in 2023 on the loan portfolio, prior to Federal Reserve rate decreases which began in September 2024. Additionally, non-interest income from our payments businesses continued to grow.
We use a number of key performance indicators (“KPIs”) to measure our overall financial performance and believe they are useful to investors because they provide additional information about our underlying operational performance and trends. We describe how we calculate and use a number of these KPIs and analyze their results below.
Return on assets and return on equity. Two KPIs commonly used within the banking industry to measure overall financial performance are return on assets and return on equity. Return on assets measures the amount of earnings compared to the level of assets utilized to generate those earnings and is derived by dividing net income by average assets. Return on equity measures the amount of earnings compared to the equity utilized to generate those earnings and is derived by dividing net income by average shareholders’ equity.
Ratio of equity to assets. Ratio of equity to assets is another KPI frequently utilized within the banking industry and is derived by dividing period-end shareholders’ equity by period-end total assets.
Net interest margin and credit losses. Net interest margin is a KPI associated with net interest income, which is the largest component of our earnings and is the difference between the interest earned on our interest-earning assets consisting of loans and investments, less the interest on our funding, consisting primarily of deposits. Net interest margin is derived by dividing net interest income by average interest-earning assets. Higher levels of earnings and net interest income on lower levels of assets, equity and interest-earning assets are generally desirable. However, these indicators must be considered in light of regulatory capital requirements, which impact equity, and credit risk inherent in loans. Accordingly, the magnitude of credit losses is an additional KPI.
Other KPIs. Other KPIs we use from time to time include growth in average loans and leases, non-interest income growth, the level of non-interest expense and various capital measures.
Results of KPIs
In the past three years, we have continued to target loan niches which we believe have lower credit risk than certain other forms of lending. These include SBLOC and IBLOC; SBA loans, a significant portion of which are government guaranteed or must have loan-to-value ratios lower than other forms of lending; leasing to which we have access to underlying vehicles; and real estate bridge lending for apartment buildings in selected national regions. Significant amounts of balances of these loans are variable rate and adjust more fully to Federal Reserve rate changes than do our deposits, which are derived primarily from our payments businesses. In 2024, we significantly increased our fixed rate investment portfolio to reduce exposure to lower rate environments. Average loans and leases grew to $5.93 billion in 2024 from $5.73 billion in 2023.
Increases in the return on average assets (‘ROA”) and return on average common equity (“ROE”) KPIs in 2024 reflected the impact of net loan growth and higher rates on loans as a result of Federal Reserve rate increases, prior to decreases which began in September 2024. The impact of loan growth in certain categories was offset by SBLOC and IBLOC payoffs, which we believe resulted from customer resistance to such higher rates. The net interest margin decreased to 4.85% in 2024 from 4.95% in 2023 and return on assets and return on equity respectively amounted to 2.71% and 27.24%, compared to 2.59% and 25.62%. ROA and ROE also reflected growth in ACH, card and other payment processing fees, prepaid, debit card and related fees and consumer credit fintech fees. Changes in book value per common share and the equity to assets ratio primarily reflect earnings retention, net of the impact of share repurchases and changes in the value of available-for-sale securities.
Critical Accounting Estimates
Our accounting and reporting policies conform with GAAP and general practices within the financial services industry. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates. We believe that the determination of our allowance for credit losses on loans, leases and securities requires estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.
We determine our allowance for credit losses with the objective of maintaining an allowance level we believe to be sufficient to absorb our estimated current and future expected credit losses. We base our determination of the adequacy of the allowance on periodic evaluations of our loan portfolio and other relevant factors. However, this evaluation is inherently subjective as it requires material estimates, including, among others, expected default probabilities, the amount of loss we may incur on a defaulted loan, expected commitment usage, the amounts and timing of expected future cash flows, collateral values and historical loss experience. We also evaluate economic conditions and uncertainties in estimating losses and other risks in our loan portfolio. To the extent actual outcomes differ from our estimates, we may need additional provisions for credit losses. Any such additional provisions for credit losses will be a direct charge to our earnings. We utilize a CECL model to determine the adequacy of the allowance and inputs include net charge-off history and estimated loan lives. The allowance for credit losses is accordingly sensitive to changes in these inputs, such that related increases would increase the allowance and provision. See “Allowance for Credit Losses”, “Note E—Loans” and “Note D—Investment Securities” to the audited consolidated financial statements herein for other factors to which the allowance and provision are sensitive.
