Cash and cash equivalents are defined as cash and amounts due from banks with an original maturity from date of purchase of three months or less and federal funds sold. The Company maintains balances in excess of insured limits at various financial institutions including the Federal Reserve Bank (the “Federal Reserve”), the Federal Home Loan Bank (“FHLB”) and other private institutions. The Company does not believe these instruments carry a significant risk of loss, but cannot provide assurances that no losses could occur if these institutions were to become insolvent.

3. Investment Securities

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

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

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

Cash and cash equivalents are defined as cash and amounts due from banks with an original maturity from date of purchase of three months or less and federal funds sold. The Company maintains balances in excess of insured limits at various financial institutions including the Federal Reserve Bank (the “Federal Reserve”), the Federal Home Loan Bank (“FHLB”) and other private institutions. The Company does not believe these instruments carry a significant risk of loss, but cannot provide assurances that no losses could occur if these institutions were to become insolvent.

Document And Entity Information - USD ($) $ in Millions	12 Months Ended
Document And Entity Information - USD ($) $ in Millions	Dec. 31, 2023	Feb. 26, 2024	Jun. 30, 2023
Document And Entity Information [Abstract]
Document Type	10-K
Document Annual Report	true
Document Period End Date	Dec. 31, 2023
Document Fiscal Period Focus	FY
Document Transition Report	false
Entity File Number	000-51018
Entity Registrant Name	The Bancorp, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	23-3016517
Entity Address, Address Line One	409 Silverside Road
Entity Address, City or Town	Wilmington
Entity Address, State or Province	DE
Entity Address, Postal Zip Code	19809
City Area Code	302
Local Phone Number	385-5000
Title of 12(b) Security	Common Stock, par value $1.00 per share
Trading Symbol	TBBK
Security Exchange Name	NASDAQ
Entity Filer Category	Large Accelerated Filer
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Emerging Growth Company	false
Entity Small Business	false
Entity Shell Company	false
ICFR Auditor Attestation Flag	true
Document Financial Statement Error Correction Flag	false
Entity Public Float			$ 1,720
Entity Common Stock, Shares Outstanding		52,748,985
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Entity Central Index Key	0001295401
Documents Incorporated by Reference	DOCUMENTS INCORPORATED BY REFERENCE Portions of the proxy statement for registrant’s 2024 Annual Meeting of Shareholders are incorporated by reference in Part III of this Form 10-K.
Auditor Firm ID	248
Auditor Location	Philadelphia, Pennsylvania
Auditor Name	GRANT THORNTON LLP

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Cash and cash equivalents
Cash and due from banks	$ 4,820	$ 24,063
Interest-earning deposits at Federal Reserve Bank	1,033,270	864,126
Total cash and cash equivalents	1,038,090	888,189
Investment securities, available-for-sale, at fair value, net of $10.0 million allowance for credit loss at December 31, 2023	747,534	766,016
Commercial loans, at fair value	332,766	589,143
Loans, net of deferred loan fees and costs	5,361,139	5,486,853
Allowance for credit losses	(27,378)	(22,374)
Loans, net	5,333,761	5,464,479
Stock in Federal Reserve, Federal Home Loan and Atlantic Central Bankers Banks	15,591	12,629
Premises and equipment, net	27,474	18,401
Accrued interest receivable	37,534	32,005
Intangible assets, net	1,651	2,049
Other real estate owned	16,949	21,210
Deferred tax asset, net	21,219	19,703
Assets held-for-sale from discontinued operations
Other assets	133,126	89,176
Total assets	7,705,695	7,903,000
Deposits
Demand and interest checking	6,630,251	6,559,617
Savings and money market	50,659	140,496
Time deposits, $100,000 and over	0	330,000
Total deposits	6,680,910	7,030,113
Securities sold under agreements to repurchase	42	42
Senior debt	95,859	99,050
Subordinated debentures	13,401	13,401
Other long-term borrowings	38,561	10,028
Other liabilities	69,641	56,335
Total liabilities	6,898,414	7,208,969
SHAREHOLDERS' EQUITY
Common stock - authorized, 75,000,000 shares of $1.00 par value; 53,202,630 and 55,689,627 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively	53,203	55,690
Additional paid-in capital	212,431	299,279
Retained earnings	561,615	369,319
Accumulated other comprehensive loss	(19,968)	(30,257)
Total shareholders' equity	807,281	694,031
Total liabilities and shareholders' equity	$ 7,705,695	$ 7,903,000

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
SHAREHOLDERS' EQUITY
Investment securities, available-for-sale, at fair value, allowance for credit loss	$ 10,000
Common stock, authorized (in shares)	75,000,000	75,000,000
Common stock, par value (in dollars per share)	$ 1.00	$ 1.00
Common stock, issued (in shares)	53,202,630	55,689,627
Common stock, outstanding	53,202,630	55,689,627

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Interest income
Loans, including fees	$ 436,649	$ 275,837	$ 192,636
Investment securities:
Taxable interest	39,078	25,598	28,661
Tax-exempt interest	153	98	103
Interest-earning deposits	33,627	6,762	715
Total interest income	509,507	308,295	222,115
Interest expense
Deposits	148,529	51,136	5,623
Short-term borrowings	271	1,538	49
Long-term borrowings	507	1,004
Senior debt	5,027	5,118	5,118
Subordinated debentures	1,121	658	449
Total interest expense	155,455	59,454	11,239
Net interest income	354,052	248,841	210,876
Provision for credit losses on loans	8,330	7,108	3,110
Provision for credit loss on security	10,000
Net interest income after provision for credit losses	335,722	241,733	207,766
Non-interest income
Net realized and unrealized gains on commercial loans, at fair value	3,745	13,531	14,885
Leasing related income	6,324	4,822	6,457
Other	2,786	1,159	1,227
Total non-interest income	112,094	105,683	104,749
Non-interest expense
Salaries and employee benefits	121,055	105,368	105,998
Depreciation and amortization	3,074	2,902	2,903
Rent and related occupancy cost	5,980	5,193	5,016
Data processing expense	5,447	4,972	4,664
Printing and supplies	478	428	371
Audit expense	1,620	1,526	1,469
Legal expense	3,850	3,878	6,848
Legal settlement		1,152
Amortization of intangible assets	398	398	398
FDIC insurance	2,957	3,270	5,586
Software	17,349	16,211	15,659
Insurance	5,139	5,026	3,896
Telecom and IT network communications	1,316	1,457	1,569
Consulting	1,938	1,262	1,426
Writedowns and other losses on other real estate owned	1,315
Civil money penalty		1,750
Other	19,126	14,709	12,547
Total non-interest expense	191,042	169,502	168,350
Income before income taxes	256,774	177,914	144,165
Income tax expense	64,478	47,701	33,724
Net income	192,296	130,213	110,441
Discontinued operations
Income from discontinued operations before income taxes			288
Income tax expense			76
Income from discontinued operations, net of tax			212
Net income	$ 192,296	$ 130,213	$ 110,653
Net income per share from continuing operations - basic	$ 3.52	$ 2.30	$ 1.93
Net income per share - basic	3.52	2.30	1.93
Net income per share from continuing operations - diluted	3.49	2.27	1.88
Net income per share - diluted	$ 3.49	$ 2.27	$ 1.88
Weighted average shares - basic	54,506,065	56,556,303	57,190,311
Weighted average shares - diluted	55,053,497	57,268,946	58,830,437
ACH, Card And Other Payment Processing Fees [Member]
Non-interest income
Fees	$ 9,822	$ 8,935	$ 7,526
Prepaid, Debit Card And Related Fees [Member]
Non-interest income
Fees	$ 89,417	$ 77,236	$ 74,654

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME [Abstract]
Net income	$ 192,296	$ 130,213	$ 110,653
Securities available-for-sale:
Change in net unrealized gains (losses)	14,215	(49,888)	(15,679)
Reclassification adjustments for losses (gains) included in income	4	(4)	7
Other comprehensive income (loss)	14,219	(49,892)	(15,672)
Securities available-for-sale:
Change in net unrealized gains (losses)	3,929	(13,343)	(4,257)
Reclassification adjustments for losses (gains) included in income	1	(1)	2
Income tax expense (benefit) related to items of other comprehensive income (loss)	3,930	(13,344)	(4,255)
Other comprehensive income (loss), net of tax and reclassifications into net income	10,289	(36,548)	(11,417)
Comprehensive income	$ 202,585	$ 93,665	$ 99,236

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings/(Accumulated Deficit) [Member]	Accumulated Other Comprehensive Income/(Loss) [Member]	Total
Balance at Dec. 31, 2020	$ 57,551	$ 377,452	$ 128,453	$ 17,708	$ 581,164
Balance, shares at Dec. 31, 2020	57,550,629
Net income			110,653		110,653
Common stock issued from option exercises, net of tax benefits	$ 634	2,794			$ 3,428
Common stock issued from option exercises, net of tax benefits, shares	633,966				633,966
Common stock issued from restricted units, net of tax benefits	$ 1,021	(1,021)
Common stock issued from restricted units, net of tax benefits, shares	1,021,029
Stock-based compensation		8,626			$ 8,626
Common stock repurchases and excise tax	$ (1,835)	(38,165)			(40,000)
Common stock repurchases and excise tax, shares	(1,835,061)
Other comprehensive income (loss) net of reclassification adjustments and tax				(11,417)	(11,417)
Balance at Dec. 31, 2021	$ 57,371	349,686	239,106	6,291	652,454
Balance (in shares) at Dec. 31, 2021	57,370,563
Net income			130,213		130,213
Common stock issued from option exercises, net of tax benefits	$ 58	262			$ 320
Common stock issued from option exercises, net of tax benefits, shares	58,531				58,531
Common stock issued from restricted units, net of tax benefits	$ 583	(583)
Common stock issued from restricted units, net of tax benefits, shares	582,789
Stock-based compensation		7,592			$ 7,592
Common stock repurchases and excise tax	$ (2,322)	(57,678)			$ (60,000)
Common stock repurchases and excise tax, shares	(2,322,256)				(2,322,256)
Other comprehensive income (loss) net of reclassification adjustments and tax				(36,548)	$ (36,548)
Balance at Dec. 31, 2022	$ 55,690	299,279	369,319	(30,257)	$ 694,031
Balance (in shares) at Dec. 31, 2022	55,689,627				55,689,627
Net income			192,296		$ 192,296
Common stock issued from option exercises, net of tax benefits	$ 13	91			$ 104
Common stock issued from option exercises, net of tax benefits, shares	13,158				13,158
Common stock issued from restricted units, net of tax benefits	$ 457	(457)
Common stock issued from restricted units, net of tax benefits, shares	456,991
Stock-based compensation		11,392			$ 11,392
Common stock repurchases and excise tax	$ (2,957)	(97,874)			$ (100,831)
Common stock repurchases and excise tax, shares	(2,957,146)				(2,957,146)
Other comprehensive income (loss) net of reclassification adjustments and tax				10,289	$ 10,289
Balance at Dec. 31, 2023	$ 53,203	$ 212,431	$ 561,615	$ (19,968)	$ 807,281
Balance (in shares) at Dec. 31, 2023	53,202,630				53,202,630

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Operating activities
Net income from continuing operations	$ 192,296	$ 130,213	$ 110,441
Net income from discontinued operations, net of tax			212
Adjustments to reconcile net income to net cash used in operating activities
Depreciation and amortization	3,472	3,300	3,301
Provision for credit losses on loans and security	18,330	7,108	3,110
Net amortization of investment securities discounts/premiums	1,023	1,704	3,458
Stock-based compensation expense	11,392	7,592	8,626
Realized gains on commercial loans, at fair value	(6,954)	(18,635)	(12,929)
Deferred income tax (benefit) expense	(5,681)	5,870	1,402
Gain from discontinued operations		(4)	(1,546)
Loss on sale of other real estate owned			315
Write-down of other real estate owned	1,147
Change in fair value of commercial loans, at fair value	3,085	6,065	1,510
Change in fair value of derivatives	124	(961)	(1,671)
Loss on sales of investment securities	4	6	7
(Increase) decrease in accrued interest receivable	(5,529)	(14,134)	2,587
Increase in other assets	(38,465)	(1,802)	(17,030)
Change in fair value of discontinued assets held-for-sale			498
Increase (decrease) in other liabilities	12,474	(5,340)	(18,399)
Net cash provided by operating activities	186,718	120,982	83,892
Investing activities
Purchase of investment securities available-for-sale	(48,989)	(24,183)	(259,059)
Proceeds from redemptions and prepayments of securities available-for-sale	71,082	161,110	492,258
Sale of repossessed assets	7,927	1,800	910
Proceeds from sale of other real estate owned	5,800	2,343	300
Net decrease (increase) in loans	142,326	(1,680,129)	(1,096,189)
Net decrease in discontinued loans held-for-sale			27,175
Commercial loans, at fair value drawn during the period	(134,256)	(66,067)	(127,765)
Payments on commercial loans, at fair value	384,353	782,157	645,330
Purchases of premises and equipment	(12,689)	(5,134)	(1,549)
Change in receivable from investment in unconsolidated entity			18
Return of investment in unconsolidated entity			7,337
Decrease in discontinued assets held-for-sale		4	5,332
Net cash provided by (used in) investing activities	415,554	(828,099)	(305,902)
Financing activities
Net (decrease) increase in deposits	(349,203)	1,053,202	514,851
Redemptions of senior debt offering	(3,273)
Proceeds from the issuance of common stock	104	320	3,428
Repurchases of common stock	(99,999)	(60,000)	(40,000)
Net cash (used in) provided by financing activities	(452,371)	993,522	478,279
Net increase in cash and cash equivalents	149,901	286,405	256,269
Cash and cash equivalents, beginning of period	888,189	601,784	345,515
Cash and cash equivalents, end of period	1,038,090	888,189	601,784
Supplemental disclosure:
Interest paid	156,269	57,601	11,709
Taxes paid	82,553	37,787	44,341
Non-cash investing and financing activities
Transfer of loans from investment in unconsolidated entity upon its dissolution			22,926
Transfer of real estate owned from investment in unconsolidated entity upon its dissolution			2,145
Transfer of loans from discontinued operations		61,580
Transfers of real estate owned from discontinued operations		17,343
Leased vehicles transferred to repossessed assets	$ 9,361	$ 2,008	$ 1,009

Organization And Nature Of Operations

12 Months Ended

Dec. 31, 2023

Organization And Nature Of Operations [Abstract]

Organization And Nature Of Operations

Note A—Organization and Nature of Operations

The Bancorp, Inc. (“the Company”) is a Delaware corporation and a registered financial holding company. Its primary, wholly-owned subsidiary is The Bancorp Bank, National Association (“the Bank”). The Bank is a nationally chartered commercial bank located in Sioux Falls, South Dakota and is a Federal Deposit Insurance Corporation (“FDIC”) insured institution. As a nationally chartered institution, its primary regulator is the Office of the Comptroller of the Currency (“OCC”). The Bank has two primary lines of business consisting of its national specialty finance segment and its payments segment.

In the national specialty finance segment, the Bank makes the following types of loans: securities-backed lines of credit (“SBLOC”) and cash value of insurance-backed lines of credit (“IBLOC”), leases (direct lease financing), Small Business Administration (“SBA”) loans and non-SBA commercial real estate bridge loans (“REBL”). Prior to 2020, the Company generated CRE bridge loans for sale into loan securitizations which issued commercial mortgage backed securities (“CMBS”). In the third quarter of 2020, the Company decided to retain the commercial real estate bridge loans on its balance sheet. In the third quarter of 2021, the Company resumed originating commercial real estate bridge loans (primarily for apartment buildings), after suspending the origination of such loans for most of 2020 and the first half of 2021. These new originations are classified as real estate bridge loans (“REBL”) and are accounted for at amortized cost, while prior commercial real estate bridge loans originally generated for securitization continue to be accounted for at fair value. Additionally, in 2020, the Company began originating advisor financing loans to investment advisors for debt refinance, acquisition of other advisory firms or internal succession.

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

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

Summary Of Significant Accounting Policies

12 Months Ended

Dec. 31, 2023

Summary Of Significant Accounting Policies [Abstract]

Summary Of Significant Accounting Policies

Note B—Summary of Significant Accounting Policies

1. Basis of Presentation

The accounting and reporting policies of the Company conform to generally accepted accounting principles in the United States of America (“GAAP”) and predominant practices within the banking industry. The consolidated financial statements include the accounts of the Company and all its subsidiaries. All inter-company balances have been eliminated.

The Company’s non-SBA commercial real estate bridge loans, at fair value, are primarily collateralized by multi-family properties (apartment buildings), and to a lesser extent, by hotel and retail properties. These loans were originally generated for sale through securitizations. In 2020, the Company decided to retain these loans on its balance sheet as interest-earning assets and resumed originating such loans in 2021. These new originations are identified as REBL and are held for investment in the loan portfolio, at amortized cost. Prior originations initially intended for securitizations continue to be accounted for at fair value, and are included in the balance sheet in “Commercial loans, at fair value.”

The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial

statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The principal estimates that are particularly susceptible to a significant change in the near term relate to (1) our allowance for credit losses (“ACL”) on loans, leases and securities, (2) the fair value of financial instruments (loans and securities) and the level in which an instrument is placed within the valuation hierarchy, (3) the fair value of stock grants and (4) the realizability of deferred income taxes. These estimates made in accordance with GAAP involve a significant level of estimation uncertainty and have had, or are reasonably likely to have, a material impact on our financial condition or results of operations.

2. Cash and Cash Equivalents

Investments in debt and equity securities which management believes may be sold prior to maturity due to changes in interest rates, prepayment risk, liquidity requirements, or other factors, are classified as available-for-sale. Net unrealized gains for such securities, net of tax effect, are reported as other comprehensive income, through equity and are excluded from the determination of net income. The unrealized losses for available-for-sale securities are evaluated to determine if any component is attributable to credit loss versus market factors. If the present value of cash flows expected to be collected is less than the amortized cost basis, a provision for credit losses is recorded within the consolidated statement of operations. Subsequent improvement in credit may result in reversal of the credit charge in future periods. For available-for-sale debt securities in an unrealized loss position, the Company also assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. The Company does not engage in securities trading. Gains or losses on disposition of investment securities are based on the net proceeds and the adjusted carrying amount of the securities sold using the specific identification method.

The Company evaluates whether an ACL is required by considering primarily the following factors: (a) the extent to which the fair value is less than the amortized cost of the security, (b) changes in the financial condition, credit rating and near-term prospects of the issuer, (c) whether the issuer is current on contractually obligated interest and principal payments, (d) changes in the financial condition of the security’s underlying collateral, and (e) the payment structure of the security. The Company’s determination of the best estimate of expected future cash flows, which is used to determine the credit loss amount, is a quantitative and qualitative process that incorporates information received from third-party sources along with internal assumptions and judgments regarding the future performance of the security. The Company concluded that, as of December 31, 2023, unrealized losses on securities reflected changes in market interest rates after the securities were purchased, except as noted below with regard to the $10.0 million trust preferred security. The Company’s unrealized loss for other debt securities is primarily related to general market conditions, including a lack of liquidity in the market. The severity of the impact of fair value in relation to the carrying amounts of the individual investments is consistent with market developments. The Company’s analysis of each investment is performed at the security level. As a result of its quarterly review, the Company concluded that an allowance was not required to recognize credit losses in either 2022 or 2021. In 2023, the Company recognized a provision of $10.0 million for the total $10.0 million par value of the only trust preferred security in its portfolio, based upon limited financial and other information received from the issuer.

4. Loans and ACL

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are classified as held for investment and are stated at amortized cost, net of unearned discounts, unearned loan fees and an ACL. For loans held for investment at amortized cost, the Company, effective January 1, 2020, began to utilize a current expected credit loss (“CECL”), methodology to determine the ACL. CECL accounting replaced the prior incurred loss model that recognized losses when it became probable that a credit loss would be incurred, with a new requirement to recognize lifetime expected credit losses immediately when a

financial asset is originated or purchased. Accordingly, CECL requires loss estimates for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts.

The ACL is established through a provision for credit losses charged to expense. Loan principal considered to be uncollectible by management is charged against the ACL. The allowance is an amount that management believes is appropriate and supportable to absorb current and future expected losses on existing loans that may become uncollectible. The evaluation takes into consideration historical losses by pools of loans with similar risk characteristics and qualitative factors such as portfolio performance and the potential impact of current economic conditions which may affect the borrowers’ ability to pay. For most pools, the historical loss ratio for each pool is multiplied by its outstanding balance and further multiplied by the estimated remaining average life of each pool. A qualitative factor determined according to the pool’s risk characteristics, is multiplied by the pool’s outstanding principal to comprise the second component of its ACL. For loans previously classified in discontinued operations, discounted cash flow is utilized to determine the related allowance. For SBLOC and IBLOC pools, which have not experienced significant credit losses, probability of loss/loss given default considerations and qualitative factors are utilized. Additionally, the allowance includes allocations for specific loans which have been individually evaluated for an ACL.

