PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

THE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	September 30,	December 31,	September 30,	December 31,
	2017	2016	2019	2018
	(unaudited)		(unaudited)
	(in thousands)		(in thousands)
ASSETS
Cash and cash equivalents
Cash and due from banks	$ 5,813	$ 4,127	$ 24,068	$ 2,440
Interest earning deposits at Federal Reserve Bank	328,023	955,733	932,440	551,862
Securities purchased under agreements to resell	65,095	39,199
Total cash and cash equivalents	398,931	999,059	956,508	554,302

Investment securities, available-for-sale, at fair value	1,196,956	1,248,614	1,382,437	1,236,324
Investment securities, held-to-maturity (fair value $85,099 and $91,799, respectively)	86,402	93,467
Commercial loans held for sale	380,272	663,140
Investment securities, held-to-maturity (fair value $83,064 and $83,391, respectively)			84,399	84,432
Commercial loans held-for-sale, at fair value			489,240	688,471
Loans, net of deferred loan fees and costs	1,374,060	1,222,911	1,683,377	1,501,976
Allowance for loan and lease losses	(7,283)	(6,332)	(10,360)	(8,653)
Loans, net	1,366,777	1,216,579	1,673,017	1,493,323
Federal Home Loan Bank and Atlantic Central Bankers Bank stock	991	1,613	4,342	1,113
Premises and equipment, net	21,087	24,125	17,857	18,895
Accrued interest receivable	10,131	10,589	13,898	12,753
Intangible assets, net	5,185	6,906	2,698	3,846
Other real estate owned	-	104
Deferred tax asset, net	53,017	55,666	13,006	21,622
Investment in unconsolidated entity, at fair value	107,711	126,930	49,431	59,273
Assets held for sale from discontinued operations	314,994	360,711
Assets held-for-sale from discontinued operations			162,098	197,831
Other assets	51,164	50,611	94,605	65,726
Total assets	$ 3,993,618	$ 4,858,114	$ 4,943,536	$ 4,437,911

LIABILITIES
Deposits
Demand and interest checking	$ 3,113,212	$ 3,816,524	$ 3,844,747	$ 3,904,638
Savings and money market	452,183	421,780	25,950	31,076
Time deposits			475,000	-
Total deposits	3,565,395	4,238,304	4,345,697	3,935,714

Securities sold under agreements to repurchase	180	274	93	93
Subordinated debentures	13,401	13,401	13,401	13,401
Long-term borrowings	42,482	263,099	41,166	41,674
Other liabilities	32,699	44,073	59,005	40,253
Total liabilities	3,654,157	4,559,151	4,459,362	4,031,135

SHAREHOLDERS' EQUITY
Common stock - authorized, 75,000,000 shares of $1.00 par value; 55,859,660 and 55,419,204
shares issued at September 30, 2017 and December 31, 2016, respectively	55,860	55,419
Common stock - authorized, 75,000,000 shares of $1.00 par value; 56,910,521 and 56,446,088
shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively			56,911	56,446
Treasury stock, at cost (100,000 shares)	(866)	(866)	(866)	(866)
Additional paid-in capital	362,340	360,564	370,113	366,181
Accumulated deficit	(77,850)	(111,941)
Accumulated other comprehensive loss	(23)	(4,213)
Accumulated earnings (deficit)			48,888	(817)
Accumulated other comprehensive income (loss)			9,128	(14,168)
Total shareholders' equity	339,461	298,963	484,174	406,776

Total liabilities and shareholders' equity	$ 3,993,618	$ 4,858,114	$ 4,943,536	$ 4,437,911

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



	For the three months ended September 30,		For the nine months ended September 30,			For the three months ended September 30,		For the nine months ended September 30,
	2017	2016	2017	2016		2019	2018	2019	2018
	(in thousands, except per share data)					(in thousands, except per share data)
Interest income
Interest income
Loans, including fees	$ 21,420	$ 17,697	$ 59,066	$ 48,928		$ 35,302	$ 24,981	$ 95,749	$ 70,254
Interest on investment securities:
Investment securities:
Taxable interest	8,847	8,350	26,990	22,782		10,485	10,906	32,649	31,375
Tax-exempt interest	86	142	228	639		43	50	133	159
Federal funds sold/securities purchased under agreements to resell	371	146	931	301		-	480	-	1,369
Interest earning deposits	1,190	397	3,961	1,677		2,545	2,239	7,502	6,166
	31,914	26,732	91,176	74,327		48,375	38,656	136,033	109,323
Interest expense
Deposits	3,688	2,906	10,554	8,692		9,034	7,690	26,727	18,298
Securities sold under agreements to repurchase	-	-	-	1
Short-term borrowings	175	153	197	263		1,595	148	2,624	261
Subordinated debenture	150	131	432	383
Subordinated debentures						186	186	573	524
	4,013	3,190	11,183	9,339		10,815	8,024	29,924	19,083
Net interest income	27,901	23,542	79,993	64,988		37,560	30,632	106,109	90,240
Provision for loan and lease losses	800	750	2,150	1,810		650	1,060	2,950	2,660
Net interest income after provision for loan and lease losses	27,101	22,792	77,843	63,178		36,910	29,572	103,159	87,580

Non-interest income
Service fees on deposit accounts	1,700	1,510	4,895	3,335		8	402	69	3,624
Card payment and ACH processing fees	1,564	1,459	4,596	4,183
Prepaid card fees	12,491	12,249	39,272	39,333
Gain on sale of loans	11,394	903	17,535	809
Gain on sale of investment securities	506	981	1,595	3,131
ACH, card and other payment processing fees						2,590	2,281	7,414	6,275
Prepaid and debit card and related fees						16,134	13,204	48,137	41,559
Net realized and unrealized gains on commercial loans
originated for sale						13,704	8,999	24,319	20,274
Change in value of investment in unconsolidated entity	(4)	811	(20)	(12,313)		-	(78)	-	(2,981)
Leasing income	705	588	2,088	1,456
Leasing related income						589	758	2,311	2,353
Affinity fees	275	1,091	1,445	3,507		-	84	-	271
Gain on sale of health savings accounts	-	-	2,538	-
Loss from sale of European prepaid operations	-	-	(3,437)	-
Gain on sale of IRA portfolio						-	65,000	-	65,000
Other	376	312	892	4,691		490	320	1,379	730
Total non-interest income	29,007	19,904	71,399	48,132		33,515	90,970	83,629	137,105

Non-interest expense
Salaries and employee benefits	21,788	21,508	57,902	62,400		24,526	19,243	70,192	59,213
Depreciation and amortization	1,080	1,241	3,405	3,751		885	999	2,825	3,012
Rent and related occupancy cost	1,368	1,638	4,227	4,797		1,432	1,343	4,304	4,077
Data processing expense	1,926	3,507	8,047	10,949		1,192	1,380	3,684	4,741
One time fee to exit data processing contract	1,136	-	1,136	-
Printing and supplies	282	825	1,120	2,194		164	285	506	779
Audit expense	393	246	1,270	746		402	471	1,265	1,553
Legal expense	2,744	814	5,909	3,786		1,466	1,610	4,324	5,811
Amortization of intangible assets	377	394	1,133	1,032		382	382	1,148	1,148
Losses on sale and write downs on other real estate owned	-	-	19	-
FDIC insurance	2,063	2,436	7,586	7,118		860	2,241	4,884	7,389
Software	3,088	3,032	9,328	8,266		3,199	3,593	9,180	9,879
Insurance	633	631	1,853	1,695		663	673	1,874	1,967
Telecom and IT network communications	426	582	1,443	1,547		417	332	1,060	971
Securitization and servicing expense	-	-	100	747
Consulting	505	1,701	1,745	4,214		934	1,130	2,576	2,658
Bank Secrecy Act and lookback consulting expenses	-	1,340	-	29,076
Civil money penalty	2,500	-	2,500	-
SEC settlement						1,400	-	1,400	-
Lease termination expense						-	-	908	395
Other						4,129	3,617	10,669	10,065
Total non-interest expense						42,051	37,299	120,799	113,658
Income from continuing operations before income taxes						28,374	83,243	65,989	111,027
Income tax expense					Income tax expense	7,975	21,942	17,585	29,550
Net income from continuing operations						$ 20,399	$ 61,301	$ 48,404	$ 81,477

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

For the nine months

ended September 30,

2017

2016

(in thousands)

Net income (loss)
$                  34,108

$               (67,720)
Other comprehensive income (loss) net of reclassifications into net income:

Other comprehensive income (loss)

Change in net unrealized gain during the period
8,194

19,207
Reclassification adjustments for gains included in income
(1,595)

(3,131)
Reclassification adjustments for foreign currency translation gains
216

335
Amortization of losses previously held as available-for-sale
25

25
Net unrealized gain
6,840

16,436

Deferred tax expense

Securities available-for-sale:

Change in net unrealized gain during the period
3,278

7,683
Reclassification adjustments for gains included in income
(638)

(1,252)
Amortization of losses previously held as available-for-sale
10

10
Income tax expense related to items of other comprehensive income
2,650

6,441

Other comprehensive income net of tax and reclassifications into net income
4,190

9,995
Comprehensive income (loss)
$                  38,298

$               (57,725)



	For the three months ended September 30,		For the nine months ended September 30,
	2019	2018	2019	2018
	(in thousands)

Net income	$ 20,425	$ 61,277	$ 49,705	$ 81,558
Other comprehensive income net of reclassifications into net income:

Other comprehensive income (loss)
Securities available-for-sale:
Change in net unrealized gain (loss) during the period	5,800	(4,540)	31,890	(23,285)
Reclassification adjustments for losses included in income	-	(15)	-	(41)
Amortization of losses previously held as available-for-sale	7	69	22	90
Other comprehensive income (loss)	5,807	(4,486)	31,912	(23,236)

Income tax (benefit) expense related to items of other comprehensive income (loss)
Securities available-for-sale:
Change in net unrealized gain (loss) during the period	1,566	(1,226)	8,610	(6,287)
Reclassification adjustments for losses included in income	-	(4)	-	(11)
Amortization of losses previously held as available-for-sale	2	18	6	24
Income tax expense (benefit) related to items of other comprehensive
income (loss)	1,568	(1,212)	8,616	(6,274)

Other comprehensive income (loss) net of tax and reclassifications into net income	4,239	(3,274)	23,296	(16,962)
Comprehensive income	$ 24,664	$ 58,003	$ 73,001	$ 64,596

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

THE BANCORP, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY


For the nine months ended September 30, 2017
For the nine months ended September 30, 2019									For the nine months ended September 30, 2019
(in thousands, except share data)	(in thousands, except share data)								(in thousands, except share data)

						Retained	Accumulated								Accumulated
		Common			Additional	earnings/	other			Common			Additional	Accumulated	other
		stock	Common	Treasury	paid-in	(accumulated	comprehensive			stock	Common	Treasury	paid-in	earnings	comprehensive
		shares	stock	stock	capital	deficit)	income (loss)	Total		shares	stock	stock	capital	(deficit)	income/(loss)	Total

Balance at January 1, 2017		55,419,204	$ 55,419	$ (866)	$ 360,564	$ (111,941)	$ (4,213)	$ 298,963
Balance at January 1, 2019										56,446,088	$ 56,446	$ (866)	$ 366,181	$ (817)	$ (14,168)	$ 406,776
Net income		-	-	-	-	34,108	-	34,108		-	-	-	-	17,930	-	17,930
Common stock issuance expense		-	-	-	(200)	-	-	(200)
Common stock issued from restricted shares,
Common stock issued from restricted units,
net of tax benefits		440,456	441	-	(424)	(17)	-	-		121,916	122	-	(122)	-	-	-
Stock-based compensation		-	-	-	2,400	-	-	2,400		-	-	-	1,424	-	-	1,424
Other comprehensive income net of
reclassification adjustments and tax		-	-	-	-	-	4,190	4,190		-	-	-	-	-	8,650	8,650

Balance at September 30, 2017		55,859,660	$ 55,860	$ (866)	$ 362,340	$ (77,850)	$ (23)	$ 339,461
Balance at March 31, 2019										56,568,004	$ 56,568	$ (866)	$ 367,483	$ 17,113	$ (5,518)	$ 434,780

Net income										-	-	-	-	11,350	-	11,350
Common stock issued from restricted units,
net of tax benefits										306,952	307	-	(307)	-	-	-
Stock-based compensation										-	-	-	1,595	-	-	1,595
Other comprehensive income net of
reclassification adjustments and tax										-	-	-	-	-	10,407	10,407

Balance at June 30, 2019										56,874,956	$ 56,875	$ (866)	$ 368,771	$ 28,463	$ 4,889	$ 458,132

Net income										-	-	-	-	20,425	-	20,425
Common stock issued from restricted units,
net of tax benefits										35,565	36	-	(36)	-	-	-
Stock-based compensation										-	-	-	1,378	-	-	1,378
Other comprehensive income net of
reclassification adjustments and tax										-	-	-	-	-	4,239	4,239

Balance at September 30, 2019										56,910,521	$ 56,911	$ (866)	$ 370,113	$ 48,888	$ 9,128	$ 484,174

For the nine months

ended September 30,

2017

2016

(in thousands)
Operating activities

Net income (loss) from continuing operations

$            30,670

$          (29,811)
Net income (loss) from discontinued operations

3,438

(37,909)
Adjustments to reconcile net income to net cash

provided by operating activities

Depreciation and amortization

4,538

4,783
Provision for loan and lease losses

2,150

1,810
Net amortization of investment securities discounts/premiums

6,955

6,066
Stock-based compensation expense

2,400

1,990
Loans originated for sale

(398,410)

(372,065)
Sale of loans originated for resale

453,976

299,855
Gain on sales of loans originated for resale

(13,119)

(809)
Loss (gain) on sale of fixed assets

28

(21)
Loss on sale of other real estate owned

19

-
Fair value adjustment on investment in unconsolidated entity

(20)

14,753
Gain on sales of investment securities

(1,595)

(3,131)
Decrease (increase) in accrued interest receivable

458

(1,025)
Decrease (increase) in other assets

872

(19,290)
Decrease (increase) in discontinued assets held for sale

1,123

(5,779)
Increase (decrease) in other liabilities

(18,794)

10,505
Net cash provided by (used in) operating activities

74,689

(130,078)

Investing activities

Purchase of investment securities available-for-sale

(237,870)

(499,969)
Proceeds from sale of investment securities available-for-sale

83,918

115,637
Proceeds from redemptions and prepayments of securities held-to-maturity

7,000

51
Proceeds from redemptions and prepayments of securities available-for-sale

234,163

133,212
Proceeds from sale of other real estate owned

85

-
Net increase in loans

(152,484)

(120,312)
Net decrease in discontinued loans held for sale

44,594

203,533
Proceeds from sale of fixed assets

366

341
Purchases of premises and equipment

(625)

(4,237)
Investment in unconsolidated entity

19,239

6,371
Net cash used in investing activities

(1,614)

(165,373)

Financing activities

Net decrease in deposits

(672,909)

(647,822)
Net decrease in securities sold under agreements to repurchase

(94)

(572)
Proceeds of short-term borrowings and federal funds purchased

-

70,000
Common stock issuance expense

(200)

-
Proceeds from the issuance of common stock

-

74,812
Net cash used in financing activities

(673,203)

(503,582)

Net decrease in cash and cash equivalents

(600,128)

(799,033)

Cash and cash equivalents, beginning of period

999,059

1,155,162

Cash and cash equivalents, end of period

$          398,931

$          356,129

Supplemental disclosure:

Interest paid

$            11,176

$              9,514
Taxes paid

$              1,051

$                 366


For the nine months ended September 30, 2018
(in thousands, except share data)
						Accumulated
	Common			Additional	Accumulated	other
	stock	Common	Treasury	paid-in	earnings	comprehensive
	shares	stock	stock	capital	(deficit)	loss	Total

Balance at January 1, 2018	55,861,150	$ 55,861	$ (866)	$ 363,196	$ (89,485)	$ (4,557)	$ 324,149
Net income	-	-	-	-	14,140	-	14,140
Common stock issued from option exercises,
net of tax benefits	13,390	13	-	107	(9)	-	111
Common stock issued from restricted units,
net of tax benefits	433,344	433	-	(433)	-	-	-
Stock-based compensation	-	-	-	743	-	-	743
Other comprehensive loss net of
reclassification adjustments and tax	-	-	-	-	-	(9,252)	(9,252)

Balance at March 31, 2018	56,307,884	$ 56,307	$ (866)	$ 363,613	$ (75,354)	$ (13,809)	$ 329,891

Net income	-	-	-	-	6,141	-	6,141
Common stock issued from restricted units,
net of tax benefits	102,641	104	-	(103)	-	-	1
Stock-based compensation	-	-	-	950	-	-	950
Other comprehensive loss net of
reclassification adjustments and tax	-	-	-	-	-	(4,436)	(4,436)

Balance at June 30, 2018	56,410,525	$ 56,411	$ (866)	$ 364,460	$ (69,213)	$ (18,245)	$ 332,547

Net income	-	-	-	-	61,277	-	61,277
Common stock issued from restricted units,
net of tax benefits	35,563	35	-	(35)	-	-	-
Stock-based compensation	-	-	-	1,324	-	-	1,324
Other comprehensive loss net of
reclassification adjustments and tax	-	-	-	-	-	(3,274)	(3,274)

Balance at September 30, 2018	56,446,088	$ 56,446	$ (866)	$ 365,749	$ (7,936)	$ (21,519)	$ 391,874



	For the nine months
	ended September 30,
	2019	2018
	(in thousands)
Operating activities
Net income from continuing operations	$ 48,404	$ 81,477
Net income from discontinued operations	1,301	81
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation and amortization	3,973	4,160
Provision for loan and lease losses	2,950	2,660
Net amortization of investment securities discounts/premiums	14,270	11,390
Stock-based compensation expense	4,396	3,017
Loans originated for sale	(1,099,719)	(485,198)
Sale of commercial loans originated for resale	1,232,041	635,964
Gain on sales of commercial loans originated for resale	(25,228)	(20,733)
Gain on sale of IRA portfolio	-	(65,000)
Loss on sale of fixed assets	-	15
Fair value adjustment on investment in unconsolidated entity	-	2,981
Writedown of other real estate owned	-	45
Change in fair value of loans held-for-sale	(1,562)	2,255
Change in fair value of derivatives	2,471	(1,797)
Gain on sales of investment securities	-	(41)
Increase in accrued interest receivable	(1,145)	(721)
Increase in other assets	(21,904)	(8,419)
Change in fair value of discontinued loans held-for-sale	-	1,387
Change in fair value of discontinued assets held-for-sale	123	-
Increase in other liabilities	2,949	2,602
Net cash provided by operating activities	163,320	166,125

Investing activities
Purchase of investment securities available-for-sale	(157,480)	(134,758)
Cash from call of investment securities held-to-maturity	-	2,000
Proceeds from sale of investment securities available-for-sale	-	3,529
Proceeds from redemptions and prepayments of securities available-for-sale	122,438	163,784
Net increase in loans	(179,806)	(106,368)
Net decrease in discontinued loans held-for-sale	28,939	71,078
Purchases of premises and equipment	(1,824)	(647)
Change in receivable from investment in unconsolidated entity	123	33,530
Return of investment in unconsolidated entity	9,842	7,280
Decrease in discontinued assets held-for-sale	6,671	5,822
Net cash (used in) provided by investing activities	(171,097)	45,250

Financing activities
Net increase (decrease) in deposits	409,983	(402,784)
Net decrease in securities sold under agreements to repurchase	-	(59)
Proceeds from the issuance of common stock	-	112
Proceeds from the sale of IRA portfolio	-	60,000
Net cash provided by (used in) financing activities	409,983	(342,731)

Net increase (decrease) in cash and cash equivalents	402,206	(131,356)

Cash and cash equivalents, beginning of period	554,302	908,935

Cash and cash equivalents, end of period	$ 956,508	$ 777,579

Supplemental disclosure:
Interest paid	$ 28,871	$ 18,977
Taxes paid	$ 15,037	$ 1,899
Non-cash investing and financing activities
Investment securities received in securitization transactions	$ 93,191	$ 62,076
Transfers of discontinued loans to other real estate owned	$ 5,295	$ 989

The Bancorp, Inc. (the Company) is a Delaware corporation and a registered financial holding company. Its primary subsidiary is The Bancorp Bank (the Bank) which is wholly owned by the Company. The Bank is a Delaware chartered commercial bank located in Wilmington, Delaware and is a Federal Deposit Insurance Corporation (FDIC) insured institution. In its continuing operations, the Bank has four primary lines of specialty lending: securities-backed lines of credit (SBLOC) and cash value of insurance-backed lines of credit (IBLOC), leasing (direct lease financing), Small Business Administration (SBA) loans and loans generated for sale into capital markets primarily through commercial loan securitizations (CMBS). Through the Bank, the Company also provides banking services nationally, which include prepaid and debit cards, private label banking, ~~institutional banking,~~deposit accounts to investment advisors’ customers, card payment and other payment processing.

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.

The financial statements of the Company, as of September 30, ~~2017~~2019 and for the three and nine month periods ended September 30, ~~2017~~2019 and ~~2016,~~2018, are unaudited. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) have been condensed or omitted in this Form 10-Q pursuant to the rules and regulations of the Securities and Exchange ~~Commission.~~Commission (SEC). However, in the opinion of management, these interim financial statements include all necessary adjustments to fairly present the results of the interim periods presented. The unaudited interim consolidated financial statements should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016 (2016~~2018 (2018 Form 10-K Report). The results of operations for the nine month period ended September 30, ~~2017~~2019 may not necessarily be indicative of the results of operations for the full year ending December 31, ~~2017.~~ 2019.

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 generally are expensed when incurred as a practical expedient as the contractual period for the majority of contracts is one year or less. The Company’s revenue streams that are in the scope of Accounting Standards Codification (ASC) 606 include prepaid and debit card, card payment, ACH and deposit processing and other fees. 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 American 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.

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 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.

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 our consolidated financial statements. ROU assets represent our right-of-use of an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments pursuant to our 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 we will exercise that option. Lease expense is recognized on a straight-line basis over the lease term.

The Company recognizes compensation expense for stock options in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 718, “Stock Based Compensation”. The expense of the option 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 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. At September 30, ~~2017,~~2019, the Company had ~~two~~three active stock-based compensation plans which are ~~more fully~~ described in ~~its 2016~~the Company’s 2018 Annual Report on the Form ~~10-K Report.~~ 10-K.

The Company granted 65,104 stock options with a vesting period of 4 years during the nine month period ended September 30, 2019. The weighted average grant-date fair value was $3.84. The Company did not grant stock options during the nine month period ended September 30, ~~2017. The Company granted 300,000 stock options with a vesting period of four years in the first nine months of 2016.~~2018. There were ~~28,500~~no common stock options exercised in the nine month ~~periods~~period ended September 30, ~~2017,~~2019, and no23,125 common stock options were exercised during the nine month period ended September 30, ~~2016.~~2018.

A summary of the ~~status of the~~ Company’s ~~equity compensation plans~~stock options is presented below.



							Weighted average
							remaining
			Weighted average			Weighted average	contractual	Aggregate
			remaining		Shares	exercise price	term (years)	intrinsic value
		Weighted average	contractual	Aggregate
	Shares	exercise price	term (years)	intrinsic value
Outstanding at January 1, 2017	2,021,625	$ 8.32	5.24	$ -
Outstanding at January 1, 2019					1,276,500	$ 8.23	3.77	$ 511,200
Granted	-	-	-	-	65,104	8.57	3.38	-
Exercised	(28,500)	7.36	-	-	-	-	-	-
Expired	(1,000)	25.43	-	-	-	-	-	-
Forfeited	(38,750)	8.37	-	-	-	-	-	-
Outstanding at September 30, 2017	1,953,375	$ 8.31	4.51	$ 941,090
Exercisable at September 30, 2017	1,705,875	$ 8.50	3.93	$ 599,090
Outstanding at September 30, 2019					1,341,604	$ 8.25	3.33	$ 2,280,348
Exercisable at September 30, 2019					1,201,500	$ 8.32	2.80	$ 1,957,510

The Company granted ~~955,024~~930,831 restricted stock units (RSUs) in the first nine months of ~~2017~~2019 of which ~~820,024~~863,331 have a vesting period of ~~three~~3 years and ~~135,000~~67,500 have a vesting period of one year. At issuance, ~~for~~ the 930,831 RSUs granted in the first nine months of ~~2017: 799,559~~2019 had a fair value of ~~$5.06, 7,923 had a fair value of $6.31 and 147,542 had a fair value of $7.65.~~$8.57 per unit. In the first nine months of ~~2016,~~2018, the Company granted ~~789,000 restricted~~507,792 RSUs, of which ~~620,000~~440,292 had a vesting period of ~~three~~2.8 years and ~~169,000~~67,500 had a vesting period of one year. ~~Of the~~The 507,792 RSUs granted in the first nine months of ~~2016, 489,000~~2018 had a fair value of ~~$4.50 and 300,000 had a fair value of $6.75 at issuance. The total fair value of RSUs vested for the nine months ended September 30, 2017 and 2016 was $2.6 million and $830,000, respectively.~~$11.07 per unit.



		Weighted average	Average remaining		Weighted average	Average remaining
		grant date	contractual		grant date	contractual
	Shares	fair value	term (years)	Shares	fair value	term (years)
Outstanding at January 1, 2017	831,775	$ 5.77	1.62
Outstanding at January 1, 2019				850,937	$ 8.84	1.44
Granted	955,024	5.47		930,831	8.57	2.22
Vested	(438,441)	5.89		(464,430)	8.21
Forfeited	(83,904)	5.93		(29,986)	8.95
Outstanding at September 30, 2017	1,264,454	$ 5.49	1.92
Outstanding at September 30, 2019				1,287,352	$ 8.87	1.90

As of September 30, ~~2017,~~2019, there was a total of ~~$5.9~~$8.8 million of unrecognized compensation cost related to unvested awards under share-based plans. This cost is expected to be recognized over a weighted average period of approximately ~~2.0~~1.9 years. Related compensation expense for the nine months ended September 30, ~~2017~~2019 and ~~2016~~2018 was ~~$2.4~~$4.4 million and ~~$2.0~~$3.0 million, respectively. The total issuance date fair value of RSUs vested and options exercised during the nine months ended September 30, 2019 and 2018 was $3.8 million and $3.1 million, respectively. The total intrinsic value of the options exercised and stock units vested in those respective periods was $4.3 million and $6.2 million, respectively.

For the periods ended September 30, 2019 and 2018, the Company estimated 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:

Expected volatility is based on the historical volatility of the Company’s stock and peer group comparisons over the expected life of the grant. 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, stock based compensation expense for the period ended September 30, 2019 is based on awards that are ultimately expected to vest and has been reduced for estimated forfeitures. The Company estimated forfeitures using historical data based upon the groups identified by management.

The Company calculates earnings per share under ASC 260, “Earnings Per Share”. Basic earnings per share exclude dilution and are 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 or other contracts to issue common stock were exercised and converted into common stock.

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



	For the three months ended			For the three months ended
	September 30, 2017			September 30, 2019
	Income	Shares	Per share	Income	Shares	Per share
	(numerator)	(denominator)	amount	(numerator)	(denominator)	amount

	(dollars in thousands except share and per share data)			(dollars in thousands except share and per share data)
Basic earnings per share from continuing operations
Net earnings available to common shareholders	$ 6,770	55,758,433	$ 0.12	$ 20,399	56,907,815	$ 0.36
Effect of dilutive securities
Common stock options	-	554,405	-
Common stock options and restricted stock units				-	505,482	-
Diluted earnings per share
Net earnings available to common shareholders	$ 6,770	56,312,838	$ 0.12	$ 20,399	57,413,297	$ 0.36



	For the three months ended			For the three months ended
	September 30, 2017			September 30, 2019
	Income	Shares	Per share	Income	Shares	Per share
	(numerator)	(denominator)	amount	(numerator)	(denominator)	amount

	(dollars in thousands except share and per share data)			(dollars in thousands except share and per share data)
Basic earnings per share from discontinued operations
Net earnings available to common shareholders	$ 511	55,758,433	$ 0.01	$ 26	56,907,815	$ -
Effect of dilutive securities
Common stock options	-	554,405	-
Common stock options and restricted stock units				-	505,482	-
Diluted earnings per share
Net earnings available to common shareholders	$ 511	56,312,838	$ 0.01	$ 26	57,413,297	$ -



		For the three months ended			For the three months ended
		September 30, 2017			September 30, 2019
		Income	Shares	Per share	Income	Shares	Per share
		(numerator)	(denominator)	amount	(numerator)	(denominator)	amount
	��
		(dollars in thousands except share and per share data)			(dollars in thousands except share and per share data)
Basic earnings per share
Net earnings available to common shareholders		$ 7,281	55,758,433	$ 0.13	$ 20,425	56,907,815	$ 0.36
Effect of dilutive securities
Common stock options		-	554,405	-
Common stock options and restricted stock units					-	505,482	-
Diluted earnings per share
Net earnings available to common shareholders		$ 7,281	56,312,838	$ 0.13	$ 20,425	57,413,297	$ 0.36

Stock options for ~~1,633,375~~984,104 shares, exercisable at prices between $6.75 and $8.57 per share, were outstanding at September 30, 2019, and included in the dilutive earnings per share computation because the exercise price per share was less than the average market price. Stock options for 357,500 were anti-dilutive and not included in the earnings per share calculation.

Stock options for 984,104 shares, exercisable at prices between $6.75 and $8.57 per share, were outstanding at September 30, 2019, and included in the dilutive earnings per share computation shares because the exercise price per share was less than the average market price. Stock options for 357,500 were anti-dilutive and not included in the earnings per share calculation.

Stock options for 136,500 shares, exercisable $10.45 per share, were outstanding at September 30, ~~2017,~~2018, but were not included in the dilutive shares because the exercise price per share was greater than the average market price.



				For the nine months ended
	For the nine months ended			September 30, 2018
	September 30, 2017			Income	Shares	Per share
	Income	Shares	Per share	(numerator)	(denominator)	amount
	(numerator)	(denominator)	amount
	(dollars in thousands except share and per share data)			(dollars in thousands except share and per share data)
Basic earnings per share from continuing operations
Net earnings available to common shareholders	$ 30,670	55,661,538	$ 0.55	$ 81,477	56,309,390	$ 1.45
Effect of dilutive securities
Common stock options	-	382,371	-
Common stock options and restricted stock units				-	775,454	(0.02)
Diluted earnings per share
Net earnings available to common shareholders	$ 30,670	56,043,909	$ 0.55	$ 81,477	57,084,844	$ 1.43

Stock options for 1,953,375 shares, exercisable at prices between $6.75 and $10.45 per share, were outstanding at September 30, 2017, but were not included in the dilutive shares because the exercise price per share was greater than the average market price.

Stock options for 2,036,500 shares, exercisable at prices between $6.75 and $25.43 per share, were outstanding at September 30, 2016 but were not included in dilutive shares because the Company had a net loss available to common shareholders.

Stock options for ~~2,036,500~~1,429,500 shares exercisable at prices between $6.75 and ~~$25.43~~$10.45 per share, were outstanding at September 30, ~~2016 but were not~~2018, and included in dilutive shares because the ~~Company had a net loss available to common shareholders.~~exercise price per share was less than the average market price.

The amortized cost, gross unrealized gains and losses, and fair values of the Company’s investment securities classified as available-for-sale and held-to-maturity at September 30, ~~2017~~2019 and December 31, ~~2016~~2018 are summarized as follows (in thousands):



Available-for-sale	September 30, 2017				September 30, 2019
		Gross	Gross			Gross	Gross
	Amortized	unrealized	unrealized	Fair	Amortized	unrealized	unrealized	Fair
	cost	gains	losses	value	cost	gains	losses	value
U.S. Government agency securities	$ 35,162	$ 87	$ (24)	$ 35,225	$ 53,479	$ 1,198	$ (149)	$ 54,528
Asset-backed securities *	264,196	1,182	(439)	264,939	259,516	225	(733)	259,008
Tax-exempt obligations of states and political subdivisions	13,157	179	(17)	13,319	6,173	137	-	6,310
Taxable obligations of states and political subdivisions	71,592	1,671	(150)	73,113	60,052	2,498	-	62,550
Residential mortgage-backed securities	367,017	840	(3,420)	364,437	349,909	4,154	(1,105)	352,958
Collateralized mortgage obligation securities	129,722	294	(923)	129,093	236,468	2,566	(200)	238,834
Commercial mortgage-backed securities	153,274	488	(114)	153,648	403,542	5,525	(818)	408,249
Foreign debt securities	59,685	398	(88)	59,995
Corporate debt securities	102,205	1,047	(65)	103,187
	$ 1,196,010	$ 6,186	$ (5,240)	$ 1,196,956	$ 1,369,139	$ 16,303	$ (3,005)	$ 1,382,437


	September 30, 2017				September 30, 2019
		Gross	Gross			Gross	Gross
	Amortized	unrealized	unrealized	Fair	Amortized	unrealized	unrealized	Fair
* Asset-backed securities as shown above	cost	gains	losses	value	cost	gains	losses	value
Federally insured student loan securities	$ 94,409	$ 254	$ (418)	$ 94,245	$ 45,776	$ 22	$ (415)	$ 45,383
Collateralized loan obligation securities	153,369	800	(19)	154,150	210,869	199	(318)	210,750
Other	16,418	128	(2)	16,544	2,871	4	-	2,875
	$ 264,196	$ 1,182	$ (439)	$ 264,939	$ 259,516	$ 225	$ (733)	$ 259,008



Held-to-maturity	September 30, 2017				September 30, 2019
		Gross	Gross			Gross	Gross
	Amortized	unrealized	unrealized	Fair	Amortized	unrealized	unrealized	Fair
	cost	gains	losses	value	cost	gains	losses	value
Other debt securities - single issuers	$ 11,017	$ 118	$ (2,761)	$ 8,374	$ 9,206	$ -	$ (2,060)	$ 7,146
Other debt securities - pooled	75,385	1,340	-	76,725	75,193	725	-	75,918
	$ 86,402	$ 1,458	$ (2,761)	$ 85,099	$ 84,399	$ 725	$ (2,060)	$ 83,064



Available-for-sale	December 31, 2016				December 31, 2018
		Gross	Gross			Gross	Gross
	Amortized	unrealized	unrealized	Fair	Amortized	unrealized	unrealized	Fair
	cost	gains	losses	value	cost	gains	losses	value
U.S. Government agency securities	$ 27,771	$ 23	$ (92)	$ 27,702	$ 54,095	$ 146	$ (879)	$ 53,362
Asset-backed securities *	355,622	1,811	(2,037)	355,396	189,850	104	(1,352)	188,602
Tax-exempt obligations of states and political subdivisions	15,492	129	(137)	15,484	7,546	50	(45)	7,551
Taxable obligations of states and political subdivisions	78,143	1,539	(633)	79,049	60,152	803	(520)	60,435
Residential mortgage-backed securities	347,120	598	(5,149)	342,569	377,199	648	(8,106)	369,741
Collateralized mortgage obligation securities	160,649	619	(1,445)	159,823	265,914	287	(3,994)	262,207
Commercial mortgage-backed securities	117,844	250	(1,008)	117,086	300,143	190	(5,907)	294,426
Foreign debt securities	56,603	168	(274)	56,497
Corporate debt securities	95,005	421	(418)	95,008
	$ 1,254,249	$ 5,558	$ (11,193)	$ 1,248,614	$ 1,254,899	$ 2,228	$ (20,803)	$ 1,236,324


	December 31, 2016				December 31, 2018
		Gross	Gross			Gross	Gross
	Amortized	unrealized	unrealized	Fair	Amortized	unrealized	unrealized	Fair
* Asset-backed securities as shown above	cost	gains	losses	value	cost	gains	losses	value
Federally insured student loan securities	$ 122,579	$ 346	$ (2,000)	$ 120,925	$ 59,705	$ 87	$ (283)	$ 59,509
Collateralized loan obligation securities	215,117	1,294	(14)	216,397	125,045	-	(1,069)	123,976
Other	17,926	171	(23)	18,074	5,100	17	-	5,117
	$ 355,622	$ 1,811	$ (2,037)	$ 355,396	$ 189,850	$ 104	$ (1,352)	$ 188,602



Held-to-maturity	December 31, 2016				December 31, 2018
		Gross	Gross			Gross	Gross
	Amortized	unrealized	unrealized	Fair	Amortized	unrealized	unrealized	Fair
	cost	gains	losses	value	cost	gains	losses	value
Other debt securities - single issuers	$ 17,983	$ 179	$ (3,026)	$ 15,136	$ 9,168	$ -	$ (1,890)	$ 7,278
Other debt securities - pooled	75,484	1,179	-	76,663	75,264	849	-	76,113
	$ 93,467	$ 1,358	$ (3,026)	$ 91,799	$ 84,432	$ 849	$ (1,890)	$ 83,391

Investments in Federal Home Loan Bank (FHLB) and Atlantic Central Bankers Bank stock are recorded at cost and amounted to ~~$991,000~~$4.3 million and ~~$1.6~~$1.1 million, respectively, at September 30, ~~2017~~2019 and December 31, ~~2016.~~2018.

The amortized cost and fair value of the Company’s investment securities at September 30, ~~2017,~~2019, by contractual maturity, are shown below (in thousands). Expected maturities may differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.



	Available-for-sale		Held-to-maturity		Available-for-sale		Held-to-maturity
	Amortized	Fair	Amortized	Fair	Amortized	Fair	Amortized	Fair
	cost	value	cost	value	cost	value	cost	value
Due before one year	$ 6,433	$ 6,441	$ -	$ -	$ 6,877	$ 6,879	$ -	$ -
Due after one year through five years	170,145	171,473	-	-	73,153	74,685	-	-
Due after five years through ten years	361,549	362,268	-	-	248,936	254,860	-	-
Due after ten years	657,883	656,774	86,402	85,099	1,040,173	1,046,013	84,399	83,064
	$ 1,196,010	$ 1,196,956	$ 86,402	$ 85,099	$ 1,369,139	$ 1,382,437	$ 84,399	$ 83,064

At September 30, ~~2017~~2019 and December 31, ~~2016, there were no investment securities pledged for securities sold under repurchase agreements as required or permitted by law. At September 30, 2017 and December 31, 2016,~~2018, investment securities with a fair value of approximately ~~$606.8~~$258.9 million and ~~$607.2~~$116.0 million, respectively, were pledged to secure a line of credit with the FHLB.At September 30, 2019 and December 31, 2018, investment securities with a fair value of approximately $165.0 million and $169.5 million, respectively, were pledged to secure a line of credit with the Federal Reserve Bank.

Fair ~~value~~values of available-for-sale securities are based on the fair market ~~value~~values supplied by a third-party market data provider, ~~while the~~or where such third-party market data is not available, fair ~~value~~values are based on discounted cash flows,. The fair values of held-to-maturity securities are based on the present value of cash flows, ~~which discounts~~derived by discounting expected cash flows from principal and interest using

~~and interest using~~ yield to maturity at the measurement date. ~~