UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2024

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

For the transition period from: _____ to _____

Commission file number: 000-51018

THE BANCORP, INC.

(Exact name of registrant as specified in its charter)

Delaware	23-3016517
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
409 Silverside Road, Wilmington, DE 19809	(302) 385-5000
(Address of principal executive offices and zip code)	(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of each Exchange on Which Registered
Common Stock, par value $1.00 per share	TBBK	Nasdaq Global Select

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x	Accelerated filer o	Non-accelerated filer o
Smaller reporting company o	Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of April 29, 2024, there were 51,764,683 outstanding shares of common stock, $1.00 par value.

THE BANCORP, INC

Form 10-Q Index

		Page
Part I Financial Information
Item 1.	Financial Statements:	3
	Consolidated Balance Sheets – March 31, 2024 (unaudited) and December 31, 2023	3
	Unaudited Consolidated Statements of Operations – Three months ended March 31, 2024 and 2023	4
	Unaudited Consolidated Statements of Comprehensive Income – Three months ended March 31, 2024 and 2023	5
	Unaudited Consolidated Statements of Changes in Shareholders’ Equity – Three months ended March 31, 2024 and 2023	6
	Unaudited Consolidated Statements of Cash Flows – Three months ended March 31, 2024 and 2023	8
	Notes to Unaudited Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	66
Item 4.	Controls and Procedures	66
Part II Other Information
Item 1.	Legal Proceedings	67
Item 1A.	Risk Factors	67
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	67
Item 6.	Exhibits	68
Signatures		69

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

THE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

		December 31,
		2023
(in thousands, except share data)	(unaudited)
ASSETS
Cash and cash equivalents
Cash and due from banks	9,105	$	4,820
Interest-earning deposits at Federal Reserve Bank	1,241,363		1,033,270
Total cash and cash equivalents	1,250,468		1,038,090
Investment securities, available-for-sale, at fair value, net of 10.0 million allowance for credit loss	718,247		747,534
Commercial loans, at fair value	282,998		332,766
Loans, net of deferred loan fees and costs	5,459,344		5,361,139
Allowance for credit losses	(28,741)		(27,378)
Loans, net	5,430,603		5,333,761
Stock in Federal Reserve, Federal Home Loan and Atlantic Central Bankers Banks	15,642		15,591
Premises and equipment, net	27,482		27,474
Accrued interest receivable	37,861		37,534
Intangible assets, net	1,552		1,651
Other real estate owned	19,559		16,949
Deferred tax asset, net	21,764		21,219
Other assets	109,680		133,126
Total assets	7,915,856	$	7,705,695
LIABILITIES
Deposits
Demand and interest checking	6,828,159	$	6,630,251
Savings and money market	62,597		50,659
Total deposits	6,890,756		6,680,910
Securities sold under agreements to repurchase	—		42
Senior debt	95,948		95,859
Subordinated debentures	13,401		13,401
Other long-term borrowings	38,407		38,561
Other liabilities	60,579		69,641
Total liabilities	7,099,091		6,898,414
SHAREHOLDERS' EQUITY
Common stock - authorized, 75,000,000 shares of 1.00 par value; 52,253,037 and 53,202,630
shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively	52,253		53,203
Additional paid-in capital	166,335		212,431
Retained earnings	618,044		561,615
Accumulated other comprehensive loss	(19,867)		(19,968)
Total shareholders' equity	816,765		807,281
Total liabilities and shareholders' equity	7,915,856	$	7,705,695

All values are in US Dollars.

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

‎

THE BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

	For the three months ended March 31,
	2024		2023
	(Dollars in thousands, except per share data)
Interest income
Loans, including fees	$	114,252	$	106,259
Investment securities:
Taxable interest		9,634		9,300
Tax-exempt interest		39		32
Interest-earning deposits		11,884		6,585
		135,809		122,176
Interest expense
Deposits		39,161		34,460
Short-term borrowings		19		234
Long-term borrowings		686		126
Senior debt		1,233		1,279
Subordinated debentures		292		261
		41,391		36,360
Net interest income		94,418		85,816
Provision for credit losses on loans		2,169		1,903
Net interest income after provision for credit losses		92,249		83,913
Non-interest income
ACH, card and other payment processing fees		2,964		2,171
Prepaid, debit card and related fees		24,286		23,323
Net realized and unrealized gains
on commercial loans, at fair value		1,096		1,725
Leasing related income		388		1,490
Other		648		280
Total non-interest income		29,382		28,989
Non-interest expense
Salaries and employee benefits		30,280		29,785
Depreciation and amortization		949		721
Rent and related occupancy cost		1,640		1,394
Data processing expense		1,421		1,321
Printing and supplies		103		145
Audit expense		359		392
Legal expense		821		958
Amortization of intangible assets		99		99
FDIC insurance		845		955
Software		4,489		4,237
Insurance		1,338		1,306
Telecom and IT network communications		271		376
Consulting		578		322
Write-downs and other losses on other real estate owned		—		1,019
Other		3,519		5,000
Total non-interest expense		46,712		48,030
Income before income taxes		74,919		64,872
Income tax expense		18,490		15,750
Net income	$	56,429	$	49,122
Net income per share - basic	$	1.07	$	0.89
Net income per share - diluted	$	1.06	$	0.88
Weighted average shares - basic		52,747,140		55,452,815
Weighted average shares - diluted		53,326,588		56,048,142

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

‎

THE BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	For the three months ended March 31,
	2024		2023
	(Dollars in thousands)
Net income	$	56,429	$	49,122
Other comprehensive income, net of reclassifications into net income:
Other comprehensive income
Securities available-for-sale:
Change in net unrealized gains		126		5,229
Reclassification adjustments for losses included in income		2		4
Other comprehensive income		128		5,233
Income tax expense related to items of other comprehensive income
Securities available-for-sale:
Change in net unrealized gains		27		1,412
Reclassification adjustments for losses included in income		—		1
Income tax expense related to items of other comprehensive income		27		1,413
Other comprehensive income, net of tax and reclassifications into net income		101		3,820
Comprehensive income	$	56,530	$	52,942

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

THE BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

For the three months ended March 31, 2024
(Dollars in thousands, except share data)
									Accumulated
	Common				Additional				other
	stock		Common		paid-in		Retained		comprehensive
	shares		stock		capital		earnings		(loss) income		Total
Balance at January 1, 2024		53,202,630	$	53,203	$	212,431	$	561,615	$	(19,968)	$	807,281
Net income		—		—		—		56,429		—		56,429
Common stock issued from restricted units,
net of tax benefits		312,619		312		(312)		—		—		—
Stock-based compensation		—		—		3,317		—		—		3,317
Common stock repurchases and excise tax		(1,262,212)		(1,262)		(49,101)		—		—		(50,363)
Other comprehensive income net of
reclassification adjustments and tax		—		—		—		—		101		101
Balance at March 31, 2024		52,253,037	$	52,253	$	166,335	$	618,044	$	(19,867)	$	816,765

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

‎

THE BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

For the three months ended March 31, 2023
(Dollars in thousands, except share data)
									Accumulated
	Common				Additional				other
	stock		Common		paid-in		Retained		comprehensive
	shares		stock		capital		earnings		(loss) income		Total
Balance at January 1, 2023		55,689,627	$	55,690	$	299,279	$	369,319	$	(30,257)	$	694,031
Net income		—		—		—		49,122		—		49,122
Common stock issued from option exercises,
net of tax benefits		13,158		13		92		—		—		105
Common stock issued from restricted units,
net of tax benefits		405,286		405		(405)		—		—		—
Stock-based compensation		—		—		3,169		—		—		3,169
Common stock repurchases and excise tax		(778,442)		(778)		(24,321)		—		—		(25,099)
Other comprehensive income net of
reclassification adjustments and tax		—		—		—		—		3,820		3,820
Balance at March 31, 2023		55,329,629	$	55,330	$	277,814	$	418,441	$	(26,437)	$	725,148

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

‎

THE BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the three months
	ended March 31,
	2024		2023
		(Dollars in thousands)
Operating activities
Net income	$	56,429	$	49,122
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		1,048		820
Provision for credit losses on loans and security		2,169		1,903
Net amortization of investment securities discounts/premiums		318		309
Stock-based compensation expense		3,317		3,169
Realized gains on commercial loans, at fair value		(1,069)		(2,407)
Write-down of other real estate owned		—		830
Change in fair value of commercial loans, at fair value		—		603
Change in fair value of derivatives		(27)		79
Loss on sales of investment securities		2		4
Increase in accrued interest receivable		(1,496)		(1,724)
Decrease (increase) in other assets		24,173		(7,835)
Decrease in other liabilities		(9,634)		(1,738)
Net cash provided by operating activities		75,230		43,135
Investing activities
Purchase of investment securities available-for-sale		(7,340)		(39,788)
Proceeds from redemptions and prepayments of securities available-for-sale		36,524		23,387
Sale of repossessed assets		2,388		1,527
Net (increase) decrease in loans		(101,062)		128,036
Commercial loans, at fair value drawn during the period		—		(35,962)
Payments on commercial loans, at fair value		48,801		132,782
Purchases of premises and equipment		(1,604)		(3,674)
Net cash (used in) provided by investing activities		(22,293)		206,308
Financing activities
Net increase (decrease) in deposits		209,846		(325,456)
Net decrease in securities sold under agreements to repurchase		(42)		—
Proceeds from the issuance of common stock		—		105
Repurchases of common stock and excise tax		(50,363)		(25,099)
Net cash provided by (used in) financing activities		159,441		(350,450)
Net increase (decrease) in cash and cash equivalents		212,378		(101,007)
Cash and cash equivalents, beginning of period		1,038,090		888,189
Cash and cash equivalents, end of period	$	1,250,468	$	787,182
Supplemental disclosure:
Interest paid	$	42,339	$	38,248
Taxes paid	$	1,096	$	1,944
Non-cash investing and financing activities
Transfer of real estate owned from commercial loans, at fair value, and loans, net	$	2,610	$	737
Leased vehicles transferred to repossessed assets	$	1,970	$	4,022

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

‎

THE BANCORP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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”). The Bank is a nationally chartered commercial bank located in Sioux Falls, South Dakota and is a Federal Deposit Insurance Corporation (“FDIC”) insured institution. As a nationally chartered institution, its primary regulator is the Office of the Comptroller of the Currency (“OCC”). The Bank has two primary lines of business consisting of its national specialty finance segment and its payments segment.

In the national specialty finance segment, the Bank makes the following types of loans: securities-backed lines of credit (“SBLOC”), cash value of insurance-backed lines of credit (“IBLOC”) and investment advisor financing; leases (direct lease financing); small business loans (“SBLs”), consisting primarily of Small Business Administration (“SBA”) loans; and non-SBA commercial real estate bridge loans (“REBL”).

While the national specialty finance segment generates the majority of the Company’s revenues, the payments segment also contributes significant revenues. In its payments segment, the Company provides payment and deposit services nationally, which include prepaid and debit card accounts, affinity group banking, deposit accounts to investment advisors’ customers, card payments and other payment processing services. Payments segment deposits fund the majority of the Company’s loans and securities and may produce lower costs than other funding sources. Most of the payments segment’s revenues and deposits, and SBLOC and IBLOC loans, result from relationships with third parties which market such products. Concentrations of loans and deposits are based upon the cumulative account balances generated by those third parties. Similar concentrations result in revenues in prepaid, debit card and related fees. These concentrations may also be reflected in a lower cost of funds compared to other funding sources. The Company sweeps certain deposits off its balance sheet to other institutions through intermediaries. Such sweeps are utilized to optimize diversity within its funding structure by managing the percentage of individual client deposits to total deposits.

The Company and the Bank are subject to regulation by certain state and federal agencies and, accordingly, they are examined periodically by those regulatory authorities. As a consequence of the extensive regulation of commercial banking activities, the Company’s and the Bank’s businesses are affected by state and federal legislation and regulations.

Note 2. Significant Accounting Policies

Basis of Presentation

The financial statements of the Company, as of March 31, 2024 and for the three-month periods ended March 31, 2024 and 2023, 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 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, 2023 (the “2023 Form 10-K”). The results of operations for the three-month period ended March 31, 2024 may not necessarily be indicative of the results of operations for the full year ending December 31, 2024.

There have been no significant changes as of March 31, 2024 from the Company’s significant accounting policies as described in the 2023 Form 10-K.

Note 3. Stock-based Compensation

The Company recognizes compensation expense for stock options and restricted stock units (“RSU”) in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 718 Stock Compensation (“ASC 718”). The fair value of the option or RSU is generally measured at fair value at the grant date with compensation expense recognized over the service period, which is typically the stated vesting period. For option grants subject to a service condition, the Company utilizes the Black-Scholes option-pricing model to estimate the fair value of such options on the date of grant. The Black-Scholes model takes into consideration the exercise price and expected life of the options, the current price of the underlying stock and its expected volatility, the expected dividends on the stock and the current risk-free interest rate for the expected life of the option. The Company’s estimate of the fair value of a stock option is based on expectations derived from historical experience and may not necessarily equate to its market value when

fully vested. In accordance with ASC 718, the Company estimates the number of options for which the requisite service is expected to be rendered. At March 31, 2024, the Company had two active stock-based compensation plans.

During the three months ended March 31, 2024, the Company granted 45,616 stock options with a vesting period of four years and a weighted average grant-date fair value of $21.92. During the three months ended March 31, 2023, the Company granted 57,573 stock options with a vesting period of four years and a weighted average grant-date fair value of $17.37. There were no common stock options exercised in the three-month period ended March 31, 2024. There were 13,158 stock options exercised in the three-month period ended March 31, 2023.

A summary of the Company’s stock options is presented below.

				Weighted average
				remaining
		Weighted average		contractual	Aggregate
	Options	exercise price		term (years)	intrinsic value
Outstanding at January 1, 2024	622,677	$	15.35	6.90	$	14,453,641
Granted	45,616		43.89	9.87		—
Exercised	—		—	—		—
Expired	—		—	—		—
Forfeited	—		—	—		—
Outstanding at March 31, 2024	668,293	$	17.30	6.87	$	11,376,439
Exercisable at March 31, 2024	429,497	$	12.89	6.37	$	8,858,939

The Company granted 355,965 RSUs in the first three months of 2024 with a vesting period of three years. At issuance, the 355,965 RSUs granted in the first three months of 2024 had a weighted average fair value of $43.89 per unit. During the three months ended March 31, 2023, the Company granted 514,785 RSUs with a vesting period of three years and a weighted average fair value of $35.17 per unit.

A summary of the Company’s RSUs is presented below.

		Weighted average		Average remaining
		grant date		contractual
	RSUs	fair value		term (years)
Outstanding at January 1, 2024	752,255	$	32.53	1.66
Granted	355,965		43.89	2.86
Vested	(312,619)		30.18	—
Forfeited	—		—	—
Outstanding at March 31, 2024	795,601	$	38.54	2.15

As of March 31, 2024, there was a total of $29.8 million of unrecognized compensation cost related to unvested awards under stock-based compensation plans. This cost is expected to be recognized over a weighted average period of approximately 1.7 years. Related compensation expense for the three months ended March 31, 2024 and 2023 was $3.3 million and $3.2 million, respectively. The total issuance date fair value of RSUs vested and options exercised during the three months ended March 31, 2024 and 2023, was $9.4 million and $5.4 million, respectively. The total intrinsic value of the options exercised and RSUs vested in those respective periods was $13.7 million and $15.0 million, respectively.

For the periods ended March 31, 2024 and 2023, the Company estimated the fair value of each stock option grant on the date of grant using the Black-Scholes options pricing model with the following weighted average assumptions:

	March 31,
	2024	2023
Risk-free interest rate	4.17%	3.67%
Expected dividend yield	—	—
Expected volatility	44.76%	45.21%
Expected lives (years)	6.3	6.3

Expected volatility is based on the historical volatility of the Company’s stock and peer group comparisons over the expected life of the option. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury Separate Trading of Registered Interest and Principal of Securities (“STRIPS”) rate in effect at the time of the grant. The life of the option is based on historical factors which include the contractual term, vesting period, exercise behavior and employee terminations. In accordance with ASC 718, stock- based compensation expense for the period ended March 31, 2024 is based on awards that are ultimately expected to vest and has been reduced for estimated forfeitures. The Company estimates forfeitures using historical data or acceptable expedients.

4. Earnings Per Share

The Company calculates earnings per share in accordance with ASC 260, Earnings Per Share. Basic earnings per share excludes dilution and is computed by dividing income available to common shareholders by the weighted average common shares outstanding during the period. Diluted earnings per share takes into account 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 following tables show the Company’s earnings per share for the periods presented:

	For the three months ended
	March 31, 2024
	Income		Shares		Per share
	(numerator)		(denominator)		amount
		(Dollars in thousands except share and per share data)
Basic earnings per share
Net earnings available to common shareholders	$	56,429		52,747,140	$	1.07
Effect of dilutive securities
Common stock options and RSUs		—		579,448		(0.01)
Diluted earnings per share
Net earnings available to common shareholders	$	56,429		53,326,588	$	1.06

Stock options for 565,104 shares, exercisable at prices between $6.87 and $30.32 per share, were outstanding at March 31, 2024, and included in the diluted earnings per share computation because their exercise price per share was less than the average market price for the three-month period ending March 31, 2024. Stock options for 103,189 shares were anti-dilutive and not included in the earnings per share calculation.

	For the three months ended
	March 31, 2023
	Income		Shares		Per share
	(numerator)		(denominator)		amount
		(Dollars in thousands except share and per share data)
Basic earnings per share
Net earnings available to common shareholders	$	49,122		55,452,815	$	0.89
Effect of dilutive securities
Common stock options and RSUs		—		595,327		(0.01)
Diluted earnings per share
Net earnings available to common shareholders	$	49,122		56,048,142	$	0.88

Stock options for 465,104 shares, exercisable at prices between $6.87 and $18.81 per share, were outstanding at March 31, 2023, and included in the diluted earnings per share computation because their exercise price per share was less than the average market price for the three-month period ending March 31, 2023. Stock options for 157,573 shares were anti-dilutive and not included in the earnings per share calculation.

Note 5. Investment Securities

Fair values of available-for-sale securities are based on the fair market values supplied by a third-party market data provider, or where such third-party market data is not available, fair values are based on discounted cash flows. The third-party market data provider uses a pricing matrix which it creates daily, taking into consideration actual trade data, projected prepayments, and when relevant, projected credit defaults and losses.

The amortized cost, gross unrealized gains and losses, and fair values of the Company’s investment securities classified as available-for-sale at March 31, 2024 and December 31, 2023 are summarized as follows (in thousands):

Available-for-sale	March 31, 2024
			Gross		Gross			Allowance
	Amortized		unrealized		unrealized			for	Fair
	cost		gains		losses			Credit Losses	value
U.S. Government agency securities	$	33,598	$	4	$	(1,638)	$	—	$	31,964
Asset-backed securities^(1)^		305,500		163		(398)		—		305,265
Tax-exempt obligations of states and political subdivisions		4,860		16		(70)		—		4,806
Taxable obligations of states and political subdivisions		38,069		10		(992)		—		37,087
Residential mortgage-backed securities		173,832		135		(10,456)		—		163,511
Collateralized mortgage obligation securities		33,553		—		(1,572)		—		31,981
Commercial mortgage-backed securities		155,076		—		(11,443)		—		143,633
Corporate debt securities		10,000		—		—		(10,000)		—
	$	754,488	$	328	$	(26,569)	$	(10,000)	$	718,247
	March 31, 2024
---	---	---	---	---	---	---	---	---
			Gross		Gross
	Amortized		unrealized		unrealized		Fair
^(1)^Asset-backed securities as shown above	cost		gains		losses		value
Federally insured student loan securities	$	5,363	$	—	$	(35)	$	5,328
Collateralized loan obligation securities		300,137		163		(363)		299,937
	$	305,500	$	163	$	(398)	$	305,265
Available-for-sale	December 31, 2023
---	---	---	---	---	---	---	---	---	---	---
			Gross		Gross			Allowance
	Amortized		unrealized		unrealized			for	Fair
	cost		gains		losses			Credit Losses	value
U.S. Government agency securities	$	35,346	$	6	$	(1,466)	$	—	$	33,886
Asset-backed securities^(1)^		327,159		9		(1,815)		—		325,353
Tax-exempt obligations of states and political subdivisions		4,860		39		(48)		—		4,851
Taxable obligations of states and political subdivisions		43,323		15		(952)		—		42,386
Residential mortgage-backed securities		169,882		108		(9,223)		—		160,767
Collateralized mortgage obligation securities		35,575		—		(1,537)		—		34,038
Commercial mortgage-backed securities		157,759		—		(11,506)		—		146,253
Corporate debt securities		10,000		—		—		(10,000)		—
	$	783,904	$	177	$	(26,547)	$	(10,000)	$	747,534
	December 31, 2023
---	---	---	---	---	---	---	---	---
			Gross		Gross
	Amortized		unrealized		unrealized		Fair
^(1)^Asset-backed securities as shown above	cost		gains		losses		value
Federally insured student loan securities	$	6,032	$	—	$	(49)	$	5,983
Collateralized loan obligation securities		321,127		9		(1,766)		319,370
	$	327,159	$	9	$	(1,815)	$	325,353

Investments in Federal Home Loan Bank (“FHLB”) stock, Atlantic Central Bankers Bank (“ACBB”) stock, and Federal Reserve Bank stock are recorded at cost and amounted to $15.6 million at March 31, 2024, and $15.6 million at December 31, 2023. At each of those dates, ACBB stock amounted to $40,000. The Bank’s conversion to a national charter required the purchase of $11.0 million of Federal Reserve Bank stock in September 2022. The amount of FHLB stock required to be held is based on the amount of borrowings, and after repayment thereof, the stock may be redeemed.

The amortized cost and fair value of the Company’s investment securities at March 31, 2024, by contractual maturity, are shown below (in thousands). Expected maturities may differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

	Available-for-sale
	Amortized		Fair
	cost		value
Due before one year	$	39,156	$	38,632
Due after one year through five years		116,088		111,912
Due after five years through ten years		284,076		277,194
Due after ten years		315,168		290,509
	$	754,488	$	718,247

In 2020, the Company began pledging loans to collateralize its line of credit with the FHLB, as described in “Note 6. Loans.” The Company had no securities pledged against that line at March 31, 2024, and December 31, 2023. There were no gross realized gains on sales of securities for the three months ended March 31, 2024, and the year ended December 31, 2023. Realized losses on securities sales were $2,000 and $4,000, respectively, for the three months ended March 31, 2024, and the year ended December 31, 2023.

The table below indicates the length of time individual securities had been in a continuous unrealized loss position at March 31, 2024 (dollars in thousands):

Available-for-sale		Less than 12 months				12 months or longer				Total
	Number of securities		Fair Value		Unrealized losses		Fair Value		Unrealized losses		Fair Value		Unrealized losses
Description of Securities
U.S. Government agency securities	16	$	7,349	$	(165)	$	23,504	$	(1,473)	$	30,853	$	(1,638)
Asset-backed securities	34		12,128		(3)		162,326		(395)		174,454		(398)
Tax-exempt obligations of states and
political subdivisions	3		—		—		2,825		(70)		2,825		(70)
Taxable obligations of states and
political subdivisions	24		—		—		34,326		(992)		34,326		(992)
Residential mortgage-backed securities	130		10,014		(330)		132,395		(10,126)		142,409		(10,456)
Collateralized mortgage obligation securities	20		—		—		31,981		(1,572)		31,981		(1,572)
Commercial mortgage-backed securities	40		—		—		143,633		(11,443)		143,633		(11,443)
Total unrealized loss position
investment securities	267	$	29,491	$	(498)	$	530,990	$	(26,071)	$	560,481	$	(26,569)

The table below indicates the length of time individual securities had been in a continuous unrealized loss position at December 31, 2023 (dollars in thousands):

Available-for-sale		Less than 12 months				12 months or longer				Total
	Number of securities		Fair Value		Unrealized losses		Fair Value		Unrealized losses		Fair Value		Unrealized losses
Description of Securities
U.S. Government agency securities	15	$	14,945	$	(302)	$	17,697	$	(1,164)	$	32,642	$	(1,466)
Asset-backed securities	53		—		—		314,749		(1,815)		314,749		(1,815)
Tax-exempt obligations of states and
political subdivisions	3		997		(3)		1,850		(45)		2,847		(48)
Taxable obligations of states and
political subdivisions	25		—		—		39,621		(952)		39,621		(952)
Residential mortgage-backed securities	132		20,884		(491)		126,645		(8,732)		147,529		(9,223)
Collateralized mortgage obligation securities	20		—		—		34,038		(1,537)		34,038		(1,537)
Commercial mortgage-backed securities	40		—		—		146,253		(11,506)		146,253		(11,506)
Total unrealized loss position
investment securities	288	$	36,826	$	(796)	$	680,853	$	(25,751)	$	717,679	$	(26,547)

The Company owns one trust preferred security, issued by an insurance company, which was purchased in 2006, and owns no other such security or similar security. At March 31, 2024, this security had a cost basis of $10.0 million, and comprises the balance of the corporate debt securities classification in the tables above. The Bank provided for a potential loss for the full amount of the $10.0 million par value of the trust preferred security through a provision for credit loss of $10.0 million in the fourth quarter of 2023. Interest payments

on the trust preferred security have been deferred, as permitted by its terms for periods up to five years. While the trust preferred security has previously been subject to interest deferral which was repaid, there can be no assurance that repayment will occur for the current deferral. The Company has evaluated the securities in the above tables as of March 31, 2024 and has concluded that, except for the trust preferred security discussed above, none of these securities required an allowance for credit loss (“ACL”).

