The Bancorp Inc.
11/05/2026 | Press release | Distributed by Public on 11/05/2026 13:48
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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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;
•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;
•our ability to obtain the anticipated benefits and cost savings of our organizational restructuring activities;
•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.
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Overview
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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.
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 September 30, 2026, 96.4% 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 direct lease financing and Small Business Loans ("SBL") which is comprised primarily of Small Business Administration ("SBA") loans. As previously disclosed in a Current Report on Form 8-K filed with the SEC in September 2026, we implemented an organizational restructuring of our resources and business to align our strategic priorities. As part of the restructuring, we intend to discontinue the origination of retail and wholesale SBL loans by the end of 2026 while continuing to manage the existing SBL loan portfolio.
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.
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Executive Summary
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As part of our long-term strategic plan, in September 2026, we announced that as part of our organizational restructuring, we intend to discontinue the origination of retail and wholesale SBL loans by the end of 2026. In addition, staffing adjustments were made across several other areas of the organization in connection with our efforts to refine workflows, expand automation and artificial intelligence, optimize costs and invest in our highest-value strategic priorities. We recognized restructuring costs of $4.3 million in the third quarter of 2026 in connection with those actions.
We remain focused on growing our fintech revenues through new partnerships, products and services. Fintech loans of $936.6 million as of September 30, 2026 increased 19.3% compared to the September 30, 2025 balance of $785.0 million. Certain loan fees on fintech loans are recorded as non-interest income and totaled $7.7 million for the quarter ended September 30, 2026, a 72.0% increase compared to $4.5 million for the quarter ended September 30, 2025.
We remain focused on returning capital through share repurchases, and repurchased 822,229 shares of our common stock at an average cost of $60.81 per share during the quarter ended September 30, 2026. Primarily driven by share repurchases, outstanding shares, net of treasury shares at September 30, 2026 decreased 5.04% to 40.221 million from 42.355 million shares at December 31, 2025.
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Financial Highlights
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Financial highlights include:
| (Dollars in millions, except per share data) | Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Results of Operations | |||||||||||||||||||||||
| Net income | $ | 62.8 | $ | 54.9 | $ | 183.5 | $ | 171.9 | |||||||||||||||
| Net income per share - basic | $ | 1.54 | $ | 1.20 | $ | 4.43 | $ | 3.69 | |||||||||||||||
| Net income per share - diluted | $ | 1.53 | $ | 1.18 | $ | 4.39 | $ | 3.64 | |||||||||||||||
| Key Performance Indicators | |||||||||||||||||||||||
| Return on assets | 2.51 | % | 2.50 | % | 2.52 | % | 2.54 | % | |||||||||||||||
| Return on equity | 36.04 | % | 26.60 | % | 35.91 | % | 29.32 | % | |||||||||||||||
| Equity to assets (as of period end) | n/a | n/a | 7.18 | % | 9.05 | % | |||||||||||||||||
| Net interest margin | 3.75 | % | 4.45 | % | 3.82 | % | 4.32 | % | |||||||||||||||
| Average deposits | $ | 8,419 | $ | 7,625 | $ | 8,384 | $ | 7,995 | |||||||||||||||
| Average loans and leases | $ | 7,908 | $ | 6,689 | $ | 7,600 | $ | 6,549 | |||||||||||||||
| Non-interest income: fintech fees | $ | 41.8 | $ | 35.1 | $ | 120.8 | $ | 105.2 | |||||||||||||||
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Prepaid, debit and credit card gross dollar volume (GDV)(1)
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$ | 54,328 | $ | 44,038 | $ | 160,294 | $ | 132,337 | |||||||||||||||
(1)Gross dollar volume represents the total dollar amount spent on prepaid, debit and credit cards issued by The Bancorp Bank, N.A.
Our net income increased to $62.8 million in the third quarter of 2026 from $54.9 million in the third quarter of 2025, an increase of $7.9 million, or 14.3%.
Earnings per diluted share increased to $1.53 in the third quarter of 2026 from $1.18 in the third quarter of 2025, an increase of 29.7%, driven both by the increase in net income and a 5.4 million decrease in weighted average diluted shares, primarily driven by our share repurchase activity during the year.
Key components of our change in net income between periods include:
•Income tax expense decreased $9.3 million to $8.9 million in the third quarter of 2026 from $18.2 million in the third quarter of 2025. The third quarter of 2026 was favorably impacted by $10.3 million of total benefits related to purchased transferable tax credits, of which $3.0 million relates to 2026 taxes and $7.3 million relates to the carryback of credits to prior periods.
•Non-interest income increased $5.4 million, to $85.8 million in the third quarter of 2026 from $80.4 million in the third quarter of 2025. That increase is driven by a $6.7 million increase in total fintech fees primarily driven by volume growth, partially offset by a $0.8 million decrease in other non-interest income.
•Provision for credit losses, total decreased $4.5 million, to $40.6 million in the third quarter of 2026, from $45.1 million in the third quarter of 2025, primarily driven by a $5.1 million decrease in provision for non-fintech loans from estimated losses for the direct leasing portfolio that were recognized in the third quarter of 2025.
The above positive impacts to net income were partially offset by:
•Net interest income decreased $4.1 million, driven by a $0.8 million decrease in interest income and a $3.3 million increase in interest expense. The increase in interest expense is primarily driven by higher interest expense of $1.4 million from senior debt due to the August 2025 facility upsizing and increase in rate and $2.0 million higher combined interest expense on short-term borrowings and deposit balances primarily due to higher average balances, partially offset by lower rates.
•Non-interest expense increased $7.1 million reflecting higher costs in the third quarter of 2026, including $4.3 million of costs related to the restructuring of our SBL business line and other departmental reductions, and $1.9 million related to an accrual for the estimated cost of a legal settlement.
A detailed discussion of our financial results and the drivers of these fluctuations follows in "Results of Operations."
Our strategic focus on growing our fintech business fee-based income and fintech loan portfolio had an impact on our KPIs as follows:
Average loans and leases grew to $7.91 billion in the third quarter of 2026 from $6.69 billion in the third quarter of 2025, an increase of $1.22 billion or 18.2%, primarily driven by a $906.7 million increase in our average fintech portfolio, reflecting our continued strategic shift towards sponsored lending.
Non-interest income-fintech fees increased $6.7 million, or 19.2%, to $41.8 million in the third quarter of 2026, which includes a $3.2 million increase in consumer credit fintech fees and a $3.5 million increase in prepaid, debit card, ACH and other fees. The growth in consumer credit fintech fees reflects continued organic volume growth with existing partners and products and the impact of new products launched within the past year. The growth in prepaid, debit card and related fees is driven by an increase in GDV to $54.3 billion, a 23.4% increase from $44.0 billion in the third quarter of 2025. GDV growth may not have a direct impact on the related fee income due to the different product fee structures within the total mix.
Net interest margin decreased to 3.75% in the third quarter of 2026 from 4.45% in the third quarter of 2025, driven by the shift in our loan portfolio to a greater percentage of fintech loans, for which we primarily earn fee income and not interest income, combined with the impact of Federal Reserve rate decreases from the fourth quarter of 2025. See further discussion of the growth in Fintech lending contributing to margin compression under "Results of Operations-Net Interest Income-Growth of Fintech Lending" in the following section.
At September 30, 2026, the ratio of equity to assets was 7.18%, compared to 7.38% at December 31, 2025, the decrease primarily driven by an accumulated other comprehensive loss in the year to date 2026 of $59.7 million from unrealized losses on our available for sale investment portfolio driven by market rate increases.
| Results of Operations - Three Months Ended September 30, 2026 and 2025 | ||
Net Interest Income
Our net interest income for the third quarter of 2026 decreased $4.1 million, or 4.4%, to $90.1 million from $94.2 million in the third quarter of 2025.
Growth of Fintech Lending. Our strategy is to continue to drive growth in our Fintech lending business, as seen by the shift in mix to Fintech representing 19.6% of our total average loan portfolio in the third quarter of 2026, compared to 9.6% for the third quarter of 2025. A significant portion of these loans are zero percent interest and, as such, do not recognize interest income; however, we do generate fee revenue from these loans, through our partnership agreements. This mix shift to non-interest earning loans results in a reduction of the calculated average rate earned by total loans, average rate earned by our total interest-earning assets, and net interest margin in the above analysis. Offsetting these impacts is the growth in Consumer credit fintech fee income recognized within non-interest income in our Consolidated Statements of Operations which was $7.7 million and $4.5 million for the third quarters of 2026 and 2025, respectively.
We expect to continue to increase the proportion of Fintech loans in our portfolio through the remainder of 2026 and beyond, and therefore we expect to see continued compression in our average rate earned on loans, and net interest margin, as the mix of fintech loans continues to grow. However, we also expect growth in our fintech fees within non-interest income driven by the increase in that portfolio.
Interest Income
Interest income for the third quarter of 2026 was $135.6 million, a decrease of $0.8 million from $136.4 million in the third quarter of 2025, primarily driven by $3.0 million lower income on interest-earning deposits partially offset by $2.1 million higher income on investment securities. In the third quarter of 2025, average interest earning deposits on balance sheet of $355.0 million was significantly higher than $100.9 million in third quarter of 2026, driven by higher fintech on-balance sheet volumes.
Interest income from loans was $114.4 million in the third quarter of 2026, $0.6 million lower than $115.0 million in the third quarter of 2025, driven by $3.7 million lower interest earned on non-fintech loans partially offset by $3.1 million higher interest earned on fintech loans. For non-fintech loans, lower interest earned was primarily driven by lower rates, as the average rate decreased to 6.93% for the third quarter of 2026, compared to 7.53% for the third quarter of 2025, while average balance was 5.2% higher. The loan portfolio average rate reflects the impact of Federal Reserve rate decreases which continued in the third and fourth quarters of 2025. For fintech loans, higher interest income of $3.1 million was driven by higher volumes of interest-earning fintech loans. See "Growth of Fintech Lending" discussion above for further information.
Interest Expense
Interest expense for the third quarter of 2026 increased $3.3 million to $45.5 million from $42.2 million in the third quarter of 2025, driven by $4.6 million higher interest on short-term borrowings and $1.4 million higher interest expense on senior debt, partially offset by $2.7 million lower interest expense on deposits.
Interest expense on deposits was $2.7 million lower, primarily driven by lower rates in 2026. Interest expense on short-term borrowings was $4.6 million higher in 2026, as that funding source was utilized to fund higher average loans on balance sheet in the third quarter of 2026, compared to limited utilization in third quarter of 2025. Interest expense on senior debt was $1.4 million higher, due to higher outstanding principal and higher rate on senior debt. In August 2025, $200 million of 7.375% Senior Notes due 2030 were issued, the proceeds of which were used in part to repay at maturity the $100 million of outstanding 4.75% Senior notes due 2025.
