The Bancorp TBBK Form 10-Q filing Q4 FY2026

Item 1. Financial Statements

THE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these consolidated statements.

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THE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

The accompanying notes are an integral part of these consolidated statements.

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THE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

The accompanying notes are an integral part of these consolidated statements.

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THE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)

(1) Repurchase of common stock includes 843,061 shares repurchased in connection with the Company's share repurchase program approved by the Board of Directors. See Note 8, “Shareholders’ Equity” for further information.

The accompanying notes are an integral part of these consolidated statements.

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THE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)

(CONTINUED)

(1) Repurchase of common stock includes 684,445 shares repurchased in connection with the Company's share repurchase program approved by the Board of Directors. See Note 8, “Shareholders’ Equity” for further information.

The accompanying notes are an integral part of these consolidated statements.

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THE BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

The accompanying notes are an integral part of these consolidated statements.

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THE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Organization and Nature of Operations

The Bancorp, Inc. (the “Company”) is a Delaware corporation and a registered financial holding company. Its primary, wholly-owned subsidiary is The Bancorp Bank, National Association (the “Bank”), which is a federally chartered commercial bank located in Sioux Falls, South Dakota and is a Federal Deposit Insurance Corporation (“FDIC”) insured institution. As a federally chartered institution, its primary regulator is the Office of the Comptroller of the Currency (“OCC”). The Company has two primary operating segments which consist of Fintech Solutions and Credit Solutions.

Through partner relationships, Fintech Solutions delivers payment, deposit, and lending products that attract deposits and generate fee 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. The Company primarily earns fee-based income from fintech products, and such products include sponsored issuance of deposit accounts and debit, credit, and prepaid cards; sponsored lending products for fintech partners; and payment processing solutions, including acquiring, ACH, and near-and real-time payment services in support of its partners.

Credit Solutions is our lending operation and makes the following types of loans: (i) Real estate bridge lending (“REBL”); (ii) Institutional Banking comprised of security-backed lines of credit (“SBLOC”), cash value insurance policy-backed lines of credit (“IBLOC”) and advisor financing; and (iii) Commercial Loans which includes Small Business Loans (“SBL”) which is comprised primarily of Small Business Administration (“SBA”) loans and direct lease financing.

The Company and the Bank are affected by state and federal legislation and regulations and are subject to regulation by certain state and federal agencies. Accordingly, they are examined periodically by those regulatory authorities.

Note 2. Significant Accounting Policies

Basis of Presentation

The financial statements of the Company, as of March 31, 2026 and for the three-month periods ended March 31, 2026 and 2025, are unaudited. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted in this Quarterly Report on Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). However, in the opinion of management, these interim financial statements include all necessary adjustments to fairly present the results of the interim periods presented. The unaudited interim condensed consolidated financial statements should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”). The results of operations for the three-month period ended March 31, 2026 may not necessarily be indicative of the results of operations anticipated for the full year ending December 31, 2026.

Certain prior period amounts have been reclassified to conform to current period presentation.

There have been no significant changes as of March 31, 2026 from the Company’s significant accounting policies as described in the 2025 Form 10-K.

Subsequent Events

The Company evaluated its March 31, 2026 financial statements for subsequent events through the date the consolidated financial statements were issued. The Company is not aware of any subsequent events which would require recognition or disclosure in the financial statements.

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Note 3. Earnings Per Share

The Company calculates earnings per share in accordance with ASC 260, Earnings Per Share. Basic earnings per share is computed by dividing income available to common shareholders by the weighted average common shares outstanding during the period. Diluted earnings per share is computed by dividing income available to common shareholders by the weighted average common shares outstanding during the period, assuming all potentially dilutive common shares were issued.

Diluted earnings per share considers the potential dilution that could occur if securities, including stock options and RSUs or other contracts to issue common stock were exercised and converted into common stock. Stock options are dilutive if their exercise prices are less than the current stock price. RSUs are dilutive because they represent grants over vesting periods which do not require employees to pay exercise prices. The dilution shown in the tables below includes the potential dilution from both stock options and RSUs. The weighted-average computation of the dilutive effect of potentially issuable shares of Common stock under the treasury stock method excludes the effect of securities that would be anti-dilutive.

The calculation of weighted-average common shares outstanding during each respective period includes activity related to share repurchases made under the Company’s share repurchase programs, as discussed further in “Note 8. Shareholders’ Equity.”

The following table summarizes the calculation of earnings per share:

Note 4. Investment Securities

The Company’s investments in debt securities are classified as available-for-sale, and are summarized as follows (dollars in thousands):

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The amortized cost and fair value of the Company’s investment securities at March 31, 2026, by contractual maturity, are shown below (dollars in thousands). Expected maturities may differ from contractual maturities based on the timing of cashflows from the underlying collateral.

The table below indicates the length of time individual securities had been in a continuous unrealized loss position (dollars in thousands):

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Note 5. Loans, net

The Company’s loans originate from several lending lines of business, including:

SBLs, or small business loans, are comprised primarily of Small Business Administration “SBA” loans.

Direct lease financing includes lease financing for commercial and government vehicle fleets and, to a lesser extent, provides lease financing for other equipment.

SBLOCs, or securities-backed lines of credit, are made to individuals, trusts and other entities and are secured by a pledge of marketable securities maintained in one or more accounts for which the Company obtains a securities account control agreement.

IBLOCs, or insurance policy cash value-backed lines of credit, are collateralized by the cash surrender value of eligible insurance policies.

Advisor financing are loans to investment advisors for purposes of debt refinancing, acquisition of another firm or internal succession.

REBL, or real estate bridge lending, are transitional commercial mortgage loans which are made to improve and rehabilitate existing properties which already have cash flow, and which are collateralized by those properties.

Fintech loans consist of short-term extensions of credit, including secured credit card loans, made in conjunction with marketers and servicers.

Other loans include warehouse financing related to loan sales to third-party purchasers of REBL loans, and also includes loans the Company generally no longer offers, including commercial loans, CRA loans and HELOC.

Major classifications of loans, excluding commercial loans at fair value, are as follows (dollars in thousands):

(1) At March 31, 2026 and December 31, 2025, IBLOC loans amounted to $459.3 million and $467.5 million, respectively.

(2) As of March 31, 2026 and December 31, 2025, fintech loans included $1.22 billion and $729.1 million of secured credit card accounts which are backed dollar for dollar by cash collateral by each individual cardholder and are required to be repaid in full monthly. For secured credit card accounts, we recognize a loan receivable and a deposit liability for the cash collateral that secures those accounts. The remaining fintech loans consist of cashflow underwritten short-term liquidity products to individual borrowers ranging in maturity from 30 to 365 days.

(3) As of both March 31, 2026 and December 31, 2025, Other loans includes $110.7 million related to warehouse financing related to loan sales to third-party purchasers of real estate bridge loans.

During the three months ended March 31, 2026 and 2025, the Company purchased $0.2 million and $15.4 million of SBLs, respectively, none of which were credit deteriorated. Additionally, in the first three months of 2026, the Company participated in SBLs with other institutions in the amount of $0.3 million.