The Company evaluates whether an ACL is required by considering primarily the following factors: (a) the extent to which the fair value is 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. The Company’s determination of the best estimate of expected future cash flows, which is used to determine the credit loss amount, is a quantitative and qualitative process that incorporates information received from third-party sources along with internal assumptions and judgments regarding the future performance of the security. With the exception of the trust preferred security discussed above, the Company concluded that the securities that are in an unrealized loss position are in a loss position because of changes in market interest rates after the securities were purchased. The severity of the impact of fair value in relation to the carrying amounts of the individual investments is consistent with market developments. The Company’s analysis of each investment is performed at the security level and the Company intends to hold its investment securities to maturity.

Note 6. Loans

The Company has several lending lines of business including: small business loans (“SBLs”), comprised primarily of SBA loans; direct lease financing primarily for commercial vehicles and to a lesser extent equipment; SBLOC collateralized by marketable securities; IBLOC collateralized by the cash value of eligible life insurance policies; and investment advisor financing for purposes of debt refinance, acquisition of another firm or internal succession. Prior to 2020, the Company also originated non-SBA commercial real estate bridge loans, primarily collateralized by multifamily properties (apartment buildings), and to a lesser extent, by hotel and retail properties, for sale into securitizations. At origination, the Company elected fair value treatment for these loans as they were originally held-for-sale, to better reflect the economics of the transactions. In 2020, the Company decided to retain these loans on its balance sheet as interest-earning assets and currently intends to continue doing so. Therefore, these loans are no longer accounted for as held-for-sale, but the Company continues to present them at fair value. At March 31, 2024, such loans comprised $173.9 million of the $283.0 million of commercial loans, at fair value, with the balance comprised of the guaranteed portion of certain SBA loans also previously held for sale. The amortized cost of the $283.0 million commercial loans at fair value was $286.7 million. Included in net realized and unrealized gains (losses) on commercial loans, at fair value in the consolidated statements of operations are changes in the estimated fair value of such loans. For the three months ended March 31, 2024, there were no related net unrealized losses or gains recognized for changes in fair value. For the three months ended March 31, 2023, related net unrealized losses recognized for changes in fair value were $603,000, none of which reflected losses attributable to credit weaknesses. In the third quarter of 2021, the Company resumed the origination of non-SBA commercial real estate bridge loans which it also intends to hold for investment and which are accounted for at amortized cost. They are captioned as REBLs as they are transitional commercial mortgage loans which are made to improve and rehabilitate existing properties which already have cash flow.

The Bank has pledged the majority of its loans held for investment at amortized cost and commercial loans at fair value to either the FHLB or the Federal Reserve Bank for lines of credit with those institutions. The FHLB and FRB 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. The lines are maintained consistent with the Bank’s liquidity policy which maximizes potential liquidity. At March 31, 2024, $2.41 billion of loans were pledged to the Federal Reserve Bank and $1.10 billion of loans were pledged to the FHLB against lines of credit which provide a source of liquidity to the Bank. There were no amounts drawn against these lines at March 31, 2024.

Prior to 2020, the Company sponsored the structuring of commercial mortgage loan securitizations, and in 2020, the Company decided not to pursue additional securitizations. The loans previously sold to the commercial mortgage-backed securitizations were transitional commercial mortgage loans made to improve and rehabilitate existing properties which already had cash flow. Servicing rights were not retained. Each of the securitizations is considered a variable interest entity of which the Company is not the primary beneficiary. Further, true sale accounting has been applicable to each of the securitizations, as supported by a review performed by an independent third-party consultant. In each of the securitizations, the Company obtained a tranche of certificates which are accounted for as available-for-sale debt securities. The securities were recorded at fair value at acquisition, which was determined by an independent third-party based on the discounted cash flow method using unobservable (level 3) inputs.

Of the six securities purchased by the Bank from our securitizations, all have been repaid except one issued by CRE-2, which is included in the commercial mortgage backed securities classification in investment securities. As of March 31, 2024, the principal balance of the Bank’s CRE-2-issued security was $12.6 million and it is subordinate to the repayment of a senior tranche with a remaining balance of $2.0 million. A total of $13.7 million plus trustee fees, late charges and unpaid interest is required to repay the Bank tranche. The collateral remaining to repay the $15.9 million consists of a suburban office building in New Jersey and a retail facility in Missouri, the combined most recent appraisals for which total $33.0 million. The excess of the $33.0 million appraised value over the $15.9 million provides repayment protection for the Bank-owned tranche. Efforts to resolve the New Jersey suburban office loan and stabilize the

property have not been successful to date. A 2023 broker’s opinion of the property’s liquidation value was $20.9 million versus a loan balance of $24.5 million. Negotiations with the borrower continue, with no plan for immediate liquidation. The Missouri retail facility is held as real estate owned by the trust and is also not yet stabilized, and the special servicer expects to market the property for liquidation. The March 9, 2023 appraised value of the property was $12.1 million versus a loan balance of $16.3 million. Since borrowers are no longer making payments, accrued interest and the Bank’s remaining $12.6 million of principal are not expected to be repaid until collateral liquidation.

The Company analyzes credit risk prior to making loans on an individual loan basis. The Company considers relevant aspects of the borrowers’ financial position and cash flow, past borrower performance, management’s knowledge of market conditions, collateral and the ratio of loan amounts to estimated collateral value in making its credit determinations. For SBLOC, the Company relies on the market value of the underlying securities collateral as adjusted by margin requirements, generally 50% for equities and 80% for investment grade securities. For IBLOC, the Company relies on the cash value of insurance policy collateral.

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

	March 31,		December 31,
	2024		2023
SBL non-real estate	$	140,956	$	137,752
SBL commercial mortgage		637,926		606,986
SBL construction		27,290		22,627
SBLs		806,172		767,365
Direct lease financing		702,512		685,657
SBLOC / IBLOC^(1)^		1,550,313		1,627,285
Advisor financing^(2)^		232,206		221,612
Real estate bridge loans		2,101,896		1,999,782
Other loans^(3)^		56,163		50,638
		5,449,262		5,352,339
Unamortized loan fees and costs		10,082		8,800
Total loans, including unamortized loan fees and costs	$	5,459,344	$	5,361,139
		December 31,
---	---	---	---
		2023
SBLs, including costs net of deferred fees of 9,979 and 9,502
for March 31, 2024 and December 31, 2023, respectively	816,151	$	776,867
SBLs included in commercial loans, at fair value	109,131		119,287
Total SBLs(4)	925,282	$	896,154

All values are in US Dollars.

^(1)^SBLOC are collateralized by marketable securities, while IBLOC are collateralized by the cash surrender value of insurance policies. At March 31, 2024 and December 31, 2023, IBLOC loans amounted to $595.6 million and $646.9 million, respectively.

^(2)^In 2020, the Bank began originating loans to investment advisors for purposes of debt refinancing, acquisition of another firm or internal succession. Maximum loan amounts are subject to loan-to-value ratios of 70% of the business enterprise value based on a third-party valuation, but may be increased depending upon the debt service coverage ratio. Personal guarantees and blanket business liens are obtained as appropriate.

^(3)^Includes demand deposit overdrafts reclassified as loan balances totaling $239,000 and $1.7 million at March 31, 2024 and December 31, 2023, respectively. Estimated overdraft charge-offs and recoveries are reflected in the ACL and are immaterial.

^(4)^The SBLs held at fair value are comprised of the government guaranteed portion of 7(a) Program (as defined below) loans at the dates indicated.

The following table provides information about loans individually evaluated for credit loss at March 31, 2024, and December 31, 2023 (in thousands).

	March 31, 2024
	Recorded<br>‎investment		Unpaid<br>‎principal<br>‎balance		Related<br>‎ACL		Average<br>‎recorded<br>‎investment		Interest<br>‎income<br>‎recognized
Without an ACL recorded
SBL non-real estate	$	1,054	$	2,356	$	—	$	788	$	—
SBL commercial mortgage		3,301		3,301		—		2,424		—
Direct lease financing		170		176		—		169		—
Other loans		—		—		—		66		—
Real estate bridge loans		39,400		39,400		—		19,700		—
Consumer - home equity		227		227		—		228		3
With an ACL recorded
SBL non-real estate		929		929		(618)		1,163		1
SBL commercial mortgage		182		182		(41)		508		—
SBL construction		3,385		3,385		(44)		3,385		—
Direct lease financing		4,677		4,902		(2,618)		4,147		—
Total
SBL non-real estate		1,983		3,285		(618)		1,951		1
SBL commercial mortgage		3,483		3,483		(41)		2,932		—
SBL construction		3,385		3,385		(44)		3,385		—
Direct lease financing		4,847		5,078		(2,618)		4,316		—
Other loans		—		—		—		66		—
Real estate bridge loans		39,400		39,400		—		19,700		—
Consumer - home equity		227		227		—		228		3
	$	53,325	$	54,858	$	(3,321)	$	32,578	$	4
	December 31, 2023
---	---	---	---	---	---	---	---	---	---	---
	Recorded<br>‎investment		Unpaid<br>‎principal<br>‎balance		Related<br>‎ACL		Average<br>‎recorded<br>‎investment		Interest<br>‎income<br>‎recognized
Without an ACL recorded
SBL non-real estate	$	522	$	1,714	$	—	$	380	$	—
SBL commercial mortgage		1,546		1,546		—		1,028		—
Direct lease financing		167		167		—		78		—
Legacy commercial real estate		—		—		—		2,131		—
Consumer - home equity		230		230		—		255		8
With an ACL recorded
SBL non-real estate		1,397		1,397		(670)		1,011		3
SBL commercial mortgage		835		835		(343)		1,553		—
SBL construction		3,385		3,385		(44)		3,385		—
Direct lease financing		3,618		3,804		(1,827)		2,814		—
IBLOC		—		—		—		95		—
Legacy commercial real estate		—		—		—		710
Other loans		132		132		(4)		384		—
Total
SBL non-real estate		1,919		3,111		(670)		1,391		3
SBL commercial mortgage		2,381		2,381		(343)		2,581		—
SBL construction		3,385		3,385		(44)		3,385		—
Direct lease financing		3,785		3,971		(1,827)		2,892		—
IBLOC		—		—		—		95		—
Legacy commercial real estate and Other loans		132		132		(4)		3,225		—
Consumer - home equity		230		230		—		255		8
	$	11,832	$	13,210	$	(2,888)	$	13,824	$	11

The loan review department recommends non-accrual status for loans to the surveillance committee, in those situations where interest income appears to be uncollectible or a protracted delay in collection becomes evident. The surveillance committee further vets and approves the non-accrual status.

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

	March 31, 2024						December 31, 2023
	Non-accrual loans with a related ACL		Non-accrual loans without a related ACL		Total non-accrual loans		Total non-accrual loans
SBL non-real estate	$	855	$	1,054	$	1,909	$	1,842
SBL commercial mortgage		182		3,301		3,483		2,381
SBL construction		3,385		—		3,385		3,385
Direct leasing		4,677		170		4,847		3,785
Real estate bridge loans^(1)^		—		39,400		39,400		—
Other loans		—		—		—		132
	$	9,099	$	43,925	$	53,024	$	11,525

^(1)^In the first quarter of 2024, a $39.4 million apartment building rehabilitation bridge loan was transferred to nonaccrual status. On April 2, 2024, the same loan was transferred from nonaccrual status to other real estate owned. We intend to continue to manage the capital improvements on the underlying apartment complex. As the units become available for lease, the property manager will be tasked with leasing these units at market rents. The Company intends to explore a potential sale of the asset prior to stabilization. The $39.4 million loan balance compares to a September 2023 third party “as is” appraisal of $47.8 million, or an 82% “as is” loan to value (“LTV”), with additional potential collateral value as construction progresses, and units are re-leased at stabilized rental rates. The $39.4 million loan, as well as the other non-accrual balances in this table as of March 31, 2024, are also reflected in the substandard loan totals.

The Company had $19.6 million of other real estate owned (“OREO”) at March 31, 2024, and $16.9 million of OREO at December 31, 2023. The following table summarizes the Company’s non-accrual loans, loans past due 90 days or more, and OREO at March 31, 2024 and December 31, 2023, respectively:

	March 31,		December 31,
	2024		2023
	(Dollars in thousands)
Non-accrual loans
SBL non-real estate	$	1,909	$	1,842
SBL commercial mortgage		3,483		2,381
SBL construction		3,385		3,385
Direct leasing		4,847		3,785
Real estate bridge loans^(1)^		39,400		—
Other loans		—		132
Total non-accrual loans		53,024		11,525
Loans past due 90 days or more and still accruing^(2)^		4,108		1,744
Total non-performing loans		57,132		13,269
OREO^(3)^		19,559		16,949
Total non-performing assets	$	76,691	$	30,218

^(1)^In the first quarter of 2024, a $39.4 million apartment building rehabilitation bridge loan was transferred to nonaccrual status. On April 2, 2024, the same loan was transferred from nonaccrual status to other real estate owned. We intend to continue to manage the capital improvements on the underlying apartment complex. As the units become available for lease, the property manager will be tasked with leasing these units at market rents. The Company intends to explore a potential sale of the asset prior to stabilization. The $39.4 million loan balance compares to a September 2023 third party “as is” appraisal of $47.8 million, or an 82% “as is” loan to value (“LTV”), with additional potential collateral value as construction progresses, and units are re-leased at stabilized rental rates. The $39.4 million loan as well as the other non-accrual balances in this table as of March 31, 2024 are reflected in the substandard loan totals in Note 6 to the financial statements.

^(2)^The vast majority of the increase in Loans past due 90 days or more and still accruing resulted from vehicle leases to governmental entities and municipalities, the payments for which are sometimes subject to administrative delays.

^(3^^)^The increase in OREO reflected the addition of a $2.6 million hotel securing an SBA loan. Should a loss be realized on the sale of this property, we believe that any such loss will be offset by a 75% SBA Guarantee, consistent with other such reimbursements from the SBA.

Interest which would have been earned on loans classified as non-accrual for the three months ended March 31, 2024 and 2023, was $440,000 and $194,000, respectively. No income on non-accrual loans was recognized during the three months ended March 31, 2024. During the three months ended March 31, 2024, $222,000 of REBL, $37,000 of direct leasing, $57,000 of SBL commercial real estate, and $22,000 of SBL non-real estate were reversed from interest income, which represented interest accrued on loans placed into non-accrual status during the period. During the three months ended March 31, 2023, $89,000 of legacy commercial real estate, $89,000 of SBL commercial real estate, $3,000 of SBL non-real estate, and $26,000 of direct leasing were reversed from interest income, which represented interest accrued on loans placed into non-accrual status during the period. Material amounts of non-accrual interest reversals are charged to the ACL, but such amounts were not material during either the three months ended March 31, 2024 or 2023.

Loans which are experiencing financial stress are reviewed by the loan review department, which is independent of the lending lines. The review includes an analysis for a potential specific reserve allocation in the ACL. For REBLs, updated appraisals are generally obtained in conjunction with modifications.

For the three months ended March 31, 2024 and the twelve months ended December 31, 2023, loans modified and related information are as follows (dollars in thousands):

	March 31, 2024								December 31, 2023
	Payment delay as a result of a payment deferral		Interest rate reduction and payment deferral		Total		Percent of total loan category		Payment delay as a result of a payment deferral		Payment delay and term extension		Total		Percent of total loan category
SBL non-real estate	$	2,224	$	—	$	2,224		1.58%	$	651	$	—	$	651		0.47%
SBL commercial mortgage		3,328		—		3,328		0.52%		—		—		—		—
Direct lease financing		—		—		—		—		—		127		127		0.02%
Real estate bridge lending^(1)^		26,923		32,500		59,423		2.83%		—		12,300		12,300		0.62%
Total	$	32,475	$	32,500	$	64,975		1.19%	$	651	$	12,427	$	13,078		0.24%

^(1)^ For the period ended March 31, 2024, the “as is” weighted average LTV of the real estate bridge lending balances was less than 72.5%, and the “as stabilized” LTV was approximately 68% based upon recent appraisals. “As stabilized” LTVs reflect the third-party appraiser’s estimated value after the rehabilitation is complete. For the period ended December 31, 2023, the weighted average loan to value was less than 70%, based on recent "as is" appraised value. On each property reflected in the balances, apartment improvements and renovations continue, utilizing additional borrower capital. The balances for both periods were also classified as either special mention or substandard as of March 31, 2024.

The following table shows an analysis of loans that were modified during the three months ended March 31, 2024 and the year ended December 31, 2023 presented by loan classification (dollars in thousands):

	March 31, 2024
	Payment Status (Amortized Cost Basis)
	30-59 Days		60-89 Days		90+ Days				Total
	past due		past due		still accruing		Non-accrual		delinquent		Current		Total
SBL non-real estate	$	—	$	—	$	—	$	790	$	790	$	1,434	$	2,224
SBL commercial mortgage		—		—		—		—		—		3,328		3,328
Real estate bridge lending^(1)^		—		—		—		—		—		59,423		59,423
	$	—	$	—	$	—	$	790	$	790	$	64,185	$	64,975
	December 31, 2023
	Payment Status (Amortized Cost Basis)
	30-59 Days		60-89 Days		90+ Days				Total
	past due		past due		still accruing		Non-accrual		delinquent		Current		Total
SBL non-real estate	$	—	$	—	$	—	$	156	$	156	$	495	$	651
Direct lease financing		—		—		—		127		127		—		127
Real estate bridge lending^(1)^		—		—		—		—		—		12,300		12,300
	$	—	$	—	$	—	$	283	$	283	$	12,795	$	13,078

The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty as of March 31, 2024 and December 31, 2023 (dollars in thousands):

	March 31, 2024			December 31, 2023
	Combined Rate and Maturity			Combined Rate and Maturity
	Weighted average interest reduction	Weighted average term extension (in months)	More-Than-Insignificant-Payment Delay^(2)^	Weighted average interest reduction	Weighted average term extension (in months)	More-Than-Insignificant-Payment Delay^(2)^
SBL non-real estate	—	—	1.58%	—	—	0.47%
SBL commercial mortgage	—	—	0.52%	—	—	—
Direct lease financing	—	—	—	—	3	—
Real estate bridge lending^(1)^	1.68%	—	1.28%	—	12	—

^(2)^Percentage represents the principal of loans deferred divided by the principal of the total loan portfolio.

There were no loans that received a term extension modification which had a payment default during the period and were modified in the twelve months before default.

The Company had no commitments to extend additional credit to loans classified as modified as of March 31, 2024 or December 31, 2023.

There were $65.0 million and $13.1 million of loans classified as modified for year-to-date March 31, 2024 and for the twelve months ended December 31, 2023, respectively, with specific reserves of $10,000 and $127,000 as of March 31, 2024 and December 31, 2023, respectively. Substantially all of the reserves at March 31, 2024 related to the non-guaranteed portion of SBA loans.

The following table summarizes loans that were restructured within the twelve months ended March 31, 2024 that have subsequently defaulted (in thousands):

	March 31, 2024
	Number	Pre-modification recorded investment
Legacy commercial real estate	1		3,552
Total	1	$	3,552

Management estimates the ACL quarterly and for most loan categories uses relevant available internal and external historical loan performance information to determine the quantitative component of the reserve and current economic conditions, and reasonable and supportable forecasts and other factors to determine the qualitative component of the reserve. Reserves on specific credit-deteriorated loans comprise the third and final component of the reserve. Historical credit loss experience provides the quantitative basis for the estimation of expected credit losses over the estimated remaining life of the loans. The qualitative component of the ACL is designed to be responsive to changes in portfolio credit quality and the impact of current and future economic conditions on loan performance, and is subjective. The review of the appropriateness of the ACL is performed by the Chief Credit Officer and presented to the Audit Committee of the Company’s Board of Directors (the “Board”) for approval. With the exception of SBLOC and IBLOC, which utilize probability of loss/loss given default, and the other loan category, which uses discounted cash flow to determine a reserve, the quantitative components for remaining categories are determined by establishing reserves on loan pools with similar risk characteristics based on a lifetime loss-rate model, or vintage analysis, as described in the following paragraph. Loans that do not share risk characteristics are evaluated on an individual basis. If foreclosure is believed to be probable or repayment is expected from the sale of collateral, a reserve for deficiency is established within the ACL. Those reserves are estimated based on the difference between loan principal and the estimated fair value of the collateral, adjusted for estimated disposition costs.

Except for SBLOC, IBLOC and other loans as noted above, for purposes of determining the quantitative historical loss reserve for each similar risk pool, 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. The average loss rate is then projected over the estimated remaining loan lives unique to each loan pool, to determine estimated lifetime losses. For SBLOC and IBLOC, since de minimus losses have been incurred, probability of loss/loss given default considerations are utilized. For the other loan category discounted cash flow is utilized to determine a reserve. The Company also considers the need for an additional ACL based upon qualitative factors such as current loan performance statistics by pool, and economic conditions. These qualitative factors are intended to account for forward looking expectations over a twelve to eighteen month period not reflected in historical loss rates and otherwise unaccounted for in the quantitative process. Accordingly, such factors may increase or decrease the allowance compared to historical loss rates as the Company’s forward looking expectations change. The qualitative factor percentages are applied against the pool balances as of the end of the period. Aside from the qualitative adjustments to account for forward looking expectations of loss over a twelve to eighteen month projection period, the balance of the ACL reverts to the Company’s quantitative analysis derived from its historical loss rates. The qualitative and quantitative historical loss rate components, together with the allowances on specific credit-deteriorated loans, comprise the total ACL.

A similar process is employed to calculate an ACL assigned to off-balance sheet commitments, which are comprised of unfunded loan commitments and letters of credit. That ACL for unfunded commitments is recorded in other liabilities. Even though portions of the ACL may be allocated to loans that have been individually measured for credit deterioration, the entire ACL is available for any credit that, in management’s judgment, should be charged off.

At March 31, 2024, the ACL amounted to $28.7 million of which $11.9 million of allowances resulted from the Company’s historical charge-off ratios, $3.3 million from reserves on specific loans, with the balance comprised of the qualitative components. The $11.9 million resulted primarily from SBA non-real estate bridge lending and leasing charge-offs. The proportion of qualitative reserves compared to charge-off history related reserves reflects the general absence of charge-offs experienced in the Company’s largest loan portfolios consisting of SBLOC, IBLOC and real estate bridge lending. The general absence of such charge-offs reflects, at least in part,

the nature of related collateral consisting, respectively, of marketable securities, the cash value of life insurance and workforce apartment buildings. As charge-offs are nonetheless possible, significant subjectivity is required to consider qualitative factors to derive the related components of the allowance.

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. As a result of continuing economic uncertainty in 2022, including heightened inflation and increased risks of recession, the qualitative factors which had previously been set in anticipation of a downturn, were maintained through the third quarter of 2022. In the fourth quarter of 2022, as risks of a recession increased, the economic qualitative risk factor was increased for non-real estate SBL and leasing. Those higher qualitative allocations were retained in the first quarter of 2023, as negative economic indications persisted. In the second quarter of 2023, CECL model adjustments of $1.7 million resulted from a $2.5 million CECL model decrease from changes in estimated average lives, partially offset by a $794,000 CECL model increase resulting from increasing economic and collateral risk factors to respective moderate-high and moderate risk levels. The elevated economic risk level for leasing reflected input from department heads regarding the potential borrower impact of the higher rate environment. The elevated collateral risk level for leasing reflected lower auction prices for vehicles and uncertainty over the extent to which such prices might decrease in the future. The adjustment for average lives reflected a change in the estimated lives of leases, higher variances for which may result from their short maturities. In the third quarter of 2023, there were indications of auction price stabilization, while the auto workers’ strike could reduce supply and drive up prices. Nonetheless, the elevated risk levels were maintained.

The Company has not increased the qualitative risk levels for SBLOC or IBLOC because of the nature of related collateral. SBLOC loans are subject to maximum loan to marketable securities value, and notwithstanding historic drops in the stock market in recent years, losses have not been realized. IBLOC loans are limited to borrowers with insurance companies that exceed credit requirements, and loan amounts are limited to life insurance cash values. The Company had not, prior to the fourth quarter of 2023, increased the economic factor for multifamily real estate bridge lending. While Federal Reserve rate increases directly increase real estate bridge loan floating-rate borrowing costs, those borrowers are required to purchase interest rate caps that will partially limit the increase in borrowing costs during the term of the loan. Additionally, there continues to be several additional mitigating factors within the multifamily sector that should continue to fuel demand. Higher interest rates are increasing the cost to purchase a home, which in turn is increasing the number of renters and subsequent demand for multifamily. The softening demand for new homes should continue to exacerbate the current housing shortage, and therefore continue to fuel demand for multifamily apartment homes. Additionally, higher rents in the multifamily sector are causing renters to be more price sensitive, which is driving demand for most of the apartment buildings within the Company’s loan portfolio which management considers “workforce” housing. In the fourth quarter of 2023, an increasing trend in substandard loans was reflected in an increase in the risk level for the REBL ACL economic qualitative factor, which resulted in a $1.0 million increase in the fourth quarter provision for credit loss on loans.