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:
| (Dollars in thousands) | Three months ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Increase (Decrease) due to: | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Average Balance | Interest | Avg. Rate | Average Balance | Interest | Avg. Rate | Volume | Rate | Total | |||||||||||||||||||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-fintech loans | $ | 6,360,234 | $ | 110,241 | 6.93% | $ | 6,048,270 | $ | 113,907 | 7.53 | % | $ | 5,875 | $ | (9,541) | $ | (3,666) | ||||||||||||||||||||||||||||||||||||
| Fintech loans | 1,547,735 | 4,202 | 1.09% | $ | 641,026 | 1,075 | 0.67 | % | 1,521 | 1,606 | 3,127 | ||||||||||||||||||||||||||||||||||||||||||
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Loans, total(1)
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7,907,969 | 114,443 | 5.79% | 6,689,296 | 114,982 | 6.88 | % | 7,396 | (7,935) | (539) | |||||||||||||||||||||||||||||||||||||||||||
| Investment securities | 1,588,403 | 20,065 | 5.05% | 1,426,443 | 17,458 | 4.90 | % | 1,982 | 625 | 2,607 | |||||||||||||||||||||||||||||||||||||||||||
| Interest-earning deposits | 100,918 | 1,042 | 4.13% | 354,991 | 3,954 | 4.46 | % | (2,830) | (82) | (2,912) | |||||||||||||||||||||||||||||||||||||||||||
| Total interest-earning assets | 9,597,290 | 135,550 | 5.65% | 8,470,730 | 136,394 | 6.44 | % | 6,548 | (7,392) | (844) | |||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses | (52,589) | (59,166) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Other assets | 371,601 | 308,654 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 9,916,302 | $ | 8,720,218 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Liabilities and shareholders' equity: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Demand and interest checking | $ | 8,336,415 | $ | 35,365 | 1.70% | $ | 7,560,744 | $ | 38,233 | 2.02 | % | $ | 3,922 | $ | (6,790) | $ | (2,868) | ||||||||||||||||||||||||||||||||||||
| Savings and money market | 83,072 | 777 | 3.74% | 64,529 | 563 | 3.49 | % | 162 | 52 | 214 | |||||||||||||||||||||||||||||||||||||||||||
| Total deposits | 8,419,487 | 36,142 | 1.72% | 7,625,273 | 38,796 | 2.04 | % | 4,084 | (6,738) | (2,654) | |||||||||||||||||||||||||||||||||||||||||||
| Short-term borrowings | 511,321 | 5,135 | 4.02% | 45,067 | 495 | 4.39 | % | 5,121 | (481) | 4,640 | |||||||||||||||||||||||||||||||||||||||||||
| Long-term borrowings | 4,316 | 74 | 6.86% | 13,866 | 197 | 5.68 | % | (136) | 13 | (123) | |||||||||||||||||||||||||||||||||||||||||||
| Subordinated debt | 13,401 | 237 | 7.07% | 13,401 | 259 | 7.73 | % | - | (22) | (22) | |||||||||||||||||||||||||||||||||||||||||||
| Senior debt | 196,599 | 3,895 | 7.92% | 140,992 | 2,450 | 6.95 | % | 966 | 479 | 1,445 | |||||||||||||||||||||||||||||||||||||||||||
| Total deposits and liabilities | 9,145,124 | 45,483 | 1.99% | 7,838,599 | 42,197 | 2.15 | % | 10,035 | (6,749) | 3,286 | |||||||||||||||||||||||||||||||||||||||||||
| Other liabilities | 80,091 | 62,405 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities | 9,225,215 | 7,901,004 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Shareholders' equity | 691,087 | 819,214 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | 9,916,302 | $ | 8,720,218 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income | $ | 90,067 | $ | 94,197 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest margin | 3.75% | 4.45 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||
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(1)Loans, total includes Commercial loans, at fair value and Loans, net of deferred loan fees and costs. Non-accrual loans are included in the Average balance.
For the third quarter of 2026 compared to third quarter of 2025, average interest-earning assets increased $1.13 billion, reflecting a $1.22 billion increase in average loans and leases and a $162.0 million increase in average investment securities, partially offset by a decrease in average interest-earning deposits of $254.1 million. For those respective periods, average deposits and liabilities increased $1.31 billion, driven by a $794.2 million increase in deposits, a $466.3 million increase in short-term borrowings and a $55.6 million increase in senior debt.
Net Interest Margin
Our net interest margin (calculated by dividing net interest income by average interest-earning assets) for the third quarter of 2026 was 3.75% compared to 4.45% for the third quarter of 2025, a decrease of 70 basis points. The average yield on interest-earning assets decreased 79 basis points, due to the shift of our portfolio mix to more fintech loans where we primarily earn fee income as discussed further under "Growth of Fintech Lending" above, plus lower market short-term interest rates. In addition, the cost of deposits and interest-bearing liabilities decreased 16 basis points, or a net change of 63 basis points, driven primarily by a 32 basis point decrease in average rate on deposits primarily due to a lower rate environment in the third quarter of 2026.
Provision for Credit Losses
Our provision for credit losses was $40.6 million for the third quarter of 2026, a decrease of $4.5 million compared to a provision of $45.1 million for the third quarter of 2025. In addition, the provision for credit losses on non-fintech loans was $0.7 million in the third quarter of 2026 compared to provision expense of $5.8 million in the third quarter of 2025 driven by estimated losses for the direct leasing portfolio in the third quarter of 2025.
The fintech loan provision correlates to the amount of related non-interest income from a credit enhancement contractually provided by a third party. Accordingly, there was no related net impact from these amounts. See further discussion of this program in "Financial Condition-Allowance for Credit Losses-Fintech Programs" in MD&A.
For more information about our provision, allowance and credit loss experience, see "Financial Condition-Portfolio Performance" below and "Note 5. Loans, net" to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
Non-Interest Income
Non-interest income was $85.8 million in the third quarter of 2026, an increase of $5.4 million compared to $80.4 million in the third quarter of 2025. The increase between those respective periods is primarily driven by $6.7 million of higher total fintech fees, partially offset by $0.8 million of lower other non-interest income.
Total fintech fees increased $6.7 million, which includes a $2.5 million increase in prepaid, debit card and related fees, or 9.7%, to $28.0 million for the third quarter of 2026, compared to $25.5 million in the third quarter of 2025, driven by higher transaction volume from new clients and organic growth from existing clients. In addition, ACH, card and other payment processing fees increased $1.0 million, or 20.2%, to $6.1 million for the third quarter of 2026, compared to $5.1 million in the third quarter of 2025, reflecting an increase in rapid funds transfer volume. Consumer credit fintech fees increased $3.2 million, or 72.0%, to $7.7 million for the third quarter of 2026, compared to $4.5 million in the third quarter of 2025, reflecting increased loan volume.
Other non-interest income decreased $0.8 million for the third quarter of 2026, compared to the third quarter of 2025, primarily driven by $2.3 million recognized in the third quarter of 2025 from the forfeiture of an earnest money deposit for a terminated OREO sale agreement, partially offset by $1.2 million higher income in the third quarter of 2026, including $0.6 million higher other fee income from loans and $0.6 million of fees earned on deposit sweeps.
Non-Interest Expense
The following table presents the principal categories of non-interest expense for the periods indicated:
| Three Months Ended September 30, | |||||||||||||||||
| 2026 | 2025 | Increase (Decrease) | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Salaries and employee benefits | $ | 36,124 | $ | 37,350 | $ | (1,226) | |||||||||||
| Restructuring costs | 4,276 | - | 4,276 | ||||||||||||||
| Depreciation | 1,296 | 1,152 | 144 | ||||||||||||||
| Rent and related occupancy cost | 1,676 | 1,592 | 84 | ||||||||||||||
| Data processing expense | 1,427 | 1,259 | 168 | ||||||||||||||
| Audit expense | 521 | 617 | (96) | ||||||||||||||
| Legal expense | 2,138 | 1,483 | 655 | ||||||||||||||
| Legal settlement | 1,900 | - | 1,900 | ||||||||||||||
| FDIC insurance | 1,709 | 905 | 804 | ||||||||||||||
| Software | 5,982 | 5,040 | 942 | ||||||||||||||
| Insurance | 1,128 | 1,194 | (66) | ||||||||||||||
| Telecom and IT network communications | 319 | 304 | 15 | ||||||||||||||
| Consulting | 152 | 430 | (278) | ||||||||||||||
| Other | 4,881 | 5,078 | (197) | ||||||||||||||
| Total non-interest expense | $ | 63,529 | $ | 56,404 | $ | 7,125 | |||||||||||
Total non-interest expense was $63.5 million for the third quarter of 2026, an increase of $7.1 million, or 12.6%, compared to $56.4 million for the third quarter of 2025. The increase is primarily driven by higher costs in the third quarter of 2026, including $4.3 million of costs related to the restructuring of our Small Business Lending business line and other departmental reductions, and $1.9 million related to an accrual for the estimated cost of a legal settlement.
Income Taxes
Income tax expense was $8.9 million for the third quarter of 2026 compared to $18.2 million in the third quarter of 2025. Our effective tax rate was 12.5% and 24.9% in the third quarters of 2026 and 2025, respectively, with each period based on a 21% federal tax rate, the impact of various state income taxes and the third quarter of 2026 was favorably impacted by purchased tax credits.
In third quarter of 2026, as part of our tax strategy, we purchased transferable tax credits to reduce our cash tax obligation for 2026 and certain eligible prior years. Income tax expense for the third quarter of 2026 includes $10.3 million of total benefits related to transferable investment tax credits, of which $3.0 million relates to 2026 taxes and $7.3 million relates to carryback of credits to prior periods. We expect to continue to invest in tax credits in future periods, resulting in an estimated annual future effective tax rate of approximately 23.9%, compared to the full year 2025 effective tax rate of 24.7%.
| Results of Operations - Nine Months Ended September 30, 2026 and 2025 | ||
Net Interest Income
Our net interest income for the nine months ended September 30, 2026 decreased $14.1 million, or 5.0%, to $269.3 million from $283.4 million in the nine months ended September 30, 2025.