Factors considered by management in determining the need for individual loan evaluation for a specific allowance include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not evaluated for an allowance for that reason alone. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record and the amount of the shortfall in relation to the principal and interest owed. The determination of the amount of the allowance calculated on individual loans considers either the present value of expected future cash flows discounted at the loan's effective interest rate or the estimated fair value of the collateral if the loan is collateral dependent. An allowance allocation is established for such loans in the amount their carrying value exceeds the present value of future cash flows; or, if collateral dependent, the amount their carrying value exceeds the collateral’s estimated fair value. The estimated fair values of substantially all of the Company's allowances on individual loans are measured based on the estimated fair value of the loan's collateral, and applicable loans are primarily found in two portfolios.

First, for small business commercial loans (“SBLs”) secured by real estate (primarily SBA), estimated fair values of collateral are determined primarily through third-party appraisals or evaluations. When a real estate secured loan is individually evaluated for a potential ACL, a decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is based on various considerations including the age of the most recent appraisal and the condition of the property. Appraised value, discounted by the estimated costs to sell the collateral, is considered to be the estimated fair value. For SBL commercial and industrial loans secured by non-real estate collateral, such as accounts receivable or inventory and equipment, estimated fair values are determined based on the borrower's financial statements, inventory reports, accounts receivable agings or equipment appraisals or invoices. Indications of value from these sources may be discounted based on the age of the financial information or the quality of the assets. Amounts guaranteed by the U.S. government are excluded from the Company’s allowance evaluations. Second, for leasing, fair values are determined utilizing authoritative industry sources such as Black Book.

The CECL methodology and the loan analyses performed on individual loans described above comprise the components of the ACL. On a quarterly basis, the allowance is adjusted to the total of those components through the provision for credit losses. The ACL represents management's estimate of losses inherent in the loan and lease portfolio as of the consolidated balance sheet date and is recorded as a reduction to loans and leases. If the quarterly analysis of those two components exceeds the balance of the ACL, the allowance is increased by the provision for credit losses. Loans deemed to be uncollectible are charged against the ACL, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of loans receivable are charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely. Because all identified losses are immediately charged off, no portion of the ACL is restricted to any individual loan or groups of loans, and the entire allowance is available to absorb any and all loan losses.

The evaluation of the adequacy of the ACL includes, among other factors, an analysis of historical loss rates and qualitative judgments, applied to current loan totals over remaining estimated lives. However, actual future losses may vary compared to historical trends and estimated remaining lives may change over time. Actual losses on specified problem loans, may depend upon disposition of collateral for which actual sales prices may differ from appraisals. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available.

Interest income is accrued as earned on a simple interest method. Accrual of interest is discontinued on a loan when management believes, after considering economic and business conditions and collection efforts, that the borrower’s financial condition is such that collection of interest is doubtful.

When a loan is placed on non-accrual status, all accumulated accrued interest receivable applicable to periods prior to the current year is charged off to the ACL. Interest that had accrued in the current year is reversed from current period income. Loans reported as having missed four or more consecutive monthly payments and still accruing interest must have both principal and accruing interest adequately secured and must be in the process of collection. Such loans are reported as 90 days delinquent and still accruing. For all loan types, the Company uses the method of reporting delinquencies which considers a loan past due or delinquent if a monthly payment has not been received by the close of business on the loan’s next due date. In the Company’s reporting, two missed payments are reflected as 30 to 59 day delinquencies and three missed payments are reflected as 60 to 89 day delinquencies.

Loans which were originated and previously intended for sale in secondary markets, but which are now being held on the balance sheet as earning assets, are carried at estimated fair value and are excluded from the allowance analysis. Changes in fair value are recognized as unrealized gains or losses on commercial loans in the consolidated statements of operations. The Company originated and sold or securitized specific commercial mortgage loans in secondary markets through 2019, but in 2020 decided to retain these loans on its balance sheet. These loans are accounted for under the fair value option and amounted to $332.8 million at December 31, 2023, and $589.1 million at December 31, 2022. These loans are classified as commercial loans, at fair value on the consolidated balance sheets.

5. Premises and Equipment

Premises and equipment, including leasehold improvements, are stated at cost less accumulated depreciation. Depreciation expense is computed on the straight-line method over the useful lives of the assets. Leasehold improvements are depreciated over the shorter of the estimated useful lives of the improvements or the terms of the related leases.

6. Internal Use Software

The Company capitalizes costs associated with internally developed and/or purchased software systems for new products and enhancements to existing products that have reached the application stage and meet recoverability tests. Capitalized costs include external direct costs of materials and services utilized in developing or obtaining internal use software and payroll and payroll related expenses for employees who are directly associated with, and devote time to, the internal use software project. Capitalization of such costs begins when the preliminary project stage is complete and ceases no later than the point at which the project is substantially complete and ready for its intended purpose.

The carrying value of the Company’s software is periodically reviewed and a loss is recognized if the value of the estimated undiscounted cash flow benefit related to the asset falls below the unamortized cost. Amortization is provided using the straight-line method over the estimated useful life of the related software, which is generally seven years. As of December 31, 2023 and 2022, the Company had net capitalized software costs of approximately $4.7 million and $5.6 million, respectively. Net capitalized software is presented as part of other assets on the consolidated balance sheets. The Company recorded related amortization expense of approximately $1.6 million, $2.0 million and $2.0 million for the years ended December 31, 2023, 2022 and 2021, respectively.

7. Income Taxes

The Company accounts for income taxes under the liability method whereby deferred tax assets and liabilities are determined based on the difference between their carrying values on the consolidated balance sheet and their tax basis as measured by the enacted tax rates which will be in effect when these differences reverse. Deferred tax expense (benefit) is the result of changes in deferred tax assets and liabilities.

The Company recognizes the benefit of a tax position in the consolidated financial statements only after determining that the relevant tax authority would more likely than not sustain the position following an audit by the tax authority. For tax positions meeting the more likely than not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. For these analyses, the

Company may engage attorneys to provide opinions related to the positions. The Company applies this policy to all tax positions for which the statute of limitations remain open, but this application does not materially impact the Company’s consolidated balance sheet or consolidated statement of operations. Any interest or penalties related to uncertain tax positions are recognized in income tax expense (benefit) in the consolidated statement of operations.

Deferred tax assets are recorded on the consolidated balance sheet at their net realizable value. The Company performs an assessment each reporting period to evaluate the amount of the deferred tax asset it is more likely than not to realize. Realization of deferred tax assets is dependent upon the amount of taxable income expected in future periods, as tax benefits require taxable income to be realized. If a valuation allowance is required, the deferred tax asset on the consolidated balance sheet is reduced via a corresponding income tax expense in the consolidated statement of operations.

8. Stock-Based Compensation

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

9. Other Real Estate Owned

Other real estate owned (“OREO”) is recorded at estimated fair market value less estimated cost of disposal; which establishes a new cost basis or carrying value. When property is acquired, the excess, if any, of the loan balance over fair market value is charged to the ACL. Periodically thereafter, the asset is reviewed for subsequent declines in the estimated fair market value against the carrying value. Subsequent declines, if any, and holding costs, as well as gains and losses on subsequent sale, are included in the consolidated statements of operations. The Company had $16.9 million of OREO at December 31, 2023 and $21.2 million at December 31, 2022.

10. Advertising Costs

The Company expenses advertising and marketing costs as incurred. Advertising and marketing costs amounted to $978,000, $1.2 million and $1.6 million for the years ended December 31, 2023, 2022 and 2021, respectively. Advertising and marketing expense is reflected under “Other” in the non-interest expense section of the consolidated statements of operations.

11. Earnings Per Share

The Company calculates earnings per share under ASC 260, Earnings Per Share. Basic earnings per share excludes dilution and is computed by dividing income available to common shareholders by the weighted average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities, including stock options and RSUs or other contracts to issue common stock were exercised and converted into common stock. Stock options are dilutive if their exercise prices are less than the current stock prices. RSUs are dilutive because they represent grants over vesting periods which do not require employees to pay exercise prices. The dilution shown in the tables below includes the potential dilution from both stock options and RSUs.

The following tables show the Company’s earnings per share for the periods presented:


	Year ended December 31, 2023
	Income		Shares		Per share
	(numerator)		(denominator)		amount
	(dollars in thousands except per share data)
Basic earnings per share
Net earnings available to common shareholders	$	192,296		54,506,065	$	3.52
Effect of dilutive securities
Common stock options and RSUs		—		547,432		(0.03)
Diluted earnings per share
Net earnings available to common shareholders	$	192,296		55,053,497	$	3.49

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


	Year ended December 31, 2022
	Income		Shares		Per share
	(numerator)		(denominator)		amount
	(dollars in thousands except per share data)
Basic earnings per share
Net earnings available to common shareholders	$	130,213		56,556,303	$	2.30
Effect of dilutive securities
Common stock options and RSUs		—		712,643		(0.03)
Diluted earnings per share
Net earnings available to common shareholders	$	130,213		57,268,946	$	2.27

Stock options for 480,104 shares, exercisable at prices between $6.87 and $18.81 per share, were outstanding at December 31, 2022 and included in the diluted earnings per share computation because the exercise price per share was less than the average market price. Stock options for 100,000 shares were anti-dilutive and not included in the earnings per share calculation.


	Year ended December 31, 2021
	Income		Shares		Per share
	(numerator)		(denominator)		amount
	(dollars in thousands except per share data)
Basic earnings per share from continuing operations
Net earnings available to common shareholders	$	110,441		57,190,311	$	1.93
Effect of dilutive securities
Common stock options and RSUs		—		1,640,126		(0.05)
Diluted earnings per share
Net earnings available to common shareholders	$	110,441		58,830,437	$	1.88


	Year ended December 31, 2021
	Income		Shares		Per share
	(numerator)		(denominator)		amount
	(dollars in thousands except per share data)
Basic earnings per share from discontinued operations
Net earnings available to common shareholders	$	212		57,190,311	$	—
Effect of dilutive securities
Common stock options and RSUs		—		1,640,126		—
Diluted earnings per share
Net earnings available to common shareholders	$	212		58,830,437	$	—


	Year ended December 31, 2021
	Income		Shares		Per share
	(numerator)		(denominator)		amount
	(dollars in thousands except per share data)
Basic earnings per share
Net earnings available to common shareholders	$	110,653		57,190,311	$	1.93
Effect of dilutive securities
Common stock options and RSUs		—		1,640,126		(0.05)
Diluted earnings per share
Net earnings available to common shareholders	$	110,653		58,830,437	$	1.88

Stock options for 450,104 shares, exercisable at prices between $6.87 and $18.81 per share, were outstanding at December 31, 2021 and included in the diluted earnings per share computation because the exercise price per share was less than the average market price. Stock options for 100,000 shares were anti-dilutive and not included in the earnings per share calculation.

12. Restrictions on Cash and Due from Banks

Historically, the Bank has been required to maintain reserves against customer demand deposits by keeping cash on hand or balances with the FRB. As a result of the COVID-19 pandemic, the requirement for such reserves were temporarily suspended, and the suspension has continued. Accordingly, the amounts of those required reserves was approximately zero at both December 31, 2023 and 2022.

13. Other Identifiable Intangible Assets

In May 2016, the Company purchased approximately $60.0 million of lease receivables, which resulted in a customer list intangible of $3.4 million which is being amortized over a ten year period. Amortization expense is $340,000 per year ($800,000 over the next three years). The gross carrying value is $3.4 million with respective accumulated amortization of $2.6 million and $2.3 million at December 31, 2023 and December 31, 2022. The purchase price allocation related to this intangible was finalized in 2017 and remained unchanged from the purchase price allocation recorded in 2016 when the purchase was made.

In January 2020, the Company purchased McMahon Leasing and subsidiaries for approximately $8.7 million, which resulted in $1.1 million of intangibles. The gross carrying value of $1.1 million of intangibles was comprised of a customer list intangible of $689,000, goodwill of $263,000 and a trade name valuation of $135,000. The customer list intangible is being amortized over a twelve year period and accumulated amortization was $230,000 at December 31, 2023. Amortization expense is $57,000 per year ($287,000 over the next five years). The gross carrying value and accumulated amortization related to the Company’s intangibles at December 31, 2023 and 2022 are presented below.


	December 31,
	2023				2022
	Gross				Gross
	Carrying		Accumulated		Carrying		Accumulated
	Amount		Amortization		Amount		Amortization
		(in thousands)

Customer list intangibles	$	4,093	$	2,840	$	4,093	$	2,442
Goodwill		263		—		263		—
Trade Name		135		—		135		—
Total	$	4,491	$	2,840	$	4,491	$	2,442

The approximate future annual amortization of both the Company’s intangible items are as follows (in thousands):


Year ending December 31,
2024	$	398
2025		398
2026		173
2027		57
2028		57
Thereafter		170
	$	1,253

14. Derivative Financial Instruments

The Company has utilized derivatives to hedge interest rate risk on fixed rate loans which were previously intended for sale. Changes in the fair value of these derivatives, designated as fair value hedges, are recorded in earnings with and in the same consolidated income statement line item as changes in the fair value of the related hedged item, “Net realized and unrealized gains (losses) on commercial loans (at fair value)”. Related loans are no longer held-for-sale, but continue to be accounted for at their estimated fair value. As the Company is no longer originating fixed rate loans for sale, it is no longer entering into new hedges. The Company has left existing hedges in place.

15. Common Stock Repurchase Program

In 2020, the Company’s Board of Directors (the “Board”) authorized a common stock repurchase program for the 2021 fiscal year (the “2021 Repurchase Program”), under which the Company purchased $10.0 million of shares in each quarter of 2021. The total of $40.0 million resulted in the repurchase of 1,835,061 shares of common stock at an average price of $21.80 per share.

On October 20, 2021, the Board approved a revised stock repurchase program for the 2022 fiscal year (the “2022 Repurchase Program”), under which the Company purchased $15.0 million of shares in each quarter of 2022. The total of $60.0 million resulted in the repurchase of 2,322,256 shares of common stock at an average price of $25.84 per share.

On October 26, 2022, the Board approved a revised stock repurchase program for the 2023 fiscal year (the “2023 Repurchase Program”) under which the Company may repurchase shares totalling up to $25.0 million per quarter in 2023, for a maximum repurchase amount of $100.0 million. The total of $100.0 million resulted in the repurchase of 2,957,146 shares of common stock at an average price of $33.82 per share.

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

16. Long-term Borrowings

The $38.6 million and $10.0 million outstanding for long-term borrowings at December 31, 2023 and 2022, respectively, consisted of sold loans which were accounted for as secured borrowings, because they did not qualify for true sale accounting.

17. Revenue Recognition

The Company’s revenue streams that are in the scope of Accounting Standards Codification (“ASC”) 606 include prepaid and debit card, card payment, interchange, automated clearing house (“ACH”) and deposit processing and other fees. The Company recognizes revenue when the performance obligations related to the transfer of goods or services under the terms of a contract are satisfied. Some obligations are satisfied at a point in time while others are satisfied over a period of time. Revenue is recognized as the amount of consideration to which the Company expects to be entitled to in exchange for transferring goods or services to a customer. When consideration includes a variable component, the amount of consideration attributable to variability is included in the transaction price only to the extent it is probable that significant revenue recognized will not be reversed when uncertainty associated

with the variable consideration is subsequently resolved. The Company’s contracts generally do not contain terms that require significant judgment to determine the variability impacting the transaction price.

A performance obligation is deemed satisfied when the control over goods or services is transferred to the customer. Control is transferred to a customer either at a point in time or over time. To determine when control is transferred at a point in time, the Company considers indicators, including but not limited to the right to payment for the asset, transfer of significant risk and rewards of ownership of the asset and acceptance of the asset by the customer. When control is transferred over a period of time, for different performance obligations, either the input or output method is used to measure progress for the transfer. The measure of progress used to assess completion of the performance obligation varies between performance obligations and may be based on time throughout the period of service or on the value of goods and services transferred to the customer. As each distinct service or activity is performed, the Company transfers control to the customer based on the services performed as the customer simultaneously receives the benefits of those services. This timing of revenue recognition aligns with the resolution of any uncertainty related to variable consideration. Costs incurred to obtain a revenue producing contract are amortized over the life of the contract if material, otherwise they are expensed as a practical expedient. The fees on those revenue streams are generally assessed and collected as the transaction occurs, or on a monthly or quarterly basis. The Company has completed its review of the contracts and other agreements that are within the scope of revenue guidance and did not identify any material changes to the timing or amount of revenue recognition. The Company’s accounting policies did not change materially since the principles of revenue recognition in Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers are largely consistent with previous practices already implemented and applied by the Company. The vast majority of the Company’s services related to its revenues are performed, earned and recognized monthly.

The majority of fees the Company earns result from contractual transaction fees paid by third-party sponsors to the Company and monthly service fees. Additionally, the Company earns interchange fees paid through settlement with associations such as Visa, which are also determined on a per transaction basis. The Company records this revenue net of costs such as association fees and interchange transaction charges. Fees earned by the Company from processing card payments, or from processing ACH payments or other payments are also determined primarily on a per transaction basis.

Prepaid and debit card fees primarily include fees for services related to reconciliation, fraud detection, regulatory compliance and other services which are performed and earned daily or monthly and are also billed and collected on a monthly basis. Accordingly, there is no significant component of the services the Company performs or related revenues which are deferred. The Company earns transactional and/or interchange fees on prepaid and debit card accounts when transactions occur and revenue is billed and collected monthly or quarterly. Certain volume or transaction based interchange expenses paid to payment networks such as Visa, reduce revenue which is presented net on the income statement. Card payment and ACH processing fees include transaction fees earned for processing merchant transactions. Revenue is recognized when a cardholder’s transaction is approved and settled, or monthly. ACH processing fees are earned on a per item basis as the transactions are processed for third party clients and are also billed and collected monthly. Service charges on deposit accounts include fees and other charges the Company receives to provide various services, including but not limited to, account maintenance, check writing, wire transfer and other services normally associated with deposit accounts. Revenue for these services is recognized monthly as the services are performed. The Company’s customer contracts do not typically have performance obligations and fees are collected and earned when the transaction occurs. The Company may, from time to time, waive certain fees for customers but generally does not reduce the transaction price to reflect variability for future reversals due to the insignificance of the amounts. Waiver of fees reduces the revenue in the period the waiver is granted to the customer.

18. Leases

The Company determines if an arrangement is a lease at inception. Operating lease right-of-use (“ROU”) assets and operating lease liabilities are included in the Company’s consolidated financial statements. ROU assets represent the Company’s right-of-use of an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments pursuant to the Company’s leases. The ROU assets and liabilities are recognized at commencement of the lease based on the present value of lease payments over the lease term. To determine the present value of lease payments, the Company uses its incremental borrowing rate. The lease term may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense is recognized on a straight-line basis over the lease term.

19. Risks and Uncertainties

ASC 275, Risks and Uncertainties addresses disclosures when it is reasonably possible that estimates in the financial statements may change in future periods. The economic impact of the COVID-19 pandemic and virus variants appears to have waned but may remain a risk.

20. Senior Debt

On August 13, 2020, the Company issued $100 million of senior notes (the “2025 Senior Notes”) with a maturity date of August 15, 2025 and a 4.75% interest rate, with interest paid semi-annually on March 15 and September 15. The 2025 Senior Notes are the Company’s direct, unsecured and unsubordinated obligations and rank equal in priority with all of the Company’s existing and future unsecured and unsubordinated indebtedness and senior in right of payment to all of the Company’s existing and future subordinated indebtedness.

21. Other long-term borrowings

Other long-term borrowings consist of loans which did not qualify for true sale accounting treatment. In 2023, there was an immaterial correction related to participation loans which increased long-term borrowings.

22. Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The update changed the accounting for credit losses on loans and debt securities. For loans and held-to-maturity debt securities, the update requires a CECL approach to determine the allowance for credit losses. CECL requires loss estimates for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts. Also, the update eliminates the existing guidance for purchased credit impaired loans, but requires an allowance for purchased financial assets with more than insignificant deterioration since origination. In addition, the update modifies the other-than-temporary impairment model for available-for-sale debt securities to require an allowance for credit losses instead of a direct write-down, which allows for reversal of credit losses in future periods based on improvements in credit. The guidance was effective in the first quarter of 2020 with a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. As a result of the Company’s adoption of the guidance in the first quarter of 2020, it recorded a $2.4 million charge to retained earnings and an $834,000 deferred tax asset, with a corresponding $2.6 million increase in the allowance for credit losses and a $569,000 increase to other liabilities. The $569,000 reflected an allowance on unfunded commitments.