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Non-Accrual and Delinquency

A detail of the Company’s delinquent and non-accrual loans by loan category is as follows (dollars in thousands):

The following table summarizes non-accrual loans with and without an ACL as of the periods indicated (dollars in thousands):

Interest which would have been earned on loans classified as non-accrual for the three months ended March 31, 2026 and 2025, was $1.1 million and $0.4 million, respectively. No income on non-accrual loans was recognized during the three months ended March 31, 2026 or 2025.

During the three months ended March 31, 2026 amounts reversed from interest income totaled $0.6 million, and primarily consist of $0.4 million of REBL and $0.2 million of SBL commercial mortgage. During the three months ended March 31, 2025 amounts reversed from interest income totaled $0.5 million and primarily consist of $0.3 million of REBL and $0.1 million of SBL non-real estate. The interest reversals represent interest receivable balance on loans at the time of transfer into non-accrual status.

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Loan Modifications

There were no loan modifications for the three months ended March 31, 2026. During the three months ended March 31, 2025, loans modified to borrowers experiencing financial difficulty, and related information are as follows (dollars in thousands):

The following table shows an analysis of loans that were modified during the three months ended March 31, 2025, presented by loan classification (dollars in thousands):

The following table describes the financial effect of modifications made during the three months ended March 31, 2025:

Three months ended March 31, 2025

Combined Rate and Maturity

Weighted average interest reduction Weighted average term extension (in months) More-than-insignificant-payment delay(1)

SBL non-real estate — — 2.79%

SBL commercial mortgage — — 0.40%

(1) Percentage represents the principal of loans deferred divided by the principal of the total loan portfolio.

The Company had no commitments to extend additional credit to loans classified as modified as of March 31, 2026. As of March 31, 2025, there were no specific reserves on the $8.1 million of loans classified as modified.

Allowance for Credit Loss

The Company had no significant changes to its quantitative and qualitative measures used in measuring the allowance for credit losses as of March 31, 2026. For additional information regarding the Company’s allowance estimate, see Note 2, “Summary of Significant Accounting Policies” and Note 5, “Loans, net,” in the 2025 Form 10-K.

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A summary of the Company’s primary portfolio pools and loans accordingly classified by year of origination, at March 31, 2026 and December 31, 2025 is as follows (dollars in thousands):

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In the above tables, the special mention classification indicates weaknesses that may, if not cured, threaten the borrower’s future repayment ability. A substandard classification reflects an existing weakness indicating the possible inadequacy of net worth and other repayment sources. These classifications are used both by regulators and peers, as they have been correlated with an increased probability of credit losses.

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A detail of the changes in the ACL by loan category is as follows (in thousands):

A summary of the Company’s gross charge-offs classified by portfolio segment and year of origination are as follows (dollars in thousands):

Total net charge-offs decreased $8.4 million, to $30.7 million for the three months ended March 31, 2026, from $39.1 million for the three months ended March 31, 2025. The improvement in net charge-offs was primarily driven by improved performance of fintech and direct lease financing.

The Company has agreements with a partner to originate and service fintech loans, which includes credit enhancement provisions through which incurred losses on fintech loans are covered by the partner. The Company recognizes an estimate of loss on this portfolio through its allowance for credit losses on its fintech loans on the Condensed Consolidated Balance Sheets, with provision for credit losses on fintech loans recognized on the Condensed Consolidated Statements of Operations. In addition, the Company recognizes a corresponding amount of credit enhancement asset on the Condensed Consolidated Balance Sheets and non-interest income — fintech loan credit enhancement in the Condensed Consolidated Statements of Operations. The measurement of the expected loan losses and the related credit enhancement are based on the same estimate and are equal and correlate to like amounts in the Condensed Consolidated Statements of Operations. The Company has recognized a credit enhancement asset on the Condensed Consolidated Balance Sheets

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related to the estimated recovery of its realized losses on fintech loans of $29.8 million and $31.1 million as of March 31, 2026 and December 31, 2025, respectively. All fintech loans are covered by credit enhancement agreements as of March 31, 2026.

Direct lease financing

The scheduled maturities of the direct financing leases reconciled to the total lease receivables as of March 31, 2026 are as follows (dollars in thousands):

(1) Of the total residual value, $42.9 million is not guaranteed by the lessee or other guarantors.

Off-Balance Sheet Exposure

In addition to estimating credit loss for outstanding loans, the Company estimates expected credit losses over the entire period in which there is exposure to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancelable by the Company. The estimate of loss for unfunded loan commitments relates to our off-balance sheet credit exposure, and is adjusted through the provision for unfunded commitments. The estimate considers the likelihood that funding will occur over the estimated life of the commitment. The amount of the reserve on such exposures as of March 31, 2026 and as of December 31, 2025 was $1.6 million and $1.4 million, respectively, and is recognized within Other liabilities in the Condensed Consolidated Balance Sheets.

Note 6. Debt

The Company’s debt and borrowing arrangements consist of:

Assets pledged as collateral that are not available to pay the Company’s general obligations as of March 31, 2026 consisted of $4.75 billion of loans held for investment at amortized cost and $251.7 million of investment securities that were pledged for short-term-borrowing agreements. In addition, there were $13.6 million of loans held for investment at amortized cost that were pledged for other long-term borrowings at March 31, 2026.

Short-term borrowings

The Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank lines are periodically utilized to manage liquidity. The amount of loans pledged varies and the collateral may be unpledged at any time to the extent the collateral exceeds advances. As of March 31, 2026, based on the amount of loans and investment securities pledged, as outlined above, total capacity of short-term borrowings was $3.45 billion, there was $470.0 million borrowed and $2.98 billion available capacity.

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Note 7. Fair Value Measurements

Recurring Measurements

Assets and liabilities measured at fair value on a recurring basis, segregated by fair value hierarchy, are summarized below (dollars in thousands) as of the dates indicated:

Activity in Level 3 instruments is summarized below (dollars in thousands):

(1) For commercial loans at fair value, gains or losses are recognized in Non-interest income—Net realized and unrealized gains on commercial loans, at fair value in the Condensed Consolidated Statement of Operations.

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Information related to assumptions used in the valuation of Level 3 instruments is as follows (dollars in thousands):

Non-Recurring Measurements

Assets measured at fair value on a nonrecurring basis consist of certain loans that are collateral-dependent with specific reserves that are recognized in Loans, net on our Condensed Consolidated Balance Sheets, and Other real estate owned.

Collateral-dependent loans were $29.2 million and $15.2 million as of March 31, 2026 and December 31, 2025, respectively. Loans recorded at amortized cost that are in non-accrual status are treated as collateral dependent to the extent they have resulted from borrower financial difficulty (and not from administrative delays or other mitigating factors) and are not brought current. For these loans, fair value is measured based on inputs including recent sales of similar collateral, and is a Level 3 measurement. At March 31, 2026, the Company’s basis in the non-accrual loans, or the loan principal of $34.7 million was reduced by specific reserves of $5.5 million within the ACL as of that date, representing the deficiency between principal and estimated collateral values, which were reduced by estimated costs to sell.

Other real estate owned (OREO) were $61.0 million and $60.7 million as of March 31, 2026 and December 31, 2025, respectively and are periodically measured for impairment based on any decline in fair value below carrying value. For OREO, fair value is based upon appraisals of the underlying collateral by third-party appraisers, reduced by 7% to 10% for estimated selling costs, and is a Level 3 non-recurring measurement. During the three months ended March 31, 2026 and 2025, the Company did not recognize unrealized losses from the impairment of OREO and realized gains (losses) on the disposition of OREO. Unrealized and realized gains or losses on OREO are recognized in Other Non-interest expense in the Condensed Consolidated Statements.