Growth of Fintech Lending. Our strategy is to continue to drive growth in our Fintech lending business, as seen in the shift in mix to Fintech representing 17.8% of our total average loan portfolio in the nine months ended September 30, 2026, compared to 8.4% for the nine months ended September 30, 2025. A significant portion of these loans are zero percent interest and, as such, do not recognize interest income; however, we do generate fee revenue from these loans, through our partnership agreements. The shift to non-interest earning loans results in a reduction of the calculated average rate earned by total loans, average rate earned by our total interest-earning assets, and net interest margin in the above analysis. Offsetting these impacts is the growth in Consumer credit fintech fee income recognized within non-interest income in our Consolidated Statements of Operations which was $19.9 million and $12.1 million for the nine months ended September 30, 2026 and 2025, respectively.
We expect to continue to increase the proportion of Fintech loans in our portfolio for the remainder of 2026 and beyond, and therefore we expect to see continued compression in our average rate earned on loans, and net interest margin, as the mix of fintech loans continues to grow. However, we also expect growth in our fintech fees within non-interest income driven by the increase in that portfolio.
Interest Income
Interest income for the nine months ended September 30, 2026 was $397.4 million, a decrease of $21.9 million from $419.3 million in the nine months ended September 30, 2025, primarily driven by $20.4 million lower income on interest-earning deposits and a one-time gain in 2025 of $3.0 million from a CRE-2 investment security which was repaid in full. In the nine months ended September 30, 2025, average interest earning deposits on balance sheet of $746.5 million was significantly higher than $168.3 million in nine months ended September 30, 2026, driven by one-time volumes in 2025 from wildfire insurance refunds and higher fintech on-balance sheet volumes.
Interest income from loans was $332.6 million in the nine months ended September 30, 2026, $3.6 million lower than $336.2 million in the nine months ended September 30, 2025, primarily driven by $10.7 million lower interest earned on non-fintech loans partially offset by $7.1 million higher interest earned on fintech loans. For non-fintech loans, lower interest earned was primarily driven by lower rates, as the average rate decreased to 6.91% for the nine months ended September 30, 2026, compared to 7.43% for the nine months ended September 30, 2025, while average balance was 4.1% higher. The loan portfolio average rate reflects the impact of Federal Reserve rate decreases which continued in the third and fourth quarters of 2025. For fintech loans, higher interest income of $7.1 million was driven by higher volumes of interest-earning fintech loans. See "Growth of Fintech Lending" discussion above for further information.
Interest Expense
Interest expense for the nine months ended September 30, 2026 decreased $7.9 million to $128.0 million from $135.9 million in the nine months ended September 30, 2025, driven by $23.3 million lower interest expense on deposits, partially offset by $9.0 million higher interest on short-term borrowings and $6.8 million higher interest expense on senior debt.
Interest expense on deposits was $23.3 million lower due to lower average rate of 1.68% in 2026 compared to 2.15% in 2025. Interest expense on short-term borrowings was $9.0 million higher in 2026, as that funding source was utilized to fund growth of loans on balance sheet in the nine months ended September 30, 2026, compared to limited utilization in 2025. Interest expense on senior debt was $6.8 million higher, due to higher outstanding principal and higher rate on senior debt. In August 2025, $200 million of 7.375% Senior Notes due 2030 were issued, the proceeds of which were used in part to repay at maturity the $100 million of outstanding 4.75% Senior Notes due 2025.
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:
| (Dollars in thousands) | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Increase (Decrease) due to: | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Average Balance | Interest | Avg. Rate | Average Balance | Interest | Avg. Rate | Volume | Rate | Total | |||||||||||||||||||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-fintech loans | $ | 6,246,850 | $ | 323,709 | 6.91% | $ | 6,000,321 | $ | 334,419 | 7.43 | % | $ | 13,740 | $ | (24,450) | $ | (10,710) | ||||||||||||||||||||||||||||||||||||
| Fintech loans | 1,352,831 | 8,862 | 0.87% | 548,909 | 1,801 | 0.44 | % | 2,638 | 4,423 | 7,061 | |||||||||||||||||||||||||||||||||||||||||||
|
Loans, total(1)
|
7,599,681 | 332,571 | 5.83% | 6,549,230 | 336,220 | 6.84 | % | 16,378 | (20,027) | (3,649) | |||||||||||||||||||||||||||||||||||||||||||
|
Investment securities(2)
|
1,630,893 | 60,195 | 4.92% | 1,464,085 | 58,164 | 5.30 | % | 6,627 | (1,579) | 5,048 | |||||||||||||||||||||||||||||||||||||||||||
| Interest-earning deposits | 168,254 | 4,624 | 3.66% | 746,470 | 24,960 | 4.46 | % | (19,334) | (1,002) | (20,336) | |||||||||||||||||||||||||||||||||||||||||||
| Total interest-earning assets | 9,398,828 | 397,390 | 5.64% | 8,759,785 | 419,344 | 6.38 | % | 3,671 | (22,608) | (18,937) | |||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses | (54,639) | (52,227) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Other assets | 375,759 | 341,661 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 9,719,948 | $ | 9,049,219 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Liabilities and shareholders' equity: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Demand and interest checking | $ | 8,246,396 | $ | 101,975 | 1.65% | $ | 7,906,597 | $ | 126,680 | 2.14 | % | $ | 5,444 | $ | (30,149) | $ | (24,705) | ||||||||||||||||||||||||||||||||||||
| Savings and money market | 137,360 | 3,790 | 3.68% | 88,687 | 2,454 | 3.69 | % | 1,347 | (11) | 1,336 | |||||||||||||||||||||||||||||||||||||||||||
| Total deposits | 8,383,756 | 105,765 | 1.68% | 7,995,284 | 129,134 | 2.15 | % | 6,791 | (30,160) | (23,369) | |||||||||||||||||||||||||||||||||||||||||||
| Short-term borrowings | 321,152 | 9,465 | 3.93% | 15,334 | 500 | 4.35 | % | 9,972 | (1,007) | 8,965 | |||||||||||||||||||||||||||||||||||||||||||
| Long-term borrowings | 9,349 | 418 | 5.96% | 13,957 | 590 | 5.64 | % | (195) | 23 | (172) | |||||||||||||||||||||||||||||||||||||||||||
| Subordinated debt | 13,401 | 708 | 7.04% | 13,401 | 771 | 7.67 | % | - | (63) | (63) | |||||||||||||||||||||||||||||||||||||||||||
| Senior debt | 196,399 | 11,687 | 7.93% | 111,354 | 4,917 | 5.89 | % | 3,755 | 3,015 | 6,770 | |||||||||||||||||||||||||||||||||||||||||||
| Total deposits and liabilities | 8,924,057 | 128,043 | 1.91% | 8,149,330 | 135,912 | 2.22 | % | 20,323 | (28,192) | (7,869) | |||||||||||||||||||||||||||||||||||||||||||
| Other liabilities | 112,596 | 115,916 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities | 9,036,653 | 8,265,246 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Shareholders' equity | 683,295 | 783,973 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | 9,719,948 | $ | 9,049,219 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income | $ | 269,347 | $ | 283,432 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest margin | 3.82% | 4.32 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||
(1)Loans, total includes Commercial loans, at fair value and Loans, net of deferred loan fees and costs. Non-accrual loans are included in the Average balance.
(2)Interest income in 2025 includes $3.0 million from a security that was known as "CRE-2" and which was related to the Company's discontinued commercial real estate securitization business. CRE-2 was repaid in full in the second quarter of 2025, resulting in a one-time gain of $3.0 million, which was excluded from change due to rate in the above analysis.
For the nine months ended September 30, 2026 compared to nine months ended September 30, 2025, average interest-earning assets increased $639.0 million, reflecting a $1.1 billion increase in average loans and leases and a $166.8 million increase in average investment securities, partially offset by a decrease in average interest-earning deposits of $578.2 million. For those respective periods, average deposits and liabilities increased $774.7 million, primarily driven by a $388.5 million increase in average deposits, a $305.8 million increase in short-term borrowings and an $85.0 million increase in senior debt.
Net Interest Margin
Our net interest margin (calculated by dividing net interest income by average interest-earning assets) for the nine months ended September 30, 2026 was 3.82% compared to 4.32% for the nine months ended September 30, 2025, a decrease of 50 basis points. The average yield on interest-earning assets decreased 74 basis points, due to the shift of our portfolio mix to more fintech loans where we primarily earn fee income as discussed further under "Growth of Fintech Lending" above, plus lower market short-term interest rates. In addition, the cost of deposits and interest-bearing liabilities decreased 31 basis points, or a net change of 43 basis points, driven primarily by a 47 basis point decrease in average rate on deposits primarily due to a lower rate environment in the nine months ended September 30, 2026.
Provision for Credit Losses
Our provision for credit losses was $94.3 million for the nine months ended September 30, 2026, a decrease of $42.0 million compared to a provision of $136.3 million for the nine months ended September 30, 2025. The decrease is primarily attributable to $34.3 million lower provision for fintech loans driven by improved performance of that loan portfolio. The lower fintech loan provision correlates to a lower amount of related non-interest income from a credit enhancement contractually provided by a third party. Accordingly, there was no related net impact from these amounts. See further discussion of this program in "Financial Condition-Allowance for Credit Losses-Fintech Programs" in MD&A.
In addition, the provision for credit losses on non-fintech loans was a release of $0.3 million in the nine months ended September 30, 2026 compared to provision expense of $8.1 million in the nine months ended September 30, 2025. The provision release in the nine months ended September 30, 2026 is primarily driven by improvements in credit quality of the direct lease financing portfolio.
For more information about our provision, allowance and credit loss experience, see "Financial Condition-Portfolio Performance" below and "Note 5. Loans" to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
Non-Interest Income
Non-interest income was $231.4 million in the nine months ended September 30, 2026, a decrease of $16.4 million compared to $247.8 million in the nine months ended September 30, 2025. The decrease between those respective periods is primarily driven by a $34.3 million decrease in fintech loan credit enhancement income, which was partially offset by $15.6 million in higher total fintech fees and $4.0 million of higher other non-interest income.
Fintech loan credit enhancement income decreased $34.3 million driven by improved performance of fintech loans, which correlates to a like amount for provision for credit losses on fintech loans. See further discussion above under "Provision for Credit Losses."
Total fintech fees increased $15.6 million, which includes a consumer credit fintech fees increase of $7.8 million to $19.9 million for the nine months ended September 30, 2026, compared to $12.1 million in the nine months ended September 30, 2025, reflecting increased loan volume. Prepaid, debit card and related fees increased $5.2 million, or 6.6%, to $82.5 million for the nine months ended September 30, 2026, compared to $77.3 million in the nine months ended September 30, 2025, driven by higher transaction volume from new clients and organic growth from existing clients. In addition, ACH, card and other payment processing fees increased $2.7 million, or 17.0%, to $18.5 million for the nine months ended September 30, 2026, compared to $15.8 million in the nine months ended September 30, 2025, reflecting an increase in rapid funds transfer volume.
