Bancorp, Inc.: Form 10-Q for the period ended Jun 30, 2026

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

MD&A is organized in the following sections:

• Overview
• Executive Summary
• Results of Operations
• Financial Condition
• Liquidity and Capital Resources
• Asset and Liability Management

Important Note Regarding Forward-Looking Statements

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

• an inconsistent recovery from an extended period of unpredictable economic and growth conditions in the U.S. economy may adversely impact our assets and operating results and result in increases in payment defaults and other credit risks, decreases in the fair value of some assets and increases in our provision for credit losses;
• weak economic and credit market conditions, either globally, nationally or regionally, may result in a reduction in our capital base, reducing our ability to maintain deposits at current levels;
• changes in the interest rate environment, particularly in response to inflation, could adversely affect our revenue and expenses and the availability and cost of capital, cash flows and liquidity;
• volatility in the banking sector (including perception of such conditions) and responsive actions taken by governmental agencies to stabilize the financial system could result in increased regulation or liquidity constraints;
• operating costs may increase;
• adverse legislation or governmental or regulatory policies may be promulgated;
• we may fail to satisfy our regulators with respect to legislative and regulatory requirements;
• management and other key personnel may leave or change roles without effective replacements;
• increased competition may reduce our client base or cause us to lose market share;
• the costs of our interest-bearing liabilities, principally deposits, may increase relative to the interest received on our interest-bearing assets, principally loans, thereby decreasing our net interest income;
• loan and investment yields may decrease, resulting in a lower net interest margin;
• geographic concentration could result in our loan portfolio being adversely affected by regional economic factors;
• the market value of real estate that secures certain of our loans may be adversely affected by economic and market conditions and other conditions outside of our control such as lack of demand, natural disasters, changes in neighborhood values, competitive overbuilding, weather, casualty losses and occupancy rates;
• cybersecurity risks, including data security breaches, ransomware, malware, “denial of service” attacks and identity theft, could result in disclosure of confidential information, operational interruptions and legal and financial exposure;
• natural disasters, pandemics, other public health crises, acts of terrorism, geopolitical conflict, including trade disputes and tariffs, sanctions, war or armed conflict, such as the conflicts between Russia and Ukraine and the ongoing military operations involving the U.S., Israel and Iran, and the possible expansion of such conflicts in surrounding areas, or other catastrophic events could disrupt the systems of us or third-party service providers and negatively impact general economic conditions;
• we may not be able to sustain our historical growth rates in our loan, prepaid and debit card and other lines of business;
• our focus on growth in fintech solutions and investing in our infrastructure, including through artificial intelligence tools to gain efficiency and productivity, and the future potential impact on our operations and financial condition may result in new operational, legal and financial risks;
• risks related to actual or threatened litigation;
• our ability to maintain effective internal control over financial reporting;
• our internal controls and procedures may fail or be circumvented, and our risk management policies may not be adequate; and
• we may not be able to manage credit risk to desired levels, improve our net interest margin and monitor interest rate sensitivity, manage our real estate exposure to capital levels and maintain flexibility if we achieve asset growth.

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

Overview

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

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

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

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

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

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

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

Executive Summary

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

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

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

Financial Highlights

Financial highlights include:

(Dollars in millions, except per share data)

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

Our net income increased to $60.7 million in the second quarter of 2026 from $59.8 million in the second quarter of 2025, an increase of $0.9 million, or 1.4%.

Earnings per diluted share increased to $1.45 in the second quarter of 2026 from $1.27 in the second quarter of 2025, an increase of 14.2%, driven both by the increase in net income and a 5.4 million decrease in weighted average diluted shares, primarily driven by our share repurchase activity during the year.

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

• Net interest income decreased $7.0 million, consisting of an $11.1 million decrease in interest income partially offset by a $4.1 million decrease in interest expense. The most significant drivers of the decrease in interest income are $6.9 million lower interest income from deposits driven by elevated average interest-earning deposits from customers in the second quarter of 2025 due to wildfire insurance refund balances, a $3.0 million one-time gain recognized in investment interest income in the second quarter of 2025 from the repayment of a CRE-2 investment security. The decrease in interest expense is primarily driven by $9.6 million lower interest expense on deposit balances partially offset by higher interest expense of $2.7 million from senior debt due to the August 2025 facility upsizing and increase in rate.
• Non-interest income decreased $10.7 million, to $73.0 million in the second quarter of 2026 from $83.7 million in the second quarter of 2025. That decrease is driven by a $17.4 million decrease in Fintech loan credit enhancement income driven by improved performance of fintech loans, partially offset by a $5.3 million increase in total fintech fees primarily driven by volume growth, and a $2.1 million increase in other non-interest income driven by higher other fee income on loans and deposit sweep income.
• Provision for credit losses, total decreased $18.3 million, to $26.1 million in the second quarter of 2026, from $44.4 million in the second quarter of 2025. That decrease includes a $17.4 million decrease in provision for fintech loans, which directly relates to the credit enhancement income decrease outlined above. See further discussion of fintech loans and the related credit enhancement in “Financial Condition—Total Loan Portfolio—Fintech Programs” in this MD&A.

