Bancorp, Inc. (TBBK)

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

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides information about our results of operations, financial condition, liquidity and asset quality. This information is intended to facilitate your understanding and assessment of significant changes and trends related to our financial condition and results of operations. This MD&A should be read in conjunction with our financial information in our Annual Report on Form 10-K for the year ended December, 31, 2025 (the “2025 Form 10-K”) and the interim Condensed Consolidated Financial Statements and notes thereto contained in this Quarterly Report on Form 10-Q.

MD&A is organized in the following sections:

•Overview

•Executive Summary

•Results of Operations

•Financial Condition

•Liquidity and Capital Resources

•Asset and Liability Management

Important Note Regarding Forward-Looking Statements

When used in this Quarterly Report on Form 10-Q, statements regarding The Bancorp’s business, that are not historical facts, are “forward-looking statements.” These statements may be identified by the use of forward-looking terminology, including, but not limited to the words “intend,” “may,” “believe,” “will,” “expect,” “look,” “anticipate,” “plan,” “estimate,” “continue,” or similar words. Forward-looking statements include but are not limited to, statements regarding our annual fiscal 2026 results, increased growth, profitability, and volumes, and our ability to reallocate or reduce resources, and relate to our current assumptions, projections, and expectations about our business and future events, including current expectations about important economic, political, and technological factors, among other factors, and are subject to risks and uncertainties, which could cause the actual results, events, or achievements to differ materially from those set forth in or implied by the forward-looking statements and related assumptions. Factors that could cause results to differ from those expressed in the forward-looking statements also include, but are not limited to, the risks and uncertainties referenced or described in The Bancorp’s filings with the Securities and Exchange Commission, including the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of our 2025 Form 10-K and other documents that we file from time to time with the Securities and Exchange Commission as well as the following:

•an inconsistent recovery from an extended period of unpredictable economic and growth conditions in the U.S. economy may adversely impact our assets and operating results and result in increases in payment defaults and other credit risks, decreases in the fair value of some assets and increases in our provision for credit losses;

•weak economic and credit market conditions, either globally, nationally or regionally, may result in a reduction in our capital base, reducing our ability to maintain deposits at current levels;

•changes in the interest rate environment, particularly in response to inflation, could adversely affect our revenue and expenses and the availability and cost of capital, cash flows and liquidity;

•volatility in the banking sector (including perception of such conditions) and responsive actions taken by governmental agencies to stabilize the financial system could result in increased regulation or liquidity constraints;

•operating costs may increase;

•adverse legislation or governmental or regulatory policies may be promulgated;

•we may fail to satisfy our regulators with respect to legislative and regulatory requirements;

•management and other key personnel may leave or change roles without effective replacements;

•increased competition may reduce our client base or cause us to lose market share;

•the costs of our interest-bearing liabilities, principally deposits, may increase relative to the interest received on our interest-bearing assets, principally loans, thereby decreasing our net interest income;

•loan and investment yields may decrease, resulting in a lower net interest margin;

•geographic concentration could result in our loan portfolio being adversely affected by regional economic factors;

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•the market value of real estate that secures certain of our loans may be adversely affected by economic and market conditions and other conditions outside of our control such as lack of demand, natural disasters, changes in neighborhood values, competitive overbuilding, weather, casualty losses and occupancy rates;

•cybersecurity risks, including data security breaches, ransomware, malware, “denial of service” attacks and identity theft, could result in disclosure of confidential information, operational interruptions and legal and financial exposure;

•natural disasters, pandemics, other public health crises, acts of terrorism, geopolitical conflict, including trade disputes and tariffs, sanctions, war or armed conflict, such as the conflicts between Russia and Ukraine and the ongoing military operations involving the U.S., Israel and Iran, and the possible expansion of such conflicts in surrounding areas, or other catastrophic events could disrupt the systems of us or third-party service providers and negatively impact general economic conditions;

•we may not be able to sustain our historical growth rates in our loan, prepaid and debit card and other lines of business;

•our focus on growth in fintech solutions and investing in our infrastructure, including through artificial intelligence tools to gain efficiency and productivity, and the future potential impact on our operations and financial condition may result in new operational, legal and financial risks;

•risks related to actual or threatened litigation;

•our ability to maintain effective internal control over financial reporting;

•our internal controls and procedures may fail or be circumvented, and our risk management policies may not be adequate; and

•we may not be able to manage credit risk to desired levels, improve our net interest margin and monitor interest rate sensitivity, manage our real estate exposure to capital levels and maintain flexibility if we achieve asset growth.