We periodically review our investment portfolio to determine whether unrealized losses on securities result from credit, based on evaluations of the creditworthiness of the issuers or guarantors, and underlying collateral, as applicable. In addition, we consider the continuing performance of the securities. We recognize credit losses through the consolidated statements of operations. If management believes market value losses are not credit related, we recognize the reduction in other comprehensive income, through equity. Our evaluation of whether a credit loss exists is sensitive to the following factors: (a) the extent to which the fair value has been less than the amortized cost of the security, (b) changes in the financial condition, credit rating and near-term prospects of the issuer, (c) whether the issuer is current on contractually obligated interest and principal payments, (d) changes in the financial condition of the security’s underlying collateral, and (e) the payment structure of the security. If a credit loss is determined, we estimate expected future cash flows to estimate the credit loss amount with a quantitative and qualitative process that incorporates information received from third-party sources and internal assumptions and judgments regarding the future performance of the security.
Results of Operations
Financial Condition
Liquidity and Capital Resources
Asset and Liability Management
Critical Accounting Estimates
We are a Delaware financial holding company, and our primary, wholly-owned subsidiary is The Bancorp Bank, National Association. The Bank is a federally chartered commercial bank located in Sioux Falls, South Dakota and is a FDIC insured institution. The vast majority of our revenue and income is currently generated through the Bank.
Our business strategy is focused on Fintech Solutions, which partners with fintech companies and other technology focused payment-based providers (collectively “partners”) to deliver payment, deposit, and sponsored lending products that attract stable, lower-cost deposits and generate fee income. Our fintech services are provided to organizations with a pre-existing customer base, and the products are tailored to support or complement the services provided by these organizations to their customers. We typically provide these services under the name and through the facilities of each organization with whom we develop a relationship. Fintech services include:
Program sponsorship includes debit, credit and prepaid cards that we issue for companies that market directly to end users. Our card-accessed deposit account types are diverse and include: consumer and business debit, general purpose reloadable prepaid, pre-tax medical spending benefit, payroll, gift, government, corporate incentive, reward, business payment accounts and others. The Bank issues the cards, provides access to the card networks, maintains deposits, and is the sponsor bank of record for accounts.
Payment services delivers real-time, end-to-end payment processing, including automated clearing house (“ACH”) and Rapid Funds Transfer products. Our ACH accounts facilitate bill payments and our acquiring accounts provide clearing and settlement services for payments made to merchants which must be settled through associations such as Visa or Mastercard.
Sponsored lending, or Fintech loans, consist of secured credit cards and unsecured short-term extensions of credit that are originated by the Bank, with the marketing and servicing assistance of our partners. The revenue generated through fintech loan agreements is primarily fee revenue, and not interest income.
Deposits generated through these partner relationships are deployed into loan and lease products offered by both Fintech sponsored lending and the Credit Solutions business line. As of December 31, 2025, 91% of our total deposits were sourced from the Fintech Solutions business, primarily from program sponsorship.
Credit Solutions is our lending business and is focused on offering flexible, specialty credit solutions, and we develop customized products and programs to meet the needs of our clients. Our loan programs include: Real estate bridge lending (REBL), which is comprised primarily of apartment building rehabilitation loans; Institutional banking, which is comprised of security-backed lines of credit (SBLOC), cash value insurance policy-backed lines of credit (IBLOC) and advisor financing; and commercial loans comprised primarily of Small Business Administration (SBA) loans and direct lease financing. Our total loan portfolio also includes the Fintech loans generated by the Fintech Solutions business. The loans in our non-fintech portfolio are secured by collateral, and the fintech loans are backed by credit enhancement agreements from our partners.
Executive Summary
We remain focused on growing our fintech revenues through new partnerships, products and services. Fintech loans of $1.10 billion as of December 31, 2025 increased 142% compared to the December 31, 2024 balance of $454.4 million. Certain loan fees on fintech loans are recorded as non-interest income, and totaled $16.6 million in 2025 compared to $4.8 million in 2024. In addition, our fees earned from ACH, card and other payment processing and Prepaid, debit card and related revenues also grew to $124.6 million in 2025 from $112.0 million in 2024.