Fair Value of Other Financial Instruments

The following tables provide information regarding carrying amounts and estimated fair values of all the Company’s financial instruments (dollars in thousands) as of the dates indicated:

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Note 8. Shareholders’ Equity

Share Repurchases

2026 Repurchase Program

On July 7, 2025, the Board authorized a share repurchase program of up to $200.0 million for 2026 (the “2026 Repurchase Plan”).

During the three months ended March 31, 2026, the Company repurchased 843,061 shares of its common stock in the open market under the 2026 Repurchase Program at an average price of $59.31 per share.

2025 Repurchase Program

On October 23, 2024, the Board approved a common stock repurchase program for the 2025 fiscal year (the “2025 Repurchase Program”), which authorizes the Company to repurchase $37.5 million in value of the Company’s common stock per fiscal quarter in 2025, for a maximum amount of $150.0 million. On July 7, 2025, the Board authorized the increase of the capacity of the Company’s existing share repurchase program for the third and fourth quarters of 2025 to $300.0 million.

During the three months ended March 31, 2025, the Company repurchased 684,445 shares of its common stock in the open market under the 2025 Repurchase Program at an average price of $54.79 per share.

Stock-Based Compensation

Restricted Stock Units (RSUs)

In the first quarter of 2026, the Company granted 388,821 RSUs, having a vesting period of three years. At issuance, the RSUs had a fair value of $62.05 per unit.

For additional information regarding the Company’s stock-based compensation plans, see Note 13, “Stock-Based Compensation,” in the 2025 Form 10-K.

Note 9. Regulatory Matters

It is the policy of the Federal Reserve that financial holding companies should pay cash dividends on common stock only out of income available over the past year and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition. The policy provides that a financial holding company should not maintain a level of cash dividends that undermines the financial holding company’s ability to serve as a source of strength to its banking subsidiaries.

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Various federal and state statutory provisions limit the amount of dividends that subsidiary banks can pay to their holding companies without regulatory approval. Without the prior approval of the OCC, a dividend may not be paid if the total of all dividends declared by a bank in any calendar year is in excess of the current year’s net income combined with the retained net income of the two preceding years. Additionally, a dividend may not be paid in excess of a bank’s retained earnings. Moreover, an insured depository institution may not pay a dividend if the payment would cause it to be less than “adequately capitalized” under the prompt corrective action framework as defined in the Federal Deposit Insurance Act or if the institution is in default in the payment of an assessment due to the FDIC. Similarly, a banking organization that fails to satisfy regulatory minimum capital conservation buffer requirements will be subject to certain limitations, which include restrictions on capital distributions.

In addition to these explicit limitations, federal and state regulatory agencies are authorized to prohibit a banking subsidiary or financial holding company from engaging in an unsafe or unsound practice. Depending upon the circumstances, the agencies could take the position that paying a dividend would constitute an unsafe or unsound banking practice.

As of March 31, 2026, the Bank met all regulatory requirements for classification as well capitalized under the regulatory framework for prompt corrective action.

The following table sets forth our regulatory capital amounts and ratios for the periods indicated:

Note 10. Commitments and Contingencies

The Delaware FCRA Matter. On June 12, 2019, the Bank was served with a qui tam lawsuit filed in the Superior Court of the State of Delaware, New Castle County. The Delaware Department of Justice intervened in the litigation. The case is titled The State of Delaware, Plaintiff, Ex rel. Russell S. Rogers, Plaintiff-Relator v. The Bancorp Bank, Interactive Communications International, Inc., and InComm Financial Services, Inc., Defendants. The lawsuit alleged that the defendants violated the Delaware False Claims and Reporting Act the (“DFCRA”) by not paying balances on certain open-loop “Vanilla” prepaid cards to the State of Delaware as unclaimed property. The complaint sought actual and treble damages, statutory penalties, and attorneys’ fees. The Bank filed an answer denying the allegations.. The Bank and other defendants previously filed a motion to dismiss the action, but that motion to dismiss was denied and the parties proceeded to engage in the first phase of discovery. On March 25, 2025, the State of Delaware filed a motion to dismiss or to stay the lawsuit without prejudice, due to a related administrative proceeding commenced by or on behalf of the State of Delaware Office of Unclaimed Property and the Bank responded to that motion by seeking dismissal with prejudice. On February 10, 2026, the court granted the State of Delaware’s motion to dismiss or stay in part, dismissing with prejudice the operative complaint alleging DFCRA violations by Bancorp and InComm and stating in pertinent that “[f]or avoidance of doubt, this means neither the State nor Relator may seek damages for any such claim via this action now that the State has sought dismissal for the purposes of pursuing administrative remedies for any of the alleged violations of Delaware’s Abandoned and Unclaimed Property Law.” Bancorp and InComm will now proceed to separate administrative proceedings in Delaware related to those certain open-loop “Vanilla” prepaid cards.

THE CFPB CID Matter. On March 27, 2023, the Bank received a Civil Investigative Demand (“CID”) from the Consumer Financial Protection Bureau (“CFPB”) seeking documents and information related to the Bank’s escheatment practices in connection with certain accounts offered through one of the Bank’s program partners. The Bank responded to the CID and has not received further inquiries from the CFPB regarding the matter.

The City Attorney of San Francisco Matter. On November 21, 2023, TBBK Card Services, Inc. (“TBBK Card”), a wholly-owned subsidiary of the Bank, was served with a complaint filed in the Superior Court of the State of California (the “California Superior

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Court”), captioned People of the State of California, acting by and through San Francisco City Attorney David Chiu, Plaintiff v. InComm Financial Services, Inc., TBBK Card Services, Inc., Sutton Bank, Pathward, N.A., and Does 1-10, Defendants. The complaint principally alleges that the defendants engaged in unlawful, unfair or fraudulent business acts and practices related to the packaging of “Vanilla” prepaid cards and the refund process for unauthorized transactions that occurred due to card draining practices. On December 14, 2023, the case was removed to the U.S. District Court for the Northern District of California. On March 26, 2024, the case was remanded to the California Superior Court. TBBK Card has vigorously defended against the claims. On May 6, 2024, TBBK Card filed a motion to quash service of the summons as to TBBK Card for lack of personal jurisdiction. TBBK Card’s motion to quash, and subsequent related appeals, were denied. On December 12, 2025, an amended complaint containing additional factual allegations was filed in the California Superior Court. The Company is not yet able to determine whether the ultimate resolution of this matter will have a material adverse effect on the Company’s financial condition or operations.

The Oxygen Matter. On November 25, 2024, the Bank commenced arbitration through the American Arbitration Association seeking approximately $1.808 million from Oxygen, Inc. (“Oxygen”) owed under a Private Label Account Program Agreement related to unpaid invoices and indemnification obligations owed by Oxygen. On January 13, 2025, Oxygen answered the Bank’s arbitration demand, generally denying the allegations made by the Bank, and filed a Counterclaim against the Bank. The Counterclaim alleges (i) that the termination of the Private Label Account Program Agreement was pretextual, (ii) the Bank breached its notification obligations in terminating the Private Label Account Program Agreement, (iii) the Bank breached the implied covenant of good faith and fair dealing, and (iv) conversion of $1.2 million by the Bank. The ad damnum clause of the Counterclaim also seeks compensatory damages in an amount not less than $40 million. The Bank believes it has meritorious defenses and intends to vigorously defend against the Counterclaim. The Company is not yet able to determine whether the ultimate resolution of this matter will have a material adverse effect on the Company’s financial condition or operations.