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

In October 2020, the FASB issued ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs, which addressed non-refundable fees and other costs related to receivables. This ASU clarifies that an entity should amortize any premium, if applicable, to the next call date, which is the first date when a call option at a specified price becomes exercisable. The amendments in this ASU became effective for fiscal years beginning after December 15, 2020. The Company had previously amortized fees through the next call date and will continue to do so; accordingly, there is no impact on the financial statements.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments-Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures. This ASU addresses areas identified by the FASB as part of its post-implementation review of the credit losses standard (ASU 2016-13) that introduced the CECL model. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan refinancings and modifications. The Company adopted ASU 2022-02 on January 1, 2023. Effective January 1, 2023 loan modifications to borrowers experiencing financial difficulty are required to be disclosed by type of modification and by type of loan. Prior accounting guidance classified loans which were modified as troubled debt restructurings only if the modification reflected a

concession from the lender in the form of a below market interest rate or other concession in addition to borrower financial difficulty. Under the new guidance, the Company reports modifications whether a concession was made or not.

On March 31, 2022, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin Number 121 (“SAB 121”). In SAB 121, the SEC staff expressed the views of its staff regarding the accounting for obligations to safeguard crypto-assets an entity holds for platform users. As the Company neither holds crypto-assets or recognizes such assets as loan collateral, this release will not impact its consolidated financial statements or disclosures.

Subsequent Events	12 Months Ended
Subsequent Events	Dec. 31, 2023
Subsequent Events [Abstract]
Subsequent Events	Note C— Subsequent Events The Company evaluated its December 31, 2023 consolidated financial statements for subsequent events through the date the consolidated financial statements were issued. Pursuant to the 2023 Repurchase Program, described in “Note J—Shareholders’ Equity,” between January 1, 2024 and February 26, 2024, the Company repurchased 766,264 shares of its common stock, at a total cost of $31.6 million and an average price of $41.30 per share.

Investment Securities

12 Months Ended

Dec. 31, 2023

Investment Securities [Abstract]

Investment Securities

Note D—Investment Securities

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


Available-for-sale	December 31, 2023
			Gross		Gross			Allowance
	Amortized		unrealized		unrealized			for	Fair
	cost		gains		losses			Credit Losses	value
U.S. Government agency securities	$	35,346	$	6	$	(1,466)	$	—	$	33,886
Asset-backed securities⁽¹⁾		327,159		9		(1,815)		—		325,353
Tax-exempt obligations of states and political subdivisions		4,860		39		(48)		—		4,851
Taxable obligations of states and political subdivisions		43,323		15		(952)		—		42,386
Residential mortgage-backed securities		169,882		108		(9,223)		—		160,767
Collateralized mortgage obligation securities		35,575		—		(1,537)		—		34,038
Commercial mortgage-backed securities		157,759		—		(11,506)		—		146,253
Corporate debt securities		10,000		—		—		(10,000)		—
	$	783,904	$	177	$	(26,547)	$	(10,000)	$	747,534


	December 31, 2023
			Gross		Gross
	Amortized		unrealized		unrealized		Fair
⁽¹⁾Asset-backed securities as shown above	cost		gains		losses		value
Federally insured student loan securities	$	6,032	$	—	$	(49)	$	5,983
Collateralized loan obligation securities		321,127		9		(1,766)		319,370
	$	327,159	$	9	$	(1,815)	$	325,353


Available-for-sale	December 31, 2022
			Gross		Gross
	Amortized		unrealized		unrealized		Fair
	cost		gains		losses		value
U.S. Government agency securities	$	29,859	$	17	$	(1,495)	$	28,381
Asset-backed securities⁽¹⁾		343,885		—		(9,876)		334,009
Tax-exempt obligations of states and political subdivisions		3,560		—		(61)		3,499
Taxable obligations of states and political subdivisions		45,668		52		(1,709)		44,011
Residential mortgage-backed securities		150,135		148		(10,463)		139,820
Collateralized mortgage obligation securities		43,858		—		(2,075)		41,783
Commercial mortgage-backed securities		179,977		—		(13,164)		166,813
Corporate debt securities		10,000		—		(2,300)		7,700
	$	806,942	$	217	$	(41,143)	$	766,016


	December 31, 2022
			Gross		Gross
	Amortized		unrealized		unrealized		Fair
⁽¹⁾Asset-backed securities as shown above	cost		gains		losses		value
Federally insured student loan securities	$	8,488	$	—	$	(144)	$	8,344
Collateralized loan obligation securities		335,397		—		(9,732)		325,665
	$	343,885	$	—	$	(9,876)	$	334,009

The amortized cost and fair value of the Company’s investment securities at December 31, 2023, by contractual maturity are shown below (in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Available-for-sale
	Amortized		Fair
	cost		value
Due before one year	$	33,726	$	33,248
Due after one year through five years		124,592		120,470
Due after five years through ten years		286,694		280,816
Due after ten years		338,892		313,000
	$	783,904	$	747,534

In 2020, the Company began pledging loans to collateralize its line of credit with the FHLB, as described in “Note E—Loans.” The Company had no securities pledged against that line at December 31, 2023 and December 31, 2022. There were no gross realized gains on sales of securities for each of the years ended December 31, 2023, 2022 and 2021. Realized losses on securities sales were $4,000, $6,000, and $7,000, respectively, for the years ended December 31, 2023, 2022 and 2021.

Investments in FHLB, ACBB, and FRB stock are recorded at cost and amounted to $15.6 million at December 31, 2023 and $12.6 million at December 31, 2022. At each of those dates, ACBB stock amounted to $40,000. The Bank’s conversion to a national charter required the purchase of $11.0 million of Federal Reserve Bank stock in September of 2022. The amount of FHLB stock required to be held is based on the amount of borrowings, and after repayment thereof, the stock may be redeemed.

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


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

The table below indicates the length of time individual securities had been in a continuous unrealized loss position at December 31, 2022 (in thousands):


Available-for-sale		Less than 12 months				12 months or longer				Total
	Number of securities	Fair Value		Unrealized losses		Fair Value		Unrealized losses		Fair Value		Unrealized losses
Description of Securities
U.S. Government agency securities	12	$	19,523	$	(1,461)	$	2,269	$	(34)	$	21,792	$	(1,495)
Asset-backed securities	55		125,938		(3,027)		208,071		(6,849)		334,009		(9,876)
Tax-exempt obligations of states and political subdivisions	4		3,499		(61)		—		—		3,499		(61)
Taxable obligations of states and political subdivisions	26		39,710		(1,709)		—		—		39,710		(1,709)
Residential mortgage-backed securities	135		101,685		(6,198)		28,843		(4,265)		130,528		(10,463)
Collateralized mortgage obligation securities	22		41,456		(2,057)		327		(18)		41,783		(2,075)
Commercial mortgage-backed securities	43		124,953		(7,683)		41,860		(5,481)		166,813		(13,164)
Corporate debt securities	1		—		—		7,700		(2,300)		7,700		(2,300)
Total unrealized loss position investment securities	298	$	456,764	$	(22,196)	$	289,070	$	(18,947)	$	745,834	$	(41,143)

The fair values of investment securities are based on a fair market value supplied by a third-party market data provider when available. If not available, prices provided by securities dealers with expertise in the securities being evaluated may also be utilized. When such market information is not available, fair values are based on the present value of cash flows, which discounts expected cash flows from principal and interest using yield to maturity at the measurement date. CECL accounting was adopted in 2020, and requires that an ACL be established through a charge to the income statement to recognize credit deterioration. The charge may be reversed should credit improve in the future. Prior accounting required recognition of losses of other-than temporary-impairment, which could not be reversed in future periods. The Company periodically reviews its investment portfolio to determine whether an ACL is warranted, based on evaluations of the creditworthiness of the issuers/guarantors, the underlying collateral if applicable and the continuing performance of the securities. The Company did not recognize credit charges on investment securities in either 2022 or 2021. In 2023, the Company recorded a provision for credit loss on a security as follows.

The Company owns one single issuer trust preferred security issued by an insurance company which was purchased in 2006, and owns no other such security or similar security. The security is not rated by any bond rating service. At December 31, 2023, this security had a cost basis of $10.0 million, with an allowance for credit loss for $10.0 million, and comprises the balance of the corporate debt securities classification in the tables above. The security was issued by an aggregator of insurance lines in run-off, including workmen’s compensation lines. In the third quarter of 2023, the Company was notified that interest payments were being deferred on the security, as permitted under the terms of the trust preferred indenture which permits such deferrals for up to twenty consecutive quarters. At the end of the deferral, deferred interest must be repaid, including interest on the deferred interest. The Bank placed the security in non-accrual status and continued previous efforts to obtain financial information from the issuer, which is not required to provide such information under the terms of the related indenture. Limited financial and other information finally distributed to holders in the fourth quarter of 2023, did not provide a substantial basis for repayment. Accordingly, the Bank provided for a potential loss for the full amount of the $10.0 million par value of the security through a provision for credit loss of $10.0 million. The security had a fair value of $6.3 million through adjustments to accumulated comprehensive income. While the security has previously been subject to interest deferral which was repaid, there can be no assurance that repayment will occur for the current deferral. In 2023, $197,000 of accrued interest income was reversed on this security when it was placed in non-accrual status, and approximately $422,000 of additional interest would have been earned in 2023 had the security continued to accrue interest. The Company has evaluated the securities in the above tables as of December 31, 2023 and has concluded that, except for the trust preferred security discussed above, none of these securities required an ACL.

The Company evaluates whether an ACL is required by considering primarily the following factors: (a) the extent to which the fair value is less than the amortized cost of the security, (b) changes in the financial condition, credit rating and near-term prospects of the issuer, (c) whether the issuer is current on contractually obligated interest and principal payments, (d) changes in the financial condition of the security’s underlying collateral, and (e) the payment structure of the security. The Company’s determination of the best estimate of expected future cash flows, which is used to determine the credit loss amount, is a quantitative and qualitative process that incorporates information received from third-party sources along with internal assumptions and judgments regarding the future performance of the security. The Company concluded that the severity of the impact of fair value in relation to the carrying

amounts of the individual investments is consistent with market developments. The Company’s analysis of each investment is performed at the security level.

Loans

12 Months Ended

Dec. 31, 2023

Loans [Abstract]

Loans

Note E—Loans

The Company has several lending lines of business including: SBLs, comprised primarily of SBA loans; direct lease financing primarily for commercial vehicles and to a lesser extent equipment; SBLOC collateralized by marketable securities; IBLOC collateralized by the cash value of eligible life insurance policies; and investment advisor financing for purposes of debt refinance, acquisition of another firm or internal succession. Prior to 2020, the Company also originated commercial real estate bridge loans for sale into securitizations. At origination, the Company elected fair value treatment for these loans as they were originally held-for-sale, to better reflect the economics of the transactions. In 2020, the Company decided to retain these loans on its balance sheet. Therefore, these loans are no longer accounted for as held-for-sale, but the Company continues to present them at fair value. These loans are included in commercial loans, at fair value which, at December 31, 2023 and 2022, amounted to $332.8 million and $589.1 million, respectively, with an amortized cost of $336.5 million and $589.8 million, respectively. Those totals also include the guaranteed portion of certain SBA loans, also previously held for sale. Included in “Net realized and unrealized gains (losses) on commercial loans, at fair value” in the consolidated statements of operations are changes in the fair value of such loans resulting in an unrealized loss of $3.1 million in 2023, an unrealized loss of $6.1 million in 2022 and an unrealized gain of $285,000 in 2021. These amounts include unrealized credit related losses of $1.7 million, $7.7 million and $201,000, respectively, in 2023, 2022 and 2021. Interest earned on loans held at fair value during the period held is recorded in “Interest Income – Loans, including fees” in the consolidated statements of operations. The $1.7 million credit related unrealized loss in 2023 resulted from a non-controlling participation in a multi-family apartment building. Included in the $6.1 million loss in 2022 was a $4.0 million third quarter unrealized loss to reflect a write-down to a September 2022 appraisal, less estimated disposition costs, of a $9.5 million loan. The loan, collateralized by a movie theater, had been current and performing but missed its August 2022 payment, and the tenant ceased operations in that month. The property was subsequently transferred to OREO, and the unrealized loss was realized in 2023 upon sale of the property. The loan represented the only movie theater loan in the Company’s portfolios and was originated in 2015, before non-SBA commercial loan originations were primarily comprised of apartment building loans. Of the $2.21 billion of non-SBA commercial loans, at fair value and REBL loans which together comprise the non-SBA commercial real estate portfolios, $2.17 billion are comprised of apartment building loans. In the third quarter of 2021, the Company resumed the origination of such loans which it also intends to hold for investment and which are accounted for at amortized cost. They are captioned as REBLs as they are transitional commercial mortgage loans which are made to improve and rehabilitate existing properties which already have cash flow. The Bank has pledged the majority of its loans held for investment at amortized cost and commercial loans, at fair value to either the FHLB or the Federal Reserve Bank for lines of credit with those institutions. The amount of loans pledged varies and the collateral may be unpledged at any time to the extent the collateral exceeds advances. The lines are maintained consistent with the Bank’s liquidity policy which maximizes potential liquidity. At December 31, 2023, $2.43 billion of loans were pledged to the Federal Reserve Bank and $1.10 billion of loans were pledged to the FHLB against lines of credit which provide a source of liquidity to the Bank. There were no amounts drawn against these lines at December 31, 2023.

Of the six securities purchased by the Bank from its securitizations, all have been repaid except one issued by CRE-2. As of December 31, 2023, the principal balance of the Bank’s CRE-2-issued security was $12.6 million and it is subordinate to the repayment of a senior tranche with a remaining balance of $3.3 million. A resulting total of $15.9 million plus trustee fees, late charges and unpaid interest is required to repay the Bank tranche. The collateral remaining to repay the $15.9 million consists of a suburban office building in New Jersey and a retail facility in Missouri, the combined most recent appraisals for which total $33.0 million. The excess of the $33.0 million appraised value over the $15.9 million provides repayment protection for the Bank-owned tranche. Efforts to resolve the New Jersey suburban office loan and stabilize the property have not been successful to date. A 2023 broker’s opinion of the property’s liquidation value was $20.9 million versus a loan balance of $24.5 million. Negotiations with the borrower continue, with no plan for immediate liquidation. The Missouri retail facility is held as real estate owned by the trust and is also not yet stabilized, and the special servicer expects to market the property for liquidation. The March 9, 2023 appraised value of the property was $12.1 million versus a loan balance of $16.3 million. Since borrowers are no longer making payments, accrued interest and the Bank’s remaining $12.6 million of principal are not expected to be repaid until collateral liquidation.

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

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


	December 31,		December 31,
	2023		2022

SBL non-real estate	$	137,752	$	108,954
SBL commercial mortgage		606,986		474,496
SBL construction		22,627		30,864
SBLs		767,365		614,314
Direct lease financing		685,657		632,160
SBLOC / IBLOC⁽¹⁾		1,627,285		2,332,469
Advisor financing⁽²⁾		221,612		172,468
Real estate bridge lending		1,999,782		1,669,031
Other loans⁽³⁾		50,638		61,679
		5,352,339		5,482,121
Unamortized loan fees and costs		8,800		4,732
Total loans, net of unamortized loan fees and costs	$	5,361,139	$	5,486,853


	December 31,		December 31,
	2023		2022

SBLs, including costs net of deferred fees of $9,502 and $7,327 for December 31, 2023 and December 31, 2022, respectively	$	776,867	$	621,641
SBLs included in commercial loans, at fair value		119,287		146,717
Total SBLs⁽⁴⁾	$	896,154	$	768,358

⁽¹⁾SBLOC are collateralized by marketable securities, while IBLOC are collateralized by the cash surrender value of insurance policies. At December 31, 2023 and December 31, 2022, respectively, IBLOC loans amounted to $646.9 million and $1.12 billion.

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

⁽³⁾Includes demand deposit overdrafts reclassified as loan balances totaling $1.7 million and $2.6 million at December 31, 2023 and December 31, 2022, respectively. Estimated overdraft charge-offs and recoveries are reflected in the ACL and have been immaterial.

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

‎

The following table provides information about loans individually evaluated for credit loss at December 31, 2023 and 2022 (in thousands). Legacy commercial real estate is comprised of Philadelphia community bank commercial loans, a business line which was exited.


	December 31, 2023
	Recorded ‎investment		Unpaid ‎principal ‎balance		Related ‎ACL		Average ‎recorded ‎investment		Interest ‎income ‎recognized
Without an ACL
SBL non-real estate	$	522	$	1,714	$	—	$	380	$	—
SBL commercial mortgage		1,546		1,546		—		1,028		—
Direct lease financing		167		167		—		78		—
Legacy commercial real estate		—		—		—		2,131		—
Consumer - home equity		230		230		—		255		8
With an ACL
SBL non-real estate		1,397		1,397		(670)		1,011		3
SBL commercial mortgage		835		835		(343)		1,553		—
SBL construction		3,385		3,385		(44)		3,385		—
Direct lease financing		3,618		3,804		(1,827)		2,814		—
IBLOC		—		—		—		95		—
Legacy commercial real estate		—		—		—		710
Other loans		132		132		(4)		384		—
Total
SBL non-real estate		1,919		3,111		(670)		1,391		3
SBL commercial mortgage		2,381		2,381		(343)		2,581		—
SBL construction		3,385		3,385		(44)		3,385		—
Direct lease financing		3,785		3,971		(1,827)		2,892		—
IBLOC		—		—		—		95		—
Legacy commercial real estate and Other loans		132		132		(4)		3,225		—
Consumer - home equity		230		230		—		255		8
	$	11,832	$	13,210	$	(2,888)	$	13,824	$	11

	December 31, 2022
	Recorded ‎investment		Unpaid ‎principal ‎balance		Related ‎ACL		Average ‎recorded ‎investment		Interest ‎income ‎recognized
Without an ACL
SBL non-real estate	$	400	$	2,762	$	—	$	388	$	—
SBL commercial mortgage		—		—		—		45		—
Direct lease financing		—		—		—		52		—
Legacy commercial real estate		3,552		3,552		—		1,421		150
Consumer - home equity		295		295		—		306		9
With an ACL
SBL non-real estate		974		974		(525)		1,237		7
SBL commercial mortgage		1,423		1,423		(441)		1,090		—
SBL construction		3,386		3,386		(153)		1,245		—
Direct lease financing		3,550		3,550		(933)		710		—
Other loans		692		692		(15)		1,923		—
Total
SBL non-real estate		1,374		3,736		(525)		1,625		7
SBL commercial mortgage		1,423		1,423		(441)		1,135		—
SBL construction		3,386		3,386		(153)		1,245		—
Direct lease financing		3,550		3,550		(933)		762		—
Legacy commercial real estate and Other loans		4,244		4,244		(15)		3,344		150
Consumer - home equity		295		295		—		306		9
	$	14,272	$	16,634	$	(2,067)	$	8,417	$	166

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

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


	December 31, 2023						December 31, 2022
	Non-accrual loans with a related ACL		Non-accrual loans without a related ACL		Total non-accrual loans		Total non-accrual loans
SBL non-real estate	$	1,320	$	522	$	1,842	$	1,249
SBL commercial mortgage		835		1,546		2,381		1,423
SBL construction		3,385		—		3,385		3,386
Direct leasing		3,618		167		3,785		3,550
Legacy commercial real estate and Other loans		132		—		132		692
Consumer - home equity		—		—		—		56
	$	9,290	$	2,235	$	11,525	$	10,356

The Company had $16.9 million of OREO at December 31, 2023, and $21.2 million of OREO at December 31, 2022. The following table summarizes the Company’s non-accrual loans, loans past due 90 days or more, and OREO at December 31, 2023, and 2021, respectively:


	December 31,
	2023		2022
		(in thousands)
Non-accrual loans
SBL non-real estate	$	1,842	$	1,249
SBL commercial mortgage		2,381		1,423
SBL construction		3,385		3,386
Direct leasing		3,785		3,550
Legacy commercial real estate and Other loans		132		692
Consumer - home equity		—		56
Total non-accrual loans		11,525		10,356

Loans past due 90 days or more and still accruing		1,744		7,775
Total non-performing loans		13,269		18,131
OREO		16,949		21,210
Total non-performing assets	$	30,218	$	39,341

Of the $11.5 million of nonaccrual loans at December 31, 2023, $2.9 million were guaranteed under various SBA loan programs. Of the $10.4 million of nonaccrual loans at December 31, 2022, $3.1 million were guaranteed under various SBA loan programs.

Interest which would have been earned on loans classified as non-accrual at December 31, 2023 and 2022, was $738,000 and $224,000, respectively. No income on non-accrual loans was recognized during 2023 or 2022. In 2023, $89,000 of legacy commercial real estate, $89,000 of SBL commercial real estate, $44,000 of SBL non-real estate, $13,000 of IBLOC, and $110,000 of direct leasing were reversed from interest income, which represented interest accrued on loans placed into non-accrual status during the period. In 2022, $139,000 of SBL commercial mortgage, $109,000 of SBL construction, $100,000 of SBL non-real estate, and $23,000 of direct leasing were reversed from interest income, which represented interest accrued on loans placed into non-accrual status during the period. Material amounts of non-accrual interest reversals are charged to the ACL, but such amounts were not material in either 2023 or 2022.