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 our management. 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.

Overview

We are a Delaware financial holding company, and our primary, wholly owned subsidiary is The Bancorp Bank, National Association. The Bank is a federally chartered commercial bank located in Sioux Falls, South Dakota and is an FDIC insured institution. Most of our revenue and income is currently generated through the Bank. An overview of our operations follows, including discussion of Fintech Solutions and Credit Solutions.

Our business strategy is focused on Fintech Solutions, which partners with fintech companies and other technology focused payment-based providers (collectively “partners”) to deliver payment, deposit, and sponsored lending products that attract stable, lower-cost deposits and generate fee income. Our fintech services are provided to organizations with a pre-existing customer base, and the products are tailored to support or complement the services provided by these organizations to their customers. We typically provide these services under the name and through the facilities of each organization with whom we develop a relationship. Fintech services include:

Program sponsorship includes debit, credit and prepaid cards that we issue for companies that market directly to end users. Our card-accessed deposit account types are diverse and include: consumer and business debit, general purpose reloadable prepaid, pre-tax medical spending benefit, payroll, gift, government, corporate incentive, reward, business payment accounts and others. The Bank issues the cards, provides access to the card networks, maintains deposits, and is the sponsor bank of record for accounts.

Payment services delivers real-time, end-to-end payment processing, including automated clearing house (“ACH”) and Rapid Funds Transfer products. Our ACH accounts facilitate bill payments and our acquiring accounts provide clearing and settlement services for payments made to merchants which must be settled through associations such as Visa or Mastercard.

Sponsored lending, or Fintech loans, consist of secured credit cards and unsecured short-term extensions of credit that are originated by the Bank, with the marketing and servicing assistance of our partners. The revenue generated through fintech loan agreements is primarily fee revenue and not interest income.

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Deposits generated through these partner relationships are deployed into loan and lease products offered by both Fintech sponsored lending and the Credit Solutions business line. As of June 30, 2026, 96% of our total deposits were sourced from the Fintech Solutions business, primarily from program sponsorship.

Credit Solutions is our lending business and is focused on offering flexible, specialty credit solutions, and we develop customized products and programs to meet the needs of our clients. Our loan programs include: (i) Real estate bridge lending (REBL), which is comprised primarily of apartment building rehabilitation loans; (ii) Institutional Banking, which is comprised of security-backed lines of credit (SBLOC), cash value insurance policy-backed lines of credit (IBLOC) and advisor financing; and (iii) Commercial Loans which includes Small Business Loans (“SBL”) which is comprised primarily of Small Business Administration (“SBA”) loans and direct lease financing. Our total loan portfolio also includes the Fintech loans generated by the Fintech Solutions business. The loans in our non-fintech portfolio are secured by collateral, and the fintech loans are backed by credit enhancement agreements from our partners.

Executive Summary

We remain focused on growing our fintech revenues through new partnerships, products and services. Fintech loans of $901.5 million as of June 30, 2026 increased 32% compared to the June 30, 2025 balance of $680.5 million. Certain loan fees on fintech loans are recorded as non-interest income and totaled $6.5 million for the quarter ended June 30, 2026, a 65% increase compared to $4.0 million for the quarter ended June 30, 2025.

We continue to invest in our infrastructure, with a focus on investing in artificial intelligence tools to gain efficiency and productivity of our people and platform, and reallocating or reducing resources where appropriate. We believe that our infrastructure can accommodate significant additional growth without proportionate increases in expense.

We remain focused on returning capital through share repurchases, and repurchased 870,129 shares of our common stock at an average cost of $57.46 per share during the quarter ended June 30, 2026. Primarily driven by share repurchases, outstanding shares, net of treasury shares at June 30, 2026 decreased 3% to 41.043 million from 42.355 million shares at December 31, 2025.