We continue to invest in our infrastructure, with a focus on investing in AI tools to gain efficiency and productivity of our people and platform, and reallocating or reducing resources where appropriate. We believe that our infrastructure can accommodate significant additional growth without proportionate increases in expense. In addition, as part of our strategies we will reallocate or reduce resources where appropriate. As part of those efforts, in the fourth quarter of 2025 we restructured our institutional banking business to de-emphasize growth and reallocate space on our balance sheet. This action resulted in a $1.1 million restructuring charge in the fourth quarter of 2025 and $8.0 million in run-rate expense reductions beginning in early 2026.
For 2025, the full year capital return was $375.0 million, and we repurchased 5.646 million shares, or 12% of issued and outstanding shares, at an average price of $66.42. We began returning capital to shareholders through share repurchases in 2021, and for the past five years of repurchases from 2021 through 2025 we have returned $825.0 million in total, repurchasing 18.998 million shares, or 33% of shares outstanding from December 31, 2020. Since 2021, we have returned 94% of our net income through share repurchases.
Our 2026 share repurchase plan was approved by our Board of Directors on July 7, 2025, and includes authorization for up to $200 million of repurchases.
Financial Highlights
Financial highlights include:
Our net income increased to $228.2 million in 2025, from $217.5 million in 2024, an increase of $10.7 million, or 5%.
Earnings per diluted share increased to $4.92 from $4.29 in 2024, an increase of 15%, driven both by the increase in net income and a 4.3 million decrease in weighted average diluted shares, primarily driven by our share repurchase activity during the year.
Key components of our change in net income between periods include:
Non-interest income increased $170.8 million, to $328.3 million in 2025 from $157.5 million in 2024. That increase includes a $138.6 million increase in Fintech loan credit enhancement income. Excluding credit enhancement, the remaining $32.2 million increase is primarily driven by a 21% growth in fintech fees, or $24.3 million, and a $5.5 million increase in other non- interest income.
Provision for credit losses, total increased $139.3 million, to $177.7 million in 2025, from $38.4 million in 2024. That increase includes $138.6 million increase in provision for fintech loans, which is offset by related credit enhancement income outlined above. Excluding the provision for fintech loans, the remaining increase in total provision between periods was $0.7 million.
See further discussion of fintech loans and the related credit enhancement in “Financial Condition—Total Loan Portfolio—Fintech Programs” in this MD&A.
Non-interest expense increased $19.9 million, to $223.1 million in 2025, from $203.2 million in 2024. That increase is primarily driven by a $11.0 million increase in salary and employee benefits, a $5.3 million increase in legal expense and legal settlements, and $2.6 million increase in software.
What changed in the latest 10-Q
Risk Factors
There have been no material changes or additions to the risk factors disclosed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December, 31, 2025.
Largest changes
“Our business, financial condition, operating results and cash flows are subject to various risks and uncertainties, including those described in Part I, Item 1A. “Risk Factors” in the 2025 Form 10-K. There have been no material changes from the risk factors disclosed in the 2025 Form 10-K.”see in full comparison
“There have been no material changes or additions to the risk factors disclosed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December, 31, 2025.”see in full comparison
Full comparison: every changed paragraph (2)
There have been no material changes or additions to the risk factors disclosed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December, 31, 2025.
Our business, financial condition, operating results and cash flows are subject to various risks and uncertainties, including those described in Part I, Item 1A. “Risk Factors” in the 2025 Form 10-K. There have been no material changes from the risk factors disclosed in the 2025 Form 10-K.
Management's Discussion & Analysis (MD&A)
New heading “Non-Interest Income”
New heading “Non-Interest Expense”
New heading “Net Interest Income”
New heading “Interest Income”
New heading “Interest Expense”
New heading “Average Daily Balances”
New heading “Net Interest Margin”
New heading “Provision for Credit Losses”
Removed heading “Executive Summary”
Removed heading “Financial Highlights”
Removed heading “Results of Operations - Q1 2026 to Q1 2025”
Removed heading “Financial Condition”
Removed heading “Liquidity and Capital Resources”
Removed heading “Asset and Liability Management”
Largest changes
Fintech net charge-offs to average loans ofsee in full comparison2.71%8.78% for thethreesix months endedMarchJune31,30, 2026 was an improvement from8.26%29.89% for thethreesix months endedMarchJune31,30, 2025, drivenbothby improved performance of unsecuredloans and an increase in the mix of fintech loans to secured credit card accounts which have insignificant losses upon default.loans. Any net charge-offs on fintech loans are covered by credit enhancement agreements, through which a partner of the Fintech business covers incurred losses on such fintech loans. The measurement of the ACL for fintech loans and the related credit enhancement are based on the same estimate and are equal and correlate to like amounts in our income statement. See “Total Loan Portfolio—Fintech Programs” for further discussion of the credit enhancement.