Other non-interest income increased $4.0 million for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025, primarily driven by $3.1 million higher other fee income from loans and $2.2 million of fees earned on deposit sweeps, partially offset by $2.3 million recognized in third quarter of 2025 from the forfeiture of an earnest money deposit for a terminated OREO sale agreement.
Non-Interest Expense
The following table presents the principal categories of non-interest expense for the periods indicated:
| Nine Months Ended September 30, | |||||||||||||||||
| 2026 | 2025 | Increase (Decrease) | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Salaries and employee benefits | $ | 110,102 | $ | 108,153 | $ | 1,949 | |||||||||||
| Restructuring costs | 5,201 | - | 5,201 | ||||||||||||||
| Depreciation | 3,771 | 3,381 | 390 | ||||||||||||||
| Rent and related occupancy cost | 5,035 | 4,877 | 158 | ||||||||||||||
| Data processing expense | 4,123 | 3,691 | 432 | ||||||||||||||
| Audit expense | 1,660 | 1,816 | (156) | ||||||||||||||
| Legal expense | 4,949 | 5,303 | (354) | ||||||||||||||
| Legal reimbursement | (100) | - | (100) | ||||||||||||||
| FDIC insurance | 4,066 | 3,160 | 906 | ||||||||||||||
| Software | 16,983 | 15,197 | 1,786 | ||||||||||||||
| Insurance | 3,379 | 3,596 | (217) | ||||||||||||||
| Telecom and IT network communications | 895 | 945 | (50) | ||||||||||||||
| Consulting | 509 | 1,322 | (813) | ||||||||||||||
| Other | 14,458 | 15,480 | (1,022) | ||||||||||||||
| Total non-interest expense | $ | 175,031 | $ | 166,921 | $ | 8,110 | |||||||||||
Total non-interest expense was $175.0 million for the nine months ended September 30, 2026, an increase of $8.1 million, or 4.9%, compared to $166.9 million for the nine months ended September 30, 2025. The increase is primarily driven by higher costs in the nine months ended September 30, 2026 including $5.2 million of costs related to the restructuring of our SBL business line and other departmental reductions, $1.9 million higher salaries and benefits expense primarily driven by higher costs from incentive compensation accruals and $1.8 million higher software expense primarily driven by increased adoption of artificial intelligence tools.
Income Taxes
Income tax expense was $47.9 million for the nine months ended September 30, 2026 compared to $56.1 million in the nine months ended September 30, 2025. Our effective tax rate was 20.7% and 24.6% in the nine months ended September 30, 2026 and 2025, respectively, based on a 21% federal tax rate and the impact of various state income taxes. The nine months ended September 30, 2026 was favorably impacted by purchased tax credits.
In third quarter of 2026, as part of our tax strategy, we invested in transferable tax credits to reduce our cash tax obligation for 2026 and certain eligible prior years. Income tax expense for the nine months ended September 30, 2026 includes $10.3 million of total benefits related to transferable investment tax credits, of which $3.0 million relates to 2026 taxes and $7.3 million relates to carryback of credits to prior periods. We expect to continue to invest in tax credits in future periods, resulting in an estimated annual future effective tax rate of approximately 23.9%, compared to the full year 2025 effective tax rate of 24.7%.
|
Financial Condition
|
||
Total Assets
Total assets at September 30, 2026 were $9.43 billion, relatively consistent with $9.35 billion at December 31, 2025.
We are managing our balance sheet to remain under $10 billion in assets in order to maintain our exemption from regulated limits on interchange fees, among other benefits, under the Durbin Amendment and the Federal Reserve's implementing regulations. Our strategy in managing our balance sheet includes balancing our investments in our loan portfolio and investment securities to strategically direct the growth of our business, and sweeping deposits off-balance sheet to other financial institutions, as discussed further in "Financial Condition-Deposits" in MD&A.
Investment Securities
The following table presents a summary of our available-for-sale investment securities, by major category (dollars in thousands):
|
September 30, 2026 |
December 31, 2025 | ||||||||||
| U.S. Government agency securities | $ | 19,650 | $ | 25,109 | |||||||
| Asset-backed securities | 218,938 | 234,101 | |||||||||
| Tax-exempt obligations of states and political subdivisions | 13,397 | 9,636 | |||||||||
| Taxable obligations of states and political subdivisions | 12,077 | 18,927 | |||||||||
| Residential mortgage-backed securities | 399,325 | 464,323 | |||||||||
| Collateralized mortgage obligation securities | 47,466 | 57,580 | |||||||||
| Commercial mortgage-backed securities | 812,648 | 862,074 | |||||||||
| Total Investment securities available for sale, at fair value | $ | 1,523,501 | $ | 1,671,750 | |||||||
The following table shows the contractual maturity distribution and the weighted average yield of our investment securities as of September 30, 2026 (dollars in thousands). The weighted average yield was calculated by dividing the amount of individual securities to total securities in each category, multiplying by the yield of the individual security and adding the results of those individual computations.
| (Dollars in thousands) | Zero to one year | After one to five years | After five to ten years | Over ten years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance | Average yield | Balance | Average yield | Balance | Average yield | Balance | Average yield | Total balance | ||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Government agency securities | $ | 650 | 2.40 | % | $ | 1,308 | 3.14 | % | $ | 11,729 | 4.73 | % | $ | 5,963 | 3.35 | % | $ | 19,650 | ||||||||||||||||||||||||||||||||||||||
| Asset-backed securities | 62 | 4.92 | % | 2,906 | 5.71 | % | 45,619 | 5.67 | % | 170,351 | 5.47 | % | 218,938 | |||||||||||||||||||||||||||||||||||||||||||
|
Tax-exempt obligations of states and political subdivisions(1)
|
1,160 | 2.30 | % | - | - | 1,882 | 3.87 | % | 10,355 | 4.53 | % | 13,397 | ||||||||||||||||||||||||||||||||||||||||||||
| Taxable obligations of states and political subdivisions | 7,342 | 4.00 | % | 2,725 | 3.48 | % | - | - | 2,010 | 6.00 | % | 12,077 | ||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage-backed securities | - | - | - | - | 2,015 | 5.04 | % | 397,310 | 4.93 | % | 399,325 | |||||||||||||||||||||||||||||||||||||||||||||
| Collateralized mortgage obligation securities | 10 | 1.85 | % | - | - | 2 | 2.92 | % | 47,454 | 4.16 | % | 47,466 | ||||||||||||||||||||||||||||||||||||||||||||
| Commercial mortgage-backed securities | 9,165 | 2.09 | % | 284,003 | 4.37 | % | 399,585 | 4.70 | % | 119,895 | 3.99 | % | 812,648 | |||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 18,389 | $ | 290,942 | $ | 460,832 | $ | 753,338 | $ | 1,523,501 | ||||||||||||||||||||||||||||||||||||||||||||||
| Weighted average yield | 2.89 | % | 4.37 | % | 4.80 | % | 4.84 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
(1)If adjusted to their taxable equivalents, yields would approximate 2.91%, 4.90%, and 5.73% for zero to one year, five to ten years, and over ten years, respectively, at a federal tax rate of 21%.
Total Loan Portfolio
The following table summarizes our loan portfolio, by loan category (dollars in thousands):
|
September 30 2026 |
December 31 2025 |
||||||||||
| Loans recorded at amortized cost: | |||||||||||
| Small business loans (SBL) non-real estate | $ | 263,657 | $ | 235,282 | |||||||
| SBL commercial mortgage | 771,566 | 749,234 | |||||||||
| SBL construction | 27,920 | 22,382 | |||||||||
| SBLs | 1,063,143 | 1,006,898 | |||||||||
| Direct lease financing | 641,008 | 685,422 | |||||||||
|
SBLOC / IBLOC(1)
|
1,830,690 | 1,669,985 | |||||||||
| Advisor financing | 196,858 | 294,236 | |||||||||
| Real estate bridge lending (REBL) | 2,427,108 | 2,188,952 | |||||||||
| Fintech | 936,577 | 1,097,998 | |||||||||
|
Other loans(2)
|
147,799 | 157,416 | |||||||||
| 7,243,183 | 7,100,907 | ||||||||||
| Unamortized loan fees and costs | 14,466 | 15,769 | |||||||||
| Total loans, net of deferred loan fees and costs | $ | 7,257,649 | $ | 7,116,676 | |||||||
| Commercial loans, at fair value: | |||||||||||
| SBLs, at fair value | $ | 52,198 | $ | 68,374 | |||||||
| REBL, at fair value | 53,730 | 71,015 | |||||||||
| Total commercial loans, at fair value | $ | 105,928 | $ | 139,389 | |||||||
| Total loan portfolio | $ | 7,363,577 | $ | 7,256,065 | |||||||
(1)Includes Securities-backed lines of credit (SBLOC) and Insurance policy cash value-backed lines of credit (IBLOC).
(2) As of September 30, 2026 and December 31, 2025, Other loans includes $109.9 million and $110.7 million, respectively, related to warehouse financing of REBL loan sales to third-party purchasers.
The majority of our loan portfolio is recorded at amortized cost and recognized net of an allowance for credit losses. Loans, net of deferred loan fees and costs increased to $7.26 billion at September 30, 2026 from $7.12 billion at December 31, 2025. This $141.0 million increase is primarily driven by an increase in REBL of $238.2 million, and an increase of SBLOC/IBLOC of $160.7 million, partially offset by a decrease in fintech loans of $161.4 million. The decline in fintech loans was primarily attributable to a change in payment processing, which impacted period-end balances and did not reflect a change in underlying customer activity.
Commercial loans, at fair value are comprised of non-SBA commercial real estate loans and SBA loans which had been originated for sale or securitization through the first quarter of 2020, and which are now being held for investment on the balance sheet. These loans continue to be recognized at fair value, and this portfolio declined $33.5 million from December 31, 2025, as this portfolio continues to runoff. All originations are now being recognized at amortized cost.
The underlying nature of the collateral for our loan portfolio includes:
•SBL non-real estate loans are collateralized by business assets, which may include certain real estate;
•SBL commercial mortgage and construction loans are collateralized by real estate for small businesses;
•SBLOCs are collateralized by marketable investment securities while IBLOC are collateralized by the cash value of life insurance;
•Advisor financing loans are collateralized by investment advisors' business franchises;
•REBL loans are primarily collateralized by apartment buildings, or other commercial real estate; and
•Direct lease financing is collateralized primarily by vehicles or equipment.