Financial Highlights

Financial highlights include:

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Item 7. 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 and provides comparisons between our results of operations for fiscal years 2025 and 2024. For discussion and comparison of fiscal years 2024 and 2023, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on 10-K, as amended, for the fiscal year ended December 31, 2024, filed with the SEC on April 7, 2025. This information is intended to facilitate your understanding and assessment of significant changes and trends related to our financial condition and results of operations. This MD&A should be read in conjunction with the audited consolidated financial statements and notes thereto contained in this Annual Report on Form 10-K.

The MD&A is organized in the following sections:

Overview

Executive Summary

Results of Operations

Financial Condition

Liquidity and Capital Resources

Asset and Liability Management

Critical Accounting Estimates

Overview

We are a Delaware financial holding company, and our primary, wholly-owned subsidiary is The Bancorp Bank, National Association. The Bank is a federally chartered commercial bank located in Sioux Falls, South Dakota and is a FDIC insured institution. The vast majority of our revenue and income is currently generated through the Bank.

Our business strategy is focused on Fintech Solutions, which partners with fintech companies and other technology focused payment-based providers (collectively “partners”) to deliver payment, deposit, and sponsored lending products that attract stable, lower-cost deposits and generate fee income. Our fintech services are provided to organizations with a pre-existing customer base, and the products are tailored to support or complement the services provided by these organizations to their customers. We typically provide these services under the name and through the facilities of each organization with whom we develop a relationship. Fintech services include:

Program sponsorship includes debit, credit and prepaid cards that we issue for companies that market directly to end users. Our card-accessed deposit account types are diverse and include: consumer and business debit, general purpose reloadable prepaid, pre-tax medical spending benefit, payroll, gift, government, corporate incentive, reward, business payment accounts and others. The Bank issues the cards, provides access to the card networks, maintains deposits, and is the sponsor bank of record for accounts.

Payment services delivers real-time, end-to-end payment processing, including automated clearing house (“ACH”) and Rapid Funds Transfer products. Our ACH accounts facilitate bill payments and our acquiring accounts provide clearing and settlement services for payments made to merchants which must be settled through associations such as Visa or Mastercard.

Sponsored lending, or Fintech loans, consist of secured credit cards and unsecured short-term extensions of credit that are originated by the Bank, with the marketing and servicing assistance of our partners. The revenue generated through fintech loan agreements is primarily fee revenue, and not interest income.

Deposits generated through these partner relationships are deployed into loan and lease products offered by both Fintech sponsored lending and the Credit Solutions business line. As of December 31, 2025, 91% of our total deposits were sourced from the Fintech Solutions business, primarily from program sponsorship.

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Credit Solutions is our lending business and is focused on offering flexible, specialty credit solutions, and we develop customized products and programs to meet the needs of our clients. Our loan programs include: Real estate bridge lending (REBL), which is comprised primarily of apartment building rehabilitation loans; Institutional banking, which is comprised of security-backed lines of credit (SBLOC), cash value insurance policy-backed lines of credit (IBLOC) and advisor financing; and commercial loans comprised primarily of Small Business Administration (SBA) loans and direct lease financing. Our total loan portfolio also includes the Fintech loans generated by the Fintech Solutions business. The loans in our non-fintech portfolio are secured by collateral, and the fintech loans are backed by credit enhancement agreements from our partners.

Executive Summary

We remain focused on growing our fintech revenues through new partnerships, products and services. Fintech loans of $1.10 billion as of December 31, 2025 increased 142% compared to the December 31, 2024 balance of $454.4 million. Certain loan fees on fintech loans are recorded as non-interest income, and totaled $16.6 million in 2025 compared to $4.8 million in 2024. In addition, our fees earned from ACH, card and other payment processing and Prepaid, debit card and related revenues also grew to $124.6 million in 2025 from $112.0 million in 2024.