see in full comparison•our focus on growth in fintech solutions anditsinvesting in our infrastructure, including through artificial intelligence tools to gain efficiency and productivity, and the future potential impact on our operations and financial condition may result in new operational, legal and financial risks;
Full comparison: every changed paragraph (163)
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides information about our results of operations, financial condition, liquidity and asset quality. This information is intended to facilitate your understanding and assessment of significant changes and trends related to our financial condition and results of operations. This MD&A should be read in conjunction with our financial information in our Annual Report on Form 10-K for the fiscal year ended December, 31, 2025 (the “2025 Form 10-K”) and the interim Condensed Consolidated Financial Statements and notes thereto contained in this Quarterly Report on Form 10-Q.
•Overview
•Executive Summary
•Results of Operations
•Financial Condition
•Liquidity and Capital Resources
•Asset and Liability Management
When used in this Quarterly Report on Form 10-Q, statements regarding The Bancorp’s business, that are not historical facts, are “forward-looking statements.” These statements may be identified by the use of forward-looking terminology, including, but not limited to the words “intend,” “may,” “believe,” “will,” “expect,” “look,” “anticipate,” “plan,” “estimate,” “continue,” or similar words. Forward-looking statements include but are not limited to, statements regarding our annual fiscal 2026 results, increased growth, profitability, and volumes, and our ability to reallocate or reduce resources, and relate to our current assumptions, projections, and expectations about our business and future events, including current expectations about important economic, political, and technological factors, among other factors, and are subject to risks and uncertainties, which could cause the actual results, events, or achievements to differ materially from those set forth in or implied by the forward-looking statements and related assumptions. Factors that could cause results to differ from those expressed in the forward-looking statements also include, but are not limited to, the risks and uncertainties referenced or described in The Bancorp’s filings with the Securities and Exchange Commission, including the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of our Annual Report on2025 Form 10-K for the fiscal year ended December 31, 2025 and other documents that we file from time to time with the Securities and Exchange Commission as well as the following:
•an inconsistent recovery from an extended period of unpredictable economic and growth conditions in the U.S. economy may adversely impact our assets and operating results and result in increases in payment defaults and other credit risks, decreases in the fair value of some assets and increases in our provision for credit losses;
•weak economic and credit market conditions, either globally, nationally or regionally, may result in a reduction in our capital base, reducing our ability to maintain deposits at current levels;
•changes in the interest rate environment, particularly in response to inflation, could adversely affect our revenue and expenses and the availability and cost of capital, cash flows and liquidity;
•volatility in the banking sector (including perception of such conditions) and responsive actions taken by governmental agencies to stabilize the financial system could result in increased regulation or liquidity constraints;
•operating costs may increase;
•adverse legislation or governmental or regulatory policies may be promulgated;
•we may fail to satisfy our regulators with respect to legislative and regulatory requirements;
•management and other key personnel may leave or change roles without effective replacements;
•increased competition may reduce our client base or cause us to lose market share;
•the costs of our interest-bearing liabilities, principally deposits, may increase relative to the interest received on our interest-bearing assets, principally loans, thereby decreasing our net interest income;
•loan and investment yields may decrease, resulting in a lower net interest margin;
•geographic concentration could result in our loan portfolio being adversely affected by regional economic factors;
•the market value of real estate that secures certain of our loans may be adversely affected by economic and market conditions and other conditions outside of our control such as lack of demand, natural disasters, changes in neighborhood values, competitive overbuilding, weather, casualty losses and occupancy rates;
•cybersecurity risks, including data security breaches, ransomware, malware, “denial of service” attacks and identity theft, could result in disclosure of confidential information, operational interruptions and legal and financial exposure;
•natural disasters, pandemics, other public health crises, acts of terrorism, geopolitical conflict, including trade disputes and tariffs, sanctions, war or armed conflict, such as the conflicts between Russia and Ukraine and the ongoing military operations involving the U.S., Israel and Iran, and the possible expansion of such conflicts in surrounding areas, or other catastrophic events could disrupt the systems of us or third-party service providers and negatively impact general economic conditions;
•we may not be able to sustain our historical growth rates in our loan, prepaid and debit card and other lines of business;
•our focus on growth in fintech solutions and itsinvesting in our infrastructure, including through artificial intelligence tools to gain efficiency and productivity, and the future potential impact on our operations and financial condition may result in new operational, legal and financial risks;
•risks related to actual or threatened litigation;
•our ability to maintain effective internal control over financial reporting;
•our internal controls and procedures may fail or be circumvented, and our risk management policies may not be adequate; and
•we may not be able to manage credit risk to desired levels, improve our net interest margin and monitor interest rate sensitivity, manage our real estate exposure to capital levels and maintain flexibility if we achieve asset growth.