Fintech loans include secured credit card accounts of $259.8 million and $729.1 million as of September 30, 2026 and December 31, 2025, respectively, which are backed dollar-for-dollar by cash collateral provided by each individual cardholder that are recognized as deposits on our Condensed Consolidated Balance Sheets, and these loans are required to be repaid in full monthly. The remaining fintech loans consist of cashflow underwritten short-term liquidity products to individual borrowers ranging in maturity from 30 to 365 days. All fintech loans are covered by credit enhancement agreements, as discussed further below under "Fintech Programs."
The following table summarizes the concentration by state of our real estate bridge loans (dollars in thousands):
| As of September 30, 2026 | ||||||||||||||
| Balance | Origination date LTV | |||||||||||||
| REBL concentration by state: | ||||||||||||||
| Texas | $ | 619,508 | 71% | |||||||||||
| Georgia | 366,388 | 72% | ||||||||||||
| Florida | 277,044 | 67% | ||||||||||||
| Missouri | 105,780 | 74% | ||||||||||||
| Michigan | 98,499 | 64% | ||||||||||||
| Ohio | 97,380 | 71% | ||||||||||||
| Other States each <$90 million | 862,509 | 70% | ||||||||||||
| Total | $ | 2,427,108 | ||||||||||||
Portfolio Estimated Maturities
The following table presents loan categories by contractual 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.
| September 30, 2026 | |||||||||||||||||||||||||||||
| Within one year | One to five years | After five but within 15 years | After 15 years | Total | |||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||
| Loans, net of deferred loan fees and costs: | |||||||||||||||||||||||||||||
| SBL non-real estate | $ | 300 | $ | 13,225 | $ | 250,132 | $ | - | $ | 263,657 | |||||||||||||||||||
| SBL commercial mortgage | 13,482 | 45,861 | 268,397 | 443,826 | 771,566 | ||||||||||||||||||||||||
| SBL construction | 2,398 | 106 | 13,476 | 11,940 | 27,920 | ||||||||||||||||||||||||
| Direct lease financing | 127,458 | 490,892 | 22,658 | - | 641,008 | ||||||||||||||||||||||||
| SBLOC / IBLOC | 1,830,690 | - | - | - | 1,830,690 | ||||||||||||||||||||||||
| Advisor financing | 3,293 | 99,093 | 94,472 | - | 196,858 | ||||||||||||||||||||||||
| Real estate bridge lending | 958,969 | 1,468,139 | - | - | 2,427,108 | ||||||||||||||||||||||||
| Fintech | 936,577 | - | - | - | 936,577 | ||||||||||||||||||||||||
| Other loans | 90,882 | 37,213 | 11,586 | 8,118 | 147,799 | ||||||||||||||||||||||||
| Commercial loans, at fair value | 12,367 | 53,249 | 12,544 | 27,768 | 105,928 | ||||||||||||||||||||||||
| Total | $ | 3,976,416 | $ | 2,207,778 | $ | 673,265 | $ | 491,652 | $ | 7,349,111 | |||||||||||||||||||
| Unamortized loan fees and costs | 14,466 | ||||||||||||||||||||||||||||
| Total loan portfolio | $ | 7,363,577 | |||||||||||||||||||||||||||
| Loan maturities after one year with: | |||||||||||||||||||||||||||||
| Fixed rates | |||||||||||||||||||||||||||||
| SBL non-real estate | $ | 665 | $ | - | $ | - | $ | 665 | |||||||||||||||||||||
| SBL commercial mortgage | 7,397 | 2,353 | - | 9,750 | |||||||||||||||||||||||||
| Direct lease financing | 490,892 | 19,847 | - | 510,739 | |||||||||||||||||||||||||
| Advisor financing | 97,655 | 94,472 | - | 192,127 | |||||||||||||||||||||||||
| Real estate bridge lending | 1,158,215 | - | - | 1,158,215 | |||||||||||||||||||||||||
| Other loans | 3,128 | 5,732 | 5,502 | 14,362 | |||||||||||||||||||||||||
| Commercial loans, at fair value | 42,326 | - | - | 42,326 | |||||||||||||||||||||||||
| Total loans with fixed rates | $ | 1,800,278 | $ | 122,404 | $ | 5,502 | $ | 1,928,184 | |||||||||||||||||||||
| Variable rates | |||||||||||||||||||||||||||||
| SBL non-real estate | $ | 12,560 | $ | 250,132 | $ | - | $ | 262,692 | |||||||||||||||||||||
| SBL commercial mortgage | 38,464 | 266,044 | 443,826 | 748,334 | |||||||||||||||||||||||||
| SBL construction | 106 | 13,476 | 11,940 | 25,522 | |||||||||||||||||||||||||
| Direct lease financing | - | 2,811 | - | 2,811 | |||||||||||||||||||||||||
| Advisor financing | 1,438 | - | - | 1,438 | |||||||||||||||||||||||||
| Real estate bridge lending | 309,924 | - | - | 309,924 | |||||||||||||||||||||||||
| Other loans | 34,085 | 5,854 | 2,616 | 42,555 | |||||||||||||||||||||||||
| Commercial loans, at fair value | 10,923 | 12,544 | 27,768 | 51,235 | |||||||||||||||||||||||||
| Total with variable rates | $ | 407,500 | $ | 550,861 | $ | 486,150 | $ | 1,444,511 | |||||||||||||||||||||
| Total maturities after one year | $ | 2,207,778 | $ | 673,265 | $ | 491,652 | $ | 3,372,695 | |||||||||||||||||||||
Portfolio Performance
Loans are considered to be non-performing if they are on a non-accrual basis or are past due 90 days or more and still accruing interest. A loan which is past due 90 days or more and still accruing interest remains on accrual status only when it is both adequately secured as to principal and interest and is in the process of collection.
The following table summarizes our non-performing assets, with discussion of significant changes between periods to follow (dollars in thousands):
|
September 30, 2026 |
December 31, 2025 |
||||||||||
| Non-accrual loans: | |||||||||||
| SBL non-real estate | $ | 12,296 | $ | 8,639 | |||||||
| SBL commercial mortgage | 24,809 | 21,977 | |||||||||
| SBL construction | 710 | 2,660 | |||||||||
| Direct lease financing | 7,149 | 12,066 | |||||||||
| SBLOC/IBLOC | - | 446 | |||||||||
| Real estate bridge lending | 12,700 | 9,755 | |||||||||
| Other loans | 248 | 142 | |||||||||
| Total non-accrual loans | 57,912 | 55,685 | |||||||||
| Loans past due 90 days or more and still accruing | 6,856 | 18,199 | |||||||||
| Total non-performing loans | 64,768 | 73,884 | |||||||||
| Other real estate owned (OREO) | 70,734 | 60,695 | |||||||||
| Total non-performing assets | $ | 135,502 | $ | 134,579 | |||||||
Non-accrual loans increased $2.2 million, from $55.7 million at December 31, 2025, primarily driven by a $2.9 million increase in REBL loans and a $4.5 million increase in SBL, partially offset by a $4.9 million decrease in direct lease financing.
Loans past due 90 days or more still accruing interest amounted to $6.9 million at September 30, 2026 and $18.2 million at December 31, 2025. The $11.3 million decrease is primarily driven by a $14.5 million REBL loan that left 90 days or more past due status after we entered into a loan agreement with a new borrower with greater financial capacity.
We evaluate loans under an internal loan risk rating system as a means of identifying problem loans. At September 30, 2026, there were $166.5 million of loans classified as special mention and substandard in total, a decrease of $27.9 million, or 14.4%, from $194.5 million at December 31, 2025. The decrease is primarily driven by a $19.4 million decrease in criticized Real estate bridge loans, a $7.8 million decrease in Direct lease financing and a $9.0 million decrease in SBL commercial mortgage, that was partially offset by an increase in SBL non-real estate criticized loans of $5.4 million.
See "Note 5. Loans" to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for further information on classified loans.
Asset Quality Ratios
The following tables summarize select asset quality ratios for the periods indicated:
| As of | ||||||||||||||||||||||||||||||||||||||
| September 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||||||||
| Total | Fintech | Non-fintech | Total | Fintech | Non-fintech | |||||||||||||||||||||||||||||||||
| ACL to loans | 0.87% | 3.33% | 0.51% | 0.93% | 2.84% | 0.58% | ||||||||||||||||||||||||||||||||
| Non-performing loan ratios: | ||||||||||||||||||||||||||||||||||||||
| ACL to non-performing loans | 98.0% |
n/m(1)
|
53.3% | 89.6% |
n/m(1)
|
48.8% | ||||||||||||||||||||||||||||||||
|
Non-performing loans to total loans(2)
|
0.89% | 0.45% | 0.96% | 1.04% | 0.18% | 1.19% | ||||||||||||||||||||||||||||||||
|
Non-performing assets to total assets
|
1.44% | --- | --- | 1.44% | --- | --- | ||||||||||||||||||||||||||||||||
___________________
(1)ACL to non-performing loan ratio for Fintech is not meaningful primarily due to the short duration of those loans.
(2)Includes loans 90 days past due still accruing interest.
| Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||||||||||||||
| Total | Fintech | Non-fintech | Total | Fintech | Non-fintech | |||||||||||||||||||||||||||||||||
| Net charge-offs to average loans (annualized) | 1.73% | 9.32% | 0.05% | 2.47% | 27.32% | 0.12% | ||||||||||||||||||||||||||||||||
Allowance for Credit Losses ("ACL") to total loans decreased to 0.87% at September 30, 2026 compared to 0.93% at December 31, 2025. The fintech ACL to Loans ratio increased to 3.33% as of September 30, 2026 from 2.84% at December 31, 2025.
Non-performing loan ratios are also calculated showing fintech and non-fintech separately, as fintech has a relatively small contribution to the non-performing loan population due to the short-term nature of those receivables, the majority of which are charged off before they reach 90 days past due. However, the fintech loan receivable portfolio growth does have an impact on the denominator of those ratios in total.
ACL to non-performing loans-Total increased to 98.0% at September 30, 2026 from 89.6% at December 31, 2025, and for non-fintech, the ratios are 53.3% and 48.8% for the respective periods. Non-performing loans are subject to specific review when preparing our allowance for credit losses estimate. We assess the collectability of the receivables, the nature of the non-performance status, the loan to collateral value, and other factors, when determining whether a specific reserve is required.