Effective January 1, 2023 loan modifications to borrowers experiencing financial difficulty are required to be disclosed by type of modification and by type of loan. Prior accounting guidance classified loans which were modified as troubled debt restructurings only if the modification reflected a concession from the lender in the form of a below market interest rate or other concession in addition to borrower financial difficulty. Under the new guidance, loans with modifications will be reported whether a concession is made or not. Loans previously classified as troubled debt restructurings will continue to be reported in the following tables and loans with modifications made after January 1, 2023 are reported under the new loan modification guidance.

Loans which are experiencing financial stress are reviewed by the loan review department, which is independent of the lending lines. The review includes an analysis for a potential specific reserve allocation in the ACL. For REBL, updated appraisals are generally obtained in conjunction with modifications. In the fourth quarter of 2023, an increasing trend in substandard loans was reflected in an increase in the risk level for the REBL ACL economic qualitative factor, which resulted in a $1.0 million increase in the fourth quarter provision for credit loss on loans.

As of December 31, 2023 loans modified and related information are as follows (dollars in thousands):


	December 31, 2023
	Payment delay as a result of a payment deferral		Payment delay and term extension		Total		Percent of total loan category
SBL non-real estate	$	651	$	—	$	651		0.47%
Direct lease financing		—		127		127		0.02%
Real estate bridge lending⁽¹⁾		—		12,300		12,300		0.62%
Total	$	651	$	12,427	$	13,078		0.24%

⁽¹⁾The modifications consisted of a one year extension for principal with an interest deferral, after an original three year loan term. The average loan to value was less than 70%, based on updated "as is" appraised value. Apartment improvements and renovations continue, utilizing additional borrower capital.

The following table shows an analysis of loans that were modified during the twelve months prior to December 31, 2023 presented by loan classification (dollars in thousands):


	Payment Status (Amortized Cost Basis)
	30-59 Days		60-89 Days		90+ Days				Total
	past due		past due		still accruing		Non-accrual		delinquent		Current		Total
SBL non-real estate	$	—	$	—	$	—	$	156	$	156	$	495	$	651
Direct lease financing		—		—		—		127		127		—		127
Real estate bridge lending⁽¹⁾		—		—		—		—		—		12,300		12,300
	$	—	$	—	$	—	$	283	$	283	$	12,795	$	13,078

⁽¹⁾The modifications consisted of a one year extension for principal with an interest deferral, after an original three year loan term. The average loan to value was less than 70%, based on updated "as is" appraised value. Apartment improvements and renovations continue, utilizing additional borrower capital.

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


	Combined Rate and Maturity
	Weighted average interest rate reduction	Weighted average term extension (in months)	More-Than-Insignificant-Payment Delay⁽²⁾
SBL non-real estate	—	—	0.47%
Direct lease financing	—	3	—
Real estate bridge lending⁽¹⁾	—	12	—

⁽¹⁾The modifications consisted of a one year extension for principal with an interest deferral, after an original three year loan term. The average loan to value was less than 70%, based on updated "as is" appraised value. Apartment improvements and renovations continue, utilizing additional borrower capital.

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

Under previous accounting guidance which was effective through December 31, 2022, the Company’s loans that were modified as of December 31, 2023 and 2022 and considered troubled debt restructurings are as follows (in thousands):


	December 31, 2023						December 31, 2022
	Number		Pre-modification recorded investment		Post-modification recorded investment		Number		Pre-modification recorded investment		Post-modification recorded investment
SBL non-real estate		6	$	514	$	514		8	$	650	$	650
SBL commercial mortgage		1		834		834		1		834		834
Legacy commercial real estate		—		—		—		1		3,552		3,552
Consumer - home equity		1		230		230		1		239		239
Total⁽¹⁾		8	$	1,578	$	1,578		11	$	5,275	$	5,275

⁽¹⁾Troubled debt restructurings included non-accrual loans of $1.3 million and $1.4 million at December 31, 2023 and December 31, 2022, respectively.

The balances below provide information as to how the loans were modified as troubled debt restructured loans at December 31, 2023 and 2022 (in thousands):


	December 31, 2023						December 31, 2022

	Adjusted interest rate		Extended maturity		Combined rate and maturity		Adjusted interest rate		Extended maturity		Combined rate and maturity
SBL non-real estate	$	—	$	—	$	514	$	—	$	—	$	650
SBL commercial mortgage		—		—		834		—		—		834
Legacy commercial real estate		—		—		—		—		—		3,552
Consumer - home equity		—		—		230		—		—		239
Total⁽¹⁾	$	—	$	—	$	1,578	$	—	$	—	$	5,275

⁽¹⁾Troubled debt restructurings included non-accrual loans of $1.3 million and $1.4 million at December 31, 2023 and December 31, 2022, respectively.

The Company had no commitments to extend additional credit to loans classified as troubled debt restructurings as of either December 31, 2023 or 2022.

Under the previous accounting guidance explained above, when loans were classified as troubled debt restructurings, the Company estimated the value of underlying collateral and repayment sources. A specific reserve in the ACL was established if the collateral valuation, less estimated disposition costs, is lower than the recorded loan value. The amount of the specific reserve serves to increase the provision for credit losses in the quarter the loan is classified as a troubled debt restructuring. As of December 31, 2023, there were eight troubled debt restructured loans with an aggregate balance of $1.6 million which had specific reserves of $591,000. As of December 31, 2022, there were eleven troubled debt restructured loans with an aggregate balance of $5.3 million which had specific reserves of $637,000. Substantially all of these reserves related to the non-guaranteed portion of SBA loans for start-up businesses. While the new guidance eliminates the troubled debt restructuring classification, loans previously classified as such will now be reported as loans with modifications, whether or not the modification reflected a lender concession. Specific reserves for loans with balances which exceed collateral values will continue to be required in the ACL. Under the new accounting guidance effective January 1, 2023, which broadened the reporting of loan restructurings to include all modifications, there were $13.1 million of loans classified as modified as of December 31, 2023 with specific reserves of $127,000.

The following table summarizes loans that were restructured within the twelve months ended December 31, 2023 that have subsequently defaulted (in thousands).

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

Except for SBLOC, IBLOC and other loans as noted above, for purposes of determining the pool-basis reserve, the loans not assigned an individual reserve are segregated by product type, to recognize differing risk characteristics within portfolio segments, and an average historical loss rate is calculated for each product type. Loss rates are computed by classifying net charge-offs by year of

loan origination, and dividing into total originations for that specific year. This methodology is referred to as vintage analysis. The average loss rate is then projected over the estimated remaining loan lives unique to each loan pool, to determine estimated lifetime losses. For SBLOC and IBLOC, since losses have not been incurred, probability of loss/loss given default considerations are utilized. For the other loan category discounted cash flow is utilized to determine a reserve. For all loan pools the Company considers the need for an additional ACL based upon qualitative factors such as the Company’s current loan performance statistics by pool, and economic conditions. These qualitative factors are intended to account for forward looking expectations over a twelve to eighteen month period not reflected in historical loss rates and otherwise unaccounted for in the quantitative process. Accordingly, such factors may increase or decrease the allowance compared to historical loss rates as the Company’s forward looking expectations change. The qualitative factor percentages are applied against the pool balances as of the end of the period. Aside from the qualitative adjustments to account for forward looking expectations of loss over a twelve to eighteen month projection period, the balance of the ACL reverts directly to the Company’s quantitative analysis derived from its historical loss rates. The qualitative and historical loss rate component, together with the reserves on specific loans, comprise the total ACL.

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

At December 31, 2023, the ACL for off-balance sheet commitments amounted to $2.6 million and the ACL for loans amounted to $27.4 million. Of the $27.4 million, $11.5 million of allowances resulted from the Company’s historical charge-off ratios, $2.9 million from reserves on specific loans, with the balance comprised of the qualitative component. The $11.5 million resulted primarily from SBA non-real estate and leasing charge-offs. The proportion of qualitative reserves compared to charge-off history related reserves reflects that significant levels of charge-offs have not been experienced in the Company’s largest loan portfolios consisting of SBLOC and IBLOC and real estate bridge lending. The absence of significant charge-offs reflects, at least in part, the nature of related collateral respectively consisting of marketable securities, the cash value of life insurance and workforce apartment buildings. As charge-offs are nonetheless possible, significant subjectivity is required to consider qualitative factors to derive the related component of the allowance.

The Company ranks its qualitative factors in five levels: minimal, low, moderate, moderate-high and high risk. The individual qualitative factors for each portfolio segment have their own scale based on an analysis of that segment. A high risk ranking has the greatest impact on the ACL calculation with each level below having a lesser impact on a sliding scale. The qualitative factors used for each portfolio are described below in the description of each portfolio segment. In the second quarter of 2021, the Company reassessed qualitative factors increased as a result of the pandemic and reversed increases to moderate-high for certain pools, based upon increased vaccination rates and significant reopening of the economy. As a result of continuing economic uncertainty, including heightened inflation and increased risks of recession, the qualitative factors which had been set in anticipation of a downturn at January 1, 2020, were maintained through the third quarter of 2022. In the fourth quarter of 2022, as risks of a recession increased, the economic qualitative risk factor was increased for non-real estate SBL and leasing. Those higher qualitative allocations were retained in the first quarter of 2023, as negative economic indications persisted. In the second quarter of 2023, CECL model adjustments of $1.7 million resulted from a $2.5 million CECL model decrease from changes in estimated average lives, partially offset by a $794,000 CECL model increase resulting from increasing economic and collateral risk factors to respective moderate-high and moderate risk levels. The elevated economic risk level for leasing reflected input from department heads regarding the potential borrower impact of the higher rate environment. The elevated collateral risk level for leasing reflected lower auction prices for vehicles and uncertainty over the extent to which such prices might decrease in the future. The adjustment for average lives reflected a change in the estimated lives of leases, higher variances for which may result from their short maturities.The Company has not increased qualitative risk levels for SBLOC or IBLOC because of the nature of related collateral. SBLOC loans are subject to maximum loan to marketable securities value, and notwithstanding historic drops in the stock market in recent years, significant losses have not been realized. IBLOC loans are limited to borrowers with insurance companies which exceed credit requirements, and are limited to life insurance cash values. The Company had, prior to the fourth quarter of 2023, not increased the economic factor for real estate bridge lending. While Federal Reserve rate increases in 2022 and 2023 directly increased real estate bridge loan floating rate borrowing costs, those borrowers are generally required to establish an interest reserve and purchase interest rate caps, that will partially limit the increase in borrowing costs during the term of the loan. Additionally, there continues to be several additional mitigating factors within the multi-family sector that are expected to continue fueling demand. Higher interest rates are increasing the cost to purchase a home, which in turn is increasing the number of renters and subsequent demand for multi-family. There is also a continued shortage of housing , which will therefore continue to fuel demand for multi-family apartment homes. However, in the

fourth quarter of 2023, an increasing trend in substandard loans was reflected in an increase in the risk level for the REBL ACL economic qualitative factor, which resulted in a $1.0 million increase in the fourth quarter provision for credit losses on loans.

The economic qualitative factor is based on the estimated impact of economic conditions on the loan pools, as distinguished from the economic factors themselves, for the following reasons. The Company has experienced limited multi-family (apartment building) losses, despite stressed economic conditions. Accordingly, the ACL for this pool was derived from a qualitative factor based on industry loss information for multi-family housing. The Company’s charge-offs have been immaterial for SBLOC and IBLOC notwithstanding stressed economic periods, and accordingly their ACL is also determined by a qualitative factor. Investment advisor loans were first offered in 2020 with limited performance history, during which charge-offs have not been experienced. For investment advisor loans, the nature of the underlying ultimate repayment source was considered, namely the fee-based advisory income streams resulting from investment portfolios under management and the impact changes in economic conditions would have on those payment streams. Additionally, the Company’s charge-off histories for SBLs, primarily SBA, and leases have not correlated with economic conditions, including trends in unemployment. While specific economic factors did not correlate with actual historical losses, multiple economic factors are considered. For the non-guaranteed portion of SBA loans, leases, real estate bridge lending and investment advisor financing the Company’s loss forecasting analysis included a review of industry statistics. However, the Company’s own charge-off history and average life estimates, for categories in which the Company has experienced charge-offs, was the primary quantitatively derived element in the forecasts. The qualitative component results from management’s qualitative assessments. In the second quarter of 2022, the Company adjusted its collateral qualitative factor for SBLs downward to account for a greater percentage of government guaranteed balances in applicable pools as compared to prior periods. Additionally, in the second quarter of 2022, allowances on credit deteriorated loans were reduced. The largest reduction was $1.0 million which resulted when single family units from a construction loan were sold for higher than expected prices. That loan had been included in discontinued loans prior to first quarter 2022, when discontinued assets were reclassified to continuing operations. The Company no longer engages in new construction residential lending.

Below are the portfolio segments used to pool loans with similar risk characteristics and align with the Company’s methodology for measuring expected credit losses. These pools have similar risk and collateral characteristics, and certain of these pools are broken down further in determining and applying the vintage loss estimates previously discussed. For instance, within the direct lease financing pool, government and public institution leases are considered separately. Additionally, the Company evaluates its loans under an internal loan risk rating system as a means of identifying problem loans. The special mention classification indicates weaknesses that may, if not cured, threaten the borrower’s future repayment ability. A substandard classification reflects an existing weakness indicating the possible inadequacy of net worth and other repayment sources. These classifications are used both by regulators and peers, as they have been correlated with an increased probability of credit losses. Increases in substandard loans do not necessarily require increased provisions for credit losses or allowance allocations on the basis of loan-to-value and other considerations based upon assessments by the loan review department which is independent of the lending lines. A summary of the Company’s primary portfolio pools and loans accordingly classified, by year of origination, at December 31, 2023 and December 31, 2022 is as follows (in thousands):


As of December 31, 2023	2023		2022		2021		2020		2019		Prior		Revolving loans at amortized cost		Total
SBL non real estate
Non-rated⁽¹⁾	$	507	$	—	$	—	$	—	$	—	$	—	$	—	$	507
Pass		47,066		32,512		26,919		9,662		4,334		5,357		—		125,850
Special mention		460		—		258		1,101		119		337		—		2,275
Substandard		—		495		632		564		250		562		—		2,503
Total SBL non-real estate		48,033		33,007		27,809		11,327		4,703		6,256		—		131,135

SBL commercial mortgage
Pass		128,375		138,281		93,399		67,635		58,550		98,704		—		584,944
Special mention		375		—		10,764		—		595		1,363		—		13,097
Substandard		—		—		—		452		1,853		1,928		—		4,233
Total SBL commercial mortgage		128,750		138,281		104,163		68,087		60,998		101,995		—		602,274

SBL construction
Pass		2,848		5,966		1,877		927		4,534		—		—		16,152
Special mention		—		—		3,090		—		—		—		—		3,090
Substandard		—		—		2,675		—		—		710		—		3,385
Total SBL construction		2,848		5,966		7,642		927		4,534		710		—		22,627

Direct lease financing
Non-rated		1,273		—		—		—		—		—		—		1,273
Pass		302,362		221,768		92,945		37,664		17,469		4,349		—		676,557
Special mention		—		666		202		125		146		—		—		1,139
Substandard		135		3,898		1,998		372		184		101		—		6,688
Total direct lease financing		303,770		226,332		95,145		38,161		17,799		4,450		—		685,657

SBLOC
Non-rated		—		—		—		—		—		—		3,261		3,261
Pass		—		—		—		—		—		—		977,158		977,158
Total SBLOC		—		—		—		—		—		—		980,419		980,419

IBLOC
Pass		—		—		—		—		—		—		646,230		646,230
Substandard		—		—		—		—		—		—		636		636
Total IBLOC		—		—		—		—		—		—		646,866		646,866

Advisor financing
Pass		92,273		63,083		40,994		24,321		—		—		—		220,671
Special mention		—		—		—		941		—		—		—		941
Total advisor financing		92,273		63,083		40,994		25,262		—		—		—		221,612

Real estate bridge lending
Pass		397,073		1,013,199		461,474		—		—		—		—		1,871,746
Special mention		—		59,423		16,913		—		—		—		—		76,336
Substandard		12,300		—		39,400		—		—		—		—		51,700
Total real estate bridge lending		409,373		1,072,622		517,787		—		—		—		—		1,999,782

Other loans
Non-rated		2,555		—		—		—		—		11,513		—		14,068
Pass		165		260		363		2,609		2,314		40,101		1,593		47,405
Special mention		—		—		—		—		—		362		—		362
Substandard		—		—		—		—		—		132		—		132
Total other loans⁽²⁾		2,720		260		363		2,609		2,314		52,108		1,593		61,967

	$	987,767	$	1,539,551	$	276,116	$	146,373	$	90,348	$	165,519	$	1,628,878	$	5,352,339

Unamortized loan fees and costs		—		—		—		—		—		—		—		8,800
Total															$	5,361,139

⁽¹⁾Included in the SBL non real estate pass total of $125.9 million was $2.1 million of SBA Paycheck Protection Program (“PPP”) loans, which are guaranteed by the U.S. government.

⁽²⁾Included in Other loans are $11.3 million of SBA loans purchased for Community Reinvestment Act (“CRA”) purposes as of March 31, 2023. These loans are classified as SBL in the Company’s loan table, which classifies loans by type, as opposed to risk characteristics.


As of December 31, 2022	2022		2021		2020		2019		2018		Prior		Revolving loans at amortized cost		Total
SBL non real estate
Non-rated⁽¹⁾	$	2,075	$	4,266	$	273	$	—	$	—	$	—	$	—	$	6,614
Pass		32,402		30,388		13,432		5,599		3,931		4,555		—		90,307
Special mention		—		—		—		—		585		284		—		869
Substandard		—		—		320		242		15		642		—		1,219
Total SBL non-real estate		34,477		34,654		14,025		5,841		4,531		5,481		—		99,009

SBL commercial mortgage
Non-rated		10,600		—		—		—		—		—		—		10,600
Pass		116,647		97,968		64,388		64,692		42,461		68,193		—		454,349
Special mention		—		—		—		1,853		—		630		—		2,483
Substandard		—		—		141		—		834		589		—		1,564
Total SBL commercial mortgage		127,247		97,968		64,529		66,545		43,295		69,412		—		468,996

SBL construction
Pass		3,153		11,650		9,712		2,964		—		—		—		27,479
Substandard		—		2,676		—		—		—		710		—		3,386
Total SBL construction		3,153		14,326		9,712		2,964		—		710		—		30,865
		.
Direct lease financing
Non-rated		73,424		30,900		8,245		1,153		429		108		—		114,259
Pass		254,063		129,763		71,043		38,038		13,722		4,291		—		510,920
Special mention		—		—		61		—		—		—		—		61
Substandard		2,854		2,324		1,658		84		—		—		—		6,920
Total direct lease financing		330,341		162,987		81,007		39,275		14,151		4,399		—		632,160

SBLOC
Non-rated		—		—		—		—		—		—		4,284		4,284
Pass		—		—		—		—		—		—		1,205,098		1,205,098
Total SBLOC		—		—		—		—		—		—		1,209,382		1,209,382

IBLOC
Non-rated		—		—		—		—		—		—		555,219		555,219
Pass		—		—		—		—		—		—		567,868		567,868
Total IBLOC		—		—		—		—		—		—		1,123,087		1,123,087

Advisor financing
Non-rated		3,318		909		—		—		—		—		—		4,227
Pass		68,078		64,498		35,665		—		—		—		—		168,241
Total advisor financing		71,396		65,407		35,665		—		—		—		—		172,468

Real estate bridge lending
Pass		1,009,708		659,323		—		—		—		—		—		1,669,031
Total real estate bridge lending		1,009,708		659,323		—		—		—		—		—		1,669,031

Other loans
Non-rated		4,374		29		37		—		—		16,326		488		21,254
Pass		264		366		2,611		2,750		2,820		41,571		1,187		51,569
Special mention		—		—		—		—		—		3,552		—		3,552
Substandard		—		—		—		—		—		692		56		748
Total other loans⁽²⁾		4,638		395		2,648		2,750		2,820		62,141		1,731		77,123

Total	$	1,580,960	$	375,737	$	207,586	$	117,375	$	64,797	$	142,143	$	2,334,200	$	5,482,121

Unamortized loan fees and costs		—		—		—		—		—		—		—		4,732
Total															$	5,486,853

⁽¹⁾Included in the SBL non real estate non-rated total of $6.6 million was $4.5 million of SBA PPP loans, which are guaranteed by the U.S. government.

⁽²⁾Included in Other loans are $15.4 million of SBA loans purchased for CRA purposes as of December 31, 2022. These loans are classified as SBL in the Company’s loan table, which classifies loans by type, as opposed to risk characteristics.

The following loan review percentages are performed over periods of eighteen to twenty-four months. At December 31, 2023, in excess of 50% of the total loan portfolio was reviewed by the loan review department which is independent of lending lines or, for SBLs, rated internally by that department. In addition to the review of all loans classified as either special mention classified loans, the targeted coverages and scope of the reviews are risk-based and vary according to each portfolio as follows:

SBLOC – The targeted review threshold for 2023 was 40% comprised of a sample of the largest SBLOCs by commitment. At December 31, 2023, approximately 47% of the SBLOC portfolio had been reviewed.