The economic qualitative factor is based on the estimated impact of economic conditions on the loan pools, as distinguished from the economic factors themselves, for the following reasons. The Company has experienced limited multifamily (apartment building) loan charge-offs, despite stressed economic conditions. Accordingly, the ACL for this pool was derived from a qualitative factor based on industry loss information for multifamily housing. The Company’s charge-offs have been virtually non-existent for SBLOC and IBLOC notwithstanding stressed economic periods, and their ACL is accordingly also determined by a qualitative factor. Investment advisor loans were first offered in 2020 with limited performance history, during which charge-offs have not been experienced. For investment advisor loans, the nature of the underlying ultimate repayment source was considered, namely the fee-based advisory income streams resulting from investment portfolios under management, and the impact changes in economic conditions would have on those payment streams. The qualitative factors used for this and the other portfolios are described below in the description of each portfolio segment. Additionally, the Company’s charge-off histories for SBLs, primarily SBA, and leases have not correlated with economic conditions, including trends in unemployment. While specific economic factors did not correlate with actual historical losses, multiple economic factors are considered in the economic qualitative factor. For the non-guaranteed portion of SBA loans, leases, real estate bridge lending and investment advisor financing, the Company’s loss forecasting analysis included a review of industry statistics. However, the Company’s own charge-off history and average life estimates, for categories in which the Company has experienced charge-offs, was the primary quantitatively-derived element in the forecasts. The qualitative component results from management’s qualitative assessments which consider internal and external inputs.

Below are the portfolio segments used to pool loans with similar risk characteristics and align with the Company’s methodology for measuring expected credit losses. These pools have similar risk and collateral characteristics, and certain of these pools are broken down further in determining and applying the vintage loss estimates previously discussed. For instance, within the direct lease financing pool, government and public institution leases are considered separately. Additionally, the Company evaluates its loans under an internal loan risk rating system as a means of identifying problem loans. 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. A summary of the Company’s primary portfolio pools and loans accordingly classified, by year of origination, at March 31, 2024 and December 31, 2023 are as follows (in thousands):

As of March 31, 2024	2024		2023		2022		2021		2020		Prior		Revolving loans at amortized cost		Total
SBL non real estate
Non-rated	$	587	$	—	$	—	$	—	$	—	$	—	$	—	$	587
Pass		4,574		53,009		30,892		25,574		8,510		7,421		—		129,980
Special mention		—		447		318		257		273		590		—		1,885
Substandard		—		—		495		531		682		874		—		2,582
Total SBL non-real estate		5,161		53,456		31,705		26,362		9,465		8,885		—		135,034
SBL commercial mortgage
Pass		33,607		131,474		142,746		85,168		67,445		154,876		—		615,316
Special mention		—		375		—		10,759		91		1,352		—		12,577
Substandard		—		—		—		1,755		452		3,129		—		5,336
Total SBL commercial mortgage		33,607		131,849		142,746		97,682		67,988		159,357		—		633,229
SBL construction
Pass		2,323		5,764		1,685		5,537		927		4,579		—		20,815
Special mention		—		—		—		3,090		—		—		—		3,090
Substandard		—		—		—		2,675		—		710		—		3,385
Total SBL construction		2,323		5,764		1,685		11,302		927		5,289		—		27,290
Direct lease financing
Non-rated		1,977		—		—		—		—		—		—		1,977
Pass		85,404		276,002		199,452		80,585		31,373		16,772		—		689,588
Special mention		—		94		1,648		978		213		85		—		3,018
Substandard		—		1,085		4,763		1,509		340		232		—		7,929
Total direct lease financing		87,381		277,181		205,863		83,072		31,926		17,089		—		702,512
SBLOC
Non-rated		—		—		—		—		—		—		1,690		1,690
Pass		—		—		—		—		—		—		953,061		953,061
Total SBLOC		—		—		—		—		—		—		954,751		954,751
IBLOC
Pass		—		—		—		—		—		—		594,985		594,985
Substandard		—		—		—		—		—		—		577		577
Total IBLOC		—		—		—		—		—		—		595,562		595,562
Advisor financing
Pass		15,324		90,955		60,599		31,104		23,423		—		—		221,405
Special mention		—		—		1,076		8,818		907		—		—		10,801
Total advisor financing		15,324		90,955		61,675		39,922		24,330		—		—		232,206
Real estate bridge loans
Pass		109,086		418,012		965,541		444,077		—		—		—		1,936,716
Special mention^(1)^		—		—		64,067		16,913		—		—		—		80,980
Substandard^(1)^		—		—		32,500		51,700		—		—		—		84,200
Total real estate bridge loans		109,086		418,012		1,062,108		512,690		—		—		—		2,101,896
Other loans
Non-rated		8,977		—		—		—		—		12,954		—		21,931
Pass		10		165		259		358		2,608		39,567		1,554		44,521
Special mention		—		—		—		—		—		330		—		330
Total other loans^(2)^		8,987		165		259		358		2,608		52,851		1,554		66,782
	$	261,869	$	977,382	$	1,506,041	$	771,388	$	137,244	$	243,471	$	1,551,867	$	5,449,262
Unamortized loan fees and costs		—		—		—		—		—		—		—		10,082
Total															$	5,459,344

^(1)^ At March 31, 2024, substandard real estate bridge loan amounts of $32.5 million and $12.3 million are reflected in the loan modification tables and the $39.4 million is reflected in the non-accrual tables. For the substandard real estate bridge loans, recent appraisals reflect a respective weighted average “as is” LTV of 79% and a further estimated 76% “as stabilized” LTV. The “as stabilized” LTV reflects the third-party appraiser’s estimate of value after rehabilitation is complete.

^(2)^Included in Other loans are $10.6 million of SBA loans purchased for Community Reinvestment Act (“CRA”) purposes as of March 31, 2024. These loans are classified as SBL in the Company’s loan table, which classifies loans by type, as opposed to risk characteristics.

As of December 31, 2023	2023		2022		2021		2020		2019		Prior		Revolving loans at amortized cost		Total
SBL non real estate
Non-rated	$	507	$	—	$	—	$	—	$	—	$	—	$	—	$	507
Pass		47,066		32,512		26,919		9,662		4,334		5,357		—		125,850
Special mention		460		—		258		1,101		119		337		—		2,275
Substandard		—		495		632		564		250		562		—		2,503
Total SBL non-real estate		48,033		33,007		27,809		11,327		4,703		6,256		—		131,135
SBL commercial mortgage
Pass		128,375		138,281		93,399		67,635		58,550		98,704		—		584,944
Special mention		375		—		10,764		—		595		1,363		—		13,097
Substandard		—		—		—		452		1,853		1,928		—		4,233
Total SBL commercial mortgage		128,750		138,281		104,163		68,087		60,998		101,995		—		602,274
SBL construction
Pass		2,848		5,966		1,877		927		4,534		—		—		16,152
Special mention		—		—		3,090		—		—		—		—		3,090
Substandard		—		—		2,675		—		—		710		—		3,385
Total SBL construction		2,848		5,966		7,642		927		4,534		710		—		22,627
		.
Direct lease financing
Non-rated		1,273		—		—		—		—		—		—		1,273
Pass		302,362		221,768		92,945		37,664		17,469		4,349		—		676,557
Special mention		—		666		202		125		146		—		—		1,139
Substandard		135		3,898		1,998		372		184		101		—		6,688
Total direct lease financing		303,770		226,332		95,145		38,161		17,799		4,450		—		685,657
SBLOC
Non-rated		—		—		—		—		—		—		3,261		3,261
Pass		—		—		—		—		—		—		977,158		977,158
Total SBLOC		—		—		—		—		—		—		980,419		980,419
IBLOC
Pass		—		—		—		—		—		—		646,230		646,230
Substandard		—		—		—		—		—		—		636		636
Total IBLOC		—		—		—		—		—		—		646,866		646,866
Advisor financing
Pass		92,273		63,083		40,994		24,321		—		—		—		220,671
Special mention		—		—		—		941		—		—		—		941
Total advisor financing		92,273		63,083		40,994		25,262		—		—		—		221,612
Real estate bridge loans
Pass		397,073		1,013,199		461,474		—		—		—		—		1,871,746
Special mention		—		59,423		16,913		—		—		—		—		76,336
Substandard		—		—		51,700		—		—		—		—		51,700
Total real estate bridge loans		397,073		1,072,622		530,087		—		—		—		—		1,999,782
Other loans
Non-rated		2,555		—		—		—		—		11,513		—		14,068
Pass		165		260		363		2,609		2,314		40,101		1,593		47,405
Special mention		—		—		—		—		—		362		—		362
Substandard		—		—		—		—		—		132		—		132
Total other loans^(1)^		2,720		260		363		2,609		2,314		52,108		1,593		61,967
Total	$	975,467	$	1,539,551	$	806,203	$	146,373	$	90,348	$	165,519	$	1,628,878	$	5,352,339
Unamortized loan fees and costs		—		—		—		—		—		—		—		8,800
Total															$	5,361,139

^(1)^Included in Other loans are $11.3 million of SBA loans purchased for CRA purposes as of December 31, 2023. These loans are classified as SBL in the Company’s loan table, which classifies loans by type, as opposed to risk characteristics.

SBL. Substantially all SBLs consist of SBA loans. The Bank participates in loan programs established by the SBA, including the 7(a) Loan Guarantee Program (the “7(a) Program”), the 504 Fixed Asset Financing Program (the “504 Program”), and the discontinued PPP. The 7(a) Program is designed to help small business borrowers start or expand their businesses by providing partial guarantees of loans made by banks and non-bank lending institutions for specific business purposes, including long or short term working capital; funds for

the purchase of equipment, machinery, supplies and materials; funds for the purchase, construction or renovation of real estate; and funds to acquire, operate or expand an existing business or refinance existing debt, all under conditions established by the SBA. The 504 Program includes the financing of real estate and commercial mortgages. In 2020 and 2021, the Company also participated in the PPP, which provided short-term loans to small businesses. PPP loans are fully guaranteed by the U.S. government. This program was a specific response to the COVID-19 pandemic, and the vast majority of these loans have been reimbursed by the U.S. government, with $1.9 million remaining to be reimbursed as of March 31, 2024. The Company segments the SBL portfolio into four pools: non-real estate, commercial mortgage and construction to capture the risk characteristics of each pool, and the PPP loans discussed above. PPP loans are not included in the risk pools because they have inherently different risk characteristics due to the U.S. government guarantee. In the table above, the PPP loans are included in non-rated SBL non-real estate. The qualitative factors for SBL loans focus on pool loan performance, underlying collateral for collateral dependent loans and changes in economic conditions. Additionally, the construction segment adds a qualitative factor for general construction risk, such as construction delays resulting from labor shortages or availability/pricing of construction materials.

Direct lease financing. The Company provides lease financing for commercial and government vehicle fleets and, to a lesser extent, provides lease financing for other equipment. Leases are either open-end or closed-end. An open-end lease is one in which, at the end of the lease term, the lessee must pay the difference between the amount at which the Company sells the leased asset and the stated termination value. Termination value is a contractual value agreed to by the parties at the inception of a lease as to the value of the leased asset at the end of the lease term. A closed-end lease is one for which no such payment is due on lease termination. In a closed-end lease, the risk that the amount received on a sale of the leased asset will be less than the residual value is assumed by the Bank, as lessor. The qualitative factors for direct lease financing focus on underlying collateral for collateral dependent loans, portfolio loan performance, loan concentrations and changes in economic conditions.

SBLOC. SBLOC loans are made to individuals, trusts and 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. The securities pledged may be either debt or equity securities or a combination thereof, but all such securities must be listed for trading on a national securities exchange or automated inter-dealer quotation system. SBLOCs are typically payable on demand. Maximum SBLOC line amounts are calculated by applying a standard “advance rate” calculation against the eligible security type depending on asset class: typically, up to 50% for equity securities and mutual fund securities and 80% for investment grade (Standard & Poor’s rating of BBB- or higher, or Moody’s rating of Baa3 or higher) municipal or corporate debt securities. Substantially all SBLOCs have full recourse to the borrower. The underlying securities collateral for SBLOC loans is monitored on a daily basis to confirm the composition of the client portfolio and its daily market value. The primary qualitative factor in the SBLOC analysis is the ratio of loans outstanding to market value. This factor has been maintained at low levels, which has remained appropriate as losses have not materialized despite the historic declines in the equity markets during 2020, during which there were no losses. Significant losses have not been incurred since inception of this line of business. Additionally, the advance rates noted above were established to provide the Company with protection from declines in market conditions from the origination date of the lines of credit.

IBLOC. IBLOC loans are collateralized by the cash surrender value of eligible insurance policies. Should a loan default, the primary risks for IBLOCs are if the insurance company issuing the policy were to become insolvent, or if that company would fail to recognize the Bank’s assignment of policy proceeds. To mitigate these risks, insurance company ratings are periodically evaluated for compliance with Bank standards. Additionally, the Bank utilizes assignments of cash surrender value, which legal counsel has concluded are enforceable. Significant losses have not been incurred since inception of this line of business. The qualitative factors for IBLOC primarily focus on the concentration risk with insurance companies.

Investment advisor financing. In 2020, the Bank began originating loans to investment advisors for purposes of debt refinancing, acquisition of another firm or internal succession. Maximum loan amounts are subject to loan-to-value ratios of 70%, based on third-party business appraisals, but may be increased depending upon the debt service coverage ratio. Personal guarantees and blanket business liens are obtained as appropriate. Loan repayment is highly dependent on fee streams from advisor clientele. Accordingly, loss of fee-based investment advisory clients or negative market performance may reduce fees and pose a risk to these credits. As credit losses have not been experienced, the ACL is determined by qualitative factors. The qualitative factors for investment advisor financing focus on historical industry losses, changes in lending policies and procedures, portfolio performance and economic conditions.

Real estate bridge loans. Real estate bridge loans are transitional commercial mortgage loans which are made to improve and rehabilitate existing properties which already have cash flow, and which are securitized by those properties. Prior to 2020, such loans were originated for securitization and loans which had been originated but not securitized continue to be accounted for at fair value in “Commercial loans, at fair value”, on the balance sheet. In 2021, originations resumed and are being held for investment in “Loans, net of deferred fees and costs”, on the balance sheet. The Bancorp has minimal exposure to non-multifamily commercial real estate such as office buildings, and instead has a portfolio largely comprised of rehabilitation bridge loans for apartment buildings. These loans generally have three-year terms with two one-year extensions to allow for the rehabilitation work to be completed and rentals stabilized for an extended period, before being refinanced at lower rates through U.S. Government Sponsored Entities or other lenders. The rehabilitation

real estate lending portfolio consists primarily of workforce housing, which the Company considers to be working class apartments at more affordable rental rates. As significant charge-offs have not been experienced for multifamily (apartment building loans) which comprise the REBL portfolio, the ACL is determined by qualitative factors. Qualitative factors focus on historical industry losses, changes in economic conditions, underlying collateral and portfolio performance.

Other loans. Other loans include commercial and consumer loans including home equity lines of credit which the Company generally no longer offers. Qualitative factors focus on changes in the underlying collateral for collateral dependent loans, portfolio loan performance, loan concentrations and changes in economic conditions.

Expected credit losses are estimated over the estimated remaining lives of loans. The estimate excludes possible extensions, renewals and modifications unless either of the following applies: management has a reasonable expectation that a loan will be restructured, or the extension or renewal options are included in the borrower contract and are not unconditionally cancellable by us.

The Company does not measure an ACL on accrued interest receivable balances, because these balances are written off in a timely manner as a reduction to interest income when loans are placed on non-accrual status.

ACL on off-balance sheet credit exposures. The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The ACL on such off-balance sheet credit exposures, also referred to as loan commitments, is adjusted through the provision for credit losses. The estimate considers the likelihood that funding will occur over the estimated life of the commitment. The amount of the ACL on such exposures as of March 31, 2024 and as of December 31, 2023 was $2.4 million and $2.6 million, respectively.

A detail of the changes in the ACL by loan category and summary of loans evaluated individually and collectively for credit deterioration is as follows (in thousands):

	March 31, 2024
	SBL non-real estate		SBL commercial mortgage		SBL construction		Direct lease financing		SBLOC / IBLOC		Advisor financing		Real estate bridge loans		Other loans		Deferred fees and costs		Total
Beginning 1/1/2024	$	6,059	$	2,820	$	285	$	10,454	$	813	$	1,662	$	4,740	$	545	$	—	$	27,378
Charge-offs		(111)		—		—		(919)		—		—		—		(6)		—		(1,036)
Recoveries		4		—		—		32		—		—		—		—		—		36
Provision (credit)^(1)^		106		(264)		58		2,276		(38)		80		149		(4)		—		2,363
Ending balance	$	6,058	$	2,556	$	343	$	11,843	$	775	$	1,742	$	4,889	$	535	$	—	$	28,741
Ending balance: Individually evaluated for expected credit loss	$	618	$	41	$	44	$	2,618	$	—	$	—	$	—	$	—	$	—	$	3,321
Ending balance: Collectively evaluated for expected credit loss	$	5,440	$	2,515	$	299	$	9,225	$	775	$	1,742	$	4,889	$	535	$	—	$	25,420
Loans:
Ending balance	$	140,956	$	637,926	$	27,290	$	702,512	$	1,550,313	$	232,206	$	2,101,896	$	56,163	$	10,082	$	5,459,344
Ending balance: Individually evaluated for expected credit loss	$	1,983	$	3,483	$	3,385	$	4,847	$	—	$	—	$	39,400	$	227	$	—	$	53,325
Ending balance: Collectively evaluated for expected credit loss	$	138,973	$	634,443	$	23,905	$	697,665	$	1,550,313	$	232,206	$	2,062,496	$	55,936	$	10,082	$	5,406,019

	December 31, 2023
	SBL non-real estate		SBL commercial mortgage		SBL construction		Direct lease financing		SBLOC / IBLOC		Advisor financing		Real estate bridge loans		Other loans		Deferred fees and costs		Total
Beginning 1/1/2023	$	5,028	$	2,585	$	565	$	7,972	$	1,167	$	1,293	$	3,121	$	643	$	—	$	22,374
Charge-offs		(871)		(76)		—		(3,666)		(24)		—		—		(3)		—		(4,640)
Recoveries		475		75		—		330		—		—		—		299		—		1,179
Provision (credit)^(1)^		1,427		236		(280)		5,818		(330)		369		1,619		(394)		—		8,465
Ending balance	$	6,059	$	2,820	$	285	$	10,454	$	813	$	1,662	$	4,740	$	545	$	—	$	27,378
Ending balance: Individually evaluated for expected credit loss	$	670	$	343	$	44	$	1,827	$	—	$	—	$	—	$	4	$	—	$	2,888
Ending balance: Collectively evaluated for expected credit loss	$	5,389	$	2,477	$	241	$	8,627	$	813	$	1,662	$	4,740	$	541	$	—	$	24,490
Loans:
Ending balance	$	137,752	$	606,986	$	22,627	$	685,657	$	1,627,285	$	221,612	$	1,999,782	$	50,638	$	8,800	$	5,361,139
Ending balance: Individually evaluated for expected credit loss	$	1,919	$	2,381	$	3,385	$	3,785	$	—	$	—	$	—	$	362	$	—	$	11,832
Ending balance: Collectively evaluated for expected credit loss	$	135,833	$	604,605	$	19,242	$	681,872	$	1,627,285	$	221,612	$	1,999,782	$	50,276	$	8,800	$	5,349,307
	March 31, 2023
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	SBL non-real estate		SBL commercial mortgage		SBL construction		Direct lease financing		SBLOC / IBLOC		Advisor financing		Real estate bridge loans		Other loans		Deferred fees and costs		Total
Beginning 1/1/2023	$	5,028	$	2,585	$	565	$	7,972	$	1,167	$	1,293	$	3,121	$	643	$	—	$	22,374
Charge-offs		(214)		—		—		(905)		—		—		—		(3)		—		(1,122)
Recoveries		202		75		—		67		—		—		—		—		—		344
Provision (credit)^(1)^		290		(179)		(75)		2,054		(140)		128		156		(36)		—		2,198
Ending balance	$	5,306	$	2,481	$	490	$	9,188	$	1,027	$	1,421	$	3,277		604	$	—	$	23,794
Ending balance: Individually evaluated for expected credit loss	$	458	$	481	$	44	$	689	$	—	$	—	$	—	$	12	$	—	$	1,684
Ending balance: Collectively evaluated for expected credit loss	$	4,848	$	2,000	$	446	$	8,499	$	1,027	$	1,421	$	3,277	$	592	$	—	$	22,110
Loans:
Ending balance	$	114,334	$	492,798	$	33,116	$	652,541	$	2,053,450	$	189,425	$	1,752,322	$	60,210	$	6,151	$	5,354,347
Ending balance: Individually evaluated for expected credit loss	$	1,160	$	2,948	$	3,385	$	1,381	$	—	$	—	$	—	$	4,388	$	—	$	13,262
Ending balance: Collectively evaluated for expected credit loss	$	113,174	$	489,850	$	29,731	$	651,160	$	2,053,450	$	189,425	$	1,752,322	$	55,822	$	6,151	$	5,341,085

^(1)^The amount shown as the provision for credit losses for the period reflects the provision on credit losses for loans, while the consolidated statements of operations provision for credit losses includes provisions for unfunded commitments as follows: $194,000 for the three months ended March 31, 2024, $295,000 provision reversal for the three months ended March 31, 2023, and $135,000 (credit) million for full year 2023.

A summary of the Company’s net charge-offs accordingly classified, by year of origination, at March 31, 2024 and December 31, 2023 are as follows (in thousands):

As of March 31, 2024		2024		2023		2022		2021		2020		Prior		Total
SBL non-real estate
Current period charge-offs	$	—	$	—	$	—	$	(101)	$	—	$	(10)	$	(111)
Current period recoveries		—		—		—		—		—		4		4
Current period SBL non-real estate net charge-offs		—		—		—		(101)		—		(6)		(107)
SBL commercial mortgage
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period SBL commercial mortgage net charge-offs		—		—		—		—		—		—		—
SBL construction
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period SBL construction net charge-offs		—		—		—		—		—		—		—
Direct lease financing
Current period charge-offs		(3)		(20)		(621)		(250)		(19)		(6)		(919)
Current period recoveries		—		—		8		14		5		5		32
Current period direct lease financing net charge-offs		(3)		(20)		(613)		(236)		(14)		(1)		(887)
SBLOC
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period SBLOC net charge-offs		—		—		—		—		—		—		—
IBLOC
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period IBLOC net charge-offs		—		—		—		—		—		—		—
Advisor financing
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period advisor financing net charge-offs		—		—		—		—		—		—		—
Real estate bridge loans
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period real estate bridge loans net charge-offs		—		—		—		—		—		—		—
Other loans
Current period charge-offs		—		(6)		—		—		—		—		(6)
Current period recoveries		—		—		—		—		—		—		—
Current period other loans net recoveries		—		(6)		—		—		—		—		(6)
Total
Current period charge-offs		(3)		(26)		(621)		(351)		(19)		(16)		(1,036)
Current period recoveries		—		—		8		14		5		9		36
Current period net charge-offs	$	(3)	$	(26)	$	(613)	$	(337)	$	(14)	$	(7)	$	(1,000)

As of December 31, 2023		2023		2022		2021		2020		2019		Prior		Total
SBL non-real estate
Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	(871)	$	(871)
Current period recoveries		—		—		—		—		—		475		475
Current period SBL non-real estate net charge-offs		—		—		—		—		—		(396)		(396)
SBL commercial mortgage
Current period charge-offs		—		—		—		—		—		(76)		(76)
Current period recoveries		—		—		—		—		—		75		75
Current period SBL commercial mortgage net charge-offs		—		—		—		—		—		(1)		(1)
SBL construction
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period SBL construction net charge-offs		—		—		—		—		—		—		—
Direct lease financing
Current period charge-offs		(138)		(2,138)		(1,117)		(234)		(39)		—		(3,666)
Current period recoveries		—		48		168		96		—		18		330
Current period direct lease financing net charge-offs		(138)		(2,090)		(949)		(138)		(39)		18		(3,336)
SBLOC
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period SBLOC net charge-offs		—		—		—		—		—		—		—
IBLOC
Current period charge-offs		—		(12)		(12)		—		—		—		(24)
Current period recoveries		—		—		—		—		—		—		—
Current period IBLOC net charge-offs		—		(12)		(12)		—		—		—		(24)
Advisor financing
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period advisor financing net charge-offs		—		—		—		—		—		—		—
Real estate bridge loans
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period real estate bridge loans net charge-offs		—		—		—		—		—		—		—
Other loans
Current period charge-offs		—		—		—		—		—		(3)		(3)
Current period recoveries		—		—		—		—		—		299		299
Current period other loans net charge-offs		—		—		—		—		—		296		296
Total
Current period charge-offs		(138)		(2,150)		(1,129)		(234)		(39)		(950)		(4,640)
Current period recoveries		—		48		168		96		—		867		1,179
Current period net charge-offs	$	(138)	$	(2,102)	$	(961)	$	(138)	$	(39)	$	(83)	$	(3,461)

The Company did not have loans acquired with deteriorated credit quality at either March 31, 2024 or December 31, 2023. In the first three months of 2024, the Company purchased $3.1 million of SBLs, none of which were credit deteriorated. Additionally, in the first three months of 2024, the Company participated in SBLs with other institutions in the amount of $633,000.

The delinquent loans in the following table 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 non-accrual loans, the Company establishes a reserve in the allowance for credit losses for deficiencies between estimated collateral and loan carrying values. During the three months ended March 31, 2024, the Company did not have any significant changes to the extent to which collateral secures its collateral dependent loans due to general collateral deterioration or from other factors. 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, while real estate bridge lending is primarily collateralized by apartment buildings, or other commercial real estate. SBLOC is collateralized by marketable investment securities while IBLOC is collateralized by the cash value of life insurance. Advisor financing is collateralized by investment advisors’ business franchises. Direct lease financing is collateralized primarily by vehicles, or equipment.