Non-performing loans to total loans decreased to 0.89% at September 30, 2026, from 1.04% at December 31, 2025.
Non-performing assets to total assets ratio was relatively consistent with 1.44% at September 30, 2026 and 1.44% at December 31, 2025.
See further discussion of the non-performing loan population directly above under "Portfolio Performance."
Net charge-offs to average loans was 1.73% for the nine months ended September 30, 2026 compared to 2.47% for the nine months ended September 30, 2025.
Fintech net charge-offs to average loans of 9.32% for the nine months ended September 30, 2026 was an improvement from 27.32% for the nine months ended September 30, 2025, driven by improved performance of unsecured loans. Any net charge-offs on fintech loans are covered by credit enhancement agreements, through which a partner of the Fintech business covers incurred losses on such fintech loans. The measurement of the ACL for fintech loans and the related credit enhancement are based on the same estimate and are equal and correlate to like amounts in our income statement. See "Total Loan Portfolio-Fintech Programs" for further discussion of the credit enhancement.
Excluding fintech loans, net charge-offs to average loans was 0.05% for the nine months ended September 30, 2026 and 0.12% for the nine months ended September 30, 2025. The decline is primarily driven by improved performance of the direct lease financing portfolio.
Non-Accrual and 90+ Days Past Due Loans
The following tables summarize non-accrual loans and loans past due 90 days or more still accruing interest, by year of origination (dollars in thousands):
| As of September 30, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2024 | 2023 | 2022 | Prior | Revolving | Total | ||||||||||||||||||||||||||||||||||||||||
| 90+ Days past due | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||||||||||||||||||
| Non-accrual | - | - | 1,353 | 5,534 | 4,480 | 929 | - | 12,296 | |||||||||||||||||||||||||||||||||||||||
| Total SBL non-real estate | - | - | 1,353 | 5,534 | 4,480 | 929 | - | 12,296 | |||||||||||||||||||||||||||||||||||||||
| 90+ Days past due | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||
| Non-accrual | - | - | 692 | 8,500 | 9,372 | 6,245 | - | 24,809 | |||||||||||||||||||||||||||||||||||||||
| Total SBL commercial mortgage | - | - | 692 | 8,500 | 9,372 | 6,245 | - | 24,809 | |||||||||||||||||||||||||||||||||||||||
| 90+ Days past due | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||
| Non-accrual | - | - | - | - | - | 710 | - | 710 | |||||||||||||||||||||||||||||||||||||||
| Total SBL construction | - | - | - | - | - | 710 | - | 710 | |||||||||||||||||||||||||||||||||||||||
| 90+ Days past due | 2,484 | 42 | - | - | - | 34 | - | 2,560 | |||||||||||||||||||||||||||||||||||||||
| Non-accrual | 452 | 35 | 676 | 3,789 | 1,796 | 401 | - | 7,149 | |||||||||||||||||||||||||||||||||||||||
| Total direct lease financing | 2,936 | 77 | 676 | 3,789 | 1,796 | 435 | - | 9,709 | |||||||||||||||||||||||||||||||||||||||
| 90+ Days past due | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||
| Non-accrual | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||
| Total IBLOC | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||
| 90+ Days past due | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||
| Non-accrual | - | - | - | - | 12,700 | - | - | 12,700 | |||||||||||||||||||||||||||||||||||||||
| Total real estate bridge lending | - | - | - | - | 12,700 | - | - | 12,700 | |||||||||||||||||||||||||||||||||||||||
| 90+ Days past due | 4,098 | 113 | - | - | - | - | - | 4,211 | |||||||||||||||||||||||||||||||||||||||
| Non-accrual | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||
| Total fintech loans | 4,098 | 113 | - | - | - | - | - | 4,211 | |||||||||||||||||||||||||||||||||||||||
| 90+ Days past due | - | - | - | - | - | 85 | - | 85 | |||||||||||||||||||||||||||||||||||||||
| Non-accrual | - | - | - | - | - | 248 | - | 248 | |||||||||||||||||||||||||||||||||||||||
| Total other loans | - | - | - | - | - | 333 | - | 333 | |||||||||||||||||||||||||||||||||||||||
| Total 90+ Days past due | $ | 6,582 | $ | 155 | $ | - | $ | - | $ | - | $ | 119 | $ | - | $ | 6,856 | |||||||||||||||||||||||||||||||
| Total Non-accrual | $ | 452 | $ | 35 | $ | 2,721 | $ | 17,823 | $ | 28,348 | $ | 8,533 | $ | - | $ | 57,912 | |||||||||||||||||||||||||||||||
| As of December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Revolving | Total | ||||||||||||||||||||||||||||||||||||||||
| 90+ Days past due | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||||||||||||||||||
| Non-accrual | - | 405 | 3,109 | 2,705 | 1,360 | 1,060 | - | 8,639 | |||||||||||||||||||||||||||||||||||||||
| Total SBL non-real estate | - | 405 | 3,109 | 2,705 | 1,360 | 1,060 | - | 8,639 | |||||||||||||||||||||||||||||||||||||||
| 90+ Days past due | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||
| Non-accrual | - | 706 | 5,318 | 7,596 | 6,049 | 2,308 | - | 21,977 | |||||||||||||||||||||||||||||||||||||||
| Total SBL commercial mortgage | - | 706 | 5,318 | 7,596 | 6,049 | 2,308 | - | 21,977 | |||||||||||||||||||||||||||||||||||||||
| 90+ Days past due | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||
| Non-accrual | - | - | - | - | 1,950 | 710 | - | 2,660 | |||||||||||||||||||||||||||||||||||||||
| Total SBL construction | - | - | - | - | 1,950 | 710 | - | 2,660 | |||||||||||||||||||||||||||||||||||||||
| 90+ Days past due | 120 | - | 92 | 98 | - | 1,147 | - | 1,457 | |||||||||||||||||||||||||||||||||||||||
| Non-accrual | - | 1,696 | 6,302 | 3,254 | 787 | 27 | - | 12,066 | |||||||||||||||||||||||||||||||||||||||
| Total direct lease financing | 120 | 1,696 | 6,394 | 3,352 | 787 | 1,174 | - | 13,523 | |||||||||||||||||||||||||||||||||||||||
| 90+ Days past due | - | - | - | - | - | - | 251 | 251 | |||||||||||||||||||||||||||||||||||||||
| Non-accrual | - | - | - | - | - | - | 446 | 446 | |||||||||||||||||||||||||||||||||||||||
| Total IBLOC | - | - | - | - | - | - | 697 | 697 | |||||||||||||||||||||||||||||||||||||||
| 90+ Days past due | - | - | - | - | 14,459 | - | - | 14,459 | |||||||||||||||||||||||||||||||||||||||
| Non-accrual | - | - | - | - | 9,755 | - | - | 9,755 | |||||||||||||||||||||||||||||||||||||||
| Total real estate bridge lending | - | - | - | - | 24,214 | - | - | 24,214 | |||||||||||||||||||||||||||||||||||||||
| 90+ Days past due | 2,030 | - | - | - | - | - | - | 2,030 | |||||||||||||||||||||||||||||||||||||||
| Non-accrual | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||
| Total fintech loans | 2,030 | - | - | - | - | - | - | 2,030 | |||||||||||||||||||||||||||||||||||||||
| 90+ Days past due | - | - | - | - | - | 2 | - | 2 | |||||||||||||||||||||||||||||||||||||||
| Non-accrual | - | - | - | - | - | 142 | - | 142 | |||||||||||||||||||||||||||||||||||||||
| Total other loans | - | - | - | - | - | 144 | - | 144 | |||||||||||||||||||||||||||||||||||||||
| Total 90+ Days past due | $ | 2,150 | $ | - | $ | 92 | $ | 98 | $ | 14,459 | $ | 1,149 | $ | 251 | $ | 18,199 | |||||||||||||||||||||||||||||||
| Total Non-accrual | $ | - | $ | 2,807 | $ | 14,729 | $ | 13,555 | $ | 19,901 | $ | 4,247 | $ | 446 | $ | 55,685 | |||||||||||||||||||||||||||||||
Allowance for Credit Losses
We review the adequacy of our ACL on at least a quarterly basis to determine a provision for credit losses to maintain our ACL at a level we believe is appropriate to recognize current expected credit losses. A summary of loans recorded at amortized cost and the allowance follows (dollars in thousands):
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||||||||
|
Allowance for credit loss |
Loans, net of deferred loan fees and costs |
% of total loans |
Allowance for credit loss |
Loans, net of deferred loan fees and costs |
% of total loans |
||||||||||||||||||||||||||||||
| SBL non-real estate | $ | 7,599 | $ | 263,657 | 3.64 | % | $ | 6,337 | $ | 235,282 | 3.31 | % | |||||||||||||||||||||||
| SBL commercial mortgage | 3,434 | 771,566 | 10.65 | % | 3,118 | 749,234 | 10.55 | % | |||||||||||||||||||||||||||
| SBL construction | 358 | 27,920 | 0.39 | % | 235 | 22,382 | 0.32 | % | |||||||||||||||||||||||||||
| Total SBLs | 11,391 | 1,063,143 | 14.68 | % | 9,690 | 1,006,898 | 14.18 | % | |||||||||||||||||||||||||||
| Direct lease financing | 11,024 | 641,008 | 8.85 | % | 15,675 | 685,422 | 9.65 | % | |||||||||||||||||||||||||||
| SBLOC / IBLOC | 915 | 1,830,690 | 25.27 | % | 1,041 | 1,669,985 | 23.52 | % | |||||||||||||||||||||||||||
| Advisor financing | 1,476 | 196,858 | 2.72 | % | 2,207 | 294,236 | 4.14 | % | |||||||||||||||||||||||||||
| Real estate bridge lending | 7,018 | 2,427,108 | 33.51 | % | 5,949 | 2,188,952 | 30.83 | % | |||||||||||||||||||||||||||
| Fintech | 31,207 | 936,577 | 12.93 | % | 31,137 | 1,097,998 | 15.46 | % | |||||||||||||||||||||||||||
| Other loans | 452 | 147,799 | 2.04 | % | 501 | 157,416 | 2.22 | % | |||||||||||||||||||||||||||
| Total loans | $ | 63,483 | $ | 7,243,183 | 100.00 | % | $ | 66,200 | $ | 7,100,907 | 100.00 | % | |||||||||||||||||||||||
| Deferred costs | - | 14,466 | - | 15,769 | |||||||||||||||||||||||||||||||
| Total loans, net of deferred costs | $ | 63,483 | $ | 7,257,649 | $ | 66,200 | $ | 7,116,676 | |||||||||||||||||||||||||||
Fintech Programs
Our fintech programs include consumer transaction accounts and fintech loans.