Overview
We are a Delaware financial holding company, and our primary, wholly-ownedwholly owned subsidiary is The Bancorp Bank, National Association. The Bank is a federally chartered commercial bank located in Sioux Falls, South Dakota and is aan FDIC insured institution. Most of our revenue and income is currently generated through the Bank. An overview of our operations follows, including discussion of Fintech Solutions and Credit Solutions.
Deposits generated through these partner relationships are deployed into loan and lease products offered by both Fintech sponsored lending and the Credit Solutions business line. As of MarchJune 31,30, 2026, 93%96% of our total deposits were sourced from the Fintech Solutions business, primarily from program sponsorship.
Executive Summary
We remain focused on growing our fintech revenues through new partnerships, products and services. Fintech loans of $1.65$901.5 billionmillion as of MarchJune 31,30, 2026 increased 50%32% compared to the $1.10June billion balance at December 31, 2025 and increased 187% compared to the March 31,30, 2025 balance of $574.0$680.5 million. Certain loan fees on fintech loans are recorded as non-interest income and totaled $5.6$6.5 million for the quarter ended MarchJune 31,30, 20262026, a 65% increase compared to $3.6$4.0 million for the quarter ended MarchJune 31,30, 2025.
We remain focused on returning capital through share repurchasesrepurchases, and repurchased 843,061870,129 shares of our common stock at an average cost of $59.31$57.46 per share during the quarter ended MarchJune 31,30, 2026. Primarily driven by share repurchases, outstanding shares, net of treasury shares at MarchJune 31,30, 2026 decreased 1%3% to 41.85941.043 million from 42.355 million shares at December 31, 2025.
Financial Highlights
Our net income increased to $60.1$60.7 million in the firstsecond quarter of 2026 from $57.2$59.8 million in the firstsecond quarter of 2025, an increase of $2.9$0.9 million, or 5.1%.1.4%.
Earnings per diluted share increased to $1.41$1.45 in the firstsecond quarter of 2026 from $1.19$1.27 in the firstsecond quarter of 2025, an increase of 18%,14.2%, driven both by the increase in net income and a 5.4 million decrease in weighted average diluted shares, primarily driven by our share repurchase activity during the year.
•Net interest income decreased $2.9$7.0 million, consisting of aan $10.0$11.1 million decrease in interest income partially offset by a $7.0$4.1 million decrease in interest expense. The most significant driverdrivers of the netdecrease changein isinterest income are $6.9 million lower interest income from deposits driven by elevated average interest-earning deposits on balance sheet from customers wasin significantlythe highersecond quarter of 2025 due to wildfire insurance refund balances, a $3.0 million one-time gain recognized in investment interest income in the firstsecond quarter of 2025,2025 from the repayment of a CRE-2 investment security. The decrease in interest expense is primarily driven by one-time$9.6 volumesmillion lower interest expense on deposit balances partially offset by higher interest expense of $2.7 million from wildfiresenior insurancedebt refundsdue to the August 2025 facility upsizing and higherincrease fintechin on-balance sheet volumes.rate.
•Non-interest income decreased $11.1$10.7 million, to $72.5$73.0 million in the firstsecond quarter of 2026 from $83.6$83.7 million in the firstsecond quarter of 2025. That decrease includesis driven by a $17.0$17.4 million decrease in Fintech loan credit enhancement income driven by improved performance of fintech loans, partially offset by a $3.6$5.3 million increase in total fintech fees primarily driven by volume growth, and a $2.7$2.1 million increase in other non-interest income driven by higher other fee income on loans and deposit sweep income.