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

	March 31, 2024
	30-59 Days		60-89 Days		90+ Days				Total				Total
	past due		past due		still accruing		Non-accrual		past due		Current		loans
SBL non-real estate	$	130	$	695	$	157	$	1,909	$	2,891	$	138,065	$	140,956
SBL commercial mortgage		273		—		—		3,483		3,756		634,170		637,926
SBL construction		—		—		—		3,385		3,385		23,905		27,290
Direct lease financing		4,133		2,307		3,700		4,847		14,987		687,525		702,512
SBLOC / IBLOC		19,941		1,861		248		—		22,050		1,528,263		1,550,313
Advisor financing		—		—		—		—		—		232,206		232,206
Real estate bridge loans		—		9,467		—		39,400		48,867		2,053,029		2,101,896
Other loans		73		1		3		—		77		56,086		56,163
Unamortized loan fees and costs		—		—		—		—		—		10,082		10,082
	$	24,550	$	14,331	$	4,108	$	53,024	$	96,013	$	5,363,331	$	5,459,344
	December 31, 2023
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	30-59 Days		60-89 Days		90+ Days				Total				Total
	past due		past due		still accruing		Non-accrual		past due		Current		loans
SBL non-real estate	$	84	$	333	$	336	$	1,842	$	2,595	$	135,157	$	137,752
SBL commercial mortgage		2,183		—		—		2,381		4,564		602,422		606,986
SBL construction		—		—		—		3,385		3,385		19,242		22,627
Direct lease financing		5,163		1,209		485		3,785		10,642		675,015		685,657
SBLOC / IBLOC		21,934		3,607		745		—		26,286		1,600,999		1,627,285
Advisor financing		—		—		—		—		—		221,612		221,612
Real estate bridge loans		—		—		—		—		—		1,999,782		1,999,782
Other loans		853		76		178		132		1,239		49,399		50,638
Unamortized loan fees and costs		—		—		—		—		—		8,800		8,800
	$	30,217	$	5,225	$	1,744	$	11,525	$	48,711	$	5,312,428	$	5,361,139

The scheduled maturities of the direct financing leases reconciled to the total lease receivables in the consolidated balance sheet, are as follows (in thousands):

Remaining 2024	$	164,137
2025		164,935
2026		142,499
2027		73,403
2028		31,181
2029 and thereafter		5,053
Total undiscounted cash flows		581,208
Residual value^(1)^		218,200
Difference between undiscounted cash flows and discounted cash flows		(96,896)
Present value of lease payments recorded as lease receivables	$	702,512

^(1)^Of the $218,200,000, $44,941,000 is not guaranteed by the lessee or other guarantors.

Note 7. Transactions with Affiliates

The Bank did not maintain any deposits for various affiliated companies as of March 31, 2024 and December 31, 2023, respectively.

The Bank has entered into lending transactions in the ordinary course of business with directors, executive officers, principal stockholders and affiliates of such persons. All loans were made on substantially the same terms, including interest rate and collateral, as those prevailing at the time for comparable loans with persons not related to the lender. At March 31, 2024, these loans were current as to principal and interest payments and did not involve more than normal risk of collectability. Loans to these related parties amounted to $5.3 million at March 31, 2024 and $5.7 million at December 31, 2023.

Mr. Hersh Kozlov, a director of the Company, is a partner at Duane Morris LLP, an international law firm. The Company paid Duane Morris LLP $3,000 and $2,700 for legal services for the three months ended March 31, 2024 and 2023, respectively.

Note 8. Fair Value Measurements

ASC 825, Financial Instruments, requires disclosure of the estimated fair value of an entity’s assets and liabilities considered to be financial instruments. For the Company, as for most financial institutions, the majority of its assets and liabilities are considered to be financial instruments. However, many such instruments lack an available trading market as characterized by a willing buyer and willing seller engaging in an exchange transaction. Accordingly, estimated fair values are determined by the Company using the best available

data and an estimation methodology it believes to be suitable for each category of financial instruments. Also, it is the Company’s general practice and intent to hold its financial instruments to maturity whether or not categorized as available-for-sale and not to engage in trading or sales activities although it has sold loans and securities in the past and may do so in the future. For fair value disclosure purposes, the Company utilized certain value measurement criteria required in accordance with ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), as discussed below. In addition, ASC 820 establishes a common definition for fair value to be applied to assets and liabilities. It clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It also establishes a framework for measuring fair value and expands disclosures concerning fair value measurements. ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Level 1 valuation is based on quoted market prices for identical assets or liabilities to which the Company has access at the measurement date. Level 2 valuation is based on other observable inputs for the asset or liability, either directly or indirectly. This includes quoted prices for similar assets in active or inactive markets, inputs other than quoted prices that are observable for the asset or liability such as yield curves, volatilities, prepayment speeds, credit risks, default rates, or inputs that are derived principally from, or corroborated through, observable market data by market-corroborated reports. Level 3 valuation is based on “unobservable inputs” which the Company believes is the best information available in the circumstances. A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

Changes in the assumptions or methodologies used to estimate fair values may materially affect the estimated amounts. Also, there may not be reasonable comparability between institutions due to the wide range of permitted assumptions and methodologies in the absence of active markets. This lack of uniformity gives rise to a high degree of subjectivity in estimating financial instrument fair values.

Cash and cash equivalents, which are comprised of cash and due from banks and the Company’s balance at the Federal Reserve Bank, had recorded values of $1.25 billion and $1.04 billion as of March 31, 2024 and December 31, 2023, respectively, which approximated fair values.

The estimated fair values of investment securities are based on quoted market prices, if available, or estimated independently by a third-party pricing service based upon their matrix pricing technique. Level 3 investment security fair values are based on the present valuing of cash flows, which discounts expected cash flows from principal and interest using yield to maturity, or yield to call as appropriate, at the measurement date. In the first quarter of 2024 and 2023, there were no transfers between the three levels.

Federal Reserve, FHLB, and ACBB stock, are held as required by those respective institutions and are carried at cost. Each of these institutions require their members to hold stock as a condition of membership. While a fixed stock amount is required by each of these institutions, the FHLB stock requirement periodically increases or decreases with varying levels of borrowing activity.

Commercial loans held at fair value are comprised primarily of commercial real estate bridge loans and SBA loans which had been originated for sale or securitization in the secondary market, and which are now being held on the balance sheet. Commercial real estate bridge loans and SBA loans are valued using a discounted cash flow analysis based upon pricing for similar loans where market indications of the sales price of such loans are not available. SBA loans are valued on a pooled basis and commercial real estate bridge loans are valued individually.

Loans, net have an estimated fair value using the present value of future cash flows. The discount rate used in these calculations is the estimated current market rate adjusted for credit risk. Accrued interest receivable has a carrying value that approximates fair value.

Loan fair values are based on “unobservable inputs” that are based on available information. Level 3 fair values are based on the present value of cash flows by unit of measurement. In the first quarter of 2022, discontinued loans were reclassified to loans held for investment, as efforts to sell the loans had concluded. Accordingly, these loans are accounted for as such, and included in related tables. Discontinued OREO, which constituted the remainder of discontinued assets, was reclassified to the OREO caption on the consolidated balance sheet.

For OREO, market value is based upon appraisals of the underlying collateral by third-party appraisers, reduced by 7% to 10% for estimated selling costs.

The estimated fair values of demand deposits (comprised of interest and non-interest-bearing checking accounts, savings accounts, and certain types of money market accounts) are equal to the amount payable on demand at the reporting date (generally, their carrying amounts). The fair values of securities sold under agreements to repurchase and short-term borrowings, when outstanding, are equal to their carrying amounts as they are short-term borrowings.

Time deposits, when outstanding, senior debt and subordinated debentures have a fair value estimated using a discounted cash flow calculation that applies current interest rates to discount expected cash flows. The carrying amount of accrued interest payable approximates its fair value. Long term borrowings resulting from sold loans which did not qualify for true sale accounting are presented in the amount of the principal of such loans.

The fair values of interest rate swaps, recorded in other assets or other liabilities, are determined using models that use readily observable market inputs and a market standard methodology applied to the contractual terms of the derivatives, including the period to maturity and interest rate indices.

The fair value of commitments to extend credit is estimated based on the amount of unamortized deferred loan commitment fees. The fair value of letters of credit is based on the amount of unearned fees plus the estimated cost to terminate the letters of credit. Fair values of unrecognized financial instruments, including commitments to extend credit, and the fair value of letters of credit are considered immaterial.

The following tables provide information regarding carrying amounts and estimated fair values (in thousands) as of the dates indicated:

	March 31, 2024
					Quoted prices in		Significant other		Significant
					active markets for		observable		unobservable
	Carrying		Estimated		identical assets		inputs		inputs
	amount		fair value		(Level 1)		(Level 2)		(Level 3)
Investment securities, available-for-sale	$	718,247	$	718,247	$	—	$	706,176	$	12,071
Federal Reserve, FHLB and ACBB stock		15,642		15,642		—		—		15,642
Commercial loans, at fair value		282,998		282,998		—		—		282,998
Loans, net of deferred loan fees and costs		5,459,344		5,411,026		—		—		5,411,026
Interest rate swaps, asset		312		312		—		312		—
Demand and interest checking		6,828,159		6,828,159		—		6,828,159		—
Savings and money market		62,597		62,597		—		62,597		—
Senior debt		95,948		91,362		—		91,362		—
Subordinated debentures		13,401		11,347		—		—		11,347
	December 31, 2023
---	---	---	---	---	---	---	---	---	---	---
					Quoted prices in		Significant other		Significant
					active markets for		observable		unobservable
	Carrying		Estimated		identical assets		inputs		inputs
	amount		fair value		(Level 1)		(Level 2)		(Level 3)
Investment securities, available-for-sale	$	747,534	$	747,534	$	—	$	735,463	$	12,071
Federal Reserve, FHLB and ACBB stock		15,591		15,591		—		—		15,591
Commercial loans, at fair value		332,766		332,766		—		—		332,766
Loans, net of deferred loan fees and costs		5,361,139		5,329,436		—		—		5,329,436
Interest rate swaps, asset		285		285		—		285		—
Demand and interest checking		6,630,251		6,630,251		—		6,630,251		—
Savings and money market		50,659		50,659		—		50,659		—
Senior debt		95,859		96,539		—		96,539		—
Subordinated debentures		13,401		11,470		—		—		11,470
Securities sold under agreements to repurchase		42		42		42		—		—

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

			Fair Value Measurements at Reporting Date Using
			Quoted prices in		Significant other		Significant
				active markets for	observable		unobservable
	Fair value		identical assets		inputs		inputs
		March 31, 2024	(Level 1)		(Level 2)		(Level 3)
Investment securities, available-for-sale
U.S. Government agency securities	$	31,964	$	—	$	31,964	$	—
Asset-backed securities		305,265		—		305,265		—
Obligations of states and political subdivisions		41,893		—		41,893		—
Residential mortgage-backed securities		163,511		—		163,511		—
Collateralized mortgage obligation securities		31,981		—		31,981		—
Commercial mortgage-backed securities		143,633		—		131,562		12,071
Total investment securities, available-for-sale		718,247		—		706,176		12,071
Commercial loans, at fair value		282,998		—		—		282,998
Interest rate swaps, asset		312		—		312		—
	$	1,001,557	$	—	$	706,488	$	295,069

			Fair Value Measurements at Reporting Date Using
			Quoted prices in		Significant other		Significant
				active markets for	observable		unobservable
	Fair value		identical assets		inputs		inputs
		December 31, 2023	(Level 1)		(Level 2)		(Level 3)
Investment securities, available-for-sale
U.S. Government agency securities	$	33,886	$	—	$	33,886	$	—
Asset-backed securities		325,353		—		325,353		—
Obligations of states and political subdivisions		47,237		—		47,237		—
Residential mortgage-backed securities		160,767		—		160,767		—
Collateralized mortgage obligation securities		34,038		—		34,038		—
Commercial mortgage-backed securities		146,253		—		134,182		12,071
Total investment securities, available-for-sale		747,534		—		735,463		12,071
Commercial loans, at fair value		332,766		—		—		332,766
Interest rate swaps, asset		285		—		285		—
	$	1,080,585	$	—	$	735,748	$	344,837

The Company’s Level 3 asset activity for the categories shown are summarized below (in thousands):

	Fair Value Measurements Using
	Significant Unobservable Inputs
	(Level 3)
	Available-for-sale				Commercial loans,
	securities				at fair value
	March 31, 2024		December 31, 2023		March 31, 2024		December 31, 2023
Beginning balance	$	12,071	$	20,023	$	332,766	$	589,143
Transfers to OREO		—		—		(1,978)		(2,686)
Total net (losses) or gains (realized/unrealized)
Included in earnings		—		—		1,069		3,869
Included in earnings (included in credit loss)		—		(10,000)		—		—
Included in other comprehensive income/(loss)		—		2,048		—		—
Purchases, issuances, sales and settlements
Issuances		—		—		—		134,256
Settlements		—		—		(48,859)		(391,816)
Ending balance	$	12,071	$	12,071	$	282,998	$	332,766
Total losses year to date included
in earnings attributable to the change in
unrealized gains or losses relating to assets still
held at the reporting date as shown above.	$	—	$	—	$	—	$	(3,085)

The Company’s OREO activity is summarized below (in thousands) as of the dates indicated:

	March 31, 2024		December 31, 2023
Beginning balance	$	16,949	$	21,210
Transfer from loans, net		632		—
Transfer from commercial loans, at fair value		1,978		2,686
Write-downs		—		(1,147)
Sales		—		(5,800)
Ending balance	$	19,559	$	16,949

Information related to fair values of Level 3 balance sheet categories is as follows (dollars in thousands):

	Level 3 instruments only
						Weighted
	Fair value at				Range at	average at
	March 31, 2024		Valuation techniques	Unobservable inputs	March 31, 2024	March 31, 2024
Commercial mortgage-backed investment
security^(1)^	$	12,071	Discounted cash flow	Discount rate	14.00%	14.00%
FHLB, ACBB,
and Federal Reserve Bank stock		15,642	Cost	N/A	N/A	N/A
Loans, net of deferred loan fees and costs^(2)^		5,411,026	Discounted cash flow	Discount rate	7.40%-13.00%	8.48%
Commercial - SBA^(3)^		109,131	Discounted cash flow	Discount rate	7.01%	7.01%
Non-SBA commercial real estate - fixed^(4)^		162,565	Discounted cash flow	Discount rate	8.52%-12.35%	9.60%
Non-SBA commercial real estate – floating^(5)^		11,302	Discounted cash flow	Discount rate	10.00%-17.00%	13.21%
Commercial loans, at fair value		282,998
Subordinated debentures^(6)^		11,347	Discounted cash flow	Discount rate	11.00%	11.00%
OREO^(7)^		19,559	Appraised value	N/A	N/A	N/A
		Level 3 instruments only
---	---	---	---	---	---	---
						Weighted
	Fair value at				Range at	average at
	December 31, 2023		Valuation techniques	Unobservable inputs	December 31, 2023	December 31, 2023
Commercial mortgage-backed investment
security	$	12,071	Discounted cash flow	Discount rate	14.00%	14.00%
FHLB, ACBB,
and Federal Reserve Bank stock		15,591	Cost	N/A	N/A	N/A
Loans, net of deferred loan fees and costs		5,329,436	Discounted cash flow	Discount rate	7.40%-13.00%	8.41%
Commercial - SBA		119,287	Discounted cash flow	Discount rate	7.46%	7.46%
Non-SBA commercial real estate - fixed		162,674	Discounted cash flow and appraisal	Discount rate	8.00%-12.30%	8.76%
Non-SBA commercial real estate - floating		50,805	Discounted cash flow	Discount rate	9.30%-16.50%	14.19%
Commercial loans, at fair value		332,766
Subordinated debentures		11,470	Discounted cash flow	Discount rate	11.00%	11.00%
OREO		16,949	Appraised value	N/A	N/A	N/A

The valuations for each of the instruments above, as of the balance sheet date, are subject to judgments, assumptions and uncertainties, changes in which could have a significant impact on such valuations. Weighted averages were calculated by using the discount rate for each individual security or loan weighted by its market value, except for SBA loans. For SBA loans, the yield derived from market pricing indications for comparable pools determined by date of loan origination. For commercial loans recorded at fair value, changes in fair value are reflected in the income statement. Changes in the fair value of securities which are unrelated to credit are recorded through equity. Changes in the fair value of loans recorded at amortized cost which are unrelated to credit are a disclosure item, without impact on the financial statements. The notes below refer to the March 31, 2024 table.

^(1)^ Commercial mortgage-backed investment security, consisting of a single bank-issued CRE security, is valued using discounted cash flow analysis. The discount rate and prepayment rate applied are based upon market observations and actual experience for comparable securities and implicitly assume market averages for defaults and loss severities. The CRE-2 security has significant credit enhancement, or protection from other subordinated tranches in the issue, which limits the valuation exposure to credit losses. Nonetheless, increases in expected default rates or loss severities on the loans underlying the issue could reduce its value. In market environments in which investors demand greater yield compensation for credit risk, the discount rate applied would ordinarily be higher and the valuation lower. Changes in loss experience could also change the interest earned on this holding in future periods and impact its fair value. As a single security, the weighted average rate shown is the actual rate applied to the CRE-2 security. For additional information related to this security, see “Note 6. Loans.”

^(2)^ Loans, net of deferred loan fees and costs are valued using discounted cash flow analysis. Discount rates are based upon available information for estimated current origination rates for each loan type. Origination rates may fluctuate based upon changes in the risk free (Treasury) rate and credit experience for each loan type.

^(3)^ Commercial – SBA Loans are comprised of the government guaranteed portion of SBA-insured loans. Their valuation is based upon the yield derived from dealer pricing indications for guaranteed pools, adjusted for seasoning and prepayments. A limited number of broker/dealers originate the pooled securities for which the loans are purchased and as a result, prices can fluctuate based on such limited market demand, although the government guarantee has resulted in consistent historical demand. Valuations are impacted by prepayment assumptions resulting from both voluntary payoffs and defaults. Such assumptions for these seasoned loans are based on a seasoning vector for constant prepayment rates from 3% to 30% over life.

^(4)^ Non-SBA commercial real estate – fixed are fixed rate non-SBA commercial real estate mortgages. These loans are fair valued by a third-party, based upon discounting at market rates for similar loans. Discount rates used in applying discounted cash flow analysis utilize input based upon loan terms, the general level of interest rates and the quality of the credit. Deterioration in loan performance or other credit weaknesses could result in fair value ranges which would be dependent upon potential buyers’ tolerance for such weaknesses and are difficult to estimate.

^(5)^ Non-SBA commercial real estate – floating are floating rate non-SBA loans, the vast majority of which are secured by multifamily properties (apartments). These are bridge loans designed to provide owners time and funding for property improvements and are generally valued using discounted cash flow analysis. The discount rate for the vast majority of these loans was based upon current origination rates for similar loans. Deterioration in loan performance or other credit weaknesses could result in fair value ranges which would be dependent upon potential buyers’ tolerance for such weaknesses and are difficult to estimate. At March 31, 2024, these loans were fair valued by a third-party, based upon discounting at market rates for similar loans.

^(6)^ Subordinated debentures are comprised of $13.4 million of debentures bearing interest at SOFR plus 3.51% and maturing in March 2038 (the “2038 Debentures”), which are valued using discounted cash flow analysis. The discount rate is based on the market rate for comparable relatively illiquid instruments. Changes in those market rates, or the credit of the Company could result in changes in the 2038 Debentures’ valuation.

^(7)^ 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. Such appraisals reflect estimates of amounts realizable upon property sales based on the sale of comparable properties and other factors. Actual sales prices may vary based upon the identification of potential purchasers, changing conditions in local real estate markets and the level of interest rates required to finance purchases.

Assets measured at fair value on a nonrecurring basis, segregated by fair value hierarchy, during the periods shown are summarized below (in thousands):

			Fair Value Measurements at Reporting Date Using
			Quoted prices in active		Significant other		Significant
			markets for identical		observable		unobservable
	Fair value		assets		inputs		inputs^(1)^
Description	March 31, 2024		(Level 1)		(Level 2)		(Level 3)
Collateral dependent loans^(1)^	$	5,852	$	—	$	—	$	5,852
OREO		19,559		—		—		19,559
	$	25,411	$	—	$	—	$	25,411
			Fair Value Measurements at Reporting Date Using
---	---	---	---	---	---	---	---	---
			Quoted prices in active		Significant other		Significant
			markets for identical		observable		unobservable
	Fair value		assets		inputs		inputs^(1)^
Description	December 31, 2023		(Level 1)		(Level 2)		(Level 3)
Collateral dependent loans^(1)^	$	8,944	$	—	$	—	$	8,944
OREO		16,949		—		—		16,949
	$	25,893	$	—	$	—	$	25,893

^(1)^The method of valuation approach for the loans evaluated for an allowance for credit losses on an individual loan basis and also for OREO was the market approach based upon appraisals of the underlying collateral by external appraisers, reduced by 7% to 10% for estimated selling costs.

At March 31, 2024, principal on collateral dependent loans, which is accounted for on the basis of the value of underlying collateral, is shown at an estimated fair value of $5.9 million. To arrive at that fair value, related loan principal of $9.2 million was reduced by specific reserves of $3.3 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. When the deficiency is deemed uncollectible, it is charged off by reducing the specific

reserve and decreasing principal. Valuation techniques consistent with the market and/or cost approach were used to measure fair value and primarily included observable inputs for the individual loans being evaluated such as recent sales of similar collateral or observable market data for operational or carrying costs. In cases where such inputs were unobservable, the loan balance is reflected within the Level 3 hierarchy.

Note 9. Derivatives

The Company utilizes derivative instruments to assist in the management of interest rate sensitivity by modifying the repricing, maturity and option characteristics on certain non-SBA commercial estate loans held at fair value. These instruments are not accounted for as effective hedges. As of March 31, 2024, the Company had entered into one interest rate swap agreement with an aggregate notional amount of $6.8 million. Under that swap agreement the Company receives an adjustable rate of interest based upon SOFR. The Company recorded a net gain of $27,000 for the three months ended March 31, 2024 to recognize the fair value of the derivative instrument which is reported in net realized and unrealized gains (losses) on commercial loans, at fair value, in the consolidated statements of operations. The amount receivable by the Company under this swap agreement was $312,000 at March 31, 2024, which is reported in other assets. The Company had minimum collateral posting thresholds with certain of its derivative counterparties and had posted cash collateral of $51,000 as of March 31, 2024.

The maturity date, notional amount, interest rate paid and received and fair value of the Company’s remaining interest rate swap agreement as of March 31, 2024 is summarized below (dollars in thousands):

	March 31, 2024
Maturity date	Notional amount		Interest rate paid		Interest rate received		Fair value
December 23, 2025		6,800		2.16%		5.56%		312
Total	$	6,800					$	312

Note 10. Other Identifiable Intangible Assets

In May 2016, the Company purchased approximately $60.0 million of lease receivables which resulted in a customer list intangible of $3.4 million that is being amortized over a ten year period. Amortization expense is $340,000 per year ($709,000 over the next three years). The gross carrying amount of the customer list intangible is $3.4 million, and as of March 31, 2024, and December 31, 2023, respectively, the accumulated amortization expense was $2.7 million and $2.6 million.

In January 2020, the Company purchased McMahon Leasing and subsidiaries for approximately $8.7 million which resulted in $1.1 million of intangibles. The gross carrying value of $1.1 million of intangibles was comprised of a customer list intangible of $689,000, goodwill of $263,000 and a trade name valuation of $135,000. The customer list intangible is being amortized over a twelve year period and accumulated amortization expense was $244,000 at March 31, 2024 and $230,000 at December 31, 2023. Amortization expense is $57,000 per year ($287,000 over the next five years). The gross carrying value and accumulated amortization related to the Company’s intangibles at March 31, 2024 and December 31, 2023 are presented below:

		March 31,				December 31,
		2024				2023
		Gross				Gross
		Carrying		Accumulated		Carrying		Accumulated
		Amount		Amortization		Amount		Amortization
		(Dollars in thousands)
Customer list intangibles	$	4,093	$	2,939	$	4,093	$	2,840
Goodwill		263		—		263		—
Trade Name		135		—		135		—
Total	$	4,491	$	2,939	$	4,491	$	2,840

Note 11. Recent Accounting Pronouncements

In March 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform in Financial Reporting, which addressed optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, resulting from the phase-out of the London Inter-Bank Offered Rate (“LIBOR”) reference rate. The Company discontinued LIBOR-based originations in 2021. Since then, all LIBOR based instruments on the balance sheet have been successfully transitioned to alternative indices with no material impact.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments-Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures. ASU 2022-02 addresses areas identified by the FASB as part of its post-implementation review of the credit losses

standard (ASU 2016-13) that introduced the CECL model. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan refinancings and modifications. The Company adopted ASU 2022-02 on January 1, 2023. Effective January 1, 2023, loan modifications to borrowers experiencing financial difficulty are required to be disclosed by type of modification and by type of loan. Prior accounting guidance classified loans which were modified as troubled debt restructurings only if the modification reflected a concession from the lender in the form of a below market interest rate or other concession in addition to borrower financial difficulty.

Note 12. Shareholders’ Equity

On October 20, 2021, the Board approved a common stock repurchase program for the 2022 fiscal year (the “2022 Repurchase Program”). Under the 2022 Repurchase Program, the Company repurchased $15.0 million in value of the Company’s common stock in each quarter of 2022.