The Putative Class Action Matter. On March 14, 2025, Nathan Linden filed a putative securities class action complaint captioned Nathan Linden v. The Bancorp, Inc., et al. in the U.S. District Court for the District of Delaware against the Company and certain of its current and former officers. The complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder and purports to assert a class action on behalf of persons and entities that purchased or otherwise acquired Company securities between January 25, 2024 and March 4, 2025. The complaint alleges, among other things, that the defendants made materially false and/or misleading statements and omissions about the Company’s business, prospects, and operations, with a focus on the Company’s commercial real estate bridge loan (“REBL”) portfolio and related provision for credit losses. On September 29, 2025, the court appointed Southeastern Pennsylvania Transportation Authority (“SEPTA”) as lead plaintiff; the case is now captioned Southeastern Pennsylvania Transportation Authority v. The Bancorp, Inc., et al. On December 22, 2025, SEPTA filed its amended class action complaint, which alleges that between January 26, 2024 and March 25, 2025, the defendants made materially false and/or misleading statements and omissions about certain loans in the Company’s REBL portfolio and related provision for credit losses. The named plaintiff seeks unspecified damages, fees, interest, and costs. The Company intends to vigorously defend against the allegations in the amended complaint. On February 20, 2026, the Company filed its motion to dismiss the amended complaint and further briefing on that motion remains outstanding. The Company is not yet able to determine whether the ultimate resolution of the matter will have a material adverse effect on the Company’s financial condition or operations.

The Ingenium Matter. On February 2, 2026, the Bank was made aware of a complaint filed in the Delaware Superior Court, Complex Commercial Division by Ingenium Capital Group, LLC (“Ingenium”) captioned as Ingenium Capital Group, LLC v. The Bancorp Bank, N.A., C.A. No. N26C-01-487 PAW CCLD. Prior to service of the complaint, on February 19, 2026, Ingenium filed its amended complaint. In the amended complaint, Ingenium alleges that the Bank committed fraud or breached a letter of understanding signed in January 2023 by inducing Ingenium to invest upwards of $10 million in Oxygen, Inc. (the same entity that the Bank is arbitrating against in the Oxygen Matter described above) and then by terminating its contract with Oxygen in February 2024. The amended complaint seeks not less than $10 million in damages, plus costs of litigation, and interest. The Bank intends to vigorously defend against the claims. We are not yet able to estimate any potential liability of the Bank.

In addition, we are a party to various routine legal proceedings arising out of the ordinary course of our business. Management believes that none of these actions, individually or in the aggregate, will have a material adverse effect on our financial condition or operations.

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Note 11. Segment Financials

The following tables provide segment information for the periods indicated (dollars in thousands):

(1) Non-interest income of the Fintech segment includes $45.9 million of Fintech loan credit enhancement income related to the estimated recovery from a Fintech partner for losses on fintech loans where the measurement of the expected loan loss and credit enhancement are based on the same estimate. The remainder of Non-interest income for Fintech is $34.4 million total fintech fees.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 Form 10-K for the fiscal year ended 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.

MD&A is organized in the following sections:

Overview

Executive Summary

Results of Operations

Financial Condition

Liquidity and Capital Resources

Asset and Liability Management

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Overview

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. 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.

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.

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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 March 31, 2026, 93% 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: (i) Real estate bridge lending (REBL), which is comprised primarily of apartment building rehabilitation loans; (ii) 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 (iii) Commercial Loans which includes Small Business Loans (“SBL”) which is 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 $1.65 billion as of March 31, 2026 increased 50% compared to the $1.10 billion balance at December 31, 2025 and increased 187% compared to the March 31, 2025 balance of $574.0 million. Certain loan fees on fintech loans are recorded as non-interest income and totaled $5.6 million for the quarter ended March 31, 2026 compared to $3.6 million for the quarter ended March 31, 2025.

We continue to invest in our infrastructure, with a focus on investing in artificial intelligence 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.

We remain focused on returning capital through share repurchases and repurchased 843,061 shares of our common stock at an average cost of $59.31 per share during the quarter ended March 31, 2026. Primarily driven by share repurchases, outstanding shares, net of treasury shares at March 31, 2026 decreased 1% to 41.859 million from 42.355 million shares at December 31, 2025.

Financial Highlights

Financial highlights include:

(1) Gross dollar volume represents the total dollar amount spent on prepaid, debit and credit cards issued by The Bancorp Bank, N.A.

Our net income increased to $60.1 million in the first quarter of 2026 from $57.2 million in the first quarter of 2025, an increase of $2.9 million, or 5.1%.

Earnings per diluted share increased to $1.41 in the first quarter of 2026 from $1.19 in the first quarter of 2025, an increase of 18%, 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.

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Key components of our change in net income between periods include:

Net interest income decreased $2.9 million, consisting of a $10.0 million decrease in interest income partially offset by a $7.0 million decrease in interest expense. The most significant driver of the net change is average deposits on balance sheet from customers was significantly higher in the first quarter of 2025, driven by one-time volumes from wildfire insurance refunds and higher fintech on-balance sheet volumes.

Non-interest income decreased $11.1 million, to $72.5 million in the first quarter of 2026 from $83.6 million in the first quarter of 2025. That decrease includes a $17.0 million decrease in Fintech loan credit enhancement income driven by improved performance of fintech loans, partially offset by a $3.6 million increase in total fintech fees primarily driven by volume growth, and a $2.7 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 million, to $27.6 million in the first quarter of 2026, from $46.9 million in the first quarter of 2025. That decrease includes $17.0 million decrease in provision for fintech loans, which directly relates to the credit enhancement income decrease outlined above. The remaining decrease in total provision between periods was $2.3 million, primarily driven by a recovery booked in the first quarter of 2026 as a result of improved credit in our direct lease financing portfolio.

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.

Detailed discussion of our financial results and the drivers of these fluctuations follows in “Results of Operations.”

Our strategic focus on growing our fintech business fee-based income and fintech loan portfolio had an impact on our KPIs as follows:

Average loans and leases grew to $7.25 billion in the first quarter of 2026 from $6.39 billion in the first quarter of 2025, an increase of $868.5 million or 13.6%, primarily driven by a $648.3 million increase in our average fintech portfolio, reflecting our continued strategic shift towards sponsored lending.

Non-interest income—consumer credit fintech fees increased to $5.6 million in the first quarter of 2026, up 55.4% from $3.6 million in the first quarter of 2025 which reflected continued organic volume growth with existing partners and products and the impact of new products launched within the past year. Prepaid and debit card gross dollar volume (“GDV”) increased to $52.51 billion, up 17.6% from $44.65 billion in the first 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. 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% in the first quarter of 2026 from 4.07% in the first 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 quarter 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 had an impact on our ratio of equity to assets. At March 31, 2026, the ratio of equity to assets was 7.04%, 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.