•Provision for credit losses, total decreased $19.3$18.3 million, to $27.6$26.1 million in the firstsecond quarter of 2026, from $46.9$44.4 million in the firstsecond quarter of 2025. That decrease includes $17.0a $17.4 million decrease in provision for fintech loans, which directly relates to the credit enhancement income decrease outlined above. TheSee remainingfurther decreasediscussion of fintech loans and the related credit enhancement in total“Financial provisionCondition—Total betweenLoan periodsPortfolio—Fintech was $2.3 million, primarily driven by a recovery bookedPrograms” in thethis first quarter of 2026 as a result of improved credit in our direct lease financing portfolio.MD&A.
See further discussion of fintech loans and the related credit enhancement in “Financial Condition—Total Loan Portfolio—Fintech Programs” in this MD&A.
Non-interest expense increased $1.7 million, to $55.0 million in the first quarter of 2026, from $53.3 million in the first quarter of 2025. That increase is primarily driven by a $3.8 million increase in salary and employee benefits from organizational changes and higher incentive accruals, partially offset by $2.0 million reimbursement from insurance related to a legal settlement that was previously expensed in the fourth quarter of 2025.
Average loans and leases grew to $7.25$7.63 billion in the firstsecond quarter of 2026 from $6.39$6.57 billion in the firstsecond quarter of 2025, an increase of $868.5$1.06 millionbillion or 13.6%,16.1%, primarily driven by a $648.3$853.9 million increase in our average fintech portfolio, reflecting our continued strategic shift towards sponsored lending.
Non-interest income— fintech fees increased $5.3 million, or 14.7%, to $40.9 million in the second quarter of 2026, which includes a $2.5 million increase in consumer credit fintech fees increasedand toa $5.6$2.7 million in the first quarter of 2026, up 55.4% from $3.6 millionincrease in theprepaid, firstdebit quartercard, ofACH 2025and whichother reflectedfees. The growth in consumer credit fintech fees reflects continued organic volume growth with existing partners and products and the impact of new products launched within the past year. PrepaidThe andgrowth in prepaid, debit card and related fees is driven by an increase in gross dollar volume (“GDV”) increased to $52.51$53.5 billion, upa 17.6%22.5% increase from $44.65$43.6 billion in the firstsecond quarter of 2025, which directly contributed to a $1.0 million, or 3.7%, increase in Prepaid, debit card and related fees within Non-interest income—fintech fees.2025. GDV growth may not have a direct impact on the related fee income due to the different product fee structures within the total mix.
Net interest margin decreased to 3.87%3.85% in the firstsecond quarter of 2026 from 4.07%4.44% in the firstsecond quarter of 2025, driven by the shift in our loan portfolio to a greater percentage of fintech loans, for which we primarily earn fee income and not interest income, combined with the impact of Federal Reserve rate decreases from the third quarterand fourth quarters of 2025. See further discussion of the growth in Fintech lending contributing to margin compression under “Results of Operations—Net Interest Income—Growth of Fintech Lending” in the following section.
Our efforts to return capital to shareholders through share repurchases have had an impact on our ratio of equity to assets. At MarchJune 31,30, 2026, the ratio of equity to assets was 7.04%,7.65%, compared to 7.38% at December 31, 2025, primarily driven by reductions in equity from share repurchases partially offset by an increase in equity capital from retained earnings.
Results of Operations - Q1 2026 to Q1 2025
Our net interest income for the firstsecond quarter of 2026 decreased $2.9$7.0 million, or 3.2%,7.2%, to $88.8$90.5 million from $91.7$97.5 million in the firstsecond quarter of 2025.
Growth of Fintech Lending. Our strategy is to continue to drive growth in our Fintech lending business, as seen inby the shift in mix shiftto Fintech representing 18.2% of our total average loan portfolio to 15.4% of average loans in the firstsecond quarter of 2026, compared to 7.3%8.2% atfor the end of the firstsecond quarter of 2025. A significant portion of these loans are zero percent interest and, as such, do not recognize interest income, however we do generate fee revenue from these loans, through our partnership agreements. This mix shift to non-interest earning loans results in a reduction of the calculated average rate earned by total loans, average rate earned by our nettotal interest-earning assets, and net interest margin in the above analysis. Offsetting these impacts is the growth in Consumer fintech fee income recognized within non-interest income in our Consolidated Statements of Operations which was $5.6$6.5 million and $3.6$4.0 million for the firstsecond quarters of 2026 and 2025, respectively.