On October 26, 2022, the Board approved a common stock repurchase program for the 2023 fiscal year (the “2023 Repurchase Program”). Under the 2023 Repurchase Program, the Company repurchased $25.0 million in value of the Company’s common stock in each quarter of 2023.

On October 26, 2023, the Board approved a common stock repurchase program for the 2024 fiscal year (the “2024 Repurchase Program”), which authorizes the Company to repurchase $50.0 million in value of the Company’s common stock per fiscal quarter in 2024, for a maximum amount of $200.0 million. Under the 2024 Repurchase Program, the Company intends to repurchase shares through open market purchases, privately negotiated transactions, block purchases or otherwise in accordance with applicable federal securities laws, including Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The 2024 Repurchase Program may be modified or terminated at any time. During the three months ended March 31, 2024, the Company repurchased 1,262,212 shares of its common stock in the open market under the 2023 Repurchase Program at an average price of $39.61 per share.

As a means of returning capital to shareholders, the Company implemented stock repurchase programs which totaled $40.0 million, $60.0 million and $100.0 million, in equal quarterly amounts, respectively, in 2021, 2022 and 2023, with $200 million originally planned for 2024. Subsequently the second quarter 2024 planned repurchase was increased from $50 million to $100 million. The planned amounts of such repurchases are determined in the fourth quarter of the preceding year by assessing the impact of budgetary earnings projections on regulatory capital requirements. The excess of projected earnings over amounts required to maintain capital requirements is the maximum available for capital return to shareholders, barring any need to retain capital for other purposes. A significant portion of such excess earnings has been utilized for stock repurchases in the amounts noted above, while cash dividends have not been paid. In determining whether capital is returned through stock repurchases or cash dividends, the Company calculates a maximum share repurchase price, based upon comparisons with what it concludes to be other exemplar peer share price valuations, with further consideration of internal growth projections. As these share prices, which are updated at least annually, have not been reached, capital return has consisted solely of stock repurchases. Exemplar share price comparisons are based upon multiples of earnings per share over time, with further consideration of returns on equity and assets. While repurchase amounts are planned in the fourth quarter of the preceding year, repurchases may be modified or terminated at any time, should capital need to be conserved.

Note 13. 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.

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.

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if

undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification of the Company and the Bank are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Moreover, capital requirements may be modified based upon regulatory rules or by regulatory discretion at any time reflecting a variety of factors including deterioration in asset quality.

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

	Tier 1 capital	Tier 1 capital	Total capital	Common equity
	to average	to risk-weighted	to risk-weighted	tier 1 to risk
	assets ratio	assets ratio	assets ratio	weighted assets
As of March 31, 2024
The Bancorp, Inc.	10.87%	15.76%	16.35%	15.76%
The Bancorp Bank, National Association	12.05%	17.43%	18.02%	17.43%
"Well capitalized" institution (under federal regulations-Basel III)	5.00%	8.00%	10.00%	6.50%
As of December 31, 2023
The Bancorp, Inc.	11.19%	15.66%	16.23%	15.66%
The Bancorp Bank, National Association	12.37%	17.35%	17.92%	17.35%
"Well capitalized" institution (under federal regulations-Basel III)	5.00%	8.00%	10.00%	6.50%

Note 14. Legal

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 alleges that the defendants violated the Delaware False Claims Act by not paying balances on certain open-loop “Vanilla” prepaid cards to the State of Delaware as unclaimed property. The complaint seeks actual and treble damages, statutory penalties, and attorneys’ fees. The Bank has filed an answer denying the allegations and continues to vigorously defend against the claims. The Bank and other defendants previously filed a motion to dismiss the action, but the motion was denied and the case is in preliminary stages of discovery. The Company is unable to determine whether the ultimate resolution of the matter will have a material adverse effect on the Company’s financial condition or operations.

On September 14, 2021, Cachet Financial Services (“Cachet”) filed an adversary proceeding against the Bank in the U.S. Bankruptcy Court for the Central District of California, titled Cachet Financial Services, Plaintiff v. The Bancorp Bank, et al., Defendants. The case was filed within the context of Cachet’s pending Chapter 11 bankruptcy case. The Bank previously served as the Originating Depository Financial Institution (“ODFI”) for automated clearing house (“ACH”) transactions in connection with Cachet’s payroll services business. The matter arises from the Bank’s termination of its Payroll Processing ODFI Agreement with Cachet on October 23, 2019, for safety and soundness reasons. The initial complaint alleges eight causes of action: (i) breach of contract; (ii) negligence; (iii) intentional interference with contract; (iv) conversion; (v) express indemnity; (vi) implied indemnity; (vii) accounting; and (viii) objection to the Bank’s proof of claim in the bankruptcy case. On November 4, 2021, the Bank filed a motion in the U.S. District Court for the Central District of California to withdraw the reference of the adversary proceeding to the bankruptcy court, which was denied in February 2023. On August 3, 2022, Cachet served the Bank with a First Amended Complaint wherein Cachet, among other things, withdraws its implied indemnity claim against the Bank and adds several defendants unaffiliated with the Bank and causes of action related to those parties. As to the Bank, Cachet seeks approximately $150 million in damages, an accounting and disallowance of the Bank’s proof of claim. The Bank is vigorously defending against these claims. On September 28, 2022, the Bank filed a partial motion to dismiss, seeking to dispose of the majority of Cachet’s claims against the Bank. The motion is still pending before the bankruptcy 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 conditions or operations.

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 continues to cooperate with the CFPB, including by responding to the CID. While the Company remains confident in the Bank’s escheatment practices, it cannot predict the timing or final outcome of the investigation. Future costs related to this matter may be material and could continue to be material at least through the completion of the investigation.

On September 8, 2023, Del Mar TIC I, LLC and Del Mar TIC II, LLC (together, “Del Mar”) filed a complaint against the Bank in the Supreme Court of the State of New York, New York County, captioned Del Mar TIC I, LLC and Del Mar TIC II, LLC, Plaintiffs v. The Bancorp Bank, Defendant. The complaint alleges, among other things, that the Bank improperly and unreasonably force-placed

excessive insurance coverage on real property that serves as security for a loan from the Bank to Del Mar, and that the Bank is improperly paying the related insurance premiums from escrow funds. The complaint asserts five causes of action: (i) declaratory judgment; (ii) breach of fiduciary duty; (iii) breach of contract: implied covenant of good faith and fair dealing; (iv) breach of contract: escrow account; and (v) injunctive relief. On October 12, 2023, the Bank removed the case to the U.S. District Court for the Southern District of New York. The Bank is vigorously defending against the claims. On November 15, 2023, the Bank filed a motion to dismiss the complaint. Del Mar subsequently filed an amended complaint, but maintained the same causes of action. On December 22, 2023, the Bank filed a motion to dismiss the amended complaint, which is still pending. The Company is unable to determine whether the ultimate resolution of the matter will have a material adverse effect on the Company’s financial condition or operations.

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, 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 Superior Court of the State of California. TBBK Card intends to vigorously defend against the claims. 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 conditions or operations.

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.

Note 15. Segment Financials

The Company operates under three segments: specialty finance, payments and corporate. The chief operating decision maker for these segments is the Chief Executive Officer. Specialty finance includes the origination of non-SBA commercial real estate loans, SBA loans, direct lease financing, security-backed lines of credit, cash value insurance policy-backed lines of credit and deposits generated by those business lines. Payments include prepaid card accounts, card payments, ACH processing and deposits generated by those business lines. Corporate includes the Company’s investment portfolio, corporate overhead and non-allocated expenses.

The following tables provide segment information for the periods indicated:

	For the three months ended March 31, 2024
	Specialty finance		Payments		Corporate		Total
		(Dollars in thousands)
Interest income	$	112,621	$	1	$	23,187	$	135,809
Interest allocation		(33,986)		39,578		(5,592)		—
Interest expense		858		38,064		2,469		41,391
Net interest income		77,777		1,515		15,126		94,418
Provision for credit losses on loans		2,169		—		—		2,169
Non-interest income		1,697		27,281		404		29,382
Non-interest expense		22,823		20,194		3,695		46,712
Income before taxes		54,482		8,602		11,835		74,919
Income tax expense		—		—		18,490		18,490
Net income (loss)	$	54,482	$	8,602	$	(6,655)	$	56,429
	For the three months ended March 31, 2023
---	---	---	---	---	---	---	---	---
	Specialty finance		Payments		Corporate		Total
		(Dollars in thousands)
Interest income	$	105,392	$	18	$	16,766	$	122,176
Interest allocation		(32,935)		34,851		(1,916)		—
Interest expense		1,486		30,504		4,370		36,360
Net interest income		70,971		4,365		10,480		85,816
Provision for credit losses		1,903		—		—		1,903
Non-interest income		3,417		25,528		44		28,989
Non-interest expense		21,479		19,217		7,334		48,030
Income before taxes		51,006		10,676		3,190		64,872
Income tax expense		—		—		15,750		15,750
Net income (loss)	$	51,006	$	10,676	$	(12,560)	$	49,122
March 31, 2024
---	---	---	---
Specialty finance	Payments	Corporate	Total

		(Dollars in thousands)
Total assets	$	5,670,852	$	31,081	$	2,213,923	$	7,915,856
Total liabilities	$	202,150	$	6,580,568	$	316,373	$	7,099,091
	December 31, 2023
---	---	---	---	---	---	---	---	---
	Specialty finance		Payments		Corporate		Total
		(Dollars in thousands)
Total assets	$	5,682,035	$	42,769	$	1,980,891	$	7,705,695
Total liabilities	$	238,042	$	6,412,911	$	247,461	$	6,898,414

Note 16. Subsequent Events

The Company evaluated its March 31, 2024 consolidated financial statements for subsequent events through the date the consolidated financial statements were issued. Pursuant to the 2024 Repurchase Program, described in “Note 12. Shareholders’ Equity,” between April 1, 2024 and May 3, 2024, the Company repurchased 726,422 shares of its common stock, at a total cost of $23.3 million and an average price of $32.14 per share.

Subsequent to the quarter-end, the Company announced that the planned common stock share repurchase for the second quarter of 2024 pursuant to the 2024 Repurchase Program would be increased from $50.0 million to $100.0 million.

In April 2024, the Company began purchasing additional U.S. government-sponsored agency fixed rate commercial and residential mortgage securities of varying maturities to reduce its exposure to lower levels of net interest income should the Federal Reserve begin decreasing rates. Such purchases would also reduce the additional net interest income which would result should the Federal Reserve increase rates. In April 2024, the Company purchased approximately $900 million of such securities, with respective estimated weighted average yields and lives of approximately 5.11% and eight years.

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 the Company’s 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 2023 (the “2023 Form 10-K”) and the unaudited interim consolidated financial statements and notes thereto contained in this Quarterly Report on Form 10-Q.

Important Note Regarding Forward-Looking Statements

When used in this Quarterly Report on Form 10-Q, the words “believes,” “anticipates,” “expects,” “intends,” “should,” “will,” “could,” “estimates,” “plans” or the negative versions of those words or other comparable words and similar expressions are intended to identify forward-looking statements, as such term is defined in the Private Securities Litigation Reform Act of 1995. Factors that could cause results to differ from those expressed in these forward-looking statements include, but are not limited to, the risks and uncertainties described or referenced in Part I, Item 1A. “Risk Factors,” in the 2023 Form 10-K and in other of our public filings with the SEC, as well as the following:

continued movement in interest rates and the resulting impact on net interest income;

changes in the monetary and fiscal policies of the federal government and its agencies;

the impacts of recent volatility in the banking sector and actual or perceived concerns regarding the liquidity and soundness of other financial institutions;

adverse changes in general economic and business conditions, including the impact of such conditions on the market value of real estate securing certain of our loans;

levels of net charge-offs and the adequacy of the ACL in covering expected losses;

any significant increase in the level of the Bank’s deposits that are uninsured by the FDIC;

any failure to maintain or enhance our competitive position with respect to new products, services and technology and achieve our strategic priorities, such as growing payments-related deposit accounts;

the impact on our stock price as a result of speculative or short trading strategies;

weather events, natural disasters, geopolitical events, public health crises and other catastrophic events beyond our control;

the outcome of regulatory matters or investigations, litigation, and other legal actions; and

our ability to identify and prevent cyber-security incidents, such as data security breaches, ransomware, malware intrusion, or other attacks.

We caution readers not to place undue reliance on forward-looking statements, which speak only as of the date hereof and are based on information presently available to the management of the Company. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q except as required by applicable law.

Recent Developments

Subsequent to the quarter-end, the Company announced that it had increased its share repurchase authorization for the second quarter of 2024 from $50.0 million to $100.0 million.

Non-performing assets increased during the quarter, primarily as a result of a REBL apartment building loan for $39.4 million, which compares to a September 2023 independent “as is” appraisal of $47.8 million, or an 82% “as is” loan to value ratio (“LTV”), with additional potential collateral value as rehabilitation progresses and units are re-leased at stabilized rental rates. The $2.1 billion apartment bridge lending portfolio has a weighted average origination date “as is” LTV of 70%, based on third-party appraisals. Further, the weighted average origination date “as stabilized” LTV, which measures the estimated value of the apartments after the rehabilitation is complete may provide even greater protection. In its real estate bridge lending portfolio, The Bancorp has minimal exposure to non-multifamily commercial real estate such as office buildings, and instead has a portfolio largely comprised of rehabilitation bridge loans for apartment buildings. These loans generally have three-year terms with two one-year extensions to allow for the rehabilitation work to be completed and rental rates stabilized for an extended period, before being refinanced at lower rates through U.S. Government

Sponsored Entities or other lenders. The rehabilitation real estate lending portfolio consists primarily of workforce housing, which we consider to be working class apartments at more affordable rental rates. Related collateral values should accordingly be more stable than higher rent properties, even in stressed economies. While the macro-economic environment has challenged the multifamily bridge space, the stability of The Bancorp’s rehabilitation bridge loan portfolio is evidenced by the estimated values of collateral for loans that have been classified as substandard. Recent third-party appraisals of those loans reflect a weighted average “as is” LTV of 79% and an “as stabilized” LTV of 76%. Accordingly, even with a higher interest rate environment and other stresses, LTVs for these loans have been significantly sustained and continue to provide protection against potential loss. As part of the underwriting process, The Bancorp reviews borrowers’ previous rehabilitation experience in addition to overall financial wherewithal. These transactions also include significant borrower equity contributions with required performance metrics. Underwriting generally includes, but is not limited to, assessment of local market information relating to vacancy and rental rates, review of post-rehabilitation rental rate assumptions against geo-specific affordability indices, negative news and lien searches, visitations by bank personnel and/or designated engineers, and other information sources. Rehabilitation progress is monitored through ongoing draw requests and financial reporting covenants. This generally allows for early identification of potential issues, and expedited action to address on a timely basis. Operations and ongoing loan evaluations are overseen by multiple levels of management, in addition to the real estate bridge lending team’s experienced professional staff and third-party consultants utilized during the underwriting and asset management process. This oversight includes a separate loan committee specific to real estate bridge lending, which is comprised of seasoned and experienced lending professionals who do not directly report to anyone on the real estate bridge lending team. There is also a separate loan review department, a surveillance committee and additional staff which evaluate potential losses under the current expected credit losses methodology (“CECL”), all of which similarly do not report to anyone on the real estate bridge lending team.

Overview

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 LTV ratios based on third-party appraisals. SBLOC and IBLOC loans are respectively collateralized by marketable securities and the cash value of life insurance, while SBA loans are either SBA 7(a) loans that come with significant government-related guarantees, or SBA 405 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”. Also enhancing Bancorp’s risk profile is the substantial earnings impact of its payment businesses.

Nature of Operations

We are a Delaware financial holding company and our primary, wholly-owned subsidiary is The Bancorp Bank, National Association (“the Bank”). The vast majority of our revenue and income is currently generated through the Bank. In our continuing operations, we have four primary lines of specialty lending in our national specialty finance segment:

SBLOC, IBLOC, and investment advisor financing;

leasing (direct lease financing);

SBLs, consisting primarily of SBA loans; and

non-SBA commercial real estate bridge loans.

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.”

The majority of our deposit accounts and non-interest income are generated in our payments business line (such business line, the “Fintech Solutions Group”), which consists of consumer deposit accounts accessed by prepaid or debit cards, issuing deposit accounts, ACH accounts, other payments such as rapid funds transfer and the collection of payments through credit card companies on behalf of merchants. The issuing deposit accounts are comprised of debit and prepaid card accounts that are generated by independent companies

that market directly to end users. Our issuing 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 and consumer payment accounts and others. Our ACH accounts facilitate bill payments, and our collection services for payments made to merchants consist of those which must be settled through associations such as Visa or MasterCard. We also provide banking services to organizations with a pre-existing customer base tailored to support or complement the services provided by these organizations to their customers, known as “affinity group 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.

Performance Summary

Our net income increased to $56.4 million for the first quarter of 2024, from $49.1 million for the first quarter of 2023, primarily reflecting an $8.6 million increase in net interest income, a $393,000 increase in non-interest income, and a $1.3 million decrease in non-interest expense. Higher rates on loans and securities resulted in increases in net interest income, which offset the impact of lower securities and SBLOC and IBLOC balances. Our cost of funds rose to 2.49% in the first quarter of 2024, driven primarily by contractual adjustments for payments balances to Federal Reserve rate increases. See “Asset and Liability Management” in this MD&A for further discussion of how our funding sources and loans adjust to Federal Reserve rate changes.

Prepaid, debit card and other payment fees, including ACH, are the largest drivers of non-interest income. Such fees for the first quarter of 2024 increased $1.8 million over the comparable 2023 period.

First quarter of 2024 non-interest expense decreased $1.3 million from the first quarter of 2023, reflecting the first quarter 2023 $1.0 million write-down on OREO that resulted from a pending sale of a movie theater property as described in Note E to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 10-K”). The property had previously been recorded at appraised value, which was adjusted to the proposed sales price in the first quarter of 2023. There was a $2.2 million provision for credit losses in the first quarter of 2024, compared to a provision for credit losses of $1.9 million in the first quarter of 2023.

Key Performance Indicators

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 including equity to assets.

Results of KPIs

In the first quarter 2024, return on assets and return on equity amounted to 2.97% and 27.95% (annualized), respectively, compared to 2.63% and 28.07% (annualized) in the first quarter of 2023.

At March 31, 2024, the ratio of equity to assets was 10.32%, compared to 9.53% at March 31, 2023, reflecting an increase in equity capital from retained earnings, partially offset by share repurchases.

Net interest margin was 5.15% in the first quarter of 2024, versus 4.67% in the first quarter of 2023, reflecting a $8.6 million increase in net interest income in the first quarter of 2024 compared to the first quarter of 2023.

Increases in the above KPIs in 2024 reflected the impact of higher rates on loans and securities as a result of Federal Reserve rate increases, while the impact of loan growth in certain categories was more than offset by SBLOC and IBLOC payoffs. We believe that these payoffs reflected customer sensitivity to the increasing rate environment. As a result of the SBLOC and IBLOC payoffs, average loans and leases decreased to $5.72 billion in the first quarter of 2024 compared to $5.99 billion in the first quarter of 2023. The provision for credit losses was $2.2 million in the first quarter of 2024 compared to a provision for credit losses of $1.9 million in the first quarter of 2023. Non-interest expense decreases over the prior year were primarily driven mostly by the $1.0 million write-down on OREO that resulted from a pending sale of a movie theater property as described in Note E to the December 31, 2022 consolidated financial statements included in the 2022 10-K. The property had previously been recorded at appraised value, which was adjusted to the proposed sales price in the first quarter of 2023.

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 view critical accounting estimates as those 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. Our critical accounting policies and estimates as of March 31, 2024 remain unchanged from those presented in the 2023 Form 10-K under Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Results of Operations

Comparison of first quarter 2024 to first quarter 2023

Net Income

Net income for the first quarter of 2024 was $56.4 million, or $1.06 per diluted share, compared to $49.1 million, or $0.88 per diluted share, for the first quarter of 2023. Income before income taxes was $74.9 million in the first quarter of 2024 compared to $64.9 million in the first quarter of 2023. Income increased between those respective periods primarily as a result of higher net interest income, which was primarily driven by the impact of Federal Reserve rate increases on the loan and securities portfolios. Variable rate loans and securities comprise the majority of the Company’s earning assets, and while they reprice on a lagged basis, they adjust more fully than deposits to Federal Reserve rate changes.

Net Interest Income

Our net interest income for the first quarter of 2024 increased $8.6 million, or 10.0%, to $94.4 million from $85.8 million in the first quarter of 2023. Our interest income for the first quarter of 2024 increased to $135.8 million, an increase of $13.6 million, or 11.2%, from $122.2 million for the first quarter of 2023. The increase in interest income resulted primarily from an increase in loan and securities yields resulting from the aforementioned Federal Reserve rate increases, as our average loans and leases decreased to $5.72 billion for the first quarter of 2024 from $5.99 billion for the first quarter of 2023, a decrease of $268.5 million, or 4.5%. Related interest income increased $8.0 million on a tax equivalent basis. Net paydowns of SBLOC and IBLOC continued in first quarter 2024, which partially offset the impact of higher rates and loan growth in other categories. At March 31, 2024, the respective balances of SBLOC and IBLOC loans were $954.8 million and $595.6 million, respectively, compared to $1.13 billion and $921.3 million at March 31, 2023. Continuing decreases in these balances will result in lower interest income, to the extent they are not replaced by loan growth in other categories. Additionally, overall net interest income may be reduced from current levels should the Federal Reserve begin lowering interest rates. The balance of our commercial loans, at fair value also decreased as a result of non-SBA commercial real estate bridge loan repayments. In the third quarter of 2021, we resumed originating such loans, referred to as real estate bridge loans which are included in loans, net on the balance sheet and which are held at amortized cost.

Of the total $8.0 million increase in loan interest income on a tax equivalent basis, the largest increases were $7.2 million for all real estate bridge loans, $2.9 million for small business lending, $2.7 million for leasing and $1.3 million for investment advisor financing, while total SBLOC and IBLOC decreased $6.8 million. Our average investment securities of $736.5 million for the first quarter of 2024 decreased $40.9 million from $777.4 million for the first quarter of 2023. Related tax equivalent interest income increased $343,000, primarily reflecting an increase in yields. Higher yields on loans and securities reflected the continuing impact of Federal Reserve rate increases as variable rate loans and securities repriced to higher rates. Federal Reserve rate changes had an immediate impact on cost of funds, while their impact on variable rate loans lags. Generally, interest expense is contractually adjusted daily. The majority of our loans and securities are variable rate and generally reprice monthly or quarterly, although some reprice over several years.

Our net interest margin (calculated by dividing net interest income by average interest-earning assets) for the first quarter of 2024 was 5.15% compared to 4.67% for the first quarter of 2023, an increase of 48 basis points. While the yield on interest-earning assets increased 76 basis points, the cost of deposits and interest-bearing liabilities increased 34 basis points, or a net change of 42 basis points. The more pronounced increase in the net interest margin compared to the net change reflected the impact of higher rates on assets funded by equity. Average interest-earning deposits at the Federal Reserve Bank increased $294.0 million, or 50.7%, to $874.1 million in the first quarter of 2024 from $580.1 million in the first quarter of 2023. In the first quarter of 2024, the average yield on our loans increased to 7.99% from 7.10% for the first quarter of 2023, an increase of 89 basis points. Yields on taxable investment securities in the first quarter of 2024 increased to 5.25% compared to 4.81% for the first quarter of 2023, an increase of 44 basis points.

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:

	Three months ended March 31,												Three months ended March 31,
	2024						2023						2024 vs 2023
	Average				Average		Average				Average
	Balance		Interest		Rate		Balance		Interest		Rate		Due to Volume		Due to Rate		Total
	(Dollars in thousands)
Assets:
Interest-earning assets:
Loans, net of deferred loan fees and costs^(1)^	$	5,717,262	$	114,160		7.99%	$	5,987,179	$	106,204		7.10%	$	(4,451)	$	12,407	$	7,956
Leases-bank qualified^(2)^		4,746		116		9.78%		3,361		69		8.21%		32		15		47
Investment securities-taxable		733,599		9,634		5.25%		774,055		9,300		4.81%		(428)		762		334
Investment securities-nontaxable^(2)^		2,895		50		6.91%		3,343		41		4.91%		(4)		13		9
Interest-earning deposits at Federal Reserve Bank		874,073		11,884		5.44%		580,058		6,585		4.54%		3,812		1,487		5,299
Net interest-earning assets		7,332,575		135,844		7.41%		7,347,996		122,199		6.65%
Allowance for credit losses		(27,158)						(22,533)
Other assets		331,756						237,721
	$	7,637,173					$	7,563,184						(1,039)		14,684		13,645
Liabilities and shareholders' equity:
Deposits:
Demand and interest checking	$	6,453,866	$	38,714		2.40%	$	6,406,834	$	32,383		2.02%		239		6,092		6,331
Savings and money market		50,970		447		3.51%		132,279		1,219		3.69%		(716)		(56)		(772)
Time		—		—		—		84,333		858		4.07%		(858)		—		(858)
Total deposits		6,504,836		39,161		2.41%		6,623,446		34,460		2.08%
Short-term borrowings		1,373		19		5.54%		20,500		234		4.57%		(278)		63		(215)
Repurchase agreements		13		—		—		42		—		—		—		—		—
Long-term borrowings		38,517		686		7.12%		9,998		126		5.04%		489		71		560
Subordinated debt		13,401		292		8.72%		13,401		261		7.79%		—		31		31
Senior debt		95,894		1,233		5.14%		99,092		1,279		5.16%		(41)		(5)		(46)
Total deposits and liabilities		6,654,034		41,391		2.49%		6,766,479		36,360		2.15%
Other liabilities		171,116						87,116
Total liabilities		6,825,150						6,853,595						(1,165)		6,196		5,031
Shareholders' equity		812,023						709,589
	$	7,637,173					$	7,563,184
Net interest income on tax equivalent basis^(2)^			$	94,453					$	85,839			$	126	$	8,488	$	8,614
Tax equivalent adjustment				35						23
Net interest income			$	94,418					$	85,816
Net interest margin^(2)^						5.15%						4.67%
^(1)^Includes commercial loans, at fair value. All periods include non-accrual loans.
^(2)^Full taxable equivalent basis, using 21% respective statutory federal tax rates in 2024 and 2023.