IBLOC – The targeted review threshold for 2023 was 40% comprised of a sample of the largest IBLOCs by commitment. At December 31, 2023, approximately 53% of the IBLOC portfolio had been reviewed.

Advisor Financing – The targeted review threshold for 2023 was 50%. At December 31, 2023, approximately 92% of the investment advisor financing portfolio had been reviewed. The loan balance review threshold is $1.0 million.

SBLs – The targeted review threshold for 2023 was 60%, to be rated and/or reviewed within 90 days of funding, excluding fully guaranteed loans purchased for CRA purposes, and fully guaranteed PPP loans. The loan balance review threshold is $1.5 million. At December 31, 2023, 71% of the non-government guaranteed SBL loan portfolio had been reviewed.

Direct Lease Financing – The targeted review threshold for 2023 was 35%. At December 31, 2023, approximately 51% of the leasing portfolio had been reviewed. All lease relationships exceeding $1.5 million are reviewed.

Commercial Real Estate Bridge Loans, at fair value and Commercial Real Estate Bridge Loans, at amortized cost (floating rate, excluding SBA, which are included in SBLs above) – The targeted review threshold for 2023 was 60%. Floating rate loans are reviewed initially within 90 days of funding and monitored on an ongoing basis as to payment status. Subsequent reviews are performed for relationships over $10.0 million. At December 31, 2023, approximately 100% of the floating rate, non-SBA commercial real estate bridge loans outstanding for more than 90 days had been reviewed.

Commercial Real Estate Loans, at fair value (fixed rate, excluding SBA, which are included in SBLs above) – The targeted review threshold for 2023 was 100%. At December 31, 2023, approximately 100% of the fixed rate, non-SBA commercial real estate loan portfolio had been reviewed.

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

SBL. Substantially all SBLs consist of SBA loans. The Bank participates in loan programs established by the SBA, including the 7(a) Loan Guarantee Program (the “7(a) Program”), the 504 Fixed Asset Financing Program (the “504 Program”), and the discontinued PPP. The 7(a) Program is designed to help small business borrowers start or expand their businesses by providing partial guarantees of loans made by banks and non-bank lending institutions for specific business purposes, including long- or short- term working capital; funds for the purchase of equipment, machinery, supplies and materials; funds for the purchase, construction or renovation of real estate; and funds to acquire, operate or expand an existing business or refinance existing debt, all under conditions established by the SBA. The 504 Program includes the financing of real estate and commercial mortgages. In 2020 and 2021, the Company also participated in the PPP, which provided short-term loans to small businesses. PPP loans are fully guaranteed by the U.S. government. This program was a specific response to the COVID-19 pandemic, and the vast majority of these loans have been reimbursed by the U.S. government, with $2.1 million remaining to be reimbursed as of December 31, 2023. The Company segments the SBL portfolio into four pools: non-real estate, commercial mortgage and construction to capture the risk characteristics of each pool, and the PPP loans discussed above. PPP loans are not included in the risk pools because they have inherently different risk characteristics due to the U.S. government guarantee. In the table above, the PPP loans are included in non-rated SBL non-real estate. The qualitative factors for SBLs focus on pool loan performance, underlying collateral for collateral dependent loans and changes in economic conditions. Additionally, the construction segment adds a qualitative factor for general construction risk, such as construction delays resulting from labor shortages or availability/pricing of construction materials.

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

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

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

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

Real estate bridge lending. Real estate bridge loans are transitional commercial mortgage loans which are made to improve and rehabilitate existing properties. The portfolio is comprised primarily of apartment buildings. Prior to 2020, a year in which the Company generally suspended such lending, loans originated for securitization but not securitized were retained and continue to be accounted for at fair value in “Commercial loans, at fair value”, on the balance sheet. In 2021, originations resumed and are being held for investment in “Loans, net of deferred fees and costs”, on the balance sheet. As limited credit losses have been experienced for multi-family (apartment building) loans, which comprise the REBL portfolio, the ACL is determined by qualitative factors. Qualitative factors focus on historical industry losses, changes in economic conditions, underlying collateral and portfolio performance.

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

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

The Company does not measure an ACL on accrued interest receivable balances, because these balances are written off in a timely manner as a reduction to interest income when loans are placed on non-accrual status. The Company does not expect material amounts of accrued interest receivable for prior year periods to be reversed. Material reversals, should they occur, would be charged against the allowance.

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

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

‎


	December 31, 2023
	SBL non-real estate		SBL commercial mortgage		SBL construction		Direct lease financing		SBLOC / IBLOC		Advisor financing		Real estate bridge lending		Other loans		Deferred fees and costs		Total
Beginning balance 1/1/2023	$	5,028	$	2,585	$	565	$	7,972	$	1,167	$	1,293	$	3,121	$	643	$	—	$	22,374
Charge-offs		(871)		(76)		—		(3,666)		(24)		—		—		(3)		—		(4,640)
Recoveries		475		75		—		330		—		—		—		299		—		1,179
Provision (credit)⁽¹⁾		1,427		236		(280)		5,818		(330)		369		1,619		(394)		—		8,465
Ending balance	$	6,059	$	2,820	$	285	$	10,454	$	813	$	1,662	$	4,740	$	545	$	—	$	27,378

Ending balance: Individually evaluated for expected credit loss	$	670	$	343	$	44	$	1,827	$	—	$	—	$	—	$	4	$	—	$	2,888

Ending balance: Collectively evaluated for expected credit loss	$	5,389	$	2,477	$	241	$	8,627	$	813	$	1,662	$	4,740	$	541	$	—	$	24,490

Loans:
Ending balance	$	137,752	$	606,986	$	22,627	$	685,657	$	1,627,285	$	221,612	$	1,999,782	$	50,638	$	8,800	$	5,361,139

Ending balance: Individually evaluated for expected credit loss	$	1,919	$	2,381	$	3,385	$	3,785	$	—	$	—	$	—	$	362	$	—	$	11,832

Ending balance: Collectively evaluated for expected credit loss	$	135,833	$	604,605	$	19,242	$	681,872	$	1,627,285	$	221,612	$	1,999,782	$	50,276	$	8,800	$	5,349,307


	December 31, 2022
	SBL non-real estate		SBL commercial mortgage		SBL construction		Direct lease financing		SBLOC / IBLOC		Advisor financing		Real estate bridge lending		Other loans		Deferred fees and costs		Total
Beginning balance 1/1/2022	$	5,415	$	2,952	$	432	$	5,817	$	964	$	868	$	1,181	$	177	$	—	$	17,806
Charge-offs		(885)		—		—		(576)		—		—		—		—		—		(1,461)
Recoveries		140		—		—		124		—		—		—		24		—		288
Provision (credit)⁽¹⁾		358		(367)		133		2,607		203		425		1,940		442		—		5,741
Ending balance	$	5,028	$	2,585	$	565	$	7,972	$	1,167	$	1,293	$	3,121	$	643	$	—	$	22,374

Ending balance: Individually evaluated for expected credit loss	$	525	$	441	$	153	$	933	$	—	$	—	$	—	$	15	$	—	$	2,067

Ending balance: Collectively evaluated for expected credit loss	$	4,503	$	2,144	$	412	$	7,039	$	1,167	$	1,293	$	3,121	$	628	$	—	$	20,307

Loans:
Ending balance	$	108,954	$	474,496	$	30,864	$	632,160	$	2,332,469	$	172,468	$	1,669,031	$	61,679	$	4,732	$	5,486,853

Ending balance: Individually evaluated for expected credit loss	$	1,374	$	1,423	$	3,386	$	3,550	$	—	$	—	$	—	$	4,539	$	—	$	14,272

Ending balance: Collectively evaluated for expected credit loss	$	107,580	$	473,073	$	27,478	$	628,610	$	2,332,469	$	172,468	$	1,669,031	$	57,140	$	4,732	$	5,472,581

⁽¹⁾The amount shown as the provision for credit losses for the period reflects the provision on credit losses for loans, while the consolidated statements of operations provision for credit losses includes the provision for unfunded commitments of $135,000 (credit) and $1.4 million for the years ended December 31, 2023, and 2022, respectively.

A summary of the Company’s 2023 net charge-offs, classified by the year of the related loan origination, is as follows (in thousands):


As of December 31, 2023		2023		2022		2021		2020		2019		Prior		Total
SBL non-real estate
Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	(871)	$	(871)
Current period recoveries		—		—		—		—		—		475		475
Current period SBL non-real estate net charge-offs		—		—		—		—		—		(396)		(396)

SBL commercial mortgage
Current period charge-offs		—		—		—		—		—		(76)		(76)
Current period recoveries		—		—		—		—		—		75		75
Current period SBL commercial mortgage net charge-offs		—		—		—		—		—		(1)		(1)

SBL construction
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period SBL construction net charge-offs		—		—		—		—		—		—		—

Direct lease financing
Current period charge-offs		(138)		(2,138)		(1,117)		(234)		(39)		—		(3,666)
Current period recoveries		—		48		168		96		—		18		330
Current period direct lease financing net charge-offs		(138)		(2,090)		(949)		(138)		(39)		18		(3,336)

SBLOC
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period SBLOC net charge-offs		—		—		—		—		—		—		—

IBLOC
Current period charge-offs		—		(12)		(12)		—		—		—		(24)
Current period recoveries		—		—		—		—		—		—		—
Current period IBLOC net charge-offs		—		(12)		(12)		—		—		—		(24)

Advisor financing
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period advisor financing net charge-offs		—		—		—		—		—		—		—

Real estate bridge loans
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period real estate bridge loans net charge-offs		—		—		—		—		—		—		—

Other loans
Current period charge-offs		—		—		—		—		—		(3)		(3)
Current period recoveries		—		—		—		—		—		299		299
Current period other loans net charge-offs		—		—		—		—		—		296		296

Total
Current period charge-offs		(138)		(2,150)		(1,129)		(234)		(39)		(950)		(4,640)
Current period recoveries		—		48		168		96		—		867		1,179
Current period net charge-offs	$	(138)	$	(2,102)	$	(961)	$	(138)	$	(39)	$	(83)	$	(3,461)

A summary of the Company’s 2022 net charge-offs, classified by the year of the related loan origination, is as follows (in thousands):


As of December 31, 2022		2022		2021		2020		2019		2018		Prior		Total
SBL non-real estate
Current period charge-offs	$	—	$	—	$	(17)	$	—	$	—	$	(868)	$	(885)
Current period recoveries		—		—		2		—		8		130		140
Current period SBL non-real estate net charge-offs		—		—		(15)		—		8		(738)		(745)

SBL commercial mortgage
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period SBL commercial mortgage net charge-offs		—		—		—		—		—		—		—

SBL construction
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period SBL construction net charge-offs		—		—		—		—		—		—		—

Direct lease financing
Current period charge-offs		(93)		(308)		(150)		(25)		—		—		(576)
Current period recoveries		—		1		117		6		—		—		124
Current period direct lease financing net charge-offs		(93)		(307)		(33)		(19)		—		—		(452)

SBLOC
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period SBLOC net charge-offs		—		—		—		—		—		—		—

IBLOC
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period IBLOC net charge-offs		—		—		—		—		—		—		—

Advisor financing
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period advisor financing net charge-offs		—		—		—		—		—		—		—

Real estate bridge loans
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period real estate bridge loans net charge-offs		—		—		—		—		—		—		—

Other loans
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		24		24
Current period other loans net charge-offs		—		—		—		—		—		24		24

Total
Current period charge-offs		(93)		(308)		(167)		(25)		—		(868)		(1,461)
Current period recoveries		—		1		119		6		8		154		288
Current period net charge-offs	$	(93)	$	(307)	$	(48)	$	(19)	$	8	$	(714)	$	(1,173)

The Company did not have loans acquired with deteriorated credit quality at either December 31, 2023, or December 31, 2022. In 2023, the Company purchased $2.0 million of lease receivables and $54.8 million of SBLs, none of which were credit deteriorated. Additionally, in 2023 the Company participated in SBLs with other institutions in the amount of $4.0 million.

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


2024	$	189,806
2025		148,522
2026		126,348
2027		61,938
2028		22,547
2029 and thereafter		2,857
Total undiscounted cash flows		552,018
Residual value⁽¹⁾		210,319
Difference between undiscounted cash flows and discounted cash flows		(76,680)
Present value of lease payments recorded as lease receivables	$	685,657

⁽¹⁾Of the $210,319,000, $39,197,000 is not guaranteed by the lessee or other guarantors.

The delinquent loans in the following table are treated as collateral dependent to the extent they have resulted from borrower financial difficulties (as opposed to administrative delays or other mitigating factors), and are not brought current. For loans 90 days or more delinquent and non-accrual loans, the Company establishes a reserve in the ACL for deficiencies between estimated collateral and loan carrying values. During the twelve months ended December 31, 2023, the Company did not have any significant changes to the extent to which collateral secures its collateral dependent loans due to general collateral deterioration or from other factors. SBL non-real estate are collateralized by business assets, which may include certain real estate. SBL commercial mortgage and construction are collateralized by real estate for small businesses, while real estate bridge lending is primarily collateralized by apartment buildings, or other commercial real estate. SBLOC is collateralized by marketable investment securities while IBLOC is collateralized by the cash value of life insurance. Advisor financing is collateralized by investment advisors’ business franchises. Direct lease financing is collateralized primarily by vehicles, or equipment.

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


	December 31, 2023
	30-59 Days		60-89 Days		90+ Days				Total				Total
	past due		past due		still accruing		Non-accrual		past due		Current		loans
SBL non-real estate	$	84	$	333	$	336	$	1,842	$	2,595	$	135,157	$	137,752
SBL commercial mortgage		2,183		—		—		2,381		4,564		602,422		606,986
SBL construction		—		—		—		3,385		3,385		19,242		22,627
Direct lease financing		5,163		1,209		485		3,785		10,642		675,015		685,657
SBLOC / IBLOC		21,934		3,607		745		—		26,286		1,600,999		1,627,285
Advisor financing		—		—		—		—		—		221,612		221,612
Real estate bridge lending		—		—		—		—		—		1,999,782		1,999,782
Other loans		853		76		178		132		1,239		49,399		50,638
Unamortized loan fees and costs		—		—		—		—		—		8,800		8,800
	$	30,217	$	5,225	$	1,744	$	11,525	$	48,711	$	5,312,428	$	5,361,139

	December 31, 2022
	30-59 Days		60-89 Days		90+ Days				Total				Total
	past due		past due		still accruing		Non-accrual		past due		Current		loans
SBL non-real estate	$	1,312	$	543	$	346	$	1,249	$	3,450	$	105,504	$	108,954
SBL commercial mortgage		1,853		5		297		1,423		3,578		470,918		474,496
SBL construction		—		—		—		3,386		3,386		27,478		30,864
Direct lease financing		4,035		2,053		539		3,550		10,177		621,983		632,160
SBLOC / IBLOC		14,782		343		2,869		—		17,994		2,314,475		2,332,469
Advisor financing		—		—		—		—		—		172,468		172,468
Real estate bridge lending		—		—		—		—		—		1,669,031		1,669,031
Other loans		330		90		3,724		748		4,892		56,787		61,679
Unamortized loan fees and costs		—		—		—		—		—		4,732		4,732
	$	22,312	$	3,034	$	7,775	$	10,356	$	43,477	$	5,443,376	$	5,486,853

Premises And Equipment

12 Months Ended

Dec. 31, 2023

Premises And Equipment [Abstract]

Premises And Equipment

Note F—Premises and Equipment

Premises and equipment are as follows (dollars in thousands):


			December 31,
	Estimated
	useful lives		2023		2022
Land		-	$	1,732	$	1,732
Buildings		39 years		3,436		3,436
Furniture, fixtures, and equipment		3 to 12 years		58,068		61,747
Leasehold improvements		6 to 15 years		20,254		11,331
				83,490		78,246
Accumulated depreciation				(56,016)		(59,845)
			$	27,474	$	18,401

Depreciation expense for the years ended December 31, 2023, 2022 and 2021 was approximately $3.1 million, $2.9 million and $2.9 million, respectively.

Time Deposits	12 Months Ended
Time Deposits	Dec. 31, 2023
Time Deposits [Abstract]
Time Deposits	Note G—Time Deposits There were no time deposits outstanding at December 31, 2023.

Variable Interest Entity (VIE)

12 Months Ended

Dec. 31, 2023

Variable Interest Entity [Abstract]

Variable Interest Entity (VIE)

Note H—Variable Interest Entity (“VIE”)

VIE’s are entities that, by design, either (1) lack sufficient equity to permit the entity to finance its activities without additional subordinated financial support from other parties, or (2) have equity investors that do not have the ability to make significant decisions relating to the entity’s operations through voting rights, or do not have the obligation to absorb the expected losses, or do not have the right to receive the residual returns of the entity.

The most common type of VIE is a special purpose entity (“SPE”). SPEs are commonly used in securitization transactions in order to isolate certain assets and distribute the cash flows from those assets to investors. The basic SPE structure involves a company selling assets to the SPE with the SPE funding the purchase of those assets by issuing securities to investors. The agreements that govern the transaction specify how the cash earned on the assets must be allocated to the SPE’s investors and other parties that have rights to those cash flows. SPEs are generally structured to insulate investors from claims on the SPE’s assets by creditors of other entities, including the creditors of the seller of the assets. The primary beneficiary of a VIE (i.e., the party that has a controlling financial interest) is required to consolidate the assets and liabilities of the VIE. The primary beneficiary is the party that has both (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; and (2) through its interests in the VIE, the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

The following table shows the Company’s remaining interests in the CRE-2 security, which represent single securities purchased by the Company in the securitizations for which the Company generated all of the commercial mortgage-backed loan collateral (in thousands).


	December 31, 2023
	Principal amount outstanding						The Company's
					Assets held in		interest
	Total assets		Assets held in		nonconsolidated		in securitized
	held by		consolidated		VIEs with		assets in
	securitization		securitization		continuing		nonconsolidated
	VIEs⁽¹⁾		VIEs		involvement		VIEs⁽²⁾
Commercial mortgage-backed securities
CRE2⁽³⁾	$	40,743	$	—	$	40,743	$	12,574
CRE3		1,939		—		1,939		—
CRE4		821		—		821		—
CRE5		14,138		—		14,138		—

	December 31, 2022
	Principal amount outstanding						The Company's
					Assets held in		interest
	Total assets		Assets held in		nonconsolidated		in securitized
	held by		consolidated		VIEs with		assets in
	securitization		securitization		continuing		nonconsolidated
	VIEs⁽¹⁾		VIEs		involvement		VIEs
Commercial mortgage-backed securities
CRE2	$	58,143	$	—	$	58,143	$	12,574
CRE3		1,939		—		1,939		—
CRE4		9,998		—		9,998		—
CRE5		35,638		—		35,638		—
CRE6		38,242		—		38,242		—

⁽¹⁾Consists of notes backed by commercial loans predominantly secured by real estate.

⁽²⁾For securities purchased from securitizations which comprise the Company's interest: CRE2 was non-rated at issuance. As of December 31, 2023, CRE2 is valued by discounted cash flow analysis.

⁽³⁾The Company's $12.6 million interest would have been repaid in October 2019 had remaining underlying loan collateral been paid as agreed. Remaining collateral is comprised of a suburban office building and a retail location. While the estimated value of these sources of repayment exceeds the amount to be repaid to the Company, there can be no assurance that the Company's interest will be fully repaid or as to the timing of repayment. See “ Note E—Loans”.

Debt

12 Months Ended

Dec. 31, 2023

Debt [Abstract]

Debt

Note I—Debt

1.Short-term borrowings

The Bank has overnight borrowing capacity with the FHLB of Des Moines which amounted to $731.5 million at December 31, 2023, collateralized by loans. The Bank also had a $1.95 billion line with the Federal Reserve as of that date, also collateralized by loans. Borrowings under these arrangements have been made with one day terms at rates which vary daily. As of December 31, 2023, the Bank did not have any borrowings outstanding on these lines. The details for such daily borrowings are presented below:


	As of or for the year ended December 31,
	2023		2022		2021
		(dollars in thousands)
Short-term borrowings
Balance at year-end	$	—	$	—	$	—
Average during the year		5,739		60,312		19,958
Maximum month-end balance		450,000		495,000		300,000
Weighted average rate during the year		4.72%		2.55%		0.25%
Rate at December 31		—		—		—

2.Securities sold under agreements to repurchase

Securities sold under agreements to repurchase generally mature within 30 days from the date of the transactions. The detail of securities sold under agreements to repurchase is presented below:


	As of or for the year ended December 31,
	2023		2022		2021
		(dollars in thousands)
Securities sold under repurchase agreements
Balance at year-end	$	42	$	42	$	42
Average during the year		41		41		41
Maximum month-end balance		42		42		42
Weighted average rate during the year		—		—		—
Rate at December 31		—		—		—

3. Guaranteed preferred beneficiary interest in the Company’s subordinated debt

As of December 31, 2023, the Company held two statutory business trusts: The Bancorp Capital Trust II and The Bancorp Capital Trust III (the “Trusts”). In each case, the Company owns all the common securities of the Trust. The Trusts issued preferred capital securities to investors and invested the proceeds in the Company through the purchase of junior subordinated debentures issued by the Company (the “2038 Debentures”). The 2038 Debentures are the sole assets of the Trusts. The $10.3 million of 2038 Debentures issued to The Bancorp Capital Trust II and the $3.1 million of 2038 Debentures issued to The Bancorp Capital Trust III were both issued on November 28,2007, mature on March 15, 2038 and bear interest at the Secured Overnight Financing Rate (“SOFR”) plus 3.51%.