Consumer transaction accounts consist primarily of Bank-issued stored value prepaid or debit cards. For this program, we recognize a deposit liability for the current balance of the cards and recognize fee-based revenue in Non-interest income-Prepaid, debit card and related fees; we do not have any receivables or allowance risk related to the payment programs.
Fintech loans consist of short-term loans originated by our Bank, with the marketing and servicing assistance of third-party relationships. Loans receivable originated under these fintech agreements are governed by an agreement with the borrower and may include: secured credit cards and unsecured short-term extensions of credit. For the secured credit card program, we recognize a loan receivable and a deposit liability for the cash collateral that secures those accounts. Unsecured fintech loans include payroll advance and other short-term extensions of credit; those accounts are typically repaid within a year of origination.
As of September 30, 2026, and December 31, 2025, all fintech loans, both secured and unsecured, are covered by credit enhancement agreements. The third-party agreements governing the fintech loans include provisions for credit enhancements, through which the third party guarantees losses on such fintech loans (either in whole or in part). When a fintech loan meets a defined delinquency level, we recognize a charge-off of the receivable, and the incurred losses are covered by the third party. Any subsequent recoveries from the charged-off loan are credited to the third party.
The third-party relationship agreements governing fintech loans include requirements for pledging cash reserve accounts at the Bank as collateral for loss exposure, through which we can collect when losses occur. The reserve accounts are then replenished by the counterparties based on contractually required thresholds. In addition to the reserve accounts, the agreements also provide for the right to offset any cashflows we owe to the third parties (such as for monthly revenues) against any net realized loan losses. While we continually monitor the risk of these counterparties, establish the reserve thresholds at levels we consider appropriate to cover loss exposure on these short-term loan receivables, and we have additional protection from our rights to net realized loan losses against cashflows owed to the third party, if the third party defaults under their agreement and/or is unable to fulfill their contractual obligations to replenish the reserve account and cover losses, we may be exposed to loan losses in excess of our net reserve position.
The loan receivable agreement with the borrower and the third-party credit enhancement agreements are required to be accounted for separately as freestanding contracts in accordance with U.S. GAAP. As such, we recognize the separate units of account as follows:
Fintech loans receivable from the borrower are recognized on the Balance sheet, along with an estimate of credit loss for fintech loans through the allowance. Provision for credit losses on fintech loans is recognized on the Statement of Operations.
A credit enhancement asset is recognized on the Balance Sheet for the estimated recovery under the third-party credit enhancement agreement, and the Company recognizes non-interest income-fintech loan credit enhancement on the Statement of Operations. In addition, deposit liability on our Balance Sheets includes amounts for reserve account collateral held to fund losses under the credit enhancement agreements.
The measurement of the estimated credit losses and the expected recovery from the credit enhancement are based on the same estimate and correlate to like amounts in our financial statements. We recognized credit enhancement assets of $31.2 million and $31.1 million on the Balance Sheets as of September 30, 2026, and December 31, 2025, respectively.
Net Charge-offs
The following tables present a ratio of net charge-offs to average loans outstanding, for each loan category. Average loans excludes commercial loans, at fair value. (dollars in thousands)
| Nine months ended September 30, 2026 | Nine months ended September 30, 2025 | ||||||||||||||||||||||||||||||||||
| Net charge-offs (recovery) | Average loan balance | Ratio |
Net charge-offs |
Average loan balance | Ratio | ||||||||||||||||||||||||||||||
| SBL non-real estate | $ | 41 | $ | 247,817 | 0.02 | % | $ | 473 | $ | 198,218 | 0.24 | % | |||||||||||||||||||||||
| SBL commercial mortgage | 486 | 746,993 | 0.07 | % | - | 695,437 | - | ||||||||||||||||||||||||||||
| SBL construction | - | 22,243 | - | - | 35,566 | - | |||||||||||||||||||||||||||||
| Direct lease financing | 1,987 | 673,112 | 0.30 | % | 3,841 | 702,590 | 0.55 | % | |||||||||||||||||||||||||||
| SBLOC / IBLOC | 446 | 1,758,894 | 0.03 | % | - | 1,584,404 | - | ||||||||||||||||||||||||||||
| Advisor financing | - | 255,231 | - | - | 273,945 | - | |||||||||||||||||||||||||||||
| Real estate bridge lending | - | 2,253,331 | - | - | 2,152,902 | - | |||||||||||||||||||||||||||||
| Fintech | 94,536 | 1,352,831 | 6.99 | % | 112,482 | 548,909 | 20.49 | % | |||||||||||||||||||||||||||
| Other loans | (501) | 153,773 | (0.33 | %) | 919 | 147,316 | 0.62 | % | |||||||||||||||||||||||||||
| Total | $ | 96,995 | $ | 7,464,225 | 1.30 | % | $ | 117,715 | $ | 6,339,287 | 1.86 | % | |||||||||||||||||||||||
Net charge-offs were $97.0 million for the nine months ended September 30, 2026, a decrease of $20.7 million from net charge-offs of $117.7 million during the nine months ended September 30, 2025.
For fintech, in the nine months ended September 30, 2026, $94.5 million of net charge-offs were recognized, or a 9.32% ratio to average loans (annualized), compared to $112.5 million, and 27.32% for the prior year period. The improved fintech charge-off levels reflect better credit performance of the unsecured fintech loans.
Excluding fintech, net charge-offs on the remaining portfolio were $2.5 million for the nine months ended September 30, 2026 and $5.2 million for the nine months ended September 30, 2025.
Deposits
Our primary source of funding is deposit acquisition. At September 30, 2026, we had total deposits of $7.34 billion compared to $8.17 billion at December 31, 2025, which reflected a decrease of $828.0 million, or 10.1%. Due to the nature of our deposit products, daily deposit balances are subject to variability, and deposits averaged $8.42 billion in the third quarter of 2026. As of September 30, 2026, 94% of the deposits are insured, 3% are low balance accounts (such as anonymous gift cards and corporate incentive cards for which there is no identified depositor) and 3% are other uninsured deposits.
Demand and interest checking is $7.26 billion of total deposits as of September 30, 2026, and primarily consists of balances from prepaid, debit and other payment card accounts that the Bank issues to fund payments for salary, medical spending, commercial, general purpose reloadable, corporate and other incentive, gift, government payments and transaction accounts. These accounts have an established history of stability and lower cost than certain other types of funding. Deposits also include payment processing balances, funds received as collateral supporting the secured credit card program of our Fintech segment, and a small population of traditional deposits.
Savings and money market is $79.6 million of total deposits as of September 30, 2026.
We do not have a traditional branch banking system. Our deposit accounts are comprised primarily of millions of small transaction-based consumer balances which are obtained through and with the assistance of our partners. We have long-term contractual relationships with the partners of our Fintech business which sponsor such accounts as discussed further in Item 1. "Business-Our Strategies" in our 2025 Form 10-K.
Of our $8.42 billion average deposits for the third quarter of 2026, the top three affinity groups accounted for approximately $4.74 billion, the next three largest $1.39 billion, and the four subsequent largest $0.71 billion. The top ten partner relationships at September 30, 2026 consisted of $3.78 billion related to payroll, debit, and government-based accounts such as child support, and $3.07 billion related to consumer and business payment companies, including companies sponsoring incentive and gift card payments.
Of our $7.63 billion average deposits for the third quarter of 2025, the top three affinity groups accounted for approximately $4.04 billion, the next three largest $1.27 billion, and the four subsequent largest $0.71 billion. The top ten partner relationships at year end 2025 consisted of $3.19 billion related to payroll, debit, and government-based accounts such as child support, and $2.83 billion related to consumer and business payment companies, including companies sponsoring incentive and gift card payments.
In addition, we sweep deposits off our balance sheet to other institutions as part of our funding strategy, which totaled $877.8 million and $849.9 million as of September 30, 2026 and December 31, 2025, respectively. Such sweeps are utilized to manage our balance sheet composition and deposit portfolio diversity.
The following table presents the average balance and rates paid on deposits for the periods indicated (dollars in thousands):
| Nine months ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
|
Average balance |
Average rate |
Average balance |
Average rate |
||||||||||||||||||||
| Demand and interest checking | $ | 8,246,396 | 1.65 | % | $ | 7,906,597 | 2.14 | % | |||||||||||||||
| Savings and money market | 137,360 | 3.68 | % | 88,687 | 3.69 | % | |||||||||||||||||
| Total deposits | $ | 8,383,756 | 1.68 | % | $ | 7,995,284 | 2.15 | % | |||||||||||||||
Of the demand and interest checking balance shown above, $132.4 million and $134.8 million for 2026 and 2025, respectively, represented balances on which we paid interest. The remaining balance for each period reflects amounts subject to fees paid to third parties, which are based upon a contractual percentage applied to a rate index, generally the effective federal funds rate, and therefore classified as interest expense.
Short-term Borrowings
Short-term borrowings consist of amounts borrowed on our lines of credit with the Federal Reserve Bank or FHLB. There were $1.11 billion and $199.0 million of borrowings with FHLB at September 30, 2026 and December 31, 2025, respectively. Our use of short-term borrowings fluctuates based on our current funding needs for loans. We generally utilize overnight borrowings to manage our daily reserve requirements at the Federal Reserve.
The following table summarizes short-term borrowings (dollars in thousands):
| Nine months ended September 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Short-term borrowings | ||||||||||||||
| Balance at period end | $ | 1,110,000 | $ | 200,000 | ||||||||||
| Average balance year-to-date | 321,152 | 15,334 | ||||||||||||
| Maximum month-end balance | 1,110,000 | 450,000 | ||||||||||||
| Weighted average rate year-to-date | 3.93 | % | 4.35 | % | ||||||||||
| Rate at period end | 4.26 | % | 4.30 | % | ||||||||||
|
Liquidity and Capital Resources
|
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Liquidity defines our ability to generate funds at a reasonable cost to support asset growth, meet deposit withdrawals, satisfy borrowing needs and otherwise operate on an ongoing basis. Maintaining an adequate level of liquidity depends on the institution's ability to efficiently meet both expected and unexpected cash flows without adversely affecting daily operations or financial condition. The Company's liquidity management policy requirements include sustaining defined liquidity minimums, concentration monitoring and management, stress testing, contingency planning and related oversight. Based on our sources of funding and liquidity discussed below, we believe we have sufficient liquidity and capital resources available for our needs in the next 12 months and for the foreseeable future. We invest the funds we do not need for daily operations primarily in our interest-bearing account at the Federal Reserve. We actively monitor our positions and contingent funding sources daily.