For the first quarter of 2024, average interest-earning assets decreased to $7.33 billion, a decrease of $15.4 million, or 0.2%, from $7.35 billion in the first quarter of 2023. The decrease reflected increased average interest-earning deposits at the Federal Reserve Bank of $294.0 million, the impact of which was more than offset by decreased average balances of loans and leases of $268.5 million, or 4.5%, and decreased average investment securities of $40.9 million, or 5.3%. For those respective periods, average demand and interest checking deposits increased $47.0 million, or 0.7%. An $81.3 million decrease in average savings and money market balances reflected the sweeping of deposits off our balance sheet to other institutions. Such sweeps are utilized to optimize diversity within our funding

structure by managing the percentage of individual client deposits to total deposits. The interest expense shown for demand and interest checking is primarily comprised of interest paid to our affinity groups.

Provision for Credit Losses

Our provision for credit losses was $2.2 million for the first quarter of 2024 compared to a provision of $1.9 million for the first quarter of 2023. The ACL was $28.7 million, or 0.53% of total loans, at March 31, 2024, compared to $27.4 million, or 0.51% of total loans, at December 31, 2023. The higher ratio at March 31, 2024 reflected the impact of higher leasing net charge-offs, primarily in long haul and local trucking, transportation and related activities for which total exposure was approximately $39 million at March 31, 2024. We believe that our ACL is appropriate and supportable. For more information about our provision and ACL and our loss experience, see “Financial Condition – Allowance for Credit Losses,” “– Net Charge-offs,” and “– Non-performing Loans, Loans 90 days Delinquent and Still Accruing, OREO, Modified Loans and Troubled Debt Restructurings,” below and “Note 6. Loans” to the unaudited consolidated financial statements herein.

Non-Interest Income

Non-interest income was $29.4 million in the first quarter of 2024 compared to $29.0 million in the first quarter of 2023. The $393,000, or 1.4%, increase between those respective periods reflected an increase in prepaid, debit card and related fees. Prepaid, debit card and related fees increased $963,000, or 4.1%, to $24.3 million for the first quarter of 2024, compared to $23.3 million in the first quarter of 2023. The first quarter of 2023 included approximately $600,000 of non-interest income related to the fourth quarter of 2022, and a $1.4 million termination fee from a client which formed its own bank. The increase reflected higher transaction volume from new clients and organic growth from existing clients. ACH, card and other payment processing fees increased $793,000, or 36.5%, to $3.0 million for the first quarter of 2024, compared to $2.2 million in the first quarter of 2023, reflecting an increase in rapid funds transfer volume.

Net realized and unrealized gains on commercial loans, at fair value, decreased $629,000, or 36.5%, to $1.1 million for the first quarter of 2024 from $1.7 million for the first quarter of 2023. The runoff of the commercial loans, at fair value portfolio, reduced the volume of loan payoffs and the income recognized at the time of payoff.

Leasing related income decreased $1.1 million, or 74.0%, to $388,000 for the first quarter of 2024 from $1.5 million for the first quarter of 2023, reflecting $1.1 million of losses related to an auto auction company which ceased operations.

Other non-interest income increased $368,000, or 131.4%, to $648,000 for the first quarter of 2024 from $280,000 in the first quarter of 2023 which reflected the impact of prior year insurance related refunds received in 2024.

Non-Interest Expense

Total non-interest expense was $46.7 million for the first quarter of 2024, a decrease of $1.3 million, or 2.7%, compared to $48.0 million for the first quarter of 2023. The decrease reflects a prior year $1.0 million write-down of OREO which resulted from a pending sale of a movie theater property as described in Note E to the consolidated financial statements included in the 2022 10-K. The property had previously been recorded at appraised value, which was adjusted to the proposed sales price in the first quarter of 2023. While salaries and employee benefits increased 1.7%, increases in the payments business and related financial crimes and in IT salary expense, were offset by decreases in incentive compensation.

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

	For the three months ended March 31,
	2024		2023		Increase (Decrease)		Percent Change
	(Dollars in thousands)
Salaries and employee benefits	$	30,280	$	29,785	$	495		1.7%
Depreciation and amortization		949		721		228		31.6%
Rent and related occupancy cost		1,640		1,394		246		17.6%
Data processing expense		1,421		1,321		100		7.6%
Printing and supplies		103		145		(42)		(29.0%)
Audit expense		359		392		(33)		(8.4%)
Legal expense		821		958		(137)		(14.3%)
Amortization of intangible assets		99		99		—		—
FDIC insurance		845		955		(110)		(11.5%)
Software		4,489		4,237		252		5.9%
Insurance		1,338		1,306		32		2.5%
Telecom and IT network communications		271		376		(105)		(27.9%)
Consulting		578		322		256		79.5%
Write-downs and other losses on other real estate owned		—		1,019		(1,019)		(100.0%)
Other		3,519		5,000		(1,481)		(29.6%)
Total non-interest expense	$	46,712	$	48,030	$	(1,318)		(2.7%)

Changes in categories of non-interest expense were as follows:

Salaries and employee benefits expense increased to $30.3 million for the first quarter of 2024, an increase of $495,000, or 1.7%, from $29.8 million for the first quarter of 2023.

Depreciation and amortization expense increased $228,000, or 31.6%, to $949,000 in the first quarter of 2024 from $721,000 in the first quarter of 2023, reflecting the impact of the Sioux Falls, South Dakota relocation to new and expanded offices and a new expanded data center.

Rent and related occupancy cost increased $246,000, or 17.6%, to $1.6 million in the first quarter of 2024 from $1.4 million in the first quarter of 2023, reflecting the impact of the Sioux Falls, South Dakota relocation to new and expanded offices and a new expanded data center.

Data processing expense increased $100,000, or 7.6%, to $1.4 million in the first quarter of 2024 from $1.3 million in the first quarter of 2023, reflecting higher transaction volume.

Printing and supplies expense decreased $42,000, or 29.0%, to $103,000 in the first quarter of 2024 from $145,000 in the first quarter of 2023.

Audit expense decreased $33,000, or 8.4%, to $359,000 in the first quarter of 2024 from $392,000 in the first quarter of 2023.

Legal expense decreased $137,000, or 14.3%, to $821,000 in the first quarter of 2024 from $958,000 in the first quarter of 2023, reflecting a reduction in legal fees related to a Civil Investigative Demand from the Consumer Financial Protection Bureau as described in Note O to the audited consolidated financial statements in the 2023 Form 10-K.

FDIC insurance expense decreased $110,000, or 11.5%, to $845,000 for the first quarter of 2024 from $955,000 in the first quarter of 2023, reflecting a reduction in the assessed rate.

Software expense increased $252,000, or 5.9%, to $4.5 million in the first quarter of 2024 from $4.2 million in the first quarter of 2023. The increase reflected higher expenditures for information technology infrastructure including leasing, cybersecurity and cloud computing, which more than offset decreases in financial crimes management related expense.

Insurance expense increased $32,000, or 2.5%, to $1.3 million in the first quarter of 2024 compared to $1.3 million in the first quarter of 2023.

Telecom and IT network communications expense decreased $105,000, or 27.9%, to $271,000 in the first quarter of 2024 from $376,000 in the first quarter of 2023.

Consulting expense increased $256,000, or 79.5%, to $578,000 in the first quarter of 2024 from $322,000 in the first quarter of 2023. The increase reflected expenses related to the Company’s ongoing efforts of documenting and optimizing operational controls.

Other non-interest expense decreased $1.5 million, or 29.6%, to $3.5 million in the first quarter of 2024 from $5.0 million in the first quarter of 2023. The $1.5 million decrease primarily reflected the following decreases: a. regulatory examination fees of $280,000 b. OREO expense of $372,000 c. contributions of $218,000 and d. other operating taxes of $163,000.

Income Taxes

Income tax expense was $18.5 million for the first quarter of 2024 compared to $15.8 million in the first quarter of 2023. The increase resulted primarily from an increase in income, substantially all of which is subject to income tax. A 24.7% effective tax rate in 2024 and a 24.3% effective tax rate in 2023 primarily reflected a 21% federal tax rate and the impact of various state income taxes.

Liquidity

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 overnight federal funds or in our interest-bearing account at the Federal Reserve.

Our primary source of funding has been deposits. Average total deposits decreased by $118.6 million, or 1.8%, to $6.50 billion for the first quarter of 2024 compared to the first quarter of 2023. The decrease reflected the planned exit of higher cost deposits. Federal Reserve average balances increased to $874.1 million in the first quarter of 2024 from $580.1 million in the first quarter of 2023. The increased reflected lower average balances of SBLOC and IBLOC loans. As a result of the approximate $900 million of securities purchases in April 2024 as discussed under “Asset and Liability Management” in this MD&A, we have increased the use of FHLB advances to partially fund such purchases, at least temporarily.

One source of contingent liquidity is available-for-sale securities, which amounted to $718.2 million at March 31, 2024, compared to $747.5 million at December 31, 2023. The $900 million of securities purchases noted above, will serve to increase these balances. The majority of these securities, including the $900 million of April 2024 purchases, can be pledged to facilitate extensions of credit in addition to loans already pledged against lines of credit, as discussed later in this section. At March 31, 2024, outstanding loans amounted to $5.46 billion, compared to $5.36 billion at the prior year end, an increase of $98.2 million representing a use of funds. Commercial loans, at fair value, decreased to $283.0 million from $332.8 million between those respective dates, a decrease of $49.8 million, which provided funding. In 2019 and previous years, these loans were generally originated for securitization and sale, but in 2020 we decided to retain such loans on the balance sheet. While we suspended originating such loans after the first quarter of 2020, we resumed originations, which consist primarily of non-SBA commercial real estate bridge loans, in the third quarter of 2021. Such originations are held for investment and are included in “Loans, net of deferred loan fees and costs” on the balance sheet. Accordingly, commercial loans, at fair value will continue to run off. Our liquidity planning has not previously placed undue reliance on securitizations, and while our future planning excludes the impact of securitizations, other liquidity sources, primarily deposits, are determined to be adequate.

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. Prior to December 2020, FDIC guidance for classification of deposit accounts as brokered was relatively broad, and generally included accounts which were referred to or “placed” with the institution by other companies. If the Bank ceases to be categorized as “well capitalized” under banking regulations, it will be prohibited from accepting, renewing or rolling over any of its deposits classified as brokered without the consent of the FDIC. In such a case, the FDIC’s refusal to grant consent to our accepting, renewing or rolling over brokered deposits could effectively restrict or eliminate the ability of the Bank to operate its business lines as presently conducted. In December 2020, the FDIC issued a new regulation which, in the third quarter of 2021, resulted in the majority of our deposits being reclassified from brokered to non-brokered. Of our total deposits of $6.89 billion as of March 31, 2024, $551.0 million were classified as brokered and an estimated $573.5 million were not insured by FDIC insurance, which requires identification of the depositor and is limited to $250,000 per identified depositor. Uninsured accounts may represent a greater liquidity risk than FDIC-insured accounts should large depositors withdraw funds as a result of negative financial developments either at the Bank or in the economy. Significant amounts of our uninsured deposits are comprised of small balances, such as anonymous gift cards and corporate incentive cards for which there is no identified depositor. We do not believe that such uninsured accounts present a significant liquidity risk.

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.

While consumer deposit accounts, including prepaid and debit card accounts, comprise the vast majority of our funding needs, we maintain secured borrowing lines with the FHLB and the Federal Reserve. Our collateralized line of credit with the Federal Reserve Bank had available accessible capacity of $1.95 billion as of March 31, 2024 and was collateralized by loans. We have also pledged in excess of $1.10 billion of multifamily loans to the FHLB. As a result, we have approximately $731.5 million of availability on that line

of credit which we can also access at any time. As of March 31, 2024, there were no amounts outstanding on either of these lines of credit. We expect to continue to maintain our facilities with the FHLB and Federal Reserve.

Another source of contingent liquidity is available-for-sale securities, which amounted to $718.2 million at March 31, 2024, compared to $747.5 million at December 31, 2023. Approximately $350 million of our available-for-sale securities are U.S. government-sponsored agency securities which are highly liquid and may be immediately pledged as additional collateral. We actively monitor our positions and contingent funding sources daily.

As a holding company conducting substantially all our business through our subsidiaries, the Company’s near-term need for liquidity consists principally of cash for required interest payments on our subordinated debentures, consisting of 2038 Debentures, and senior debt, consisting of $100.0 million senior notes with an interest rate of 4.75% and maturing in August 2025 (the “2025 Senior Notes”). Semi-annual interest payments on the 2025 Senior Notes are approximately $2.4 million, and quarterly interest payments on the 2038 Debentures are approximately $300,000. As of March 31, 2024, we had cash reserves of approximately $6.2 million at the holding company. During the first quarter of 2024, $50.0 million of common stock repurchases were funded by a dividend from the Bank, as are 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.

Included in our cash and cash-equivalents at March 31, 2024 were $1.24 billion of interest-earning deposits which primarily consisted of deposits with the Federal Reserve.

In 2024, purchases of $7.3 million of securities were exceeded by $36.5 million of redemptions. We had outstanding commitments to fund loans, including unused lines of credit, of $1.78 billion and $1.79 billion as of March 31, 2024 and December 31, 2023, respectively. The majority of our commitments are variable rate and originate with SBLOC. The recorded amount of such commitments has, for many accounts, been based on the full amount of collateral in a customer’s investment account. The funding requirements for such commitments occur on a measured basis over time and would be funded by normal deposit growth. Additionally, these loans are “demand” loans and as such, represent a contingent source of funding.

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, 2024, both the Company and the Bank were “well capitalized” under banking regulations.

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

	Tier 1 capital	Tier 1 capital	Total capital	Common equity
	to average	to risk-weighted	to risk-weighted	tier 1 to risk
	assets ratio	assets ratio	assets ratio	weighted assets
As of March 31, 2024
The Bancorp, Inc.	10.87%	15.76%	16.35%	15.76%
The Bancorp Bank, National Association	12.05%	17.43%	18.02%	17.43%
"Well capitalized" institution (under federal regulations-Basel III)	5.00%	8.00%	10.00%	6.50%
As of December 31, 2023
The Bancorp, Inc.	11.19%	15.66%	16.23%	15.66%
The Bancorp Bank, National Association	12.37%	17.35%	17.92%	17.35%
"Well capitalized" institution (under federal regulations-Basel III)	5.00%	8.00%	10.00%	6.50%

Asset and Liability Management

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. While it is difficult to predict the impact of inflation and responsive Federal Reserve rate changes on our net interest income, the Federal Reserve has historically utilized increases in the overnight federal funds rate as one tool in fighting inflation. As a result of high rates of inflation, the Federal Reserve raised rates in each quarter of 2022 and in the first three quarters of 2023. Our largest funding source, prepaid and debit card deposit accounts, contractually adjusts to only a portion of increases or decreases in rates which are largely determined by such Federal Reserve actions. That pricing has generally supported the maintenance

of a balance sheet for which net interest income tends to increase with increases in rates. While deposits reprice to only a portion of Federal Reserve rate changes, such changes are immediate. Interest-earning assets, comprised primarily of loans and securities, tend to adjust more fully to rate increases at lagged contractual pricing intervals. The majority of our loans and securities are variable rate and generally reprice monthly or quarterly, although some reprice over several years. Additionally, the impact of loan interest rate floors which must be exceeded before rates on certain loans increase, may result in decreases in net interest income with lesser increases in rates. Cumulative 2022 Federal Reserve interest rate increases resulted in contractual rates on loans generally exceeding rate floors beginning in the second quarter of 2022.

We have adopted policies designed to manage net interest income and preserve capital over a broad range of interest rate movements. To effectively administer the policies and to monitor our exposure to fluctuations in interest rates, we maintain an asset/liability committee, consisting of the Bank’s Chief Executive Officer, Chief Accounting Officer, Chief Financial Officer, Chief Credit Officer and others. This committee meets quarterly to review our financial results, develop strategies to optimize margins and to respond to market conditions. The primary goal of our policies is to optimize margins and manage interest rate risk, subject to overall policy constraints for prudent management of interest rate risk.

We monitor, manage and control interest rate risk through a variety of techniques, including the use of traditional interest rate sensitivity analysis (also known as “gap analysis”) and an interest rate risk management model. With the interest rate risk management model, we project future net interest income and then estimate the effect of various changes in interest rates on that projected net interest income. We also use the interest rate risk management model to calculate the change in net portfolio value over a range of interest rate change scenarios. Traditional gap analysis involves arranging our interest-earning assets and interest-bearing liabilities by repricing periods and then computing the difference (or “interest rate sensitivity gap”) between the assets and liabilities that we estimate will reprice during each time period and cumulatively through the end of each time period.

Both interest rate sensitivity modeling and gap analysis are done at a specific point in time and involve a variety of significant estimates and assumptions. Interest rate sensitivity modeling requires, among other things, estimates of how much and when yields and costs on individual categories of interest-earning assets and interest-bearing liabilities will respond to general changes in market rates, future cash flows and discount rates. Gap analysis requires estimates as to when individual categories of interest-sensitive assets and liabilities will reprice, and assumes that assets and liabilities assigned to the same repricing period will reprice at the same time and in the same amount. Gap analysis does not account for the fact that repricing of assets and liabilities is discretionary and subject to competitive and other pressures. A gap is considered positive when the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive liabilities. A gap is considered negative when the amount of interest rate sensitive liabilities exceeds interest rate sensitive assets. During a period of falling interest rates, a positive gap would tend to adversely affect net interest income, while a negative gap would tend to result in an increase in net interest income. During a period of rising interest rates, a positive gap would tend to result in an increase in net interest income while a negative gap would tend to affect net interest income adversely.

The following table sets forth the estimated maturity or repricing structure of our interest-earning assets and interest-bearing liabilities at March 31, 2024. Except as stated below, the amounts of assets or liabilities shown which reprice or mature during a particular period were determined in accordance with the contractual terms of each asset or liability. 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, although non-interest-bearing transaction accounts are not paid interest, we estimate certain of the balances will reprice as a result of the contractual fees that are paid to the affinity groups which are based upon a rate index, and therefore are included in interest expense. We have adjusted the transaction account balances in the table downward, to better reflect the impact of their partial adjustment to changes in rates. Loans and security balances, which adjust more fully to market rate changes, are based upon actual balances. The table does not assume any prepayment of fixed-rate loans and mortgage-backed securities are scheduled based on their anticipated cash flow, including prepayments based on historical data and current market trends. The table does not necessarily indicate the impact of general interest rate movements on our net interest income because the repricing and related behavior of certain categories of assets and liabilities (for example, prepayments of loans and withdrawal of deposits) is beyond our control. As a result, certain assets and liabilities indicated as repricing within a stated period may in fact reprice at different times and at different rate levels. For instance, the majority of REBL loans are variable rate with floors, but prepayments may offset the benefit of such floors in decreasing rate environments.

	1-90		91-364		1-3		3-5		Over 5
	Days		Days		Years		Years		Years
	(Dollars in thousands)
Interest earning assets:
Commercial loans, at fair value	$	96,769	$	133,609	$	29,336	$	21,173	$	2,111
Loans, net of deferred loan fees and costs		3,343,329		132,648		1,112,611		682,390		188,366
Investment securities		359,651		65,606		117,936		100,170		74,884
Interest earning deposits		1,241,363		—		—		—		—
Total interest earning assets		5,041,112		331,863		1,259,883		803,733		265,361
Interest bearing liabilities:
Transaction accounts as adjusted^(1)^		3,414,080		—		—		—		—
Savings and money market		62,597		—		—		—		—
Senior debt and subordinated debentures		13,401		—		95,948		—		—
Total interest bearing liabilities		3,490,078		—		95,948		—		—
Gap	$	1,551,034	$	331,863	$	1,163,935	$	803,733	$	265,361
Cumulative gap	$	1,551,034	$	1,882,897	$	3,046,832	$	3,850,565	$	4,115,926
Gap to assets ratio		20%		4%		15%		10%		3%
Cumulative gap to assets ratio		20%		24%		39%		49%		52%

^(1)^Transaction accounts are comprised primarily of demand deposits. While demand deposits are non-interest-bearing, related fees paid to affinity groups may reprice according to specified indices.

The methods used to analyze interest rate sensitivity in this table have a number of limitations. Certain assets and liabilities may react differently to changes in interest rates even though they reprice or mature in the same or similar time periods. The interest rates on certain assets and liabilities may change at different times than market interest rates, with some changing in advance of changes in market rates and some lagging behind changes in market rates. Additionally, the actual prepayments and withdrawals we experience when interest rates change may deviate significantly from those assumed in calculating the data shown in the table. Accordingly, actual results can and often do differ from projections.

We believe that the assumptions utilized in evaluating our estimated net interest income are reasonable; however, the interest rate sensitivity of our assets, liabilities and off-balance sheet financial instruments, as well as the estimated effect of changes in interest rates on estimated net interest income, could vary substantially if different assumptions are used or actual experience differs from presumed behavior of various deposit and loan categories. The following table shows the effects of interest rate shocks on our net portfolio value described as Market Value of Portfolio Equity (“MVPE”) and net interest income. Rate shocks assume that current interest rates change immediately and sustain parallel shifts. For interest rate increases or decreases of 100 and 200 basis points, our policy includes a guideline that our MVPE ratio should not decrease more than 10% and 15%, respectively, and that net interest income should not decrease more than 10% and 15%, respectively. As illustrated in the following table, we complied with our asset/liability policy guidelines at March 31, 2024. While our modeling suggests that rate increases of 100 and 200 basis points will have a positive impact on net interest income (as shown in the table below), the actual amount of such increase cannot be determined, and there can be no assurance any increase will be realized. Because the Company has emphasized variable rate instruments in its loan and investment portfolios, it tends to benefit from higher interest rate environments. As a result of the Federal Reserve rate increases in 2022 and 2023, net interest income has increased and exceeded prior period levels. Future Federal Reserve rate reductions may result in a return to lower net interest income levels. In April 2024, the Company began purchasing additional fixed rate commercial and residential mortgage securities of varying maturities to reduce its exposure to lower levels of net interest income should the Federal Reserve begin decreasing rates. Such purchases would also reduce the additional net interest income which would result should the Federal Reserve increase rates. In April 2024, the Company purchased approximately $900 million of such securities, with respective estimated weighted average yields and lives of approximately 5.11% and eight years. While an estimate of the decrease in the Company’s sensitivity to changes in rates is subject to the limitations and variables discussed above, and other portfolio changes, such securities purchases and fixed rate loan originations are projected to decrease the changes to net interest income in the table below significantly.

	Net portfolio value at				Net interest income
	March 31, 2024				March 31, 2024
			Percentage				Percentage
Rate scenario	Amount		change		Amount		change
		(Dollars in thousands)
+200 basis points	$	1,180,023		5.33%	$	419,056		10.60%
+100 basis points		1,150,990		2.74%		398,973		5.30%
Flat rate		1,120,301		—		378,894		—
-100 basis points		1,082,520		(3.37%)		358,225		(5.46%)
-200 basis points		1,037,520		(7.39%)		337,392		(10.95%)

Financial Condition

General. Our total assets at March 31, 2024 were $7.92 billion, of which our total loans were $5.46 billion, and our commercial loans, at fair value, were $283.0 million. At December 31, 2023, our total assets were $7.71 billion, of which our total loans were $5.36 billion, and our commercial loans, at fair value were $332.8 million. The increase reflected an increase in interest-earning assets at the Federal Reserve Bank, which at least partially resulted from temporary seasonal deposit inflows from consumer tax refund deposits. The increase also reflected loan growth in various loan categories, which offset decreases both in SBLOC and IBLOC loan balances and in commercial loans, at fair value as that portfolio continues to run off.

Interest-earning Deposits

At March 31, 2024, we had a total of $1.24 billion of interest-earning deposits compared to $1.03 billion at December 31, 2023, an increase of $208.1 million. These deposits were comprised primarily of balances at the Federal Reserve.

Investment Portfolio

For detailed information on the composition and maturity distribution of our investment portfolio, see “Note 5. Investment Securities” to the unaudited consolidated financial statements herein. Total investment securities decreased to $718.2 million at March 31, 2024, a decrease of $29.3 million, or 3.9%, from December 31, 2023.

Under the accounting guidance related to CECL, changes in fair value of securities unrelated to credit losses continue to be recognized through equity. However, credit-related losses are recognized through an allowance, rather than through a reduction in the amortized cost of the security. CECL accounting guidance also permits the reversal of allowances for credit deterioration in future periods based on improvements in credit, which was not included in previous guidance. Generally, a security’s credit-related loss is the difference between its amortized cost basis and the best estimate of its expected future cash flows discounted at the security’s effective yield. That difference is recognized through the income statement, as with prior guidance, but is renamed a provision for credit loss. For the three months ended March 31, 2024 and 2023, we recognized no credit-related losses on our portfolio.