As of December 31, 2023, the Trusts qualify as VIEs under ASC 810, Consolidation. However, the Company is not considered the primary beneficiary and, therefore, the Trusts are not consolidated in the Company’s consolidated financial statements. The Trusts are accounted for under the equity method of accounting.

4. Senior debt

On August 13, 2020, the Company issued $100.0 million of 2025 Senior Notes, which have a maturity date of August 15, 2025, and a 4.75% interest rate, with interest paid semi-annually on March 15 and September 15. The 2025 Senior Notes are the Company’s direct, unsecured and unsubordinated obligations and rank equal in priority with all of the Company’s existing and future unsecured and unsubordinated indebtedness and senior in right of payment to all of the Company’s existing and future subordinated indebtedness.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Subparagraph (h)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(c))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1

Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
-Topic 470
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//470/tableOfContent

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Subparagraph (g)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Subparagraph (i)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1C
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1C
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
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-Section 50
-Paragraph 1C
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1E
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1E

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1I
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1I
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1I
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I

+ Details

Shareholders' Equity

12 Months Ended

Dec. 31, 2023

Shareholders' Equity [Abstract]

Shareholders' Equity

Note J—Shareholders’ Equity

On October 20, 2021, the Board approved the 2022 Repurchase Program. Under the 2022 Repurchase Program, the Company repurchased $15.0 million in value of the Company’s common stock in each quarter of 2022. During the twelve months ended December 31, 2022, the Company repurchased 2,322,256 shares of its common stock in the open market under the 2022 Common Stock Repurchase Program at an average cost of $25.84 per share.

On October 26, 2022, the Board approved the 2023 Repurchase Program. Under the 2023 Repurchase Program, the Company repurchased $25.0 million in value of the Company’s common stock in each quarter of 2023. During the twelve months ended December 31, 2023, the Company repurchased 2,957,146 shares of its common stock in the open market at an average price of $33.82 per share.

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

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

- Definition

The entire disclosure for equity.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-13

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
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-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (h)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-13

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
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-Name Accounting Standards Codification
-Section 50
-Paragraph 14
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-14

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 235
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481062/946-235-50-2

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 235
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481062/946-235-50-2

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 505
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481004/946-505-50-6

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 815
-SubTopic 40
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480237/815-40-50-6

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.3-04)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480008/505-10-S99-1

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(e)(1))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1

Reference 10: http://fasb.org/us-gaap/role/ref/legacyRef
-Topic 505
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//505/tableOfContent

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-13

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (g)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-13

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (i)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-13

Reference 14: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
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-Name Accounting Standards Codification
-Section 50
-Paragraph 14
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-14

Reference 15: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
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-Name Accounting Standards Codification
-Section 50
-Paragraph 14
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-14

Reference 16: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
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-Name Accounting Standards Codification
-Section 50
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-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-16

Reference 17: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
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-Name Accounting Standards Codification
-Section 50
-Paragraph 18
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-18

Reference 18: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
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-Section 50
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-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-18

Reference 19: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
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-Name Accounting Standards Codification
-Section 50
-Paragraph 18
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-18

+ Details

Benefit Plans

12 Months Ended

Dec. 31, 2023

Benefit Plans [Abstract]

Benefit Plans

Note K—Benefit Plans

401 (k) Plan

The Company maintains a 401(k) savings plan covering substantially all employees of the Company. Under the plan, the Company matches 50% of the employee contributions for all participants, not to exceed 6% of their salary. Contributions made by the Company were approximately $2.3 million, $2.0 million and $1.6 million for the years ended December 31, 2023, 2022 and 2021, respectively and are reflected in salaries and employee benefits in the consolidated statement of operations.

Supplemental Executive Retirement Plan

In 2005, the Company began contributing to a supplemental executive retirement plan for its former Chief Executive Officer that provides annual retirement benefits of $25,000 per month until death. There were $300,000 of disbursements under the plan in each of 2023, 2022 and 2021. The actuarial assumptions as of December 31, 2023, 2022 and 2021 reflected respective discount rates of 4.56%, 4.73% and 2.12% with a monthly benefit of $25,000. Projected payouts for years one, two, three, four, and five are $300,000, $283,000, $271,000, $257,000, and $242,000, respectively, and $965,000 for the subsequent five years. The Company adjusts its related liability to actuarially derived estimates of lifetime payouts based upon actuarial tables as follows: SOA Pri-2012 Amount-Weighted White Collar Retiree Mortality Table with Mortality Improvement Scale MP-2021. The Company’s related expense was $300,000, $300,000 and $300,000, respectively, for the years ended December 31, 2023, 2022 and 2021. As of December 31, 2023, the Company had accrued $3.0 million for potential future payouts.

- Definition

The entire disclosure for retirement benefits.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 715
-SubTopic 70
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480794/715-70-50-1

Reference 2: http://www.xbrl.org/2003/role/exampleRef
-Topic 715
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480506/715-20-50-1

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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-Paragraph 1
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-Publisher FASB
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 715
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
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-Section 50
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Reference 10: http://www.xbrl.org/2003/role/disclosureRef
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Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 715
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
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-URI https://asc.fasb.org//1943274/2147480506/715-20-50-1

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 715
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-Section 50
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-Subparagraph (r)(2)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480506/715-20-50-1

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 715
-SubTopic 20
-Name Accounting Standards Codification
-Section S99
-Paragraph 2
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480126/715-20-S99-2

Reference 14: http://www.xbrl.org/2003/role/disclosureRef
-Topic 715
-SubTopic 60
-Name Accounting Standards Codification
-Section 50
-Paragraph 3
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480266/715-60-50-3

+ Details

Income Taxes

12 Months Ended

Dec. 31, 2023

Income Taxes [Abstract]

Income Taxes

Note L—Income Taxes

The Company operates in the United States and is subject to corporate net income taxes for federal and state purposes. In 2021 and applicable prior years, tax expense was computed in total on combined continuing and discontinued operations, then separately for continuing operations which is subtracted from that total. The remainder is shown as tax expense for discontinued operations. The components of income tax expense included in the statements of continuing operations are as follows:


	For the years ended
	December 31,
	2023		2022		2021
		(in thousands)
Current tax provision
Federal	$	55,314	$	29,994	$	22,364
State		14,845		11,837		9,958
		70,159		41,831		32,322
Deferred tax (benefit) provision
Federal		(4,925)		5,206		1,564
State		(756)		664		(162)
		(5,681)		5,870		1,402
	$	64,478	$	47,701	$	33,724

The differences between applicable income tax expense (benefit) from continuing operations and the amounts computed by applying the statutory federal income tax rate of 21% for 2023, 2022 and 2021, are as follows:


	For the years ended
	December 31,
	2023		2022		2021
		(in thousands)

Computed tax expense at statutory rate	$	53,923	$	37,410	$	30,275
State taxes		10,885		9,499		7,704
Tax-exempt interest income		(459)		(480)		(566)
Meals and entertainment		82		6		24
Civil money penalty		—		368		—
Other net (deductible) nondeductible items		(49)		(22)		(3,762)
Valuation allowance - domestic		—		—		(1,446)
Other		96		920		1,495
	$	64,478	$	47,701	$	33,724

Deferred income taxes are provided for the temporary difference between the financial reporting basis and the tax basis of the Company’s assets and liabilities. Cumulative temporary differences recognized in the financial statement of position are as follows:


	For the years ended
	December 31,
	2023		2022
		(in thousands)
Deferred tax assets:
Allowance for credit losses	$	8,400	$	5,283
Non-accrual interest		2,900		2,076
Deferred compensation		625		625
State taxes		2,514		1,192
Nonqualified stock options		1,296		747
Capital loss limitations		6,280		8,158
Tax deductible goodwill		609		614
Operating lease liabilities		3,929		1,652
Unrealized losses on investment securities available-for-sale		6,509		10,668
Fair value adjustment to investments		682		—
Other		66		222
Total gross deferred tax assets		33,810		31,237
Federal and state valuation allowance		(6,280)		(8,158)
Deferred tax liabilities:
Depreciation		2,594		2,025
Right of use asset		3,717		1,314
Fair value adjustment to investments		—		37
Total deferred tax liabilities		6,311		3,376
Net deferred tax asset	$	21,219	$	19,703

Management assesses all available positive and negative evidence to determine whether it is more likely than not that the Company will be able to recognize the existing deferred tax assets. If that threshold is not met, a valuation allowance is established against the deferred tax asset. The federal and state valuation allowance at December 31, 2023 and 2022, respectively, was $6.3 million and $8.2 million and resulted from Walnut Street assets, primarily because related capital losses will likely be non-deductible. Walnut Street reflected the Bank’s prior investment in an entity through which a portion of its discontinued loan portfolio was sold.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:


	For the years ended
	December 31,
	2023		2022		2021
	(in thousands)
Beginning balance at January 1	$	—	$	338	$	338
Decreases in tax provisions for prior years		—		(338)		—
Gross unrecognized tax benefits at December 31	$	—	$	—	$	338

Management does not believe these amounts will significantly increase or decrease within 12 months of December 31, 2023. The total amount of unrecognized tax benefits, if recognized, will impact the effective tax rate.

Tax years after 2020 remain subject to examination by the federal authorities, and 2019 and after remain subject to examination by most state tax authorities. The Company recognizes interest accrued and penalties related to unrecognized tax benefits in income tax expense for all periods presented. To date, no amounts of interest or penalties relating to unrecognized tax benefits have been recorded.

On December 27, 2020, the Consolidated Appropriations Act 2021 (the “Appropriations Act”) was enacted in response to the COVID-19 pandemic. The Appropriations Act, among other things, temporarily extends through December 31, 2025, certain expiring tax provisions. Additionally, the Appropriations Act enacts new provisions and extends certain provisions originated within the Coronavirus Aid, Relief, and Economic Security Act, enacted on March 27, 2020. The legislation did not have a material impact on the Company’s tax position. On March 11, 2021 the American Rescue Plan Act of 2021, which includes certain business tax provisions, was signed into law. This legislation did not have a material impact on the Company’s tax provision.

On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was signed into law. The IRA made several changes to the U.S. tax code effective after December 31, 2022, including, but not limited to, a 15% minimum tax on large corporations with average annual financial statement income of more than $1.00 billion for a three tax-year period and a 1% excise tax on public company stock buybacks, which will be accounted for in treasury stock. These changes have not had, nor does the Company expect these changes to have, a material impact on the provision for income taxes or financial statements.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480990/946-20-50-13

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(h)(2))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-Name Accounting Standards Codification
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-URI https://asc.fasb.org//740/tableOfContent

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 14
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-14

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
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-Section 50
-Paragraph 21
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-21

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
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-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482526/740-270-50-1

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 17
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-17

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SAB TOPIC 6.I.5.Q1)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479360/740-10-S99-1

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 2
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-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479360/740-10-S99-2

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 30
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482603/740-30-50-2

+ Details

Stock-Based Compensation

12 Months Ended

Dec. 31, 2023

Stock-Based Compensation [Abstract]

Stock-Based Compensation

Note M—Stock-Based Compensation

The Company recognizes compensation expense for stock options and RSUs in accordance with FASB ASC 718, Stock Based Compensation. The expense of the option or RSU is generally measured at fair value at the grant date with compensation expense recognized over the service period, which is typically the vesting period. For option grants subject to a service condition, the Company utilizes the Black-Scholes option-pricing model to estimate the fair value of each option on the date of grant. The Black-Scholes model takes into consideration the exercise price and expected life of the options, the current price of the underlying stock and its expected volatility, the expected dividends on the stock and the current risk-free interest rate for the expected life of the option. The Company’s estimate of the fair value of a stock option is based on expectations derived from historical experience and may not necessarily equate to its market value when fully vested. In accordance with ASC 718, the Company estimates the number of options for which the requisite service is expected to be rendered. For RSUs, fair value is determined by the quoted price of the Company’s common stock on Nasdaq as of the date of grant.

At December 31, 2023, the Company had two active stock-based compensation plans, The Bancorp, Inc. 2020 Equity Incentive Plan (the “2020 Plan”) and The Bancorp, Inc. 2018 Equity Incentive Plan (the “2018 Plan” and, together with the 2020 Plan, the “Equity Plans”).

The 2020 Plan was adopted in May 2020. Employees and directors of the Company and the Bank and consultants (with restrictions) are eligible to participate in the 2020 Plan. Terms of options granted under the 2020 Plan may not exceed 10 years from the date of grant. Any employee or consultant who possesses more than 10% of voting power of all classes of stock of the Company, or any parent or subsidiary, may not have options with terms exceeding five years from the date of grant. An aggregate of 3,300,000 shares of common stock were reserved for issuance under the 2020 Plan. RSUs may also be granted under the 2020 Plan, with conditions similar to those for options.

The 2018 Plan was adopted in May 2018. Employees and directors of the Company and the Bank and consultants (with restrictions) are eligible to participate in the 2018 Plan. Terms of options granted under the 2018 Plan may not exceed 10 years from the date of grant. Any employee or consultant who possesses more than 10% of voting power of all classes of stock of the Company, or any parent or subsidiary, may not have options with terms exceeding five years from the date of grant. An aggregate of 1,700,000 shares of common stock were reserved for issuance under the 2018 Plan, but none remain. Restricted stock units may have also been granted under the 2018 Plan, with conditions similar to those for options.

During 2023, the Company granted 57,573 stock options with a vesting period of four years and a weighted average grant-date fair value of $17.37. During 2022, the Company granted 100,000 stock options with a vesting period of four years and a weighted average grant-date fair value of $14.01. During 2021, the Company granted 100,000 stock options with a vesting period of four years and a weighted average grant-date fair value of $8.51. The total common stock options exercised in 2023, 2022 and 2021 were 13,158, 58,531 and 633,966, respectively.

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


					Weighted-average
					remaining
			Weighted-average		contractual		Aggregate
	Options		exercise price		term (years)		intrinsic value
		(in thousands except per share data)

Outstanding at January 1, 2023		580,104	$	13.25		7.48	$	8,968,660
Granted		57,573		35.17		9.12		—
Exercised		(13,158)		10.45		—		278,450
Expired		—		—		—		—
Forfeited		(1,842)		—		—		—
Outstanding at December 31, 2023		622,677		15.35		6.90		14,453,641
Exercisable at December 31, 2023		365,104	$	10.41		6.38	$	10,276,219

A summary of the Company’s non-vested options under the Equity Plans as of December 31, 2023, and changes during 2023, is presented below:


		Weighted-average
		grant date
	Options	fair value
Non-Vested at January 1, 2023	341,276	$	7.49
Granted	57,573		17.37
Vested	(141,276)		4.67
Expired	—		—
Forfeited	—		—
Non-Vested at December 31, 2023	257,573	$	10.49

The Company granted 547,556 RSUs in 2023, of which 514,785 have a vesting period of three years and 32,771 have a vesting period of one year. At issuance, the 547,556 RSUs granted in 2023 had a fair value of $35.00 per unit. The Company granted 260,693 RSUs in 2022, of which 219,311 have a vesting period of three years and 41,382 had a vesting period of one year. At issuance, the 260,693 RSUs granted in 2022 had a fair value of $28.61 per unit. The Company granted 313,697 RSUs in 2021 of which 261,073 have a vesting period of three years and 52,624 had a vesting period of one year. At issuance, the 313,697 RSUs granted in 2021 had a fair value of $18.81 per unit.

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


		Weighted-average		Average remaining
		grant date		contractual
	RSUs	fair value		term (years)
Outstanding at January 1, 2023	671,696	$	17.78		1.00
Granted	547,556		35.00		2.01
Vested	(456,991)		13.80		—
Forfeited	(10,006)		32.84		—
Outstanding at December 31, 2023	752,255	$	32.53		1.66

There were 470,149 options exercised and RSUs vested in 2023, 641,320 options exercised and RSUs vested in 2022 and 1,732,529 options exercised and RSUs vested in 2021. The total intrinsic value of the options exercised and RSUs vested in 2023, 2022 and 2021 was $16.8 million, $15.7 million and $35.5 million, respectively. The total issuance date fair value of options that were exercised and RSUs which vested during the years ended December 31, 2023, 2022, 2021 was $6.4 million, $6.1 million, and $10.5 million, respectively.

As of December 31, 2023, there was a total of $16.5 million of unrecognized compensation cost related to unvested awards under stock-based compensation plans. This cost is expected to be recognized over a weighted average period of approximately 1.3 years. Related compensation expense for the years ended December 31, 2023, 2022 and 2021 was $11.4 million, $7.6 million and $8.6 million respectively, and the related tax benefits recognized were $2.4 million, $1.6 million and $1.8 million, respectively.

For the years ended December 31, 2023, 2022 and 2021, the Company estimated the fair value of each stock option grant on the date of grant using the Black-Scholes options pricing model with the following weighted average assumptions:


	December 31,
	2023	2022		2021
Risk-free interest rate	3.67%		1.94%		1.19%
Expected dividend yield	—		—		—
Expected volatility	45.2%		45.1%		45.6%
Expected lives (years)	6.3		6.3		6.3

Expected volatility is based on the historical volatility of the Company’s stock and peer group comparisons over the expected life of the option. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury strip rate in effect at the time of the grant. The life of the option is based on historical factors which include the contractual term, vesting period, exercise behavior and employee terminations. In accordance with the ASC 718, stock-based compensation expense for the year ended December 31, 2023 is based on awards that are ultimately expected to vest and has been reduced for estimated forfeitures. The Company estimates forfeitures using historical data or acceptable expedients.

Transactions With Affiliates

12 Months Ended

Dec. 31, 2023

Transactions With Affiliates [Abstract]

Transactions With Affiliates

Note N—Transactions with Affiliates

The Bank did not maintain any deposits for various affiliated companies as of December 31, 2023 and December 31, 2022, respectively.

The Bank has entered into lending transactions in the ordinary course of business with directors, executive officers, principal stockholders and affiliates of such persons. All loans were made on substantially the same terms, including interest rate and collateral, as those prevailing at the time for comparable loans with persons not related to the lender. At December 31, 2023, these loans were current as to principal and interest payments, and did not involve more than normal risk of collectability or present other unfavorable features. At December 31, 2023 and 2022, loans to these related parties amounted to $5.7 million and $5.5 million, respectively.

Mr. Hersh Kozlov, a director of the Company, is a partner at Duane Morris LLP, an international law firm. The Company paid Duane Morris LLP $174,000 in 2023, $1.5 million in 2022 and $1.9 million in 2021 for legal services.

- Definition

The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480990/946-20-50-2

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 5
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480990/946-20-50-5

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480990/946-20-50-6

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 235
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481062/946-235-50-2

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 235
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (e)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481062/946-235-50-2

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483326/850-10-50-1

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 220
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.6-07(2)(g)(3))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483575/946-220-S99-1

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 220
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.6-07(2)(c))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483575/946-220-S99-1

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
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-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.6-07(2)(e))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483575/946-220-S99-1

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//850/tableOfContent

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483326/850-10-50-6

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483326/850-10-50-1

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 850
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483326/850-10-50-1

+ Details

Commitments And Contingencies

12 Months Ended

Dec. 31, 2023

Commitments and Contingencies [Abstract]

Commitments And Contingencies

Note O—Commitments and Contingencies

1. Operating Leases

As part of its cost control efforts, the Company is actively managing its facilities. The lease for its Wilmington, Delaware operations facility and its Crofton, Maryland business leasing office expire in 2025. The lease for its Westmont (suburban Chicago), Illinois SBL office expires in 2026. The occupied New York and Norristown sites are, respectively, loan administration and leasing offices, and the leases will expire in 2024 and 2028, respectively. The Memphis, Tennessee SBL office lease expires in 2025. The Morrisville, North Carolina SBL loan office lease expires in 2024. The Company also has leases for leasing business development offices in New Jersey that expire in 2024, and leases for SBL and leasing business development offices in Washington state and Utah that expire at various times through 2024 and 2028, respectively. The Company’s lease in South Dakota for its prepaid and debit card division expires in 2037.

These leases require the Company to pay the real estate taxes and insurance on the leased properties in addition to rent. The approximate future minimum annual rental payments, including any additional rents for escalation clauses, are as follows (in thousands):


Year ending December 31,

2024	$	4,176
2025		3,194
2026		1,650
2027		1,661
2028		1,683
Thereafter		17,651
	$	30,015

Rent and related expense for the years ended December 31, 2023, 2022 and 2021 were approximately $4.3 million, $3.7 million and $3.6 million net of sublease rentals of approximately $406,000, $406,000 and $729,000, respectively.