Deposits. Our primary source of funding has been consumer deposits generated through partner relationships. Average total deposits increased by $794.2 million, or 10.4%, to $8.42 billion for the third quarter of 2026 compared to $7.63 billion in the third quarter of 2025. While we do not have a traditional branch system, we believe that our core deposits, which include our demand, interest checking, savings and money market accounts, have similar characteristics to those of a bank with a branch system, but are tied to long-term partner contracts. Certain components of our deposits experience seasonality, creating greater excess liquidity at certain times. The largest deposit inflows occur in the first quarter of the year when certain of our accounts are credited with tax refund payments from the U.S. Treasury.
As of September 30, 2026, 94% of the deposits are insured, 3% are low balance accounts (such as anonymous gift cards and corporate incentive cards for which there is no identified depositor) and 3% are other uninsured deposits. We do not believe that such uninsured accounts present a significant liquidity risk.
In addition, we sweep deposits off our balance sheet to other institutions as part of our funding strategy, which totaled $877.8 million and $849.9 million as of September 30, 2026 and December 31, 2025, respectively. Such sweeps are utilized to optimize diversity within our funding structure by managing the percentage of individual client deposits to total deposits. Deposit sweeps represent an amount of deposits that are greater than our current needs to fund our assets. The swept deposits serve as a source of contingent liquidity, as we may move a portion of those deposits back on balance sheet, at our election.
Other Funding Sources. While consumer deposit accounts, including prepaid and debit card accounts, comprise the vast majority of our funding sources, we maintain secured borrowing lines with the FHLB and the Federal Reserve that are collateralized by pledged loans and investment securities. Average short-term borrowings increased by $466.3 million to $511.3 million for the third quarter of 2026 compared to $45.1 million in the third quarter of 2025, as we utilized more short-term borrowings to fund growth in our loan portfolio.
As of September 30, 2026, we had $1.11 billion borrowed under these facilities, and based on the current amount of loans and securities pledged there is $3.45 billion of additional available capacity which we can access anytime, which is an increase from $199.0 million borrowed and $3.19 billion available capacity based on assets pledged as of December 31, 2025. We expect to continue to maintain our facilities with the FHLB and Federal Reserve.
Loans. We utilize the deposits that are primarily generated by our Fintech business to fund our credit solutions business and the sponsored lending loans of fintech. Historically, growth in deposits has funded growth of loans. Average loans and leases grew to $7.91 billion in the third quarter of 2026 from $6.69 billion in the third quarter of 2025, an increase of $1.22 billion representing a use of funds.
Investment Securities. One source of contingent liquidity is available-for-sale securities, which amounted to $1.52 billion at September 30, 2026, compared to $1.67 billion at December 31, 2025. In the nine months ended September 30, 2026, $19.1 million of securities purchased were exceeded by $91.3 million of securities cash inflows.
Cash. At September 30, 2026, our interest-earning deposits within cash and cash equivalents were $70.9 million, and primarily consisted of deposits with the Federal Reserve. Interest-earning deposit average balances decreased to $100.9 million in the third quarter of 2026 from $355.0 million in the third quarter of 2025.
Funding Commitments and Uses. As a holding company conducting substantially all our business through our subsidiaries, our near-term need for liquidity consists principally of cash for required interest payments on debt, which includes semi-annual interest payments on the 2030 Senior Notes of $7.4 million, and quarterly interest payments on the subordinated debentures of $300,000, and cash required to fund operating costs.
We had outstanding commitments to fund loans, including unused lines of credit, of $2.54 billion as of September 30, 2026. The majority of our commitments are variable rate and originate with SBLOC. The amount of such commitments represents amounts unfunded under existing loan agreements, where there is capacity for the customer to borrow additional amounts as long as there is no violation of any condition of the contract. The funding requirements for such commitments occur on a measured basis over time and would be funded by normal deposit growth.
As of September 30, 2026, we had cash reserves of $10.9 million at the holding company. Stock repurchases along with interest payments on our debt instruments have historically been funded by dividends from the Bank, as have interest payments on the above debt instruments. Stock repurchases may be terminated at any time. The holding company's sources of liquidity are primarily comprised of dividends paid by the Bank to the Company, and the issuance of debt.
Capital Resources and Requirements. We must comply with capital adequacy guidelines issued by our regulators. The following table sets forth our regulatory capital ratios and the required levels to be considered a "well capitalized" institution as of September 30, 2026:
|
Tier 1 capital to average assets ratio |
Tier 1 capital to risk-weighted assets ratio |
Total capital to risk-weighted assets ratio |
Common equity Tier 1 to risk weighted assets |
||||||||||||||||||||
| As of September 30, 2026 | |||||||||||||||||||||||
| The Bancorp, Inc. | 7.26% | 11.37% | 12.39% | 11.37% | |||||||||||||||||||
| The Bancorp Bank, National Association | 9.03% | 14.11% | 15.12% | 14.11% | |||||||||||||||||||
|
"Well capitalized" institution (under federal regulations-Basel III)
|
5.00% | 8.00% | 10.00% | 6.50% | |||||||||||||||||||
At September 30, 2026, the Bank was "well capitalized" under banking regulations.
|
Asset and Liability Management
|
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Our principal market exposure is to interest rate risk, specifically changes in the Federal Reserve overnight federal funds rate, due to their impact on our net interest income and the market value of our interest-earning assets.
We assess our interest rate risk using both: (i) a Gap Analysis that outlines the estimated timing of when interest-bearing assets and liabilities mature, repay or reprice; and (ii) a Sensitivity Analysis that measures the potential impact on our net portfolio value based on hypothetical changes in interest rates.
Gap Analysis
The following table sets forth the amounts of interest-earning assets and interest-bearing liabilities that were outstanding at September 30, 2026 and the portions of each financial instrument that are anticipated, based upon certain assumptions, to mature or reset in each future period:
| 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 | $ | 48,242 | $ | 6,985 | $ | 45,672 | $ | 3,318 | $ | 1,711 | |||||||||||||||||||
| Loans, net of deferred loan fees and costs | 4,019,931 | 644,154 | 1,704,842 | 746,166 | 142,556 | ||||||||||||||||||||||||
| Investment securities | 284,016 | 24,203 | 198,387 | 270,280 | 746,615 | ||||||||||||||||||||||||
| Interest-earning deposits | 70,857 | - | - | - | - | ||||||||||||||||||||||||
| Total interest-earning assets | 4,423,046 | 675,342 | 1,948,901 | 1,019,764 | 890,882 | ||||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||||||||
| Deposits: Transaction accounts, as adjusted | 3,628,962 | - | - | - | - | ||||||||||||||||||||||||
| Deposits: Savings and money market | 79,583 | - | - | - | - | ||||||||||||||||||||||||
| Short-term borrowings | 1,110,000 | - | - | - | - | ||||||||||||||||||||||||
| Senior debt and subordinated debentures | 13,401 | - | - | 196,736 | - | ||||||||||||||||||||||||
| Total interest-bearing liabilities | 4,831,946 | - | - | 196,736 | - | ||||||||||||||||||||||||
| Gap | $ | (408,900) | $ | 675,342 | $ | 1,948,901 | $ | 823,028 | $ | 890,882 | |||||||||||||||||||
| Cumulative gap | $ | (408,900) | $ | 266,442 | $ | 2,215,343 | $ | 3,038,371 | $ | 3,929,253 | |||||||||||||||||||
| Gap to assets ratio | (4) | % | 7 | % | 21 | % | 8 | % | 10 | % | |||||||||||||||||||
| Cumulative gap to assets ratio | (4) | % | 3 | % | 24 | % | 32 | % | 42 | % | |||||||||||||||||||
The above table provides an approximation of the projected repricing of assets and liabilities at period end on the basis of contractual terms, except for adjustments as noted:
•Loans at fair value and Loans, net - We do not assume any prepayment of fixed-rate loans.
•Investment securities - Prepayment adjustments are made for mortgage and asset backed securities based on historical data and current market trends.
•Deposits - Transaction accounts are comprised primarily of demand deposits. The majority of transaction and savings balances are assumed to be "core" deposits, or deposits that will generally remain with us regardless of market interest rates. We estimate the repricing characteristics of these deposits based on historical performance, past experience, judgmental predictions and other deposit behavior assumptions. However, we may choose not to reprice liabilities proportionally to changes in market interest rates for competitive or other reasons.
Additionally, while demand deposits are non-interest-bearing, related fees paid to affinity groups may reprice according to specified indices, and as such those fees are included in interest expense. We have adjusted the transaction account balances downward to better reflect the impact of their partial adjustment to changes in rates.
Although a gap analysis is a useful measurement device available to management in determining the existence of interest rate exposure, its static focus as of a particular date makes it necessary to utilize other techniques in measuring exposure to changes in interest rates. For example, gap analysis is limited in its ability to predict trends in future earnings and makes no assumptions about changes in prepayment tendencies, deposit or loan maturity preferences or repricing time lags that may occur in response to a change in the interest rate environment.
Interest Rate Sensitivity Analysis
The following table shows impact of hypothetical instantaneous parallel shifts in the yield curve on our net portfolio value and annual net interest income:
| (Dollars in thousands) | Net portfolio value at | Net interest income | ||||||||||||||||||||||||
| September 30, 2026 | September 30, 2026 | |||||||||||||||||||||||||
| Rate scenario | Amount |
Percent Change |
Amount |
Percent Change |
||||||||||||||||||||||
| +200 basis points | $ | 1,934,956 | 1.07% | $ | 368,222 | (1.51)% | ||||||||||||||||||||
| +100 basis points | 1,922,886 | 0.44% | 370,941 | (0.78)% | ||||||||||||||||||||||
| Flat rate | 1,914,398 | - | 373,860 | - | ||||||||||||||||||||||
| -100 basis points | 1,897,705 | (0.87)% | 378,782 | 1.32% | ||||||||||||||||||||||
| -200 basis points | 1,869,113 | (2.37)% | 382,352 | 2.27% | ||||||||||||||||||||||
These sensitivities are hypothetical and are presented for illustrative purposes only. Changes in fair value and the impact on our net interest income generally cannot be extrapolated because the relationship of the change in fair value may not be linear. Actual interest rate sensitivity could vary substantially from the above analysis if different assumptions are used or actual experience differs from presumed behavior of various deposit and loan categories.
The Bancorp Inc. published this content on November 05, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 05, 2026 at 19:49 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]