We expect to continue to increase the proportion of Fintech loans in our portfolio inthrough the remainder of 2026 and beyond, and therefore we expect to see continued compression in our average rate earned on loans, and net interest margin, as the mix of fintech loans continues to grow. However, we also expect growth in our fintech fees within non-interest income driven by the increase in that portfolio.
Interest income for the firstsecond quarter of 2026 was $129.8$132.0 million, a decrease of $10.0$11.1 million from $139.8$143.1 million in the firstsecond quarter of 2025, primarily driven by $10.5$6.9 million lower income on interest-earning deposits.deposits and a one-time gain in 2025 of $3.0 million from a CRE-2 investment security, which was repaid in full. In the firstsecond quarter of 2025, average deposits on balance sheet from customers of $1.14$756.6 billionmillion was significantly higher than $250.0$155.5 million in firstsecond quarter of 2026, driven by one-time volumes from wildfire insurance refunds and higher fintech on-balance sheet volumes. This higher interest income on interest earning cash deposits directly correlates to higher interest expense paid on deposits, discussed further below.
Interest income from loans was $107.5$110.6 million in the firstsecond quarter of 2026, $1.4$1.7 million lower than $108.9$112.3 million in the firstsecond quarter of 2025, driven by $3.0$4.1 million lower interest earned on non-fintech loans partially offset by $1.6$2.3 million higher interest earned on fintech loans. For non-fintech loans, lower interest earned was primarily driven by lower rates, as the average rate decreased to 6.89%6.91% for firstthe second quarter of 2026, compared to 7.34%7.42% for firstthe second quarter of 2025, while average balance was 3.7%3.4% higher. The loan portfolio isaverage reflectingrate reflects the impact of Federal Reserve rate decreases which continued in the third quarterand fourth quarters of 2025. For fintech loans, higher interest income of $1.6$2.3 million was driven by higher volumes of interest-earning fintech loans. See “Growth of Fintech Lending” discussion above for further information.
Interest expense for the second quarter of 2026 decreased $4.1 million to $41.6 million from $45.7 million in the second quarter of 2025, driven by $9.6 million lower interest expense on deposits, partially offset by $2.9 million higher interest on short-term borrowings and $2.7 million higher interest expense on senior debt.
Interest expense for the first quarter of 2026 decreased $7.1 million to $41.0 million from $48.1 million in the first quarter of 2025, driven by $11.1 million lower interest expense on deposits, partially offset by $1.4 million higher interest on short-term borrowings and $2.6 million higher interest expense on senior debt. Interest expense on deposits was $11.1$9.6 million higherlower, primarily driven by lower rates in 2025 due to the higher on-balance sheet deposits related to wildfire insurance refunds and higher fintech balances, and directly correlates to higher income on interest earning cash deposits as discussed above under interest income.2026. Interest expense on short-term deposits was $1.4$2.9 million higher in 2026, as that funding source was utilized to fund higher average loans on balance sheet in the firstsecond quarter of 20262026, andcompared thatto fundinglimited source was not utilized at allutilization in firstsecond quarter of 2025. Interest expense on senior debt was $2.6$2.7 million higher, due to higher outstanding principal and higher rate on senior debt. In August 2025, $200 million of 7.375% Senior Notes due 2030 were issued, the proceeds of which were used in part to repay at maturity the $100 million of outstanding 4.75% Senior notes due 2025.
_________ (1)Includes commercial loans, at fair value and non-accrual loans.
(2)Full taxable equivalent basis, using 21% respective statutory federal tax rates in 2026 and 2025.
(3)Interest income in the second quarter of 2025 includes $3.0 million from a security that was known as “CRE-2” and which was related to the Company’s discontinued commercial real estate securitization business. CRE-2 was repaid in full in the quarter resulting in a one-time gain of $3.0 million, which was excluded from change due to rate in the above analysis.