2. Legal Proceedings

On June 12, 2019, the Bank was served with a qui tam lawsuit filed in the Superior Court of the State of Delaware, New Castle County. The Delaware Department of Justice intervened in the litigation. The case is titled The State of Delaware, Plaintiff, Ex rel. Russell S. Rogers, Plaintiff-Relator v. The Bancorp Bank, Interactive Communications International, Inc., and InComm Financial Services, Inc., Defendants. The lawsuit alleges that the defendants violated the Delaware False Claims Act by not paying balances on certain open-loop “Vanilla” prepaid cards to the State of Delaware as unclaimed property. The complaint seeks actual and treble damages, statutory penalties, and attorneys’ fees. The Bank has filed an answer denying the allegations and continues to vigorously defend against the claims. The Bank and other defendants previously filed a motion to dismiss the action, but the motion was denied and the case is in preliminary stages of discovery. The Company is unable to determine whether the ultimate resolution of the matter will have a material adverse effect on the Company’s financial condition or operations.

On September 14, 2021, Cachet Financial Services (“Cachet”) filed an adversary proceeding against the Bank in the United States Bankruptcy Court for the Central District of California, titled Cachet Financial Services, Plaintiff v. The Bancorp Bank, et al., Defendants. The case was filed within the context of Cachet’s pending Chapter 11 bankruptcy case. The Bank previously served as the Originating Depository Financial Institution (“ODFI”) for automated clearing house (“ACH”) transactions in connection with Cachet’s payroll services business. The matter arises from the Bank’s termination of its Payroll Processing ODFI Agreement with Cachet on October 23, 2019, for safety and soundness reasons. The initial complaint alleges eight causes of action: (i) breach of contract; (ii) negligence; (iii) intentional interference with contract; (iv) conversion; (v) express indemnity; (vi) implied indemnity; (vii) accounting; and (viii) objection to the Bank’s proof of claim in the bankruptcy case. On November 4, 2021, the Bank filed a motion in the United States District Court for the Central District of California to withdraw the reference of the adversary proceeding to the bankruptcy court, which was denied in February 2023. On August 3, 2022, Cachet served the Bank with a First Amended Complaint wherein Cachet, among other things, withdraws its implied indemnity claim against the Bank and adds several defendants unaffiliated with the Bank and causes of action related to those parties. As to the Bank, Cachet seeks approximately $150 million in damages, an accounting and disallowance of the Bank’s proof of claim. The Bank is vigorously defending against these claims. On September 28, 2022, the Bank filed a partial motion to dismiss, seeking to dispose of the majority of Cachet’s claims against the Bank. The motion is still pending before the bankruptcy court. The Company is not yet able to determine whether the ultimate resolution of this matter will have a material adverse effect on the Company’s financial condition or operations.

On March 27, 2023, the Bank received a Civil Investigative Demand (“CID”) from the Consumer Financial Protection Bureau (“CFPB”) seeking documents and information related to the Bank’s escheatment practices in connection with certain accounts offered through one of the Bank’s program partners. The Bank continues to cooperate with the CFPB, including by responding to the CID. While the Company remains confident in the Bank’s escheatment practices, it cannot predict the timing or final outcome of the investigation. Future costs related to this matter may be material and could continue to be material at least through the completion of the investigation.

On September 8, 2023, Del Mar TIC I, LLC and Del Mar TIC II, LLC (together, “Del Mar”) filed a complaint against the Bank in the Supreme Court of the State of New York, New York County, captioned Del Mar TIC I, LLC and Del Mar TIC II, LLC, Plaintiffs v. The Bancorp Bank, Defendant. The complaint alleges, among other things, that the Bank improperly and unreasonably force-placed excessive insurance coverage on real property that serves as security for a loan from the Bank to Del Mar, and that the Bank is improperly paying the related insurance premiums from escrow funds. The complaint asserts five causes of action: (i) declaratory judgment; (ii) breach of fiduciary duty; (iii) breach of contract: implied covenant of good faith and fair dealing; (iv) breach of contract: escrow account; and (v) injunctive relief. On October 12, 2023, the Bank removed the case to the U.S. District Court for the Southern District of New York. On November 15, 2023, the Bank filed a motion to dismiss the complaint. Del Mar subsequently filed an amended complaint, but maintained the same causes of action. On December 22, 2023, the Bank filed a motion to dismiss the amended complaint, which is still pending. The Company is unable to determine whether the ultimate resolution of the matter will have a material adverse effect on the Company’s financial condition or operations.

On November 21, 2023, TBBK Card Services, Inc. (“TBBK Card”), a wholly-owned subsidiary of the Bank, was served with a complaint filed in the Superior Court of the State of California, captioned People of the State of California, acting by and through San Francisco City Attorney David Chiu, Plaintiff v. InComm Financial Services, Inc., TBBK Card Services, Inc., Sutton Bank, Pathward, N.A., and Does 1-10, Defendants. The complaint principally alleges that the defendants engaged in unlawful, unfair or fraudulent business acts and practices related to the packaging of “Vanilla” prepaid cards and the refund process for unauthorized transactions that

occurred due to card draining practices. On December 14, 2023, the case was removed to the U.S. District Court for the Northern District of California. On January 30, 2024, Plaintiff filed a motion to remand the case to California state court, which is still pending. TBBK Card intends to vigorously defend against the claims. The Company is not yet able to determine whether the ultimate resolution of this matter will have a material adverse effect on the Company’s financial condition or operations.

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

Financial Instruments With Off-Balance-Sheet Risk And Concentrations Of Credit Risk

12 Months Ended

Dec. 31, 2023

Financial Instruments With Off-Balance-Sheet Risk And Concentrations Of Credit Risk [Abstract]

Financial Instruments With Off-Balance-Sheet Risk And Concentrations Of Credit Risk

Note P—Financial Instruments with Off-Balance-Sheet Risk and Concentrations of Credit Risk

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Such financial instruments are recorded in the consolidated financial statements when they become payable. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The contractual, or notional, amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

The approximate contract amounts and maturity term of the Company’s unused credit commitments are as follows:


	December 31,
	2023		2022
		(in thousands)
Financial instruments whose contract amounts represent credit risk
Commitments to extend credit	$	1,785,050	$	1,980,154
Standby letters of credit		1,698		1,698
	$	1,786,748	$	1,981,852

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation. The vast majority of commitments to extend credit arise from SBLOC which are variable rate and which represent collateral values available to support additional extensions of credit, and not expected usage. Such commitments are normally based on the full amount of collateral in a customer’s investment account. The majority of such lines of credit have historically not been drawn upon.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company holds residential or commercial real estate, accounts receivable, inventory and equipment as collateral supporting those commitments for which collateral is deemed necessary. The Company reduces any potential liability on its standby letters of credit based upon its estimate of the proceeds obtainable upon the liquidation of the collateral held. Fair values of unrecognized financial instruments, including commitments to extend credit and the fair value of letters of credit, are considered immaterial.

The Company’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. CECL accounting guidance requires the establishment of an allowance for loss on such unfunded instruments. To establish that allowance, the Company generally utilizes the same methodologies as it does to establish allowances on outstanding loans, adjusted for estimated usage as appropriate.

Fair Value Measurements

12 Months Ended

Dec. 31, 2023

Fair Value Measurements [Abstract]

Fair Value Measurements

Note Q—Fair Value of Financial Instruments

ASC 825, Financial Instruments, requires disclosure of the estimated fair value of an entity’s assets and liabilities considered to be financial instruments. For the Company, as for most financial institutions, the majority of its assets and liabilities are considered to be financial instruments. However, many such instruments lack an available trading market as characterized by a willing buyer and willing seller engaging in an exchange transaction. Also, it is the Company’s general practice and intent to hold its financial instruments to maturity whether or not categorized as “available-for-sale” and not to engage in trading or sales activities although it sold loans in 2019 and prior years, and may do so in the future. For fair value disclosure purposes, the Company utilized the fair value measurement criteria of ASC 820, Fair Value Measurements and Disclosures (“ASC 820”).

ASC 820 establishes a common definition for fair value to be applied to assets and liabilities. It clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It also establishes a framework for measuring fair value and expands disclosures concerning fair value measurements. ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Level 1 valuation is based on quoted market prices for identical assets or liabilities to which the Company has access at the measurement date. Level 2 valuation is based on other observable inputs for the asset or liability, either directly or indirectly. This includes quoted prices for similar assets in active or inactive markets, inputs other than quoted prices that are observable for the asset or liability such as yield curves, volatilities, prepayment speeds, credit risks, default rates, or inputs that are derived principally from, or corroborated through, observable market data by market-corroborated reports. Level 3 valuation is based on “unobservable inputs” that are the best information available in the circumstances. Assets classified as level 3 are only classified as such, when the observable inputs discussed above are not available, often as a result of thinly traded markets. A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. There were no transfers between levels in 2023 and 2022. Transfers between levels in prior years, resulted only from the availability or non-availability of third-party pricing for commercial real estate securities from the Company’s securitizations, see “Note E—Loans”. For fair value disclosure purposes, the Company utilized certain value measurement criteria required under the ASC 820, as discussed below.

Estimated fair values have been determined by the Company using the best available data and an estimation methodology it believes to be suitable for each category of financial instruments. Changes in the assumptions or methodologies used to estimate fair values may materially affect the estimated amounts. Also, there may not be reasonable comparability between institutions due to the wide range of permitted assumptions and methodologies in the absence of active markets. This lack of uniformity gives rise to a high degree of subjectivity in estimating financial instrument fair values.

Cash and cash equivalents, which are comprised of cash and due from banks and the Company’s balance at the Federal Reserve, had recorded values of $1.04 billion and $888.2 million at December 31, 2023 and 2022, respectively, which approximated fair values.

Investment securities have estimated fair values based on quoted market prices or other observable inputs, if available. If observable inputs are not available, fair values are determined using unobservable (Level 3) inputs that are based on the best information available in the circumstances. For these investment securities, fair values are based on the present value of expected cash flows from principal and interest to maturity, or yield to call as appropriate, at the measurement date.

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

Loans, net have an estimated fair value using the present value of future cash flows. The discount rate used in these calculations is the estimated current market rate adjusted for borrower-specific credit risk. The carrying value of accrued interest approximates fair value.

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

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

Assets held-for-sale from discontinued operations were recorded at the lower of cost basis or market value. For loans, market value was determined using the discounted cash flow approach which converts expected cash flows from the loan portfolio by unit of measurement to a present value estimate. Unit of measurement was determined by loan type and for significant loans on an individual loan basis. Loan fair values are based on “unobservable inputs” that are based on available information. Level 3 fair values are based on the present value of cash flows by unit of measurement. In the first quarter of 2022, discontinued loans were reclassified to loans held for investment, as efforts to sell the loans had concluded. Accordingly, these loans will be accounted for as such, and included in related tables. Discontinued OREO which constituted the remainder of discontinued assets was reclassified to the OREO caption on the consolidated balance sheet.

Deposits (comprised of interest and non-interest-bearing checking accounts, savings, and certain types of money market accounts) are equal to the amount payable on demand at the reporting date (generally, their carrying amounts). The fair values of securities sold under agreements to repurchase and short-term borrowings are equal to their carrying amounts as they are overnight borrowings. There were no short-term borrowings outstanding at December 31, 2023 or 2022.

Time deposits, when outstanding, senior debt and subordinated debentures have a fair value estimated using a discounted cash flow calculation that applies current interest rates to discount expected cash flows. There were no time deposits outstanding at December 31, 2023 and $330.0 million at December 31, 2022.

Long-term borrowings resulted from sold loans which did not qualify for true sale accounting. They are presented in the principal amount of such loans.

Interest rate swaps are either assets or liabilities and have a fair value which is estimated using models that use readily observable market inputs and a market standard methodology applied to the contractual terms of the derivatives, including the period to maturity and the applicable interest rate index.

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


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


	December 31, 2022
					Quoted prices		Significant
					in active		other		Significant
					markets for		observable		unobservable
	Carrying		Estimated		identical assets		inputs		inputs
	amount		fair value		(Level 1)		(Level 2)		(Level 3)
		(in thousands)
Investment securities, available-for-sale	$	766,016	$	766,016	$	—	$	745,993	$	20,023
Federal Reserve, FHLB and ACBB stock		12,629		12,629		—		—		12,629
Commercial loans, at fair value		589,143		589,143		—		—		589,143
Loans, net of deferred loan fees and costs		5,486,853		5,462,948		—		—		5,462,948
Interest rate swaps, asset		408		408		—		408		—
Demand and interest checking		6,559,617		6,559,617		—		6,559,617		—
Savings and money market		140,496		140,496		—		140,496		—
Senior debt		99,050		93,871		—		93,871		—
Time deposits		330,000		330,000				330,000		—
Subordinated debentures		13,401		10,067		—		—		10,067
Securities sold under agreements to repurchase		42		42		42		—		—

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


			Fair Value Measurements at Reporting Date Using
			Quoted prices in active		Significant other		Significant
			markets for identical		observable		unobservable
	Fair value		assets		inputs		inputs
	December 31, 2023		(Level 1)		(Level 2)		(Level 3)

Investment securities, available-for-sale
U.S. Government agency securities	$	33,886	$	—	$	33,886	$	—
Asset-backed securities		325,353		—		325,353		—
Obligations of states and political subdivisions		47,237		—		47,237		—
Residential mortgage-backed securities		160,767		—		160,767		—
Collateralized mortgage obligation securities		34,038		—		34,038		—
Commercial mortgage-backed securities		146,253		—		134,182		12,071
Total investment securities, available-for-sale		747,534		—		735,463		12,071
Commercial loans, at fair value		332,766		—		—		332,766
Interest rate swaps, asset		285		—		285		—
	$	1,080,585	$	—	$	735,748	$	344,837


			Fair Value Measurements at Reporting Date Using
			Quoted prices in active		Significant other		Significant
			markets for identical		observable		unobservable
	Fair value		assets		inputs		inputs
	December 31, 2022		(Level 1)		(Level 2)		(Level 3)
	.
Investment securities, available-for-sale
U.S. Government agency securities	$	28,381	$	—	$	28,381	$	—
Asset-backed securities		334,009		—		334,009		—
Obligations of states and political subdivisions		47,510		—		47,510		—
Residential mortgage-backed securities		139,820		—		139,820		—
Collateralized mortgage obligation securities		41,783		—		41,783		—
Commercial mortgage-backed securities		166,813		—		154,490		12,323
Corporate debt securities		7,700		—		—		7,700
Total investment securities, available-for-sale		766,016		—		745,993		20,023
Commercial loans, at fair value		589,143		—		—		589,143
Interest rate swaps, asset		408		—		408		—
	$	1,355,567	$	—	$	746,401	$	609,166

The Company’s Level 3 asset activity for the categories shown for the years 2023 and 2022 is as follows (in thousands):


		Fair Value Measurements Using
		Significant Unobservable Inputs
		(Level 3)

	Available-for-sale				Commercial loans,
	securities				at fair value
	December 31, 2023		December 31, 2022		December 31, 2023		December 31, 2022
Beginning balance	$	20,023	$	19,031	$	589,143	$	1,388,416
Transfers to OREO		—		—		(2,686)		(61,580)
Total net (losses) or gains (realized/unrealized)
Included in earnings		—		—		3,869		12,570
Included in earnings (included in credit loss)		(10,000)		—		—		—
Included in other comprehensive income/(loss)		2,048		992		—		—
Purchases, issuances, sales and settlements
Issuances		—		—		134,256		66,067
Settlements		—		—		(391,816)		(816,330)
Ending balance	$	12,071	$	20,023	$	332,766	$	589,143

Total losses year to date included
in earnings attributable to the change in
unrealized gains or losses relating to assets still
held at the reporting date as shown above.	$	—	$	—	$	(3,085)	$	(3,492)


	Fair Value Measurements Using
	Significant Unobservable Inputs
	(Level 3)

	Assets held-for-sale
	from discontinued operations
	December 31, 2023		December 31, 2022
Beginning balance	$	—	$	3,268
Settlements		—		(3,268)
Ending balance	$	—	$	—

Total losses year to date included
in earnings attributable to the change in
unrealized gains or losses relating to assets still
held at the reporting date as shown above.	$	—	$	—

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


	December 31, 2023		December 31, 2022
Beginning balance	$	21,210	$	18,873
Transfer from commercial loans, at fair value		2,686		—
Writedowns		(1,147)		—
Sales		(5,800)		(2,343)
Transfers from commercial loans, at fair value		—		4,680
Ending balance	$	16,949	$	21,210

Information related to fair values of Level 3 balance sheet categories is as follows (dollars in thousands, except range and weighted average data):



	Fair value at				Range at	Weighted average at
Level 3 instruments only	December 31, 2023		Valuation techniques	Unobservable inputs	December 31, 2023	December 31, 2023

Commercial mortgage-backed investment
security⁽¹⁾	$	12,071	Discounted cash flow	Discount rate	14.00%	14.00%
FHLB, ACBB,
and Federal Reserve Bank stock		15,591	Cost	N/A	N/A	N/A
Loans, net of deferred loan fees and costs⁽²⁾		5,329,436	Discounted cash flow	Discount rate	7.40%-13.00%	8.41%

Commercial - SBA⁽³⁾		119,287	Discounted cash flow	Discount rate	7.46%	7.46%
Non-SBA commercial real estate - fixed⁽⁴⁾		162,674	Discounted cash flow and appraisal	Discount rate	8.00%-12.30%	8.76%
Non-SBA commercial real estate - floating⁽⁵⁾		50,805	Discounted cash flow	Discount rate	9.30%-16.50%	14.19%
Commercial loans, at fair value		332,766

Subordinated debentures⁽⁶⁾		11,470	Discounted cash flow	Discount rate	11.00%	11.00%

OREO⁽⁷⁾		16,949	Appraised value	N/A	N/A	N/A


	Fair value at				Range at	Weighted average at
Level 3 instruments only	December 31, 2022		Valuation techniques	Unobservable inputs	December 31, 2022	December 31, 2022

Commercial mortgage-backed investment
securities	$	12,323	Discounted cash flow	Discount rate	12.71%	12.71%
Insurance liquidating trust preferred security		7,700	Discounted cash flow	Discount rate	11.50%	11.50%
FHLB, ACBB,
and Federal Reserve Bank stock		12,629	Cost	N/A	N/A	N/A
Loans, net of deferred loan fees and costs		5,462,948	Discounted cash flow	Discount rate	5.65%-11.00%	6.86%

Commercial - SBA		146,717	Discounted cash flow	Discount rate	5.57%-6.25%	6.17%
Non-SBA commercial real estate - fixed		28,695	Discounted cash flow and appraisal	Discount rate	8.36%-11.65%	10.31%
Non-SBA commercial real estate - floating		413,731	Discounted cash flow	Discount rate	7.07%-17.20%	7.90%
Commercial loans, at fair value		589,143

Subordinated debentures		10,067	Discounted cash flow	Discount rate	11.50%	11.50%

OREO		21,210	Appraised value	N/A	N/A	N/A

The valuations for each of the instruments above, as of the balance sheet date, are sensitive to judgments, assumptions and uncertainties, changes in which could have a significant impact on such valuations. All weighted averages at December 31, 2023 were calculated using the discount rate for each individual security or loan weighted by its par value, except for SBA loans. For SBA loans, traders’ pricing indications based on loan seasoning were weighted. For commercial loans recorded at fair value, changes in fair value are reflected in the income statement. Changes in the fair value of securities which are unrelated to credit are recorded through equity. Changes in the value of subordinated debentures are a disclosure item, without impact on the financial statements. Changes in the fair value of loans recorded at amortized cost which are unrelated to credit are also a disclosure item, without impact on the financial statements. The notes below refer to the December 31, 2023 table.

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

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

⁽³⁾Commercial – SBA Loans are comprised of the government guaranteed portion of SBA-insured loans. Their valuation is based upon the yield derived from dealer pricing indications for guaranteed pools, adjusted for seasoning and prepayments. A limited number of broker/dealers originate the pooled securities for which the loans are purchased and as a result, prices can fluctuate based on such limited market demand, although the government guarantee has resulted in consistent historical demand. Valuations are impacted by prepayment assumptions resulting from both voluntary payoffs and defaults. As of December 31, 2023 all remaining SBA loans carried at fair value have in excess of 36 months of seasoning. As such, a single discount rate and prepayment assumption, based upon pool pricing, was applied to this calculation.

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

⁽⁵⁾Non-SBA commercial real estate – floating are floating rate non-SBA loans, the majority of which are secured by multi-family properties (apartment buildings). These are bridge loans designed to provide owners time and funding for property improvements and are generally valued using discounted cash flow analysis. The discount rate for the vast majority of these loans was based upon current origination rates for similar loans. Deterioration in loan performance or other credit weaknesses could result in fair value ranges which would be dependent upon potential buyers’ tolerance for such weaknesses and are difficult to estimate. At December 31, 2023, these loans were fair valued by a third party, based upon discounting at market rates for similar loans.