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Results of Operations - Q1 2026 to Q1 2025

Net Interest Income

Our net interest income for the first quarter of 2026 decreased $2.9 million, or 3.2%, to $88.8 million from $91.7 million in the first quarter of 2025.

Growth of Fintech Lending. Our strategy is to continue to drive growth in our Fintech lending business, as seen in the mix shift of our loan portfolio to 15.4% of average loans in the first quarter 2026, compared to 7.3% at the end of the first 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 net 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 million and $3.6 million for the first quarters of 2026 and 2025, respectively.

We expect to continue to increase the proportion of Fintech loans in our portfolio in 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

Interest income for the first quarter of 2026 was $129.8 million, a decrease of $10.0 million from $139.8 million in the first quarter of 2025, primarily driven by $10.5 million lower income on interest-earning deposits. In the first quarter of 2025, average deposits on balance sheet from customers of $1.14 billion was significantly higher than $250.0 million in first 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 million in the first quarter of 2026, $1.4 million lower than $108.9 million in the first quarter of 2025, driven by $3.0 million lower interest earned on non-fintech loans partially offset by $1.6 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% for first quarter of 2026, compared to 7.34% for first quarter of 2025, while average balance was 3.7% higher. The loan portfolio is reflecting the impact of Federal Reserve rate decreases which continued in the third quarter of 2025. For fintech loans, higher interest income of $1.6 million was driven by higher volumes of fintech loans. See “Growth of Fintech Lending” discussion above for further information.

Interest Expense

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 million higher 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. Interest expense on short-term deposits was $1.4 million higher in 2026, as that funding source was utilized to fund higher average loans on balance sheet in the first quarter of 2026 and that funding source was not utilized at all in first quarter 2025. Interest expense on senior debt was $2.6 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.

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Average Daily Balances

The following table presents the average daily balances of assets, liabilities and shareholders’ equity and the respective interest earned or paid on interest-earning assets and interest-bearing liabilities, as well as average annualized rates, for the periods indicated:

For the first quarter of 2026 compared to first quarter of 2025, average interest-earning assets increased $159.4 million, reflecting an $867.5 million increase in average loans and a $177.3 million increase in average investment securities, partially offset by a decrease in average interest-earning deposits of $886.4 million. For those respective periods, average deposits and liabilities increased $250.8 million, primarily driven by a $145.9 million increase in short-term borrowings and a $100.0 million increase in senior debt.

Net Interest Margin

Our net interest margin (calculated by dividing net interest income by average interest-earning assets) for the first quarter of 2026 was 3.87% compared to 4.07% for the first quarter of 2025, a decrease of 20 basis points. The average yield on interest-earning assets decreased 54 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 39 basis points, or a net change of 15 basis points, driven primarily by a 53 basis point decrease in average rate on deposits primarily due to a lower rate environment in the first quarter of 2026.

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Provision for Credit Losses

Our provision for credit losses was $27.6 million for the first quarter of 2026, a decrease of $19.3 million compared to a provision of $46.9 million for the first quarter of 2025. The decrease is primarily attributable to $17.0 million lower provision for fintech loans driven by improved performance of that loan portfolio. The lower fintech loan provision correlates to a lower amount of related non-interest income from a credit enhancement contractually provided by a third party. Accordingly, there have been no related net impact from these amounts. See further discussion of this program in “Financial Condition—Allowance for Credit Loss—Fintech Programs” in MD&A.

In addition, the provision for credit losses on non-fintech loans was a reversal of $1.3 million in the first quarter of 2026 compared to provision expense of $0.9 million in the first quarter of 2025. The provision reversal in the first quarter of 2026 is primarily driven by improvements in credit quality of the direct lease financing portfolio.

For more information about our provision, allowance and credit loss experience, see “Financial Condition—Portfolio Performance” below and “Note 5. Loans” to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

Non-Interest Income

Non-interest income was $72.5 million in the first quarter of 2026, a decrease of $11.1 million compared to $83.6 million in the first quarter of 2025. The decrease between those respective periods is primarily driven by a $17.0 million decrease in fintech loan credit enhancement income, which was partially offset by $3.6 million in higher total fintech fees and $2.7 million of higher other non-interest income.

Fintech loan credit enhancement income decreased $17.0 million driven by improved performance of fintech loans, which correlates to a like amount for provision for credit losses on fintech loans. See further discussion above under “Provision for Credit Losses”.

Total fintech fees increased $3.6 million, which includes a $1.0 million increase in prepaid, debit card and related fees, or 3.7%, to $26.7 million for the first quarter of 2026, compared to $25.7 million in the first quarter of 2025, driven by higher transaction volume from new clients and organic growth from existing clients. In addition, ACH, card and other payment processing fees increased $0.7 million, or 12.9%, to $5.8 million for the first quarter of 2026, compared to $5.1 million in the first quarter of 2025, reflecting an increase in rapid funds transfer volume. Consumer credit fintech fees increased $2.0 million to $5.6 million for the first quarter of 2026, compared to $3.6 million in the first quarter of 2025, reflecting increased loan volume.

Other non-interest income increased $2.7 million for the first quarter of 2026, compared to the first quarter of 2025, primarily driven by $1.1 million higher other fee income from loans and $0.9 million of fees earned on deposit sweeps.

Non-Interest Expense

The following table presents the principal categories of non-interest expense for the periods indicated:

Total non-interest expense was $55.0 million for the first quarter of 2026, an increase of $1.7 million, or 3.2%, compared to $53.3 million for the first quarter of 2025. The increase reflects $3.8 million higher salaries and benefits expense primarily driven by higher costs from

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incentive compensation accruals and costs related to organization changes, partially offset by a $2.0 million reimbursement from insurance in the first quarter of 2026 related to a legal settlement that was previously expensed in fourth quarter of 2025.

Income Taxes

Income tax expense was $18.6 million for the first quarter of 2026 compared to $18.1 million in the first quarter of 2025. A 23.7% effective tax rate and a 24.0% effective tax rate in the first quarters of 2026 and 2025, respectively, based on a 21% federal tax rate and the impact of various state income taxes. The tax rate in the first quarter of the year is typically lower than our full-year effective rate, which was 24.7% for full year 2025, due to the tax impact of stock-based compensation activity from the first quarter of each year.

Financial Condition

Total Assets

Total assets at March 31, 2026 were $9.90 billion, a $546.3 million increase from $9.35 billion at December 31, 2025. The change in total assets was primarily driven by a $637.0 million increase in our total loan portfolio.

We are managing our balance sheet to remain under $10 billion in assets in order to maintain our exemption from regulated limits on interchange fees, among other benefits, under the Durbin Amendment and the Federal Reserve’s implementing regulations. Our strategy in managing our balance sheet includes balancing our investments in our loan portfolio and investment securities to strategically direct the growth of our business, and sweeping deposits off-balance sheet to other financial institutions, as discussed further in “Financial Condition—Deposits” in MD&A.

Investment Securities

The following table presents a summary of our available-for-sale investment securities, by major category:

The following table shows the contractual maturity distribution and the weighted average yield of our investment securities as of March 31, 2026 (dollars in thousands). The weighted average yield was calculated by dividing the amount of individual securities to total securities in each category, multiplying by the yield of the individual security and adding the results of those individual computations.