Investments in FHLB, ACBB and Federal Reserve Bank stock are recorded at cost and amounted to $15.6 million at March 31, 2024 and $15.6 million at December 31, 2023. Each of these institutions require their correspondent banking institutions to hold stock as a condition of membership. The Bank’s conversion to a national charter required the purchase of $11.0 million of Federal Reserve Bank stock in September 2022. Additionally, in the second quarter of 2023, we joined the FHLB of Des Moines, which required a $9.1 million purchase of stock. While a fixed stock amount is required by each of these institutions, the FHLB stock requirement increases or decreases with the level of borrowing activity.

At March 31, 2024 and December 31, 2023 no investment securities were encumbered, as lines of credit established for borrowings were collateralized by loans.

The following table shows the contractual maturity distribution and the weighted average yield of our investment portfolio securities as of March 31, 2024 (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.

				After			After
	Zero			one to			five to			Over
	to one		Average	five		Average	ten		Average	ten		Average
Available-for-sale	year		yield	years		yield	years		yield	years		yield	Total
U.S. Government agency securities	$	713	2.28%	$	7,576	2.76%	$	14,741	4.99%	$	8,934	3.96%	$	31,964
Asset-backed securities		3,620	6.86%		653	6.85%		184,343	7.10%		116,649	7.22%		305,265
Tax-exempt obligations of states and political subdivisions^(1)^		994	3.10%		1,831	2.65%		1,981	3.87%		—	—		4,806
Taxable obligations of states and political subdivisions		9,966	3.18%		25,962	3.30%		1,159	4.33%		—	—		37,087
Residential mortgage-backed securities		—	—		43,006	2.66%		55,873	3.82%		64,632	3.98%		163,511
Collateralized mortgage obligation securities		—	—		4,890	2.73%		78	2.27%		27,013	4.05%		31,981
Commercial mortgage-backed securities		23,339	2.60%		27,994	3.43%		19,019	2.79%		73,281	3.79%		143,633
Total	$	38,632		$	111,912		$	277,194		$	290,509		$	718,247
Weighted average yield			3.16%			3.03%			6.00%			5.24%

^(1)^If adjusted to their taxable equivalents, yields would approximate 3.92%, 3.35%, and 4.90% for zero to one year, one to five years, and five to ten years, respectively, at a federal tax rate of 21%.

Commercial Loans, at Fair Value

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 first quarter 2020, and which are now being held on the balance sheet. SBA loans are valued on a pooled basis and commercial real estate bridge loans are valued individually. Commercial loans, at fair value decreased to $283.0 million at March 31, 2024 from $332.8 million at December 31, 2023, primarily reflecting the impact of loan repayments as this portfolio runs off. These loans continue to be accounted for at fair value. In the third quarter of 2021 we resumed originating non-SBA commercial real estate loans, after suspending such originations in the first quarter of 2020. These originations reflect lending criteria similar to the existing loan portfolio and are primarily comprised of multifamily (apartment buildings) collateral. The new originations, which are intended to be held for investment, are accounted for at amortized cost.

Loan Portfolio. Total loans increased to $5.46 billion at March 31, 2024 from $5.36 billion at December 31, 2023.

The following table summarizes our loan portfolio, excluding loans held at fair value, by loan category for the periods indicated (in

thousands):

	March 31,		December 31,
	2024		2023
SBL non-real estate	$	140,956	$	137,752
SBL commercial mortgage		637,926		606,986
SBL construction		27,290		22,627
SBLs		806,172		767,365
Direct lease financing		702,512		685,657
SBLOC / IBLOC^(1)^		1,550,313		1,627,285
Advisor financing^(2)^		232,206		221,612
Real estate bridge loans		2,101,896		1,999,782
Other loans^(3)^		56,163		50,638
		5,449,262		5,352,339
Unamortized loan fees and costs		10,082		8,800
Total loans, including unamortized loan fees and costs	$	5,459,344	$	5,361,139
		December 31,
---	---	---	---
		2023
SBLs, including costs net of deferred fees of 9,979 and 9,502
for March 31, 2024 and December 31, 2023, respectively	816,151	$	776,867
SBLs included in commercial loans, at fair value	109,131		119,287
Total SBLs(4)	925,282	$	896,154

All values are in US Dollars.

^(1)^SBLOC are collateralized by marketable securities, while IBLOC, are collateralized by the cash surrender value of insurance policies. At March 31, 2024 and December 31, 2023, IBLOC loans amounted to $595.6 million and $646.9 million, respectively.

^(2)^In 2020, we began originating loans to investment advisors for purposes of debt refinancing, acquisition of another firm or internal succession. Maximum loan amounts are subject to LTV ratios of 70% of the business enterprise value based on a third-party valuation, but may be increased depending upon the debt service coverage ratio. Personal guarantees and blanket business liens are obtained as appropriate.

^(4)^The SBLs held at fair value are comprised of the government guaranteed portion of 7(a) Program loans at the dates indicated.

The following table summarizes our SBL portfolio, including loans held at fair value, by loan category as of March 31, 2024 (in thousands):

	Loan principal
U.S. government guaranteed portion of SBA loans^(1)^	$	395,334
PPP loans^(1)^		1,936
Commercial mortgage SBA^(2)^		311,230
Construction SBA^(3)^		13,641
Non-guaranteed portion of U.S. government guaranteed 7(a) Program loans^(4)^		114,104
Non-SBA SBLs		48,831
Other^(5)^		28,661
Total principal	$	913,737
Unamortized fees and costs		11,545
Total SBLs	$	925,282

^(1)^Includes the portion of SBA 7(a) Program loans and PPP loans which have been guaranteed by the U.S. government, and therefore are assumed to have no credit risk.

^(2)^Substantially all these loans are made under the 504 Program, which dictates origination date LTV percentages, generally 50-60%, to which The Bank adheres.

^(3)^Includes $6.2 million in 504 Program first mortgages with an origination date LTV of 50-60% and $7.4 million in SBA interim loans with an approved SBA post-construction full takeout/payoff.

^(4)^Includes the unguaranteed portion of 7(a) Program loans which are generally 70% or more guaranteed by the U.S. government. SBA 7(a) Program loans are not made on the basis of real estate LTV; however, they are subject to SBA's "All Available Collateral" rule which mandates that to the extent a borrower or its 20% or greater principals have available collateral (including personal residences), the collateral must be pledged to fully collateralize the loan, after applying SBA-determined liquidation rates. In addition, all 7(a) Program loans and 504 Program loans require the personal guaranty of all 20% or greater owners.

^(5)^Comprised of $28.7 million of loans sold that do not qualify for true sale accounting.

The following table summarizes our SBL portfolio, excluding the government guaranteed portion of SBA 7(a) Program loans and PPP loans, by loan type as of March 31, 2024 (dollars in thousands):

	SBL commercial mortgage^(1)^		SBL construction^(1)^		SBL non-real estate		Total		% Total
Hotels and motels	$	75,044	$	71	$	17	$	75,132	15%
Funeral homes and funeral services		40,187		—		43		40,230	8%
Full-service restaurants		24,473		7,120		1,834		33,427	7%
Car washes		21,105		264		95		21,464	4%
Child day care services		16,893		552		1,987		19,432	4%
General line grocery merchant wholesalers		17,346		—		—		17,346	4%
Homes for the elderly		16,010		109		71		16,190	3%
Outpatient mental health and substance abuse centers		15,419		—		112		15,531	3%
Gasoline stations with convenience stores		11,744		43		147		11,934	2%
Fitness and recreational sports centers		7,779		—		2,032		9,811	2%
Nursing care facilities		9,502		—		—		9,502	2%
Lawyer's offices		9,272		—		—		9,272	2%
Limited-service restaurants		4,765		927		3,158		8,850	2%
All other specialty trade contractors		6,794		—		393		7,187	1%
Caterers		7,014		—		27		7,041	1%
General warehousing and storage		6,488		—		—		6,488	1%
Plumbing, heating, and air-conditioning		4,684		—		886		5,570	1%
Accounting services		5,096		—		454		5,550	1%
Miscellaneous durable goods merchants		4,748		—		—		4,748	1%
Packaged frozen food merchant wholesalers		4,705		—		—		4,705	1%
Technical and trade schools		4,699		—		—		4,699	1%
Amusement and recreation		3,929		44		252		4,225	1%
Furniture merchant wholesalers		3,550		—		—		3,550	1%
Offices of dentists		3,463		—		63		3,526	1%
Other^(2)^		109,018		6,912		26,466		142,396	31%
Total	$	433,727	$	16,042	$	38,037	$	487,806	100%

^(1)^Of the SBL commercial mortgage and SBL construction loans, $124.9 million represents the total of the non-guaranteed portion of SBA 7(a) Program loans and non-SBA loans. The balance of those categories represents SBA 504 Program loans with 50%-60% origination date LTVs. SBL Commercial excludes $28.7 million of loans sold that do not qualify for true sale accounting.

^(2)^Loan types of less than $3.5 million are spread over approximately one hundred different business types.

The following table summarizes our SBL portfolio, excluding the government guaranteed portion of SBA 7(a) Program loans and PPP loans, by state as of March 31, 2024 (dollars in thousands):

	SBL commercial mortgage^(1)^		SBL construction^(1)^		SBL non-real estate		Total		% Total
California	$	102,725	$	4,579	$	3,666	$	110,970	23%
Florida		73,211		1,838		2,991		78,040	16%
North Carolina		37,298		927		2,222		40,447	8%
Pennsylvania		34,708		—		854		35,562	7%
New York		27,823		1,505		2,251		31,579	6%
Texas		19,463		1,415		5,939		26,817	5%
New Jersey		17,372		3,357		3,174		23,903	5%
Georgia		21,029		709		1,562		23,300	5%
Other States		100,098		1,712		15,378		117,188	25%
Total	$	433,727	$	16,042	$	38,037	$	487,806	100%

The following table summarizes the ten largest loans in our SBL portfolio, including loans held at fair value, as of March 31, 2024 (in thousands):

Type^(1)^	State	SBL commercial mortgage
General line grocery merchant wholesaler	California	$	13,450
Funeral homes and funeral services	Pennsylvania		12,914
Outpatient mental health and substance abuse center	Florida		9,894
Funeral homes and funeral services	Maine		8,706
Hotel	Florida		8,334
Lawyer's office	California		8,086
Hotel	North Carolina		6,704
General warehousing and storage	Pennsylvania		6,488
Hotel	Florida		5,750
Hotel	New York		5,659
Total		$	85,985

^(1)^The table above does not include loans to the extent that they are U.S. government guaranteed.

Commercial real estate loans, primarily real estate bridge loans and excluding SBA loans, were as follows as of March 31, 2024 (dollars in thousands):

	# Loans	Balance
Real estate bridge loans (multifamily apartment loans recorded at amortized cost)^(1)^	156	$	2,101,896	70%	9.27%
Non-SBA commercial real estate loans, at fair value:
Multifamily (apartment bridge loans)^(1)^	8	$	128,557	77%	9.15%
Hospitality (hotels and lodging)	2		27,366	65%	9.82%
Retail	2		12,269	72%	8.19%
Other	2		9,378	73%	4.97%
	14		177,570	74%	8.97%
Fair value adjustment			(3,703)
Total non-SBA commercial real estate loans, at fair value			173,867
Total commercial real estate loans		$	2,275,763	70%	9.26%

^(1)^ In the third quarter of 2021, we resumed the origination of multifamily apartment loans. These are similar to the multifamily apartment loans carried at fair value, but at origination are intended to be held on the balance sheet, so they are not accounted for at fair value. In addition to “as is” origination date appraisals, on which the weighted average origination date LTVs are based, third-party appraisers also estimated “as stabilized” values, which represents additional potential collateral value as rehabilitation progresses, and units are re-leased at stabilized rental rates. The weighted average origination date “as stabilized” LTV was estimated at 61%.

The following table summarizes our commercial real estate loans, primarily real estate bridge loans and excluding SBA loans, by state as of March 31, 2024 (dollars in thousands):


Texas	826,533	72%
Georgia	250,690	69%
Florida	244,028	69%
Michigan	131,016	68%
Indiana	104,522	71%
Ohio	72,535	67%
New Jersey	68,816	68%
Other States each <60 million	577,623	71%
Total	2,275,763	70%

All values are in US Dollars.

The following table summarizes our fifteen largest commercial real estate loans, primarily real estate bridge loans and excluding SBA loans, as of March 31, 2024 (dollars in thousands). All of these loans are multifamily loans.

	Balance
Texas	$	46,785	72%
Texas		45,520	75%
Tennessee		40,000	72%
Texas		39,400	75%
Michigan		37,281	62%
Texas		37,259	80%
Texas		36,318	67%
Florida		34,850	72%
Indiana		33,588	76%
Texas		32,812	62%
Michigan		32,500	79%
Oklahoma		31,153	78%
Texas		31,050	77%
New Jersey		30,866	62%
Michigan		29,786	66%
15 largest commercial real estate loans	$	539,168	72%

The following table summarizes our institutional banking portfolio by type as of March 31, 2024 (dollars in thousands):

Type	Principal		% of total
SBLOC	$	954,751	54%
IBLOC		595,562	33%
Advisor financing		232,206	13%
Total	$	1,782,519	100%

For SBLOC, we generally lend up to 50% of the value of equities and 80% for investment grade securities. While the value of equities has fallen in excess of 30% in recent years, the reduction in collateral value of brokerage accounts collateralizing SBLOCs generally has been less. This is because many collateral accounts are “balanced” and accordingly, have a component of debt securities, which have either not decreased in value as much as equities, or in some cases may have increased in value. Further, many of these accounts have the benefit of professional investment advisors who provided some protection against market downturns, through diversification and other means. Additionally, borrowers often utilize only a portion of collateral value, which lowers the percentage of principal to the market value of collateral.

The following table summarizes our ten largest SBLOC loans as of March 31, 2024 (dollars in thousands):

	Principal amount
	$	10,782	18%
		9,465	43%
		9,035	38%
		8,058	70%
		7,905	67%
		7,726	24%
		7,328	74%
		7,235	22%
		7,085	42%
		6,997	32%
Total and weighted average	$	81,616	42%

IBLOC loans are backed by the cash value of life insurance policies which have been assigned to us. We generally lend up to 95% of such cash value. Our underwriting standards require approval of the insurance companies which carry the policies backing these loans. Currently, fifteen insurance companies have been approved and, as of March 31, 2024, all were rated A- or better by AM Best.

The following table summarizes our direct lease financing portfolio by type as of March 31, 2024 (dollars in thousands):

	Principal balance^(1)^
Government agencies and public institutions^(2)^	$	122,389	17%
Construction		113,986	16%
Waste management and remediation services		108,029	15%
Real estate and rental and leasing		69,924	10%
Health care and social assistance		28,559	4%
General freight trucking		24,932	4%
Professional, scientific, and technical services		24,613	4%
Other services (except public administration)		24,426	3%
Wholesale trade		18,680	3%
Transportation and warehousing		13,928	2%
Finance and insurance		11,328	2%
Food manufacturing		8,611	1%
Other and non-classified		133,107	19%
Total	$	702,512	100%

^(1)^Of the total $702.5 million of direct lease financing, $631.3 million consisted of vehicle leases with the remaining balance consisting of equipment leases.

^(2)^Includes public universities and school districts.

The following table summarizes our direct lease financing portfolio by state as of March 31, 2024 (dollars in thousands):

	Principal balance
Florida	$	100,625	14%
Utah		67,863	10%
New York		61,274	9%
California		54,696	8%
Pennsylvania		41,453	6%
New Jersey		39,869	6%
North Carolina		36,048	5%
Connecticut		33,724	5%
Maryland		33,342	5%
Texas		29,037	4%
Idaho		17,776	3%
Washington		16,106	2%
Georgia		14,929	2%
Ohio		12,274	2%
Alabama		11,744	2%
Other States		131,752	17%
Total	$	702,512	100%

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.

		March 31, 2024
		Within		One to five		After five but
		one year		years		within 15 years		After 15 years		Total
		(Dollars in thousands)
SBL non-real estate	$	272	$	29,634	$	149,091	$	1,206	$	180,203
SBL commercial mortgage		14,361		18,285		229,077		455,648		717,371
SBL construction		7,382		—		—		20,326		27,708
Leasing		118,427		560,154		24,389		—		702,970
SBLOC/IBLOC		1,556,644		—		—		—		1,556,644
Advisor financing		204		79,333		155,689		—		235,226
Real estate bridge lending		568,331		1,523,829		—		—		2,092,160
Other loans		29,762		3,913		7,191		15,324		56,190
Loans at fair value excluding SBL		153,805		18,367		—		1,698		173,870
	$	2,449,188	$	2,233,515	$	565,437	$	494,202	$	5,742,342
Loan maturities after one year with:
Fixed rates
SBL non-real estate			$	1,936	$	—	$	—	$	1,936
Leasing				560,154		24,389		—		584,543
Advisor financing				79,333		155,689		—		235,022
Real estate bridge lending				531,715		—		—		531,715
Other loans				3,542		833		12,577		16,952
Loans at fair value excluding SBL				18,367		—		—		18,367
Total loans at fixed rates			$	1,195,047	$	180,911	$	12,577	$	1,388,535
Variable rates
SBL non-real estate			$	27,698	$	149,091	$	1,206	$	177,995
SBL commercial mortgage				18,285		229,077		455,648		703,010
SBL construction				—		—		20,326		20,326
Real estate bridge lending				992,114		—		—		992,114
Other loans				371		6,358		2,747		9,476
Loans at fair value excluding SBL				—		—		1,698		1,698
Total at variable rates			$	1,038,468	$	384,526	$	481,625	$	1,904,619
Total			$	2,233,515	$	565,437	$	494,202	$	3,293,154

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. Our Chief Credit Officer oversees the loan review department, which measures the adequacy of the ACL independently of loan production officers. For detailed information on the ACL methodology, see “Note 6. Loans” to the unaudited consolidated financial statements herein.

At March 31, 2024, the ACL amounted to $28.7 million, which represented a $1.4 million increase compared to the $27.4 million ACL at December 31, 2023. The increase reflected the impact of higher net charge-offs.

A description of loan review coverage targets is set forth below.

The following loan review percentages are performed over periods of eighteen to twenty-four months. At March 31, 2024, in excess of 50% of the total loan portfolio was reviewed by the loan review department or, for SBLs, rated internally by that department. In addition to the review of all loans classified as either special mention or substandard, the targeted coverages and scope of the reviews are risk-based and vary according to each portfolio as follows:

SBLOC – The targeted review threshold is 40%, including a sample focusing on the largest 25% of SBLOCs by commitment. A random sample of at least twenty loans will be reviewed each quarter. At March 31, 2024, approximately 47% of the SBLOC portfolio had been reviewed.

IBLOC – The targeted review threshold is 40%, including a sample focusing on the largest 25% of IBLOCs by commitment. A random sample of at least twenty loans will be reviewed each quarter. At March 31, 2024, approximately 56% of the IBLOC portfolio had been reviewed.

Advisor Financing – The targeted review threshold is 50%. At March 31, 2024, approximately 97% of the advisor financing portfolio had been reviewed. The loan balance review threshold is $1.0 million.

SBLs – The targeted review threshold is 60%, to be rated and/or reviewed within 90 days of funding, excluding fully guaranteed loans purchased for CRA purposes, and fully guaranteed PPP loans. The loan balance review threshold is $1.5 million and additionally includes any classified loans. At March 31, 2024, approximately 74% of the non-government guaranteed SBL loan portfolio had been reviewed.

Direct Lease Financing – The targeted review threshold is 35%. At March 31, 2024, approximately 51% of the leasing portfolio had been reviewed. The loan balance review threshold is $1.5 million.

Commercial Real Estate Bridge Loans, at fair value and Commercial Real Estate Bridge Loans, at amortized cost (floating rate, excluding SBA, which are included in SBLs above) – The targeted review threshold is 60%. Floating rate loans will be reviewed initially within 90 days of funding and will be monitored on an ongoing basis as to payment status. Subsequent reviews will be performed for relationships over $10.0 million. At March 31, 2024, approximately 100% of the floating rate, non-SBA commercial real estate bridge loans outstanding for more than 90 days had been reviewed.

Commercial Real Estate Loans, at fair value (fixed rate, excluding SBA, which are included in SBLs above) – The targeted review threshold is 100%. At March 31, 2024, approximately 100% of the fixed rate, non-SBA commercial real estate loan portfolio had been reviewed.

Other minor loan categories are reviewed at the discretion of the loan review department.

The following tables present delinquencies by type of loan as of the dates specified (in thousands):

	March 31, 2024
	30-59 Days		60-89 Days		90+ Days				Total				Total
	past due		past due		still accruing		Non-accrual		past due		Current		loans
SBL non-real estate	$	130	$	695	$	157	$	1,909	$	2,891	$	138,065	$	140,956
SBL commercial mortgage		273		—		—		3,483		3,756		634,170		637,926
SBL construction		—		—		—		3,385		3,385		23,905		27,290
Direct lease financing		4,133		2,307		3,700		4,847		14,987		687,525		702,512
SBLOC / IBLOC		19,941		1,861		248		—		22,050		1,528,263		1,550,313
Advisor financing		—		—		—		—		—		232,206		232,206
Real estate bridge loans		—		9,467		—		39,400		48,867		2,053,029		2,101,896
Other loans		73		1		3		—		77		56,086		56,163
Unamortized loan fees and costs		—		—		—		—		—		10,082		10,082
	$	24,550	$	14,331	$	4,108	$	53,024	$	96,013	$	5,363,331	$	5,459,344
	December 31, 2023
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	30-59 Days		60-89 Days		90+ Days				Total				Total
	past due		past due		still accruing		Non-accrual		past due		Current		loans
SBL non-real estate	$	84	$	333	$	336	$	1,842	$	2,595	$	135,157	$	137,752
SBL commercial mortgage		2,183		—		—		2,381		4,564		602,422		606,986
SBL construction		—		—		—		3,385		3,385		19,242		22,627
Direct lease financing		5,163		1,209		485		3,785		10,642		675,015		685,657
SBLOC / IBLOC		21,934		3,607		745		—		26,286		1,600,999		1,627,285
Advisor financing		—		—		—		—		—		221,612		221,612
Real estate bridge loans		—		—		—		—		—		1,999,782		1,999,782
Other loans		853		76		178		132		1,239		49,399		50,638
Unamortized loan fees and costs		—		—		—		—		—		8,800		8,800
	$	30,217	$	5,225	$	1,744	$	11,525	$	48,711	$	5,312,428	$	5,361,139

Although we consider our ACL to be adequate based on information currently available, future additions to the ACL may be necessary due to changes in economic conditions, our ongoing loss experience and that of our peers, changes in management’s assumptions as to future delinquencies, recoveries and losses, deterioration of specific credits and management’s intent with regard to the disposition of loans and leases.

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

	For the three months ended		For the year ended
	or as of March 31,		or as of December 31,
	2024	2023	2023
Ratio of:
ACL to total loans	0.53%	0.44%	0.51%
ACL to non-performing loans^(1)^	50.31%	172.28%	206.33%
Non-performing loans to total loans^(1)^	1.05%	0.26%	0.25%
Non-performing assets to total assets^(1)^	0.97%	0.46%	0.39%
Net charge-offs to average loans	0.02%	0.01%	0.07%
^(1)^Includes loans 90 days past due still accruing interest.

The ratio of the ACL to total loans increased to 0.53% as of March 31, 2024 from 0.44% at March 31, 2023 as the ACL increased proportionately more that total loans. Approximately $1.6 million of the increase in the ACL resulted from increased reserves on specific distressed credits. Additionally, approximately $1.0 million was added to the reserve in fourth quarter for a qualitative factor for an increasing trend in substandard real estate bridge loans. Additionally, while reserves for SBLOC and IBLOC loans were reduced as a result of lower loan balances, the related reserve impact was more than offset by growth in other loan categories with higher ACL allocations. The lower reserve allocations for SBLOC and IBLOC reflect their respective marketable securities and cash value of insurance collateral. The ratio of the ACL to non-performing loans decreased to 50.31% at March 31, 2024, from 172.28% at March 31, 2023, primarily as a result of the increase in non-performing loans which proportionately exceeded the increase in the ACL. The majority of the increase in non-performing loans resulted from a $39.4 million apartment building rehabilitation bridge loan that was transferred to nonaccrual status. As a result of the increase in non-performing loans, the ratio of non-performing loans to total loans also increased to 1.05% at March 31, 2024 from 0.26% at March 31, 2023. The ratio of non-performing assets to total assets increased to 0.97% at March 31, 2024 from 0.46% at March 31, 2023, again reflecting the increase in non-performing loans. The ratio of net charge-offs to average loans was 0.02% for the three months ended March 31, 2024 and 0.01% for the three months ended March 31, 2023. The increase reflected an increase in SBA non-real estate net charge-offs.

Net Charge-offs

Net charge-offs were $1.0 million for the three months ended March 31, 2024, an increase of $222,000 from net charge-offs of $778,000 during the three months ended March 31, 2023. Charge-offs in both periods resulted primarily from non-real estate SBL and leasing charge-offs. SBL charge-offs resulted primarily from the non-government guaranteed portion of SBA loans.