⁽⁶⁾Subordinated debentures are comprised of the 2038 Debentures, which are valued using discounted cash flow analysis. The discount rate is based on the market rate for comparable relatively illiquid instruments. Changes in those market rates, or the credit of the Company could result in changes in the valuation.

⁽⁷⁾For OREO, fair value is based upon appraisals of the underlying collateral by third party appraisers, reduced by 7% to 10% for estimated selling costs. Such appraisals reflect estimates of amounts realizable upon property sales based on the sale of comparable properties and other factors. Actual sales prices may vary based upon the identification of potential purchasers, changing conditions in local real estate markets and the level of interest rates required to finance purchases.

Assets measured at fair value on a nonrecurring basis, segregated by fair value hierarchy, at December 31, 2022 and 2021 are summarized below (in thousands):


			Fair Value Measurements at Reporting Date Using
			Quoted prices in active		Significant other		Significant
			markets for identical		observable		unobservable
	Fair value		assets		inputs		inputs⁽¹⁾
Description	December 31, 2023		(Level 1)		(Level 2)		(Level 3)

Collateral dependent loans⁽¹⁾	$	8,944	$	—	$	—	$	8,944
OREO		16,949		—		—		16,949
Intangible assets		1,651		—		—		1,651
	$	27,544	$	—	$	—	$	27,544


			Fair Value Measurements at Reporting Date Using
			Quoted prices in active		Significant other		Significant
			markets for identical		observable		unobservable
	Fair value		assets		inputs		inputs⁽¹⁾
Description	December 31, 2022		(Level 1)		(Level 2)		(Level 3)


Collateral dependent loans⁽¹⁾	$	12,205	$	—	$	—	$	12,205
OREO		21,210		—		—		21,210
Intangible assets		2,049		—		—		2,049
	$	35,464	$	—	$	—	$	35,464

⁽¹⁾The method of valuation approach for the loans evaluated for an ACL on an individual loan basis and also for OREO was the market approach based upon appraisals of the underlying collateral by external appraisers, reduced by 7% to 10% for estimated selling costs. Intangible assets are valued based upon internal analyses.

At December 31, 2023, principal on collateral dependent loans and troubled debt restructurings, which is accounted for on the basis of the value of underlying collateral, is shown in the above table at an estimated fair value of $8.9 million. To arrive at that fair value, related loan principal of $11.8 million was reduced by specific allowances of $2.9 million within the ACL, as of that date, representing the deficiency between principal and estimated collateral values, which were reduced by estimated costs to sell. When the deficiency is deemed uncollectible, it is charged off by reducing the specific allowance and decreasing principal. Included in the loans individually evaluated for an ACL at December 31, 2023, were troubled debt restructured loans with a balance of $1.6 million which had specific allowances of $591,000. At December 31, 2022, principal on loans individually evaluated for an ACL, and troubled debt restructurings that is accounted for on the basis of the value of underlying collateral, is shown in the above table at an estimated fair value of $12.2 million. To arrive at that fair value, related loan principal of $14.3 million was reduced by specific allowances of $2.1 million within the ACL, as of that date, representing the deficiency between principal and estimated collateral values, which were reduced by estimated costs to sell. Included in the loans individually evaluated for an ACL at December 31, 2022, were troubled debt restructured loans with a balance of $5.3 million which had specific allowances of $637,000. Under the new accounting guidance effective January 1, 2023, which broadened the reporting of loan restructurings to include all modifications, there were $13.1 million of loans classified as modified as of December 31, 2023 with specific allowances of $127,000. Valuation techniques consistent with the market and/or cost approach were used to measure fair value and primarily included observable inputs for the individual loans being evaluated such as recent sales of similar collateral or observable market data for operational or carrying costs. In cases where such inputs were unobservable, the loan balance is reflected within the Level 3 hierarchy.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Derivatives

12 Months Ended

Dec. 31, 2023

Derivatives [Abstract]

Derivatives

Note R –Derivatives

The Company has utilized derivative instruments to assist in the management of interest rate sensitivity by modifying the repricing, maturity and option characteristics on certain non-SBA commercial real estate loans held at fair value. These instruments are not accounted for as effective hedges. As of December 31, 2023, the Company had entered into one interest rate swap agreement with an aggregate notional amount of $6.8 million. Under that swap agreement, the Company receives an adjustable rate of interest based upon SOFR. The Company recorded a loss of $124,000, a gain of $961,000 and a gain of $1.7 million for the years ended December 31, 2023, 2022 and 2021, respectively, to recognize the fair value of derivative instruments. Those amounts are recorded on the consolidated statements of operations under “Net realized and unrealized gains (losses) on commercial loans (at fair value)”. At December 31, 2023, the amount receivable by the Company under this swap agreement was $285,000. At December 31, 2023 and 2022, the Company had minimum collateral posting thresholds with certain of its derivative counterparties and had posted cash collateral of $548,000 and $523,000, respectively.

The maturity dates, notional amounts, interest rates paid and received and fair value of the Company’s remaining interest rate swap agreements as of December 31, 2023 are summarized below (dollars in thousands):


	December 31, 2023
Maturity date	Notional amount		Interest rate paid		Interest rate received		Fair value
December 23, 2025	$	6,800		2.16%		5.59%	$	285
Total	$	6,800					$	285

The $285,000 fair value position of the outstanding derivatives at December 31, 2023, as detailed in the above table, was recorded in other assets on the consolidated balance sheet.

Regulatory Matters

12 Months Ended

Dec. 31, 2023

Regulatory Matters [Abstract]

Regulatory Matters

Note S—Regulatory Matters

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


							To be well
							capitalized under
					For capital		prompt corrective
		Actual			adequacy purposes		action provisions
		Amount	Ratio		Amount	Ratio	Amount	Ratio
		(dollars in thousands)
As of December 31, 2023
Total capital
(to risk-weighted assets)
The Bancorp, Inc.	$	855,599	16.23%	$	421,660	>=8.00	N/A	N/A
The Bancorp Bank, National Association		941,646	17.92%		420,430	8.00	525,538	>= 10.00%

Tier 1 capital
(to risk-weighted assets)
The Bancorp, Inc.		825,597	15.66%		316,245	>=6.00	N/A	N/A
The Bancorp Bank, National Association		911,644	17.35%		315,323	6.00	420,430	>= 8.00%

Tier 1 capital
(to average assets)
The Bancorp, Inc.		825,597	11.19%		295,246	>=4.00	N/A	N/A
The Bancorp Bank, National Association		911,644	12.37%		294,736	4.00	368,420	>= 5.00%

Common equity tier 1
(to risk-weighted assets)
The Bancorp, Inc.		825,597	15.66%		210,830	>=4.00	N/A	N/A
The Bancorp Bank, National Association		911,644	17.35%		236,492	4.50	341,600	>= 6.50%

As of December 31, 2022
Total capital
(to risk-weighted assets)
The Bancorp, Inc.	$	747,372	13.87%	$	431,203	>=8.00	N/A	N/A
The Bancorp Bank, National Association		829,540	15.42%		430,483	8.00	538,103	>= 10.00%

Tier 1 capital
(to risk-weighted assets)
The Bancorp, Inc.		722,238	13.40%		323,403	>=6.00	N/A	N/A
The Bancorp Bank, National Association		804,406	14.95%		322,862	6.00	430,483	>= 8.00%

Tier 1 capital
(to average assets)
The Bancorp, Inc.		722,238	9.63%		299,913	>=4.00	N/A	N/A
The Bancorp Bank, National Association		804,406	10.73%		299,794	4.00	374,742	>= 5.00%

Common equity tier 1
(to risk-weighted assets)
The Bancorp, Inc.		722,238	13.40%		215,602	>=4.00	N/A	N/A
The Bancorp Bank, National Association		804,406	14.95%		242,147	4.50	349,767	>= 6.50%

As of December 31, 2023, the Company and the Bank met all regulatory requirements for classification as well capitalized under the regulatory framework for prompt corrective action.

- Definition

The entire disclosure for regulatory capital requirement for depository and lending institutions. Institutions include, but not are not limited to, finance company, insured depository institution, bank holding company, savings and loan association holding company, bank and savings institution not federally insured, mortgage company, foreign financial institution and credit union.

+ References + Details

Condensed Financial Information-Parent Only

12 Months Ended

Dec. 31, 2023

Condensed Financial Information-Parent Only [Abstract]

Condensed Financial Information-Parent Only

Note T—Condensed Financial Information—Parent Only

Condensed Balance Sheets


	December 31,
	2023		2022
		(in thousands)
Assets
Cash and due from banks	$	8,895	$	18,712
Investment in subsidiaries		893,328		776,199
Other assets		16,550		13,016
Total assets	$	918,773	$	807,927

Liabilities and stockholders' equity
Other liabilities	$	2,232	$	1,445
Senior debt		95,859		99,050
Subordinated debentures		13,401		13,401
Shareholders' equity		807,281		694,031
Total liabilities and stockholders' equity	$	918,773	$	807,927

Condensed Statements of Operations


	For the year ended December 31,
	2023		2022		2021
		(in thousands)
Income
Other income	$	329	$	10	$	—
Total income		329		10		—

Expense
Interest on subordinated debentures		1,121		657		449
Interest on senior debt		5,027		5,118		5,118
Non-interest expense		12,589		8,520		9,266
Total expense		18,737		14,295		14,833
Income tax benefit		(3,864)		(2,999)		(3,114)
Equity in undistributed income of subsidiaries		206,840		141,499		122,372
Net income available to common shareholders	$	192,296	$	130,213	$	110,653

Condensed Statements of Cash Flows



	Year ended December 31,
	2023		2022		2021
		(in thousands)
Operating activities
Net income	$	192,296	$	130,213	$	110,653
Net amortization of investment securities discounts/premiums		82		368		368
Increase in other assets		(3,534)		(1,692)		(3,164)
(Decrease) increase in other liabilities		(45)		27		(423)
Stock based compensation expense		11,392		7,592		8,626
Equity in undistributed income		(206,840)		(141,499)		(122,372)
Net cash used in operating activities		(6,649)		(4,991)		(6,312)

Investing activities
Contribution from subsidiary		100,000		15,000		—
Net cash provided by investing activities		100,000		15,000		—

Financing activities
Proceeds from the exercise of common stock options		104		320		3,428
Redemptions of senior debt offering		(3,273)		—		—
Repurchases of common stock		(99,999)		(60,000)		(40,000)
Net cash used in financing activities		(103,168)		(59,680)		(36,572)
Net decrease in cash and cash equivalents		(9,817)		(49,671)		(42,884)
Cash and cash equivalents, beginning of year		18,712		68,383		111,267
Cash and cash equivalents, end of year	$	8,895	$	18,712	$	68,383

Segment Financials

12 Months Ended

Dec. 31, 2023

Segment Financials [Abstract]

Segment Financials

Note U—Segment Financials

The Company operates under three segments: national specialty lending (specialty finance), payments and corporate. The chief operating decision maker for these segments is the Chief Executive Officer. Specialty finance includes the origination of non-SBA commercial real estate loans, SBA loans, direct lease financing, SBLOC, IBLOC, advisor financing and deposits generated by those business lines. Payments include prepaid and debit card accounts, card payments, ACH processing, payment companies and deposits generated by those business lines. Corporate includes the Company’s investment portfolio, corporate overhead and non-allocated expenses. In the third quarter of 2022, the Company began allocating interest expense between segments and has adjusted prior period presentation to reflect such allocation. These operating segments reflect the way the Company views its current operations.



	For the year ended December 31, 2023
	Specialty finance		Payments		Corporate		Discontinued operations		Total
		(in thousands)
Interest income	$	433,084	$	110	$	76,313	$	—	$	509,507
Interest allocation		(132,875)		146,460		(13,585)		—		—
Interest expense		4,862		139,500		11,093		—		155,455
Net interest income		295,347		7,070		51,635		—		354,052
Provision for credit losses on loans		8,330		—		—		—		8,330
Provision for credit loss on security		—		—		10,000		—		10,000
Non-interest income		12,203		99,376		515		—		112,094
Non-interest expense		84,363		75,671		31,008		—		191,042
Income before taxes		214,857		30,775		11,142		—		256,774
Income tax expense		—		—		64,478		—		64,478
Net income (loss)	$	214,857	$	30,775	$	(53,336)	$	—	$	192,296



	For the year ended December 31, 2022
	Specialty finance		Payments		Corporate		Discontinued operations		Total
		(in thousands)
Interest income	$	273,392	$	113	$	34,790	$	—	$	308,295
Interest allocation		(55,680)		56,064		(384)		—		—
Interest expense		3,083		42,883		13,488		—		59,454
Net interest income		214,629		13,294		20,918		—		248,841
Provision for credit losses		7,108		—		—		—		7,108
Non-interest income		15,371		86,313		3,999		—		105,683
Non-interest expense		71,878		69,261		28,363		—		169,502
Income (loss) before taxes		151,014		30,346		(3,446)		—		177,914
Income tax expense		—		—		47,701		—		47,701
Net income (loss)	$	151,014	$	30,346	$	(51,147)	$	—	$	130,213



	For the year ended December 31, 2021
	Specialty finance		Payments		Corporate		Discontinued operations		Total
		(in thousands)
Interest income	$	191,867	$	—	$	30,248	$	—	$	222,115
Interest allocation		(17,217)		20,634		(3,417)		—		—
Interest expense		963		4,162		6,114		—		11,239
Net interest income		173,687		16,472		20,717		—		210,876
Provision for credit losses		3,110		—		—		—		3,110
Non-interest income		22,331		82,343		75		—		104,749
Non-interest expense		67,263		69,716		31,371		—		168,350
Income (loss) from continuing operations before taxes		125,645		29,099		(10,579)		—		144,165
Income tax expense		—		—		33,724		—		33,724
Income (loss) from continuing operations		125,645		29,099		(44,303)		—		110,441
Income from discontinued operations		—		—		—		212		212
Net income (loss)	$	125,645	$	29,099	$	(44,303)	$	212	$	110,653



	December 31, 2023
	Specialty finance		Payments		Corporate		Total
	(in thousands)
Total assets	$	5,682,035	$	42,769	$	1,980,891	$	7,705,695
Total liabilities	$	238,042	$	6,412,911	$	247,461	$	6,898,414



	December 31, 2022
	Specialty finance		Payments		Corporate		Total
	(in thousands)
Total assets	$	6,042,765	$	57,894	$	1,802,341	$	7,903,000
Total liabilities	$	321,335	$	6,101,539	$	786,095	$	7,208,969

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 22
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-22

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 15
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-15

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 31
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-31

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 32
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-32

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 42
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-42

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 32
-Subparagraph (f)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-32

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 40
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-40

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//280/tableOfContent

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 26
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-26

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 34
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-34

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 41
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-41

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 21
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-21

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 21
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-21

Reference 14: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 32
-Subparagraph (e)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-32

+ Details

Discontinued Operations

12 Months Ended

Dec. 31, 2023

Discontinued Operations [Abstract]

Discontinued Operations

Note V—Discontinued Operations

The Company performed a strategic evaluation of its businesses in the third quarter of 2014 and decided to discontinue its Philadelphia commercial lending operations to focus on its specialty finance lending. The Company has since disposed of the vast majority of related loans and OREO. While in the process of disposition, financial results of the commercial lending operations were presented as separate from continuing operations on the consolidated statements of operations and assets of the commercial lending operations to be disposed of were presented as assets held-for-sale on the consolidated balance sheets. As disposition efforts were winding down, discontinued loans of $61.6 million were reclassified to loans held for investment in the first quarter of 2022. These loans will accordingly be accounted for as such, and included in related tables as management continues related collections. While classified as discontinued operations, loans were recorded at the lower of their cost or fair value. Fair value was determined using a discounted cash flow analysis where projections of cash flows were developed in consideration of internal loan review analysis and

default/prepayment assumptions for smaller pools of loans. Those credit and collateral related assumptions were subject to uncertainty. Discontinued OREO of $17.3 million which constituted the remainder of discontinued assets was also reclassified to the OREO caption on the balance sheet in the first quarter of 2022.

The following table presents financial results of the commercial lending business included in net income (loss) from discontinued operations for the twelve months ended December 31, 2023, 2022 and 2021. The majority of non-interest expense is comprised of loan related charges including charge-offs, realized and unrealized gains and losses, other real estate loan charges and attorney fees.



	For the year ended December 31,
	2023			2022		2021
			(in thousands)
Interest income	$	—		$	—	$	3,096
Interest expense		—			—		—
Net interest income		—			—		3,096

Non-interest income		—			—		99
Non-interest expense		—			—		2,907

Income before taxes		—			—		288
Income tax expense		—			—		76
Net income	$	—		$	—	$	212


	December 31,		December 31,
	2023		2022
		(in thousands)
Commercial loans, at fair value	$	—	$	—
Other real estate owned		—		—
Total assets	$	—	$	—

Non-interest expense for the years ended December 31, 2023, 2022 and 2021, reflected no activity for 2023 and 2022, a gain of $1.5 million for 2021, for fair value and realized gains (losses) on loans. For those respective years, it also reflected respective expenses and losses of $0, $0 and $2.8 million related to OREO. Discontinued operations loans are recorded at the lower of their cost or fair value. Fair value is determined using a discounted cash flow analysis where projections of cash flows are developed in consideration of internal loan review analysis and default/prepayment assumptions for smaller pools of loans. These credit and collateral related assumptions are subject to uncertainty.

Summary Of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2023

Summary Of Significant Accounting Policies [Abstract]

Basis Of Presentation

1. Basis of Presentation

The accounting and reporting policies of the Company conform to generally accepted accounting principles in the United States of America (“GAAP”) and predominant practices within the banking industry. The consolidated financial statements include the accounts of the Company and all its subsidiaries. All inter-company balances have been eliminated.

The Company’s non-SBA commercial real estate bridge loans, at fair value, are primarily collateralized by multi-family properties (apartment buildings), and to a lesser extent, by hotel and retail properties. These loans were originally generated for sale through securitizations. In 2020, the Company decided to retain these loans on its balance sheet as interest-earning assets and resumed originating such loans in 2021. These new originations are identified as REBL and are held for investment in the loan portfolio, at amortized cost. Prior originations initially intended for securitizations continue to be accounted for at fair value, and are included in the balance sheet in “Commercial loans, at fair value.”

The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial

statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The principal estimates that are particularly susceptible to a significant change in the near term relate to (1) our allowance for credit losses (“ACL”) on loans, leases and securities, (2) the fair value of financial instruments (loans and securities) and the level in which an instrument is placed within the valuation hierarchy, (3) the fair value of stock grants and (4) the realizability of deferred income taxes. These estimates made in accordance with GAAP involve a significant level of estimation uncertainty and have had, or are reasonably likely to have, a material impact on our financial condition or results of operations.

Cash And Cash Equivalents

2. Cash and Cash Equivalents

December 31, 2023

Pre-modification recorded investment

SBL non-real estate

Legacy commercial real estate

Investment Securities

3. Investment Securities

Investments in debt and equity securities which management believes may be sold prior to maturity due to changes in interest rates, prepayment risk, liquidity requirements, or other factors, are classified as available-for-sale. Net unrealized gains for such securities, net of tax effect, are reported as other comprehensive income, through equity and are excluded from the determination of net income. The unrealized losses for available-for-sale securities are evaluated to determine if any component is attributable to credit loss versus market factors. If the present value of cash flows expected to be collected is less than the amortized cost basis, a provision for credit losses is recorded within the consolidated statement of operations. Subsequent improvement in credit may result in reversal of the credit charge in future periods. For available-for-sale debt securities in an unrealized loss position, the Company also assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. The Company does not engage in securities trading. Gains or losses on disposition of investment securities are based on the net proceeds and the adjusted carrying amount of the securities sold using the specific identification method.

The Company evaluates whether an ACL is required by considering primarily the following factors: (a) the extent to which the fair value is less than the amortized cost of the security, (b) changes in the financial condition, credit rating and near-term prospects of the issuer, (c) whether the issuer is current on contractually obligated interest and principal payments, (d) changes in the financial condition of the security’s underlying collateral, and (e) the payment structure of the security. The Company’s determination of the best estimate of expected future cash flows, which is used to determine the credit loss amount, is a quantitative and qualitative process that incorporates information received from third-party sources along with internal assumptions and judgments regarding the future performance of the security. The Company concluded that, as of December 31, 2023, unrealized losses on securities reflected changes in market interest rates after the securities were purchased, except as noted below with regard to the $10.0 million trust preferred security. The Company’s unrealized loss for other debt securities is primarily related to general market conditions, including a lack of liquidity in the market. The severity of the impact of fair value in relation to the carrying amounts of the individual investments is consistent with market developments. The Company’s analysis of each investment is performed at the security level. As a result of its quarterly review, the Company concluded that an allowance was not required to recognize credit losses in either 2022 or 2021. In 2023, the Company recognized a provision of $10.0 million for the total $10.0 million par value of the only trust preferred security in its portfolio, based upon limited financial and other information received from the issuer.

Loans And ACL