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

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

Average loans and leases grew to $7.63 billion in the second quarter of 2026 from $6.57 billion in the second quarter of 2025, an increase of $1.06 billion or 16.1%, primarily driven by a $853.9 million increase in our average fintech portfolio, reflecting our continued strategic shift towards sponsored lending.

Non-interest income fintech fees increased $5.3 million, or 14.7%, to $40.9 million in the second quarter of 2026, which includes a $2.5 million increase in consumer credit fintech fees and a $2.7 million increase in prepaid, debit card, ACH and other fees. The growth in consumer credit fintech fees reflects continued organic volume growth with existing partners and products and the impact of new products launched within the past year. The growth in prepaid, debit card and related fees is driven by an increase in gross dollar volume (“GDV”) to $53.5 billion, a 22.5% increase from $43.6 billion in the second quarter of 2025. GDV growth may not have a direct impact on the related fee income due to the different product fee structures within the total mix.

Net interest margin decreased to 3.85% in the second quarter of 2026 from 4.44% in the second quarter of 2025, driven by the shift in our loan portfolio to a greater percentage of fintech loans, for which we primarily earn fee income and not interest income, combined with the impact of Federal Reserve rate decreases from the third and fourth quarters of 2025. See further discussion of the growth in Fintech lending contributing to margin compression under “Results of Operations—Net Interest Income—Growth of Fintech Lending” in the following section.

Our efforts to return capital to shareholders through share repurchases have had an impact on our ratio of equity to assets. At June 30, 2026, the ratio of equity to assets was 7.65%, compared to 7.38% at December 31, 2025, primarily driven by reductions in equity from share repurchases partially offset by an increase in equity capital from retained earnings.

Results of Operations - Three Months Ended June 30, 2026 and 2025

Net Interest Income

Our net interest income for the second quarter of 2026 decreased $7.0 million, or 7.2%, to $90.5 million from $97.5 million in the second quarter of 2025.

Growth of Fintech Lending. Our strategy is to continue to drive growth in our Fintech lending business, as seen by the shift in mix to Fintech representing 18.2% of our total average loan portfolio in the second quarter of 2026, compared to 8.2% for the second quarter of 2025. A significant portion of these loans are zero percent interest and, as such, do not recognize interest income, however we do generate fee revenue from these loans, through our partnership agreements. This mix shift to non-interest earning loans results in a reduction of the calculated average rate earned by total loans, average rate earned by our total interest-earning assets, and net interest margin in the above analysis. Offsetting these impacts is the growth in Consumer fintech fee income recognized within non-interest income in our Consolidated Statements of Operations which was $6.5 million and $4.0 million for the second quarters of 2026 and 2025, respectively.

We expect to continue to increase the proportion of Fintech loans in our portfolio through the remainder of 2026 and beyond, and therefore we expect to see continued compression in our average rate earned on loans, and net interest margin, as the mix of fintech loans continues to grow. However, we also expect growth in our fintech fees within non-interest income driven by the increase in that portfolio.

Interest Income

Interest income for the second quarter of 2026 was $132.0 million, a decrease of $11.1 million from $143.1 million in the second quarter of 2025, primarily driven by $6.9 million lower income on interest-earning deposits and a one-time gain in 2025 of $3.0 million from a CRE-2 investment security, which was repaid in full. In the second quarter of 2025, average deposits on balance sheet from customers of $756.6 million was significantly higher than $155.5 million in second quarter of 2026, driven by higher fintech on-balance sheet volumes.

Interest income from loans was $110.6 million in the second quarter of 2026, $1.7 million lower than $112.3 million in the second quarter of 2025, driven by $4.1 million lower interest earned on non-fintech loans partially offset by $2.3 million higher interest earned on fintech loans. For non-fintech loans, lower interest earned was primarily driven by lower rates, as the average rate decreased to 6.91% for the second quarter of 2026, compared to 7.42% for the second quarter of 2025, while average balance was 3.4% higher. The loan portfolio average rate reflects the impact of Federal Reserve rate decreases which continued in the third and fourth quarters of 2025. For fintech loans, higher interest income of $2.3 million was driven by higher volumes of interest-earning fintech loans. See “Growth of Fintech Lending” discussion above for further information.

Interest Expense

Interest expense for the second quarter of 2026 decreased $4.1 million to $41.6 million from $45.7 million in the second quarter of 2025, driven by $9.6 million lower interest expense on deposits, partially offset by $2.9 million higher interest on short-term borrowings and $2.7 million higher interest expense on senior debt.