We continue to invest in our infrastructure, with a focus on investing in AI tools to gain efficiency and productivity of our people and platform, and reallocating or reducing resources where appropriate. We believe that our infrastructure can accommodate significant additional growth without proportionate increases in expense. In addition, as part of our strategies we will reallocate or reduce resources where appropriate. As part of those efforts, in the fourth quarter of 2025 we restructured our institutional banking business to de-emphasize growth and reallocate space on our balance sheet. This action resulted in a $1.1 million restructuring charge in the fourth quarter of 2025 and $8.0 million in run-rate expense reductions beginning in early 2026.

For 2025, the full year capital return was $375.0 million, and we repurchased 5.646 million shares, or 12% of issued and outstanding shares, at an average price of $66.42. We began returning capital to shareholders through share repurchases in 2021, and for the past five years of repurchases from 2021 through 2025 we have returned $825.0 million in total, repurchasing 18.998 million shares, or 33% of shares outstanding from December 31, 2020. Since 2021, we have returned 94% of our net income through share repurchases.

Our 2026 share repurchase plan was approved by our Board of Directors on July 7, 2025, and includes authorization for up to $200 million of repurchases.

Financial Highlights

Financial highlights include:

Our net income increased to $228.2 million in 2025, from $217.5 million in 2024, an increase of $10.7 million, or 5%.

Earnings per diluted share increased to $4.92 from $4.29 in 2024, an increase of 15%, driven both by the increase in net income and a 4.3 million decrease in weighted average diluted shares, primarily driven by our share repurchase activity during the year.

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

Non-interest income increased $170.8 million, to $328.3 million in 2025 from $157.5 million in 2024. That increase includes a $138.6 million increase in Fintech loan credit enhancement income. Excluding credit enhancement, the remaining $32.2 million increase is primarily driven by a 21% growth in fintech fees, or $24.3 million, and a $5.5 million increase in other non- interest income.

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Provision for credit losses, total increased $139.3 million, to $177.7 million in 2025, from $38.4 million in 2024. That increase includes $138.6 million increase in provision for fintech loans, which is offset by related credit enhancement income outlined above. Excluding the provision for fintech loans, the remaining increase in total provision between periods was $0.7 million.

See further discussion of fintech loans and the related credit enhancement in “Financial Condition—Total Loan Portfolio—Fintech Programs” in this MD&A.

Non-interest expense increased $19.9 million, to $223.1 million in 2025, from $203.2 million in 2024. That increase is primarily driven by a $11.0 million increase in salary and employee benefits, a $5.3 million increase in legal expense and legal settlements, and $2.6 million increase in software.

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

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.

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

Average loans and leases grew to $6.62 billion in 2025 from $5.93 billion in 2024, an increase of $698.6 million or 12%, primarily driven by a $468.6 million increase in our average fintech portfolio.

Non-interest income—fintech fees increased to $141.1 million in 2025, up 21% from $116.8 million in 2024 which reflected continued organic volume growth with existing partners and products and the impact of new products launched within the past year.

Net interest margin decreased to 4.31% in 2025 from 4.85% in 2024, driven by the shift in our loan portfolio to a greater percentage of fintech loans, for which we primarily earn fee income and not interest income, combined with the impact of Federal Reserve rate decreases beginning in September 2024. See further discussion of the growth in Fintech lending contributing to margin compression under “Results of Operations—Growth of Fintech Lending” in the following section.

Prepaid and debit card gross dollar volume increased to $178.21 billion, up 17% from $152.64 billion in 2024, which directly contributed to a $6.1 million increase in Fintech fee income from Prepaid, debit card and related fees.

Average deposits grew to $7.89 billion in 2025 from $6.95 billion in 2024, an increase of $947 million or 14%, primarily driven by a $970 million increase in average fintech deposits. Fintech is the source of 95% of our average total deposits for the year ended December 31, 2025.

Our efforts to return capital to shareholders through share repurchases had an impact on our ratio of equity to assets KPI. At December 31, 2025, the ratio of equity to assets was 7.38%, compared to 9.05% at December 31, 2024, primarily driven by reductions in equity from share repurchases partially offset by an increase in equity capital from retained earnings.

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Results of Operations – 2025 compared to 2024

Net Interest Income

Net interest

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