For the firstsecond quarter of 2026 compared to firstsecond quarter of 2025, average interest-earning assets increased $159.4$620.5 million, reflecting ana $867.5$1.06 millionbillion increase in average loans and leases and a $177.3$161.4 million increase in average investment securities, partially offset by a decrease in average interest-earning deposits of $886.4$601.1 million. For those respective periods, average deposits and liabilities increased $250.8$755.3 million, primarily driven by a $145.9$357.2 million increase in deposits, $301.8 million increase in short-term borrowings and a $100.0$100.1 million increase in senior debt.
Our net interest margin (calculated by dividing net interest income by average interest-earning assets) for the firstsecond quarter of 2026 was 3.87%3.85% compared to 4.07%4.44% for the firstsecond quarter of 2025, a decrease of 2059 basis points. The average yield on interest-earning assets decreased 5490 basis points, due to the shift of our portfolio mix to more fintech loans where we primarily earn fee income as discussed further under “Growth of Fintech Lending” above, plus lower market short-term interest rates. In addition, the cost of deposits and interest-bearing liabilities decreased 3937 basis points, or a net change of 1553 basis points, driven primarily by a 5355 basis point decrease in average rate on deposits primarily due to a lower rate environment in the firstsecond quarter of 2026.
TBBK insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 1 Form 4 filing (1 insider, 2 trade dates, 2,500 shares, about $148.8K) and open-market sales in 3 filings (3 insiders, 3 trade dates, 15,927 shares, about $995.7K). Net open-market shares: -13,427 (purchases minus sales); net value about -$846.9K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-08-06 | Egan Martin |
Open-market sale | 2,057 | $72.01 | $148.1K |
| 2026-08-06 | Egan Martin |
Open-market sale | 1,000 | $72.07 | $72.1K |
| 2026-06-11 | Connolly Mark Leo |
Inheritance | 3,200 | — | — |
| 2026-05-27 | Tryniski Mark E |
Grant/award | 3,600 | — | — |
| 2026-05-27 | Mudick Stephanie B |
Grant/award | 3,600 | — | — |
| 2026-05-27 | Mcentee James J Iii |
Grant/award | 3,600 | — | — |
| 2026-05-27 | Lamb William H |
Grant/award | 2,250 | — | — |
| 2026-05-27 | Kozlov Hersh |
Grant/award | 3,600 | — | — |
| 2026-05-27 | Creuzot Cheryl |
Grant/award | 2,250 | — | — |
| 2026-05-27 | Cohn Matthew |
Grant/award | 2,250 | — | — |
| 2026-05-27 | Brockman Todd J. |
Grant/award | 3,600 | — | — |
| 2026-05-27 | Allen Dwayne |
Grant/award | 2,250 | — | — |
| 2026-05-04 | Cohn Matthew |
Open-market purchase | 250 | $58.77 | $14.7K |
| 2026-05-01 | Cohn Matthew |
Open-market purchase | 250 | $59.90 | $15.0K |
| 2026-05-01 | Cohn Matthew |
Open-market purchase | 500 | $59.76 | $29.9K |
| 2026-05-01 | Cohn Matthew |
Open-market purchase | 1,500 | $59.50 | $89.2K |
| 2026-04-29 | Caesar Erika R |
Open-market sale | 4,470 | $60.28 | $269.5K |
| 2026-04-28 | Wainwright Maria |
Open-market sale | 8,400 | $60.24 | $506.0K |
Well-known investors holding TBBK (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 323,387 | $20.3M | 0.01% | Added 28% |
| Millennium Management (Israel Englander) | 2026-06-30 | 267,695 | $16.8M | 0.01% | Reduced 57% |
| D. E. Shaw & Co. | 2026-06-30 | 187,699 | $11.8M | 0.01% | Added 349% |
| Point72 Asset Management (Steve Cohen) | 2026-06-30 | 101,275 | $6.3M | 0.01% | Added 524% |
| Renaissance Technologies | 2026-06-30 | 73,249 | $4.6M | 0.01% | New position |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 70,880 | $4.4M | 0.0% | Added 17% |
| Two Sigma Investments | 2026-06-30 | 59,505 | $3.7M | 0.0% | Reduced 37% |
| Gotham Asset Management (Joel Greenblatt) | 2026-06-30 | 5,003 | $313.4K | 0.0% | No change |