Interest expense on deposits was $9.6 million lower, primarily driven by lower rates in 2026. Interest expense on short-term deposits was $2.9 million higher in 2026, as that funding source was utilized to fund higher average loans on balance sheet in the second quarter of 2026, compared to limited utilization in second quarter of 2025. Interest expense on senior debt was $2.7 million higher, due to higher outstanding principal and higher rate on senior debt. In August 2025, $200 million of 7.375% Senior Notes due 2030 were issued, the proceeds of which were used in part to repay at maturity the $100 million of outstanding 4.75% Senior notes due 2025.

Average Daily Balances

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

(Dollars in thousands)

(1) Includes commercial loans, at fair value and non-accrual loans.

(2) Full taxable equivalent basis, using 21% respective statutory federal tax rates in 2026 and 2025.

(3) Interest income in the second quarter of 2025 includes $3.0 million from a security that was known as “CRE-2” and which was related to the Company’s discontinued commercial real estate securitization business. CRE-2 was repaid in full in the quarter resulting in a one-time gain of $3.0 million, which was excluded from change due to rate in the above analysis.

For the second quarter of 2026 compared to second quarter of 2025, average interest-earning assets increased $620.5 million, reflecting a $1.06 billion increase in average loans and leases and a $161.4 million increase in average investment securities, partially offset by a decrease in average interest-earning deposits of $601.1 million. For those respective periods, average deposits and liabilities increased $755.3 million, driven by a $357.2 million increase in deposits, $301.8 million increase in short-term borrowings and a $100.1 million increase in senior debt.

Net Interest Margin

Our net interest margin (calculated by dividing net interest income by average interest-earning assets) for the second quarter of 2026 was 3.85% compared to 4.44% for the second quarter of 2025, a decrease of 59 basis points. The average yield on interest-earning assets decreased 90 basis points, due to the shift of our portfolio mix to more fintech loans where we primarily earn fee income as discussed further under “Growth of Fintech Lending” above, plus lower market short-term interest rates. In addition, the cost of deposits and interest-bearing liabilities decreased 37 basis points, or a net change of 53 basis points, driven primarily by a 55 basis point decrease in average rate on deposits primarily due to a lower rate environment in the second quarter of 2026.

Provision for Credit Losses

Our provision for credit losses was $26.1 million for the second quarter of 2026, a decrease of $18.3 million compared to a provision of $44.4 million for the second quarter of 2025. The decrease is primarily attributable to $17.4 million lower provision for fintech loans driven by improved performance of that loan portfolio. The lower fintech loan provision correlates to a lower amount of related non-interest income from a credit enhancement contractually provided by a third party. Accordingly, there was no related net impact from these amounts. See further discussion of this program in “Financial Condition—Allowance for Credit Loss—Fintech Programs” in MD&A.

In addition, the provision for credit losses on non-fintech loans was $0.4 million in the second quarter of 2026 compared to provision expense of $1.5 million in the second quarter of 2025.

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

Non-Interest Income

Non-interest income was $73.0 million in the second quarter of 2026, a decrease of $10.7 million compared to $83.7 million in the second quarter of 2025. The decrease between those respective periods is primarily driven by a $17.4 million decrease in fintech loan credit enhancement income, which was partially offset by $5.3 million in higher total fintech fees and $2.1 million of higher other non-interest income.

Fintech loan credit enhancement income decreased $17.4 million driven by improved performance of fintech loans, which correlates to a like amount for provision for credit losses on fintech loans. See further discussion above under “Provision for Credit Losses.”

Total fintech fees increased $5.3 million, which includes a $1.7 million increase in prepaid, debit card and related fees, or 6.4%, to $27.8 million for the second quarter of 2026, compared to $26.1 million in the second quarter of 2025, driven by higher transaction volume from new clients and organic growth from existing clients. In addition, ACH, card and other payment processing fees increased $1.0 million, or 17.9%, to $6.6 million for the second quarter of 2026, compared to $5.6 million in the second quarter of 2025, reflecting an increase in rapid funds transfer volume. Consumer credit fintech fees increased $2.5 million, or 64.9%, to $6.5 million for the second quarter of 2026, compared to $4.0 million in the second quarter of 2025, reflecting increased loan volume.

Other non-interest income increased $2.1 million for the second quarter of 2026, compared to the second quarter of 2025, primarily driven by $1.3 million higher other fee income from loans and $0.7 million of fees earned on deposit sweeps.

Non-Interest Expense

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

(Dollars in thousands)

Total non-interest expense was $56.5 million for the second quarter of 2026, a decrease of $0.7 million, or 1.3%, compared to $57.2 million for the second quarter of 2025. The decrease reflects a $0.6 million decrease in legal expense due to higher costs in 2025 for payments related matters and regulatory filings.

Income Taxes

Income tax expense was $20.3 million for the second quarter of 2026 compared to $19.8 million in the second quarter of 2025. Our effective tax rate was 25.1%, and 24.9% in the second quarters of 2026 and 2025, respectively, based on a 21% federal tax rate and the impact of various state income taxes.

Results of Operations - Six Months Ended June 30, 2026 and 2025

Net Interest Income

Our net interest income for the six months ended June 30, 2026 decreased $10.0 million, or 5.3%, to $179.3 million from $189.2 million in the six months ended June 30, 2025.

Growth of Fintech Lending. Our strategy is to continue to drive growth in our Fintech lending business, as seen in the shift in mix to Fintech representing 16.8% of our total average loan portfolio in the six months ended June 30, 2026, compared to 7.8% for the six months ended June 30, 2025. A significant portion of these loans are zero percent interest and, as such, do not recognize interest income, however we do generate fee revenue from these loans, through our partnership agreements. The shift to non-interest earning loans results in a reduction of the calculated average rate earned by total loans, average rate earned by our total interest-earning assets, and net interest margin in the above analysis. Offsetting these impacts is the growth in Consumer fintech fee income recognized within non-interest income in our Consolidated Statements of Operations which was $12.1 million and $7.6 million for the six months ended June 30, 2026 and 2025, respectively.

We expect to continue to increase the proportion of Fintech loans in our portfolio for the remainder of 2026 and beyond, and therefore we expect to see continued compression in our average rate earned on loans, and net interest margin, as the mix of fintech loans continues to grow. However, we also expect growth in our fintech fees within non-interest income driven by the increase in that portfolio.

Interest Income

Interest income for the six months ended June 30, 2026 was $261.8 million, a decrease of $21.2 million from $283.0 million in the six months ended June 30, 2025, primarily driven by $17.4 million lower income on interest-earning deposits and a one-time gain in 2025 of $3.0 million from a CRE-2 investment security which was repaid in full. In the six months ended June 30, 2025, average interest earning deposits on balance sheet of $945.5 million was significantly higher than $202.5 million in six months ended June 30, 2026, driven by one-time volumes from wildfire insurance refunds and higher fintech on-balance sheet volumes.

Interest income from loans was $218.1 million in the six months ended June 30, 2026, $3.1 million lower than $221.2 million in the six months ended June 30, 2025, driven by $7.0 million lower interest earned on non-fintech loans partially offset by $3.9 million higher interest earned on fintech loans. For non-fintech loans, lower interest earned was primarily driven by lower rates, as the average rate decreased to 6.90% for the six months ended June 30, 2026, compared to 7.38% for the six months ended June 30, 2025, while average balance was 3.6% higher. The loan portfolio average rate reflects the impact of Federal Reserve rate decreases which continued in the third and fourth quarters of 2025. For fintech loans, higher interest income of $3.9 million was driven by higher volumes of interest-earning fintech loans. See “Growth of Fintech Lending” discussion above for further information.

Interest Expense

Interest expense for the six months ended June 30, 2026 decreased $11.1 million to $82.6 million from $93.7 million in the six months ended June 30, 2025, driven by $20.7 million lower interest expense on deposits, partially offset by $4.3 million higher interest on short-term borrowings and $5.3 million higher interest expense on senior debt.

Interest expense on deposits was $20.7 million lower due to higher average balance of deposits in 2025 related to wildfire insurance refunds, and lower rates in 2026. Interest expense on short-term borrowings was $4.3 million higher in 2026, as that funding source was utilized to fund higher average loans on balance sheet in the six months ended June 30, 2026, compared to limited utilization in 2025. Interest expense on senior debt was $5.3 million higher, due to higher outstanding principal and higher rate on senior debt. In August 2025, $200 million of 7.375% Senior Notes due 2030 were issued, the proceeds of which were used in part to repay at maturity the $100 million of outstanding 4.75% Senior notes due 2025.

Average Daily Balances

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

(Dollars in thousands)

(1) Includes commercial loans, at fair value and non-accrual loans.

(2) Full taxable equivalent basis, using 21% respective statutory federal tax rates in 2026 and 2025.

(3) Interest income in 2025 includes $3.0 million from a security that was known as “CRE-2” and which was related to the Company’s discontinued commercial real estate securitization business. CRE-2 was repaid in full in the second quarter of 2025, resulting in a one-time gain of $3.0 million, which was excluded from change due to rate in the above analysis.

For the six months ended June 30, 2026 compared to six months ended June 30, 2025, average interest-earning assets increased $391.2 million, reflecting a $964.9 million increase in average loans and leases and a $169.3 million increase in average investment securities, partially offset by a decrease in average interest-earning deposits of $743.0 million. For those respective periods, average deposits and liabilities increased $504.4 million, primarily driven by a $224.3 million increase in short-term borrowings and a $100.0 million increase in senior debt.

Net Interest Margin

Our net interest margin (calculated by dividing net interest income by average interest-earning assets) for the six months ended June 30, 2026 was 3.86% compared to 4.25% for the six months ended June 30, 2025, a decrease of 39 basis points. The average yield on interest-earning assets decreased 72 basis points, due to the shift of our portfolio mix to more fintech loans where we primarily earn fee income as discussed further under “Growth of Fintech Lending” above, plus lower market short-term interest rates. In addition, the cost of deposits and interest-bearing liabilities decreased 39 basis points, or a net change of 33 basis points, driven primarily by a 55 basis point decrease in average rate on deposits primarily due to a lower rate environment in the six months ended June 30, 2026.

Provision for Credit Losses

Our provision for credit losses was $53.7 million for the six months ended June 30, 2026, a decrease of $37.5 million compared to a provision of $91.2 million for the six months ended June 30, 2025. The decrease is primarily attributable to $34.5 million lower provision for fintech loans driven by improved performance of that loan portfolio. The lower fintech loan provision correlates to a lower amount of related non-interest income from a credit enhancement contractually provided by a third party. Accordingly, there was no related net impact from these amounts. See further discussion of this program in “Financial Condition—Allowance for Credit Loss—Fintech Programs” in MD&A.

In addition, the provision for credit losses on non-fintech loans was a release of $1.0 million in the six months ended June 30, 2026 compared to provision expense of $2.4 million in the six months ended June 30, 2025. The provision release in the six months ended June 30, 2026 is primarily driven by improvements in credit quality of the direct lease financing portfolio.

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

Non-Interest Income

Non-interest income was $145.6 million in the six months ended June 30, 2026, a decrease of $21.8 million compared to $167.4 million in the six months ended June 30, 2025. The decrease between those respective periods is primarily driven by a $34.5 million decrease in fintech loan credit enhancement income, which was partially offset by $8.9 million in higher total fintech fees and $4.8 million of higher other non-interest income.

Fintech loan credit enhancement income decreased $34.5 million driven by improved performance of fintech loans, which correlates to a like amount for provision for credit losses on fintech loans. See further discussion above under “Provision for Credit Losses.”

Total fintech fees increased $8.9 million, which includes a $2.7 million increase in prepaid, debit card and related fees, or 5.1%, to $54.5 million for the six months ended June 30, 2026, compared to $51.8 million in the six months ended June 30, 2025, driven by higher transaction volume from new clients and organic growth from existing clients. In addition, ACH, card and other payment processing fees increased $1.7 million, or 15.5%, to $12.4 million for the six months ended June 30, 2026, compared to $10.7 million in the six months ended June 30, 2025, reflecting an increase in rapid funds transfer volume. Consumer credit fintech fees increased $4.5 million to $12.1 million for the six months ended June 30, 2026, compared to $7.6 million in the six months ended June 30, 2025, reflecting increased loan volume.

Other non-interest income increased $4.8 million for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, primarily driven by $2.5 million higher other fee income from loans and $1.6 million of fees earned on deposit sweeps.

Non-Interest Expense

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

(Dollars in thousands)

Total non-interest expense was $111.5 million for the six months ended June 30, 2026, an increase of $1.0 million, or 0.9%, compared to $110.5 million for the six months ended June 30, 2025. The increase reflects $4.1 million higher salaries and benefits expense primarily driven by higher costs from incentive compensation accruals and costs related to organization changes, partially offset by a $2.0 million legal settlement reimbursement from insurance in the first quarter of 2026 related to a legal settlement that was previously expensed in fourth quarter of 2025 and a $1.0 million decrease in legal expense due to higher costs in 2025 for payments related matters and regulatory filings.

Income Taxes

Income tax expense was $38.9 million for the six months ended June 30, 2026 compared to $37.9 million in the six months ended June 30, 2025. Our effective tax rate was 24.4% and 24.5% in the six months ended June 30, 2026 and 2025, respectively, based on a 21% federal tax rate and the impact of various state income taxes.

Financial Condition

Total Assets

Total assets at June 30, 2026 were $9.22 billion, a $136.4 million decrease from $9.35 billion at December 31, 2025. The change in total assets was primarily driven by a $40.1 million decrease in our total loan portfolio and a $56.9 million decrease in investment securities.

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

Investment Securities

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

(Dollars in thousands)

The following table shows the contractual maturity distribution and the weighted average yield of our investment securities as of June 30, 2026 (dollars in thousands). The weighted average yield was calculated by dividing the amount of individual securities to total securities in each category, multiplying by the yield of the individual security and adding the results of those individual computations.

(Dollars in thousands)

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

Total Loan Portfolio

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

(1) Includes Securities-backed lines of credit (SBLOC) and Insurance policy cash value-backed lines of credit (IBLOC).

(2) As of June 30, 2026 and December 31, 2025, Other loans includes $110.0 million and $110.7 million, respectively, related to warehouse financing of REBL loan sales to third-party purchasers.

The majority of our loan portfolio is recorded at amortized cost and recognized net of an allowance for credit loss. Loans, net of deferred loan fees and costs decreased to $7.07 billion at June 30, 2026 from $7.12 billion at December 31, 2025. This $42.8 million decrease is primarily driven by a decrease in fintech loans of $196.5 million, partially offset by a $155.3 million increase in SBLOC/IBLOC. The decline in fintech loans was primarily attributable to a change in payment processing, which impacted period-end balances and did not reflect a change in underlying customer activity.

Commercial loans, at fair value are comprised of non-SBA commercial real estate loans and SBA loans which had been originated for sale or securitization through the first quarter of 2020, and which are now being held for investment on the balance sheet. These loans continue to be recognized at fair value, and this portfolio declined $25.2 million from December 31, 2025, as this portfolio continues to runoff. All originations are now being recognized at amortized cost.

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

• SBL non-real estate are collateralized by business assets, which may include certain real estate;
• SBL commercial mortgage and construction are collateralized by real estate for small businesses;
• SBLOC are collateralized by marketable investment securities while IBLOC are collateralized by the cash value of life insurance;
• Advisor financing are collateralized by investment advisors’ business franchises;
• REBL are primarily collateralized by apartment buildings, or other commercial real estate; and
• Direct lease financing are collateralized primarily by vehicles or equipment.

Fintech loans include secured credit card accounts of $336.3 million and $729.1 million as of June 30, 2026 and December 31, 2025, respectively, which are backed dollar-for-dollar by cash collateral by each individual cardholder that are recognized as deposits on our Condensed Consolidated Balance Sheets, and these loans are required to be repaid in full monthly. The remaining fintech loans consist of cashflow underwritten short-term liquidity products to individual borrowers ranging in maturity from 30 to 365 days. All fintech loans are covered by credit enhancement agreements, as discussed further below under “Fintech Programs.”

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

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Portfolio Estimated Maturities

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

(Dollars in thousands)

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Portfolio Performance

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

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

(Dollars in thousands)

Non-accrual loans increased $16.6 million, primarily driven by a $12.7 million increase in REBL loans and $4.9 million increase in SBL commercial mortgage.

Loans past due 90 days or more still accruing interest amounted to $2.3 million at June 30, 2026 and $18.2 million at December 31, 2025. The $15.9 million decrease is primarily driven by a $14.5 million REBL loan that left 90 days or more past due status after we entered into a loan agreement with a new borrower with greater financial capacity.

We evaluate loans under an internal loan risk rating system as a means of identifying problem loans. At June 30, 2026, there were $146.7 million of loans classified as special mention and substandard in total, a decrease of $47.8 million, or 24.6%, from $194.5 million at December 31, 2025. The decrease is primarily driven by a $37.3 million decrease in criticized Real estate bridge loans.

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

Asset Quality Ratios

The following tables summarize select asset quality ratios for the periods indicated:

(1) ACL to non-performing loan ratio for Fintech is not meaningful primarily due to the short duration of those loans.

(2) Includes loans 90 days past due still accruing interest.

Allowance for Credit Losses (“ACL”) to total loans decreased slightly to 0.90% at June 30, 2026 compared to 0.93% at December 31, 2025. The fintech ACL to Loans ratio increased to 3.41% as of June 30, 2026 from 2.84% at December 31, 2025 as the ACL did not decrease proportional to the decrease in this population.

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

ACL to non-performing loans—Total decreased to 85.2% at June 30, 2026 from 89.6% at December 31, 2025, and for non-fintech, the ratios are 45.0% and 48.8% for the respective periods. Non-performing loans are subject to specific review when preparing our allowance for credit losses estimate. We assess the collectability of the receivables, the nature of the non-performance status, the loan to collateral value, and other factors, when determining whether a specific reserve is required. The ACL as of June 30, 2026 declined as the 4% decrease in the ACL was greater than the 1% increase in non-performing loans.

Non-performing loans to total loans increased to 1.05% at June 30, 2026, from 1.04% at December 31, 2025.

Non-performing assets to total assets ratio increased to 1.48% at June 30, 2026 from 1.44% at December 31, 2025.

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

Net charge-offs to average loans was 1.51% for the six months ended June 30, 2026 compared to 2.38% for the six months ended June 30, 2025.

Fintech net charge-offs to average loans of 8.78% for the six months ended June 30, 2026 was an improvement from 29.89% for the six months ended June 30, 2025, driven by improved performance of unsecured loans. Any net charge-offs on fintech loans are covered by credit enhancement agreements, through which a partner of the Fintech business covers incurred losses on such fintech loans. The measurement of the ACL for fintech loans and the related credit enhancement are based on the same estimate and are equal and correlate to like amounts in our income statement. See “Total Loan Portfolio—Fintech Programs” for further discussion of the credit enhancement.

Excluding fintech loans, net charge-offs to average loans was 0.04% for the six months ended June 30, 2026 and 0.06% for the six months ended June 30, 2025. The decline is primarily driven by improved performance of the direct lease financing portfolio.

Non-Accrual and 90+ Days Past Due Loans

The following tables summarize non-accrual loans and loans past due 90 days or more still accruing interest, by year of origination:

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Allowance for Credit Losses

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

The ACL decreased $2.7 million from December 31, 2025, primarily driven by a $3.5 million decrease in reserves on direct lease financing, driven by improved credit performance on the underlying loan portfolio segment.

Fintech Programs

Our fintech programs include consumer transaction accounts and fintech loans.

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

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

As of June 30, 2026, and December 31, 2025, all fintech loans, both secured and unsecured, are covered by credit enhancement agreements. The third-party agreements governing the fintech loans include provisions for credit enhancements, through which the third party guarantees losses on such fintech loans (either in whole or in part). When a fintech loan meets a defined delinquency level, we recognize a charge-off of the receivable, and the incurred losses are covered by the third party. Any subsequent recoveries from the charged-off loan are credited to the third party.

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

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

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

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

The measurement of the estimated credit losses and the expected recovery from the credit enhancement are based on the same estimate and correlate to like amounts in our financial statements. We recognized credit enhancement assets of $30.7 million and $31.1 million on the Balance Sheets as of June 30, 2026, and December 31, 2025, respectively.

Net Charge-offs

The following tables present a ratio of net charge-offs to average loans outstanding, for each loan category. Average loans excludes commercial loans, at fair value. (dollars in thousands)

Net charge-offs were $56.3 million for the six months ended June 30, 2026, a decrease of $20.6 million from net charge-offs of $76.9 million during the six months ended June 30, 2025.

For fintech, in the six months ended June 30, 2026, $55.0 million of net charge-offs were recognized, or an 8.78% ratio to average loans (annualized), compared to $75.0 million, and 29.89% for the prior year period. The improved fintech charge-off levels reflect better credit performance of the unsecured fintech loans.

Excluding fintech, net charge-offs on the remaining portfolio were $1.3 million for the six months ended June 30, 2026 and $1.9 million for the six months ended June 30, 2025.

Deposits

Our primary source of funding is deposit acquisition. At June 30, 2026, we had total deposits of $7.48 billion compared to $8.17 billion at December 31, 2025, which reflected a decrease of $689.3 million, or 8.4%. Due to the nature of our deposit products, daily deposit balances are subject to variability, and deposits averaged $8.41 billion in the second quarter of 2026. As of June 30, 2026, 94% of the deposits are insured, 3% are low balance accounts (such as anonymous gift cards and corporate incentive cards for which there is no identified depositor) and 3% are other uninsured deposits.

Demand and interest checking is $7.35 billion of total deposits as of June 30, 2026, and primarily consists of balances from prepaid, debit and other payment card accounts that the Bank issues to fund payments for salary, medical spending, commercial, general purpose reloadable, corporate and other incentive, gift, government payments and transaction accounts. These accounts have an established history of stability and lower cost than certain other types of funding. Deposits also include payment processing balances, funds received as collateral supporting the secured credit card program of our Fintech segment, and small population of traditional deposits.

Savings and money market is $123.1 million of total deposits as of June 30, 2026.

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

Of our $7.48 billion total deposits at June 30, 2026, the top three affinity groups accounted for approximately $4.72 billion, the next three largest $1.36 billion, and the four subsequent largest $755 million. The top ten partner relationships at June 30, 2026 consisted of $3.70 billion related to payroll, debit, and government-based accounts such as child support, and $3.13 billion related to consumer and business payment companies, including companies sponsoring incentive and gift card payments.

Of our $8.17 billion total deposits at year-end 2025, the top three affinity groups accounted for approximately $3.83 billion, the next three largest $1.35 billion, and the four subsequent largest $812 million. The top ten partner relationships at year end 2025 consisted of $3.20 billion related to payroll, debit, and government-based accounts such as child support, and $2.80 billion related to consumer and business payment companies, including companies sponsoring incentive and gift card payments.

In addition, we sweep deposits off our balance sheet to other institutions as part of our funding strategies, which totaled $1.12 billion and $849.9 million as of June 30, 2026 and December 31, 2025, respectively. Such sweeps are utilized to manage our balance sheet composition and deposit portfolio diversity.

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

Of the demand and interest checking balance shown above, $132.9 million and $138.7 million for 2026 and 2025, respectively, represented balances on which we paid interest. The remaining balance for each period reflects amounts subject to fees paid to third parties, which are based upon a contractual percentage applied to a rate index, generally the effective federal funds rate, and therefore classified as interest expense.

Short-term Borrowings

Short-term borrowings consist of amounts borrowed on our lines of credit with the Federal Reserve Bank or FHLB. There were $744.0 million and $199.0 million of borrowings with FHLB at June 30, 2026 and December 31, 2025, respectively. Our use of short-term borrowings fluctuates based on our current funding needs for loans. We generally utilize overnight borrowings to manage our daily reserve requirements at the Federal Reserve.

The following table summarizes short-term borrowings (dollars in thousands):

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Liquidity and Capital Resources

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

Deposits. Our primary source of funding has been consumer deposits generated through partner relationships. Average total deposits increased by $357.2 million, or 4.4%, to $8.41 billion for the second quarter of 2026 compared to the second quarter of 2025. While we do not have a traditional branch system, we believe that our core deposits, which include our demand, interest checking, savings and money market accounts, have similar characteristics to those of a bank with a branch system, but are tied to long-term partner contracts. Certain components of our deposits experience seasonality, creating greater excess liquidity at certain times. The largest deposit inflows occur in the first quarter of the year when certain of our accounts are credited with tax refund payments from the U.S. Treasury.

As of June 30, 2026, 94% of the deposits are insured, 3% are low balance accounts (such as anonymous gift cards and corporate incentive cards for which there is no identified depositor) and 3% are other uninsured deposits. We do not believe that such uninsured accounts present a significant liquidity risk.

In addition, we sweep deposits off our balance sheet to other institutions as part of our funding strategies, which totaled $1.12 billion and $849.9 million as of June 30, 2026 and December 31, 2025, respectively. Such sweeps are utilized to optimize diversity within our funding structure by managing the percentage of individual client deposits to total deposits. Deposit sweeps represent an amount of deposits that are greater than our current needs to fund our assets. The swept deposits serve as a source of contingent liquidity, as we may move a portion of those deposits back on balance sheet, at our election.

Other Funding Sources. While consumer deposit accounts, including prepaid and debit card accounts, comprise the vast majority of our funding sources, we maintain secured borrowing lines with the FHLB and the Federal Reserve that are collateralized by pledged loans and investment securities. As of June 30, 2026, we had $744.0 million borrowed under these facilities, and based on the current amount of loans and securities pledged there is $3.79 billion of additional available capacity which we can access anytime, which is an increase from $199.0 million borrowed and $3.19 billion available capacity based on assets pledged as of December 31, 2025. We expect to continue to maintain our facilities with the FHLB and Federal Reserve.

Loans. We utilize the deposits that are primarily generated by our Fintech business to fund our credit solutions business and the sponsored lending loans of fintech. Historically, growth in deposits has funded growth of loans. Average loans and leases grew to $7.63 billion in the second quarter of 2026 from $6.57 billion in the second quarter of 2025, an increase of $1.06 billion representing a use of funds.

Investment Securities. One source of contingent liquidity is available-for-sale securities, which amounted to $1.61 billion at June 30, 2026, compared to $1.67 billion at December 31, 2025. In the second quarter of 2026, $9.1 million of securities purchased were exceeded by $49.1 million of securities cash inflows.

Cash. At June 30, 2026, our interest-earning deposits within cash and cash equivalents were $70.6 million, and primarily consisted of deposits with the Federal Reserve. Interest-earning deposit average balances decreased to $155.5 million in the second quarter of 2026 from $756.6 million in the second quarter of 2025.

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

We had outstanding commitments to fund loans, including unused lines of credit, of $2.49 billion as of June 30, 2026. The majority of our commitments are variable rate and originate with SBLOC. The amount of such commitments represents amounts unfunded under existing loan agreements, where there is capacity for the customer to borrow additional amounts as long as there is no violation of any condition of the contract. The funding requirements for such commitments occur on a measured basis over time and would be funded by normal deposit growth.

As of June 30, 2026, we had cash reserves of $11.6 million at the holding company. Stock repurchases along with interest payments on our debt instruments have historically been funded by dividends from the Bank, as have interest payments on the above debt instruments. Stock repurchases may be terminated at any time. The holding company’s sources of liquidity are primarily comprised of dividends paid by the Bank to the Company, and the issuance of debt.

Capital Resources and Requirements. We must comply with capital adequacy guidelines issued by our regulators. The following table sets forth our regulatory capital ratios and the required levels to be considered a "well capitalized" institution as of June 30, 2026:

At June 30, 2026, the Bank was “well capitalized” under banking regulations.

Asset and Liability Management

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

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

Gap Analysis

The following table sets forth the amounts of interest-earning assets and interest-bearing liabilities that were outstanding at June 30, 2026 and the portions of each financial instrument that are anticipated, based upon certain assumptions, to mature or reset in each future period:

(Dollars in thousands)

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

• Loans at fair value and Loans, net – We do not assume any prepayment of fixed-rate loans.
• Investment securities – Prepayment adjustments are made for mortgage and asset backed securities based on historical data and current market trends.
• Deposits – Transaction accounts are comprised primarily of demand deposits. The majority of transaction and savings balances are assumed to be “core” deposits, or deposits that will generally remain with us regardless of market interest rates. We estimate the repricing characteristics of these deposits based on historical performance, past experience, judgmental predictions and other deposit behavior assumptions. However, we may choose not to reprice liabilities proportionally to changes in market interest rates for competitive or other reasons.

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

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

Interest Rate Sensitivity Analysis

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

(Dollars in thousands)

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

Information about market risk for the quarter ended June 30, 2026 is included in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Asset and Liability Management” of this Quarterly Report on Form 10-Q. Except for such information, there has been no material change to our assessment of our sensitivity to market risk as discussed our Annual Report on Form 10-K for the year ended December, 31, 2025.

Evaluation of Disclosure Controls and Procedures

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

Under the supervision of our Chief Executive Officer and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at a reasonable level of assurance as of June 30, 2026.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes or additions to the risk factors disclosed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December, 31, 2025.