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):

	March 31, 2024
	SBL non-real estate		SBL commercial mortgage		SBL construction		Direct lease financing		SBLOC / IBLOC		Advisor financing		Real estate bridge loans		Other loans
Charge-offs	$	111	$	—	$	—	$	919	$	—	$	—	$	—	$	6
Recoveries		(4)		—		—		(32)		—		—		—		—
Net charge-offs	$	107	$	—	$	—	$	887	$	—	$	—	$	—	$	6
Average loan balance	$	139,354	$	622,456	$	24,959	$	694,085	$	1,588,799	$	226,909	$	2,050,839	$	53,401
Ratio of net charge-offs during the period to average loans during the period		0.08%		—		—		0.13%		—		—		—		0.01%
	March 31, 2023
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	SBL non-real estate		SBL commercial mortgage		SBL construction		Direct lease financing		SBLOC / IBLOC		Advisor financing		Real estate bridge loans		Other loans
Charge-offs	$	214	$	—	$	—	$	905	$	—	$	—	$	—	$	3
Recoveries		(202)		(75)		—		(67)		—		—		—		—
Net charge-offs	$	12	$	(75)	$	—	$	838	$	—	$	—	$	—	$	3
Average loan balance	$	111,644	$	483,647	$	31,990	$	642,351	$	2,192,960	$	180,947	$	1,710,677	$	60,945
Ratio of net charge-offs during the period to average loans during the period		0.01%		(0.02%)		—		0.13%		—		—		—		—

We review charge-offs at least quarterly in loan surveillance meetings which include the chief credit officer, the loan review department and other senior credit officers in a process which includes identifying any trends or other factors impacting portfolio management. In recent periods charge-offs have been primarily comprised of the non-guaranteed portion of SBA 7a loans and leases. The charge-offs have resulted from individual borrower or business circumstances as opposed to overall trends or other factors.

Non-accrual Loans, Loans 90 Days Delinquent and Still Accruing, OREO and Modified Loans.

Loans are considered to be non-performing if they are on a non-accrual basis or they 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. We had $19.6 million of OREO at March 31, 2024 and $16.9 million of OREO at December 31, 2023. The following tables summarize our non-performing loans, OREO, and loans past due 90 days or more still accruing interest.

	March 31,		December 31,
	2024		2023
	(Dollars in thousands)
Non-accrual loans
SBL non-real estate	$	1,909	$	1,842
SBL commercial mortgage		3,483		2,381
SBL construction		3,385		3,385
Direct leasing		4,847		3,785
Real estate bridge loans^(1)^		39,400		—
Other loans		—		132
Total non-accrual loans		53,024		11,525
Loans past due 90 days or more and still accruing^(2)^		4,108		1,744
Total non-performing loans		57,132		13,269
OREO^(3)^		19,559		16,949
Total non-performing assets	$	76,691	$	30,218

^(1)^In the first quarter of 2024, a $39.4 million apartment building rehabilitation bridge loan was transferred to nonaccrual status. On April 2, 2024, the same loan was transferred from nonaccrual status to other real estate owned. We intend to continue to manage the capital improvements on the underlying apartment complex. As the units become available for lease, the property manager will be tasked with leasing these units at market rents. The Company intends to explore a potential sale of the asset prior to stabilization. The $39.4 million loan balance compares to a September 2023 third party “as is” appraisal of $47.8 million, or an 82% “as is” loan to value (“LTV”), with additional potential collateral value as construction progresses, and units are re-leased at stabilized rental rates. The $39.4 million loan as well as the other non-accrual balances in this table as of March 31, 2024 are reflected in the substandard loan totals in Note 6 to the financial statements.

For the three months ended March 31, 2024 and the year ended December 31, 2023, loans modified and related information are as follows (dollars in thousands):

	March 31, 2024								December 31, 2023
	Payment delay as a result of a payment deferral		Interest rate reduction and payment deferral		Total		Percent of total loan category		Payment delay as a result of a payment deferral		Payment delay and term extension		Total		Percent of total loan category
SBL non-real estate	$	2,224	$	—	$	2,224		1.58%	$	651	$	—	$	651		0.47%
SBL commercial mortgage		3,328		—		3,328		0.52%		—		—		—		—
Direct lease financing		—		—		—		—		—		127		127		0.02%
Real estate bridge lending^(1)^		26,923		32,500		59,423		2.83%		—		12,300		12,300		0.62%
Total	$	32,475	$	32,500	$	64,975		1.19%	$	651	$	12,427	$	13,078		0.24%

	March 31, 2024
	Payment Status (Amortized Cost Basis)
	30-59 Days		60-89 Days		90+ Days				Total
	past due		past due		still accruing		Non-accrual		delinquent		Current		Total
SBL non-real estate	$	—	$	—	$	—	$	790	$	790	$	1,434	$	2,224
SBL commercial mortgage		—		—		—		—		—		3,328		3,328
Real estate bridge lending^(1)^		—		—		—		—		—		59,423		59,423
	$	—	$	—	$	—	$	790	$	790	$	64,185	$	64,975
	December 31, 2023
	Payment Status (Amortized Cost Basis)
	30-59 Days		60-89 Days		90+ Days				Total
	past due		past due		still accruing		Non-accrual		delinquent		Current		Total
SBL non-real estate	$	—	$	—	$	—	$	156	$	156	$	495	$	651
Direct lease financing		—		—		—		127		127		—		127
Real estate bridge lending^(1)^		—		—		—		—		—		12,300		12,300
	$	—	$	—	$	—	$	283	$	283	$	12,795	$	13,078

There were $65.0 million and $13.1 million of loans modified in the year-to-date March 31, 2024 and for the twelve months ended December 31, 2023, respectively, with specific reserves of $10,000 and $127,000 as of March 31, 2024 and December 31, 2023, respectively. Substantially all of the reserves at March 31, 2024 related to the non-guaranteed portion of SBA loans.

The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty as of March 31, 2024 and December 31, 2023 (dollars in thousands):

	March 31, 2024			December 31, 2023
	Combined Rate and Maturity			Combined Rate and Maturity
	Weighted average interest reduction	Weighted average term extension (in months)	More-Than-Insignificant-Payment Delay^(2)^	Weighted average interest reduction	Weighted average term extension (in months)	More-Than-Insignificant-Payment Delay^(2)^
SBL non-real estate	—	—	1.58%	—	—	0.47%
SBL commercial mortgage	—	—	0.52%	—	—	—
Direct lease financing	—	—	—	—	3	—
Real estate bridge lending^(1)^	1.68%	—	1.28%	—	12	—

^(2)^Percentage represents the principal of loans deferred divided by the principal of the total loan portfolio.

There were no loans that received a term extension modification that had a payment default during the period and were modified in the twelve months before default.

We had no commitments to extend additional credit to loans classified as modified as of March 31, 2024 or December 31, 2023.

The following table provides information about credit deteriorated loans at March 31, 2024 and December 31, 2023 (in thousands):

	March 31, 2024
	Recorded<br>‎investment		Unpaid<br>‎principal<br>‎balance		Related<br>‎ACL		Average<br>‎recorded<br>‎investment		Interest<br>‎income<br>‎recognized
Without an ACL recorded
SBL non-real estate	$	1,054	$	2,356	$	—	$	788	$	—
SBL commercial mortgage		3,301		3,301		—		2,424		—
Direct lease financing		170		176		—		169		—
Other loans		—		—		—		66		—
Real estate bridge loans		39,400		39,400		—		19,700		—
Consumer - home equity		227		227		—		228		3
With an ACL recorded
SBL non-real estate		929		929		(618)		1,163		1
SBL commercial mortgage		182		182		(41)		508		—
SBL construction		3,385		3,385		(44)		3,385		—
Direct lease financing		4,677		4,902		(2,618)		4,147		—
Total
SBL non-real estate		1,983		3,285		(618)		1,951		1
SBL commercial mortgage		3,483		3,483		(41)		2,932		—
SBL construction		3,385		3,385		(44)		3,385		—
Direct lease financing		4,847		5,078		(2,618)		4,316		—
Other loans		—		—		—		66		—
Real estate bridge loans		39,400		39,400		—		19,700		—
Consumer - home equity		227		227		—		228		3
	$	53,325	$	54,858	$	(3,321)	$	32,578	$	4
	December 31, 2023
---	---	---	---	---	---	---	---	---	---	---
	Recorded<br>‎investment		Unpaid<br>‎principal<br>‎balance		Related<br>‎ACL		Average<br>‎recorded<br>‎investment		Interest<br>‎income<br>‎recognized
Without an ACL recorded
SBL non-real estate	$	522	$	1,714	$	—	$	380	$	—
SBL commercial mortgage		1,546		1,546		—		1,028		—
Direct lease financing		167		167		—		78		—
Legacy commercial real estate		—		—		—		2,131		—
Consumer - home equity		230		230		—		255		8
With an ACL recorded
SBL non-real estate		1,397		1,397		(670)		1,011		3
SBL commercial mortgage		835		835		(343)		1,553		—
SBL construction		3,385		3,385		(44)		3,385		—
Direct lease financing		3,618		3,804		(1,827)		2,814		—
IBLOC		—		—		—		95		—
Legacy commercial real estate		—		—		—		710
Other loans		132		132		(4)		384		—
Total
SBL non-real estate		1,919		3,111		(670)		1,391		3
SBL commercial mortgage		2,381		2,381		(343)		2,581		—
SBL construction		3,385		3,385		(44)		3,385		—
Direct lease financing		3,785		3,971		(1,827)		2,892		—
IBLOC		—		—		—		95		—
Legacy commercial real estate and Other loans		132		132		(4)		3,225		—
Consumer - home equity		230		230		—		255		8
	$	11,832	$	13,210	$	(2,888)	$	13,824	$	11

We had $53.0 million of non-accrual loans at March 31, 2024, compared to $11.5 million of non-accrual loans at December 31, 2023. The $41.5 million increase in non-accrual loans was primarily due to $46.4 million of additions partially offset by $2.6 million transferred to OREO, $941,000 of charge-offs, $707,000 transferred to repossessed vehicle inventory, $498,000 of payments, and $129,000 returned to accrual status. Loans past due 90 days or more still accruing interest amounted to $4.1 million at March 31, 2024 and $1.7 million at December 31, 2023. The $2.4 million increase reflected $3.9 million of additions partially offset by $1.5 million of loan payments and $24,000 transferred to non-accrual loans.

We had $19.6 million of OREO at March 31, 2024 and $16.9 million of OREO at December 31, 2023. The change in balance reflected $2.6 million transferred from non-accrual loans.

We evaluate loans under an internal loan risk rating system as a means of identifying problem loans. At March 31, 2024 and December 31, 2023, classified loans were segregated by year of origination and are shown in “Note 6. Loans” to the unaudited consolidated financial statements herein.

Premises and Equipment, Net

Premises and equipment amounted to $27.5 million at March 31, 2024, compared to $27.5 million at December 31, 2023.

Other assets

Other assets amounted to $109.7 million at March 31, 2024 compared to $133.1 million at December 31, 2023. The higher balance at the prior year-end reflected tax adjustments.

Deposits

Our primary source of funding is deposit acquisition. We offer a variety of deposit accounts with a range of interest rates and terms, including demand, checking and money market accounts, through and with the assistance of affinity groups. The majority of our deposits are generated through prepaid card and debit and other payments related deposit accounts. At March 31, 2024, we had total deposits of $6.89 billion compared to $6.68 billion at December 31, 2023, which reflected an increase of $209.8 million, or 3.1%. Daily deposit balances are subject to variability, and deposits averaged $6.50 billion in the first quarter of 2024. Savings and money market balances were reduced, as we swept deposits off our balance sheet to other institutions. Such sweeps are utilized to optimize diversity within our funding structure by managing the percentage of individual client deposits to total deposits. A diversified group of prepaid and debit card accounts, which have an established history of stability and lower cost than certain other types of funding, comprise the majority of our deposits. Our product mix includes prepaid card accounts for salary, medical spending, commercial, general purpose reloadable, corporate and other incentive, gift, government payments and transaction accounts accessed by debit cards. Balances are subject to daily fluctuations, which may comprise a significant component of variances between dates. Our funding is comprised primarily of millions of small transaction-based consumer balances, the vast majority of which are FDIC-insured. We have multi-year, contractual relationships with affinity groups which sponsor such accounts and with whom we have had long-term relationships (see Item 1. “Business—Our Strategies” in our Annual Report on Form 10-K for the year ended December 31, 2023). Those long-term relationships comprise the majority of our deposits while we continue to grow and add new client relationships. Of our deposits at March 31, 2024, the top three affinity groups accounted for approximately $2.62 billion, the next three largest $1.49 billion, and the four subsequent largest $858.8 million. Of our deposits at year-end 2023, the top three affinity groups accounted for approximately $2.33 billion, the next three largest $1.46 billion, and the four subsequent largest $852.1 million. While certain of these relationships may have changed their ranking in the top ten, the affinity groups themselves were generally identical at both dates, with one exception as the ninth largest at the prior period was replaced by a new entity, which was also the ninth largest at the end of the current period. We believe that payroll, debit, and government-based accounts such as child support are comparable to traditional consumer checking accounts. Such balances in the top ten relationships at March 31, 2024 totaled $3.32 billion while balances related to consumer and business payment companies, including companies sponsoring incentive payments, amounted to $1.66 billion. Such balances in the top ten relationships at year-end 2023, totaled $2.91 billion while balances related to consumer and business payment companies, including companies sponsoring incentive and gift card payments, amounted to $1.72 billion We pay interest directly to consumer account holders for an immaterial amount of deposit balances, while the vast majority of interest expense results from fees paid to affinity groups. The vast majority of such payments are variable rate and equate to varying contractual percentages tied to the effective federal funds rate, which results from Federal Reserve rate hikes and reductions. The effective federal funds rate also reflects a market rate which might be required to replace lower cost deposits, or fund loan growth in excess of deposit growth, at least in the short-term. Because underlying balances have generally exhibited stability, so too have trends in the cost of funds. The more consequential impact to cost of funds are market changes and the effective federal funds rate, specifically the impact of Federal Reserve rate hikes and reductions. We model significant fee-based relationships in our net interest income sensitivity modeling (see “Asset and Liability Management”). The following discussion is applicable to our transaction accounts, comprising the majority of our deposits, in the 100 and 200 basis point rate increase and decrease scenarios as presented in the applicable table in that Asset and Liability Management section. The impact of the Federal Reserve rate hikes or reductions, which respectively increase or decrease interest expense, has approximated the ratio of our cost of funds divided by the effective federal funds rate, all else equal. However, there can be no assurance that such ratios could not change significantly given the other variables discussed in the Asset and Liability Management section. In first quarter 2024, our demand and interest checking balances averaged $6.45 billion, compared to $6.41 billion in first quarter 2023. The growth primarily reflected increases in payment company balances. Average savings and money market balances decreased to $51.0 million the first quarter of 2024, compared to $132.3 million in the first quarter of 2023 as we swept deposits off our balance sheet to other institutions. Such sweeps are utilized to optimize diversity within our funding structure by managing the percentage of individual client deposits to total deposits. Short-term time deposits have been used minimally to provide liquidity cushions, for instance when short-term loan origination exceeds short-term deposit growth, as was the case in 2022. In 2023, we did not use short-term time deposits after the first quarter of the year. Short-term time deposits are generated through established intermediaries such as banks and other financial companies. These deposits generally originate with investment or trust companies or banks, which offer those deposits at market rates to FDIC-insured institutions, such that the balances are fully FDIC-insured. These deposits are generally classified as brokered. While affinity groups may decide to pay interest

or other remuneration to account holders, they do not currently do so for the vast majority of balances. The following table presents the average balance and rates paid on deposits for the periods indicated (in thousands):

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

	For the three months ended			For the year ended
	March 31, 2024			December 31, 2023
	Average		Average	Average		Average
	balance		rate	balance		rate
Demand and interest checking^(1)^	$	6,453,866	2.40%	$	6,308,509	2.30%
Savings and money market		50,970	3.51%		78,074	3.66%
Time		—	—		20,794	4.13%
Total deposits	$	6,504,836	2.41%	$	6,407,377	2.32%

^(1)^ Of the amounts shown for 2024 and 2023, $155.6 million and $177.0 million, respectively, represented balances on which the Bank 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.

Short-term Borrowings

Short-term borrowings consist of amounts borrowed on our lines of credit with the Federal Reserve Bank or FHLB. There were no borrowings on either line at March 31, 2024 or December 31, 2023. We generally utilize overnight borrowings to manage our daily reserve requirements at the Federal Reserve. Period-end and year-to-date information for the dates shown is as follows.

	March 31,		December 31,
	2024		2023
		(Dollars in thousands)
Short-term borrowings
Balance at period end	$	—	$	—
Average for the three months ended March 31, 2024		1,373		N/A
Average during the year		1,373		5,739
Maximum month-end balance		125,000		450,000
Weighted average rate during the period		5.54%		4.72%
Rate at period end		—		—

Senior Debt

On August 13, 2020, we issued $100.0 million of the 2025 Senior Notes, with a maturity date of August 15, 2025, and a 4.75% interest rate, with interest paid semi-annually on March 15 and September 15. The 2025 Senior Notes are the Company’s direct, unsecured and unsubordinated obligations and rank equal in priority with all our existing and future unsecured and unsubordinated indebtedness and senior in right of payment to all our existing and future subordinated indebtedness. In lieu of repayment of debt from dividends paid by the Bank to the Company, industry practice includes the issuance of new debt to repay maturing debt.

Borrowings

At March 31, 2024, we had other long-term borrowings of $38.4 million compared to $38.6 million at December 31, 2023. The borrowings consisted of sold loans which were accounted for as a secured borrowing because they did not qualify for true sale accounting. We do not have any policy prohibiting us from incurring debt.

The 2038 Debentures, which total $13.4 million, mature in March 2038 and bear interest at SOFR plus 3.51%, are grandfathered to qualify as tier 1 capital at the Bank.

Other Liabilities

Other liabilities amounted to $60.6 million at March 31, 2024, compared to $69.6 million at December 31, 2023.

Shareholders’ Equity

As a means of returning capital to shareholders, the Company implemented stock repurchase programs which totaled $40.0 million, $60.0 million and $100.0 million, respectively, in 2021, 2022 and 2023, with $250 million currently planned for 2024. For 2024, the repurchases amounted to $50 million in the first quarter, currently planned purchases of $100 million in the second quarter and $50 million in the remaining quarters. The planned amounts of such repurchases are generally determined in the fourth quarter of the

preceding year by assessing the impact of budgetary earnings projections on regulatory capital requirements. The excess of projected earnings over amounts required to maintain capital requirements is the maximum available for capital return to shareholders, barring any need to retain capital for other purposes. A significant portion of such excess earnings has been utilized for stock repurchases in the amounts noted above, while cash dividends have not been paid. In determining whether capital is returned through stock repurchases or cash dividends, the Company calculates a maximum share repurchase price, based upon comparisons with what it concludes to be other exemplar peer share price valuations, with further consideration of internal growth projections. As these share prices, which are updated at least annually, have not been reached, capital return has consisted solely of stock repurchases. Exemplar share price comparisons are based upon multiples of earnings per share over time, with further consideration of returns on equity and assets. While repurchase amounts are planned in the fourth quarter of the preceding year, repurchases may be modified or terminated at any time, should capital need to be conserved.

Off-balance sheet arrangements

There were no off-balance sheet arrangements during the three months ended March 31, 2024 that have or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our interests.

‎

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Information about market risk for the quarter ended March 31, 2024 is included under “Asset and Liability Management” in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q. Except for such information, there has been no material change to our assessment of our sensitivity to market risk as discussed in the 2023 Form 10-K.

As noted under “Asset and Liability Management,” the Company’s exposure to interest rate risk is managed through the use of guidelines which limit interest rate exposure to higher interest rates. Because the Company has emphasized variable rate instruments in its loan and investment portfolios, it tends to benefit from higher interest rate environments. As a result of the Federal Reserve rate increases in 2022 and 2023, net interest income has increased and exceeded prior period levels. Future Federal Reserve rate reductions may result in a return to lower net interest income levels. In addition to the aforementioned guidelines which the Company uses to manage interest rate risk, the Company utilizes an asset liability committee to provide oversight by multiple departments and senior officers.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal financial officer), as appropriate, to allow timely decisions regarding required disclosure. Because of inherent limitations, disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of disclosure controls and procedures are met.

Under the supervision of our Chief Executive Officer and Chief Financial Officer, our management carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at a reasonable level of assurance as of March 31, 2024.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

For a discussion of our material pending legal proceedings, see “Note 14. Legal” to the unaudited consolidated financial statements in this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

Item 1A. Risk Factors

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 2023 Form 10-K. There have been no material changes from the risk factors disclosed in the 2023 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Stock Repurchases

On October 26, 2023, the Board approved the 2024 Repurchase Program, which authorizes the Company to repurchase $50.0 million in value of the Company’s common stock per fiscal quarter in 2024, for a maximum amount of $200.0 million. The Company increased its share repurchase authorization for the second quarter of 2024 from $50.0 million to $100.0 million, which increased the maximum amount under the 2024 Repurchase Program to $250.0 million. Under the 2024 Repurchase Program, the Company intends to repurchase shares through open market purchases, privately-negotiated transactions, block purchases or otherwise in accordance with applicable federal securities laws, including Rule 10b-18 of the Exchange Act. The 2024 Repurchase Program may be modified or terminated at any time. With respect to further repurchases in subsequent quarters under this program, the Company cannot predict if, or when, it will repurchase any shares of common stock and the timing and amount of any shares repurchased will be determined by management based on its evaluation of market conditions and other factors.

The following table sets forth information regarding the Company’s repurchases of its common stock during the quarter ended March 31, 2024:

Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs^(1)^	Approximate dollar value of shares that may yet be purchased under the plans or programs^(2)^
	(Dollars in thousands, except per share data)
January 1, 2024 - January 31, 2024	445,691	$	39.98	445,691	$	182,181
February 1, 2024 - February 29, 2024	365,573		43.38	365,573		166,325
March 1, 2024 - March 31, 2024	450,948		36.20	450,948		150,000
Total	1,262,212		39.61	1,262,212		150,000

^(1)^During the first quarter of 2024, all shares of common stock were repurchased pursuant to the 2024 Repurchase Program, which was approved by the Board on October 26, 2023 and publicly announced on October 26, 2023. Under the 2024 Repurchase Program, the Company is authorized to repurchase shares of its common stock totaling up to $50.0 million per quarter, for a maximum amount of $200.0 million in 2024. The Company may repurchase shares through open market purchases, including through written trading plans under Rule 10b5-1 under the Exchange Act, privately-negotiated transactions, block purchases or otherwise in accordance with applicable federal securities laws, including Rule 10b-18 under the Exchange Act.

^(2)^The 2024 Repurchase Program may be suspended, amended or discontinued at any time and had an expiration date of December 31, 2024. With respect to further repurchases, the Company cannot predict if, or when, it will repurchase any shares of common stock, and the timing and amount of any shares repurchased will be determined by management based on its evaluation of market conditions and other factors.

‎

Item 6. Exhibits

Exhibit No.	Description
3.1.1	Certificate of Incorporation filed July 20, 1999, amended July 27, 1999, amended June 7, 2001, and amended October 8, 2002 (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-4 filed July 15, 2004)
3.1.2	Amendment to Certificate of Incorporation filed July 30, 2009 (incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q filed November 9, 2016)
3.1.3	Amendment to Certificate of Incorporation filed May 18, 2016 (incorporated by reference to Exhibit 3.3 to the Company’s Quarterly Report on Form 10-Q filed November 9, 2016)
3.2	Amended and Restated Bylaws(incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K filed March 16, 2017)
31.1	Rule 13a-14(a)/15d-14(a) Certifications*
31.2	Rule 13a-14(a)/15d-14(a) Certifications*
32.1	Section 1350 Certifications*
32.2	Section 1350 Certifications*
101.INS	Inline XBRL Instance Document**
101.SCH	Inline XBRL Taxonomy Extension Schema Document*
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document*
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document*
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)*
*	Filed herewith
**	The Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

‎

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

10
	THE BANCORP, INC.
	(Registrant)
May 10, 2024	/S/ DAMIAN KOZLOWSKI
Date	Damian Kozlowski
	Chief Executive Officer
May 10, 2024	/S/ PAUL FRENKIEL
Date	Paul Frenkiel<br><br>Chief Financial Officer and Secretary

		20240331 Exhibit 311

Exhibit 31.1

CERTIFICATION

I, Damian Kozlowski, certify that:

I have reviewed this quarterly report on Form 10-Q for the quarterly period ended March 31, 2024 of The Bancorp, Inc. (the “Registrant”);
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

| | | | --- | --- | | Date: May 10, 2024 | /S/ DAMIAN KOZLOWSKI | | | Damian Kozlowski | | | Chief Executive Officer |

		20240331 Exhibit 312

Exhibit 31.2

CERTIFICATION

I, Paul Frenkiel, certify that:

I have reviewed this quarterly report on Form 10-Q for the quarterly period ended March 31, 2024 of The Bancorp, Inc. (the “Registrant”);
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent function):

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. | | | | --- | --- | | | | | | | | Date: May 10, 2024 | /S/ PAUL FRENKIEL | | | Paul Frenkiel | | | Chief Financial Officer and Secretary |

		20240331 Exhibit 321

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of The Bancorp, Inc. (the “Company”) on Form 10-Q for the quarterly period ended March 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Damian Kozlowski, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

|  |  |

| --- | --- | | | | | | | | Dated: May 10, 2024 | /S/ DAMIAN KOZLOWSKI | | | Damian Kozlowski | | | Chief Executive Officer |

		20240331 Exhibit 322

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of The Bancorp, Inc. (the “Company”) on Form 10-Q for the quarterly period ended March 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Paul Frenkiel, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

|  |  |

| --- | --- | | | | | | | | Dated: May 10, 2024 | /S/ PAUL FRENKIEL | | | Paul Frenkiel | | | Chief Financial Officer and Secretary |