(1) If adjusted to their taxable equivalents, yields would approximate 2.91%, 4.90%, and 5.73% for zero to one year, five to ten years, and over ten years, respectively, at a federal tax rate of 21%.

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Total Loan Portfolio

The following table summarizes our loan portfolio, by loan category (dollars in thousands):

(1) As of both March 31, 2026 and December 31, 2025, Other loans includes $110.7 million related to warehouse financing related to loan sales to third-party purchasers of real estate bridge loans.

The majority of our loan portfolio is loans recorded at amortized cost, which are recognized net of an allowance for credit loss. Loans, net of deferred loan fees and costs increased to $7.75 billion at March 31, 2026 from $7.12 billion at December 31, 2025. This $637.0 million increase is primarily driven by growth in fintech loans of $548.6 million, and a $90.5 million increase in REBL loans.

Commercial loans, at fair value are comprised of non-SBA commercial real estate loans and SBA loans which had been originated for sale or securitization through the first quarter of 2020, and which are now being held for investment on the balance sheet. These loans continue to be recognized at fair value, and this portfolio declined $11.1 million from December 31, 2025, as this portfolio continues to runoff. All originations are now being recognized at amortized cost.

The underlying nature of the collateral for our loan portfolio includes:

SBL non-real estate are collateralized by business assets, which may include certain real estate;

SBL commercial mortgage and construction are collateralized by real estate for small businesses;

SBLOC are collateralized by marketable investment securities while IBLOC are collateralized by the cash value of life insurance;

Advisor financing are collateralized by investment advisors’ business franchises;

Real estate bridge loans are primarily collateralized by apartment buildings, or other commercial real estate; and

Direct lease financing are collateralized primarily by vehicles or equipment.

Fintech loans include secured credit card accounts of $1.22 billion and $729.1 million as of March 31, 2026 and December 31, 2025, respectively, which are backed dollar-for-dollar by cash collateral by each individual cardholder that are recognized as deposits on our Condensed Consolidated Balance Sheets, and these loans are required to be repaid in-full monthly. The remaining fintech loans consist of cashflow underwritten short-term liquidity products to individual borrowers ranging in maturities from 30 to 365 days. All fintech loans are covered by credit enhancement agreements, as discussed further below under “Fintech Programs.”

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The following table summarizes the concentration by state of our real estate bridge loans as of March 31, 2026 (dollars in thousands):

Portfolio Estimated Maturities

The following table presents loan categories by maturity for the period indicated. Actual repayments historically have, and will likely in the future, differ significantly from contractual maturities because individual borrowers generally have the right to prepay loans, with or without prepayment penalties. See “Asset and Liability Management” in this MD&A for a discussion of interest rate risk.

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Portfolio Performance

Loans are considered to be non-performing if they are on a non-accrual basis, or are past due 90 days or more and still accruing interest. A loan which is past due 90 days or more and still accruing interest remains on accrual status only when it is both adequately secured as to principal and interest and is in the process of collection.

The following table summarizes our non-performing assets, with discussion of significant changes between periods to follow (dollars in thousands):

Non-accrual loans increased $17.1 million, primarily driven by a $12.7 million increase in REBL loans and $4.4 million increase in SBL commercial mortgage.

Loans past due 90 days or more still accruing interest amounted to $2.2 million at March 31, 2026 and $18.2 million at December 31, 2025. The $16.0 million decrease is primarily driven by a $14.5 million REBL loan that left 90 days or more past due status after we entered into a loan agreement with a new borrower with greater financial capacity.

We evaluate loans under an internal loan risk rating system as a means of identifying problem loans. At March 31, 2026, there were $163.1 million of loans classified as special mention and substandard in total, a decrease of $31.4 million, or 16%, from $194.5 million at December 31, 2025. The decrease is primarily driven by a $24.4 million decrease in criticized Real estate bridge loans, and a $6.3 million decrease in criticized small business commercial mortgage loans.

See “Note 5. Loans” to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for further information on loan modification and classified loans.

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Asset Quality Ratios

The following table summarizes select asset quality ratios for each of the periods indicated:

Allowance for Credit Losses (“ACL”) to total loans decreased slightly to 0.81% at March 31, 2026 compared to 0.93% at December 31, 2025. The fintech ACL to Loans ratio decreased to 1.81% as of March 31, 2026 from 2.84% at December 31, 2025, driven by both an increase in the mix of secured credit card loans that have insignificant expected losses, and improved performance of unsecured fintech loans.

Non-performing loan ratios are also calculated showing fintech and non-fintech separately, as fintech has a relatively small contribution to the non-performing loan population due to the short-term nature of those receivables, the majority of are charged off before they reach 90 days past due. However, the fintech loan receivable portfolio growth does have an impact on the denominator of those ratios in total.

ACL to non-performing loans—Total decreased to 84.1% at March 31, 2026 from 89.6% at December 31, 2025, and for non-fintech, the ratios are 45.4% and 48.8% for the respective periods. Non-performing loans are subject to specific review when preparing our allowance for credit losses estimate. We assess the collectability of the receivables, the nature of the non-performance status, the loan to collateral value, and other factors, when determining whether a specific reserve is required. The ACL as of March 31, 2026 did not increase proportional to the increase in this population based on our assessment of the collectability of that population.

Non-performing loans to total loans declined to 0.97% at March 31, 2026, from 1.04% at December 31, 2025, as the 9% increase in total loan population was greater than the 1% increase in non-performing loans.

Non-performing assets to total assets ratio declined to 1.37% at March 31, 2026 from 1.44% at December 31, 2025, as total assets increased 6% while non-performing assets increased 1%.

See further discussion of the non-performing loan population directly above under “Portfolio Performance.”

Net charge-offs to average loans was 0.42% for the three months ended March 31, 2026 compared to 0.61% for the three months ended March 31, 2025.

Fintech net charge-offs to average loans of 2.71% for the three months ended March 31, 2026 was an improvement from 8.26% for the three months ended March 31, 2025, driven both by improved performance of unsecured loans and an increase in the mix of fintech

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loans to secured credit card accounts which have insignificant losses upon default. 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.

Excluding fintech loans, net charge-offs to average loans was 0.01% for both the three months ended March 31, 2026 and 2025.

Non-Accrual and 90+ Days Past Due Loans

The following table summarizes the Company’s non-accrual loans and loans past due 90 days or more still accruing interest, by year of origination, at March 31, 2026 and December 31, 2025:

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Allowance for Credit Losses

We review the adequacy of our ACL on at least a quarterly basis to determine a provision for credit losses to maintain our ACL at a level we believe is appropriate to recognize current expected credit losses. A summary of loans recorded at amortized cost and the allowance follows (dollars in thousands):

The ACL decreased $3.2 million from December 31, 2025, primarily driven by a $2.5 million decrease in reserves on direct lease financing, and a $1.4 million decrease in reserves on fintech loans, in each case driven by improved credit performance on the underlying loan portfolio segments.

Fintech Programs

Our fintech programs include consumer transaction accounts and fintech loans.

Consumer transaction accounts consist primarily of Bank-issued stored value prepaid or debit cards. For this program, we recognize a deposit liability for the current balance of the cards and recognize fee-based revenue in Non-interest income—Prepaid, debit card and related fees; we do not have any receivables or allowance risk related to the payment programs.

Fintech loans consist of short-term loans originated by our Bank, with the marketing and servicing assistance of third-party relationships. Loans receivable originated under these fintech agreements are governed by an agreement with the borrower and may include: secured credit cards and unsecured short-term extensions of credit. For the secured credit card program, we recognize a loan receivable and a deposit liability for the cash collateral that secures those accounts. Unsecured fintech loans include payroll advance and other short term-extensions of credit; those accounts are typically repaid within a year of origination.

As of March 31, 2026, and December 31, 2025, all fintech loans, both secured and unsecured, are covered by credit enhancement agreements. The third-party agreements governing the fintech loans include provisions for credit enhancements, through which the third party guarantees losses on such fintech loans (either in whole or in part). When a fintech loan meets a defined delinquency level, we recognize a charge-off of the receivable, and the incurred losses are covered by the third party. Any subsequent recoveries from the charged-off loan are credited to the third party.

The third-party relationship agreements governing fintech loans include requirements for pledging cash reserve accounts at the Bank as collateral for loss exposure, through which we can collect when losses occur. The reserve accounts are then replenished by the counterparties based on contractually required thresholds. In addition to the reserve accounts, the agreements also provide for the right to offset any cashflows we owe to the third parties (such as for monthly revenues) against any net realized loan losses. While we continually monitor the risk of these counterparties, establish the reserve thresholds at levels we consider appropriate to cover loss exposure on these short-term loan receivables, and we have additional protection from our rights to net realized loan losses against cashflows owed to the third party, if the third party defaults under their agreement and/or is unable to fulfill their contractual obligations to replenish the reserve account and cover losses, we may be exposed to loan losses in excess of our net reserve position.

The loan receivable agreement with the borrower and the third-party credit enhancement agreements are required to be accounted for separately as freestanding contracts in accordance with U.S. GAAP. As such, we recognize the separate units of account as follows:

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Fintech loans receivable from the borrower are recognized on the Balance sheet, along with an estimate of credit loss for fintech loans through the allowance. Provision for credit losses on fintech loans is recognized on the Statement of Operations.

A credit enhancement asset is recognized on the Balance Sheet for the estimated recovery under the third-party credit enhancement agreement, and the Company recognizes non-interest income—fintech loan credit enhancement on the Statement of Operations. In addition, deposit liability on our Balance Sheets includes amounts for reserve account collateral held to fund losses under the credit enhancement agreements.

The measurement of the estimated credit losses and the expected recovery from the credit enhancement are based on the same estimate and correlate to like amounts in our financial statements. We recognized credit enhancement assets of $29.8 million and $31.1 million on the Balance Sheets as of March 31, 2026, and December 31, 2025, respectively.

Net Charge-offs

The following tables reflect the relationship of year-to-date average loans outstanding, based upon quarter end averages, and net charge-offs by loan category (dollars in thousands):

Net charge-offs were $30.7 million for the three months ended March 31, 2026, a decrease of $8.4 million from net charge-offs of $39.1 million during the three months ended March 31, 2025. In the three months ended March 31, 2026, $30.2 million of net charge-offs were recognized on fintech loans, or a 2.20% ratio to average loans, compared to $38.6 million, and 11.19% for the prior year period. The improved fintech charge-off levels reflect better credit performance of the unsecured fintech loans, and an increase in the mix of secured credit card loans which have an insignificant level of expected losses.

Excluding fintech, net charge-offs on the remaining portfolio were $0.5 million for each of the three months ended March 31, 2026 and March 31, 2025.

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Deposits

Our primary source of funding is deposit acquisition. At March 31, 2026, we had total deposits of $8.43 billion compared to $8.17 billion at December 31, 2025, which reflected an increase of $264.5 million, or 3.2%. Due to the nature of our deposit products, daily deposit balances are subject to variability, and deposits averaged $8.32 billion in the first quarter of 2026. As of March 31, 2026, 94% of the deposits are insured, 3% are low balance accounts (such as anonymous gift cards and corporate incentive cards for which there is no identified depositor) and 3% are other uninsured deposits.

Demand and interest checking is $8.28 billion of total deposits as of March 31, 2026, and primarily consists of balances from prepaid, debit and other payment card accounts that the Bank issues to fund payments for salary, medical spending, commercial, general purpose reloadable, corporate and other incentive, gift, government payments and transaction accounts. These accounts have an established history of stability and lower cost than certain other types of funding. Deposits also include payment processing balances, funds received as collateral supporting the secured credit card program of our Fintech segment, and small population of traditional deposits.

Savings and money market is $149.0 million of total deposits as of March 31, 2026.

We do not have a traditional branch system. Our deposit accounts are comprised primarily of millions of small transaction-based consumer balances which are obtained through and with the assistance of our partners. We have long-term contractual relationships with the partners of our Fintech business which sponsor such accounts as discussed further in Item 1. “Business—Our Strategies” in our Annual Report on Form 10-K for the year ended December 31, 2025.

Of our $8.43 billion total deposits at March 31, 2026, the top three affinity groups accounted for approximately $4.85 billion, the next three largest $1.33 billion, and the four subsequent largest $806.0 million. The top ten partner relationships at March 31, 2026 consisted of $4.11 billion related to payroll, debit, and government-based accounts such as child support, and $2.88 billion related to consumer and business payment companies, including companies sponsoring incentive and gift card payments.

Of our $8.17 billion total deposits at year-end 2025, the top three affinity groups accounted for approximately $3.83 billion, the next three largest $1.35 billion, and the four subsequent largest $811.7 million. The top ten partner relationships at year end 2025 consisted of $3.20 billion related to payroll, debit, and government-based accounts such as child support, and $2.80 billion related to consumer and business payment companies, including companies sponsoring incentive and gift card payments.

In addition, we sweep deposits off our balance sheet to other institutions as part of our funding strategies, which totaled $1.34 billion and $849.9 million as of March 31, 2026 and December 31, 2025, respectively. Such sweeps are utilized to manage our balance sheet composition and deposit portfolio diversity.

The following table presents the average balance and rates paid on deposits for the periods indicated (dollars in thousands):

Of the demand and interest checking balance shown above, $136.4 million and $136.0 million for 2026 and 2025, respectively, represented balances on which we paid interest. The remaining balance for each period reflects amounts subject to fees paid to third parties, which are based upon a contractual percentage applied to a rate index, generally the effective federal funds rate, and therefore classified as interest expense.

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Short-term Borrowings

Short-term borrowings consist of amounts borrowed on our lines of credit with the Federal Reserve Bank or FHLB. There were $470.0 million and $199.0 million of borrowings with FHLB at March 31, 2026 and December 31, 2025, respectively. Our use of short-term borrowings fluctuates based on our current funding needs for loans. We generally utilize overnight borrowings to manage our daily reserve requirements at the Federal Reserve.

The following table summarizes short-term borrowings:

Liquidity and Capital Resources

Liquidity defines our ability to generate funds at a reasonable cost to support asset growth, meet deposit withdrawals, satisfy borrowing needs and otherwise operate on an ongoing basis. Maintaining an adequate level of liquidity depends on the institution’s ability to efficiently meet both expected and unexpected cash flows without adversely affecting daily operations or financial condition. The Company’s liquidity management policy requirements include sustaining defined liquidity minimums, concentration monitoring and management, stress testing, contingency planning and related oversight. Based on our sources of funding and liquidity discussed below, we believe we have sufficient liquidity and capital resources available for our needs in the next 12 months and for the foreseeable future. We invest the funds we do not need for daily operations primarily in our interest-bearing account at the Federal Reserve. We actively monitor our positions and contingent funding sources daily.

Deposits. Our primary source of funding has been consumer deposits generated through partner relationships. Average total deposits increased by $5.3 million, or 0.1%, to $8.32 billion for the first quarter of 2026 compared to the first quarter of 2025. 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, but are tied to long-term partner contracts. Certain components of our deposits experience seasonality, creating greater excess liquidity at certain times. The largest deposit inflows occur in the first quarter of the year when certain of our accounts are credited with tax refund payments from the U.S. Treasury.

As of March 31, 2026, 94% of the deposits are insured, 3% are low balance accounts (such as anonymous gift cards and corporate incentive cards for which there is no identified depositor) and 3% are other uninsured deposits. We do not believe that such uninsured accounts present a significant liquidity risk.

In addition, we sweep deposits off our balance sheet to other institutions as part of our funding strategies, which totaled $1.34 billion and $849.9 million as of March 31, 2026 and December 31, 2025, respectively. Such sweeps are utilized to optimize diversity within our funding structure by managing the percentage of individual client deposits to total deposits. Deposit sweeps represent an amount of deposits that are greater than our current needs to fund our assets. The swept deposits serve as a source of contingent liquidity, as we may move a portion of those deposits back on balance sheet, at our election.

Other Funding Sources. While consumer deposit accounts, including prepaid and debit card accounts, comprise the vast majority of our funding sources, we maintain secured borrowing lines with the FHLB and the Federal Reserve that are collateralized by pledged loans and investment securities. As of March 31, 2026, we had $470.0 million borrowed under these facilities, and based on the current amount of loans and securities pledged there currently is $2.98 billion of additional available capacity which we can access anytime. We expect to continue to maintain our facilities with the FHLB and Federal Reserve.

Loans. We utilize the deposits that are primarily generated by our Fintech business to fund our credit solutions business and the sponsored lending loans of fintech. Historically, growth in deposits has funded growth of loans. At March 31, 2026, outstanding loans amounted to $7.75 billion, compared to $7.12 billion at the prior year end, an increase of $637.0 million representing a use of funds.

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Investment Securities. One source of contingent liquidity is available-for-sale securities, which amounted to $1.65 billion at March 31, 2026, compared to $1.67 billion at December 31, 2025. In the first quarter of 2026, $5.0 million of securities purchases were exceeded by $25.6 million of securities cash inflows.

Cash. At March 31, 2026, our interest-earning deposits within cash and cash equivalents were $58.5 million, and primarily consisted of deposits with the Federal Reserve. Interest-earning deposit average balances decreased to $250.0 million in the first quarter of 2026 from $1.14 billion in the first quarter of 2025.

Funding Commitments and Uses. As a holding company conducting substantially all our business through our subsidiaries, our near-term need for liquidity consists principally of cash for required interest payments on debt, which includes semi-annual interest payments on the 2030 Senior Notes of $7.4 million, and quarterly interest payments on the subordinated debentures of $300,000, and cash required to fund operating costs.

We had outstanding commitments to fund loans, including unused lines of credit, of $2.33 billion as of March 31, 2026. The majority of our commitments are variable rate and originate with SBLOC. The amount of such commitments represents amounts unfunded under existing loan agreements, where there is capacity for the customer to borrow additional amounts as long as there is no violation of any condition of the contract. The funding requirements for such commitments occur on a measured basis over time and would be funded by normal deposit growth.

As of March 31, 2026, we had cash reserves of $11.1 million at the holding company. Stock repurchases along with interest payments on our debt instruments have historically been funded by dividends from the Bank, as have interest payments on the above debt instruments. Stock repurchases may be terminated at any time. The holding company’s sources of liquidity are primarily comprised of dividends paid by the Bank to the Company, and the issuance of debt.

Capital Resources and Requirements. We must comply with capital adequacy guidelines issued by our regulators. A bank must, in general, have a Tier 1 leverage ratio of 5.00%, a ratio of Tier I capital to risk-weighted assets of 8.0%, a ratio of total capital to risk-weighted assets of 10.0% and a ratio of common equity Tier 1 to risk weighted assets of 6.5% to be considered “well capitalized.” The Tier I leverage ratio is the ratio of Tier 1 capital to average assets for the quarter. “Tier I capital” includes common shareholders’ equity, certain qualifying perpetual preferred stock and minority interests in equity accounts of consolidated subsidiaries, less intangibles. At March 31, 2026, the Bank was “well capitalized” under banking regulations.

The following table sets forth our regulatory capital amounts and ratios for the periods indicated:

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Asset and Liability Management

Our principal market exposure is to interest rate risk, specifically changes in the Federal Reserve overnight federal funds rate, due to their impact on our net interest income and the market value of our interest-earning assets.

We assess our interest rate risk using both: (i) a Gap Analysis that outlines the estimated timing of when interest-bearing assets and liabilities mature, repay or reprice; and (ii) a Sensitivity Analysis that measures the potential impact on our net portfolio value based on hypothetical changes in interest rates.

Gap Analysis

The following table sets forth the amounts of interest-earning assets and interest-bearing liabilities that were outstanding at March 31, 2026 and the portions of each financial instrument that are anticipated, based upon certain assumptions, to mature or reset in each future period:

The above table provides an approximation of the projected repricing of assets and liabilities at period end on the basis of contractual terms, except for adjustments as noted:

Loans at fair value and Loans, net – We do not assume any prepayment of fixed-rate loans.

Investment securities – Prepayment adjustments are made for mortgage and asset backed securities based on historical data and current market trends.

Deposits – Transaction accounts are comprised primarily of demand deposits. The majority of transaction and savings balances are assumed to be “core” deposits, or deposits that will generally remain with us regardless of market interest rates. We estimate the repricing characteristics of these deposits based on historical performance, past experience, judgmental predictions and other deposit behavior assumptions. However, we may choose not to reprice liabilities proportionally to changes in market interest rates for competitive or other reasons.

Additionally, while demand deposits are non-interest-bearing, related fees paid to affinity groups may reprice according to specified indices, and as such those fees are included in interest expense. We have adjusted the transaction account balances downward to better reflect the impact of their partial adjustment to changes in rates.

Although a gap analysis is a useful measurement device available to management in determining the existence of interest rate exposure, its static focus as of a particular date makes it necessary to utilize other techniques in measuring exposure to changes in interest rates. For example, gap analysis is limited in its ability to predict trends in future earnings and makes no assumptions about changes in prepayment tendencies, deposit or loan maturity preferences or repricing time lags that may occur in response to a change in the interest rate environment.

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Interest Rate Sensitivity Analysis

The following table shows impact of hypothetical instantaneous parallel shifts in the yield curve on our net portfolio value and annual net interest income:

These sensitivities are hypothetical and are presented for illustrative purposes only. Changes in fair value and the impact on our net interest income generally cannot be extrapolated because the relationship of the change in fair value may not be linear. Actual interest rate sensitivity could vary substantially from the above analysis if different assumptions are used or actual experience differs from presumed behavior of various deposit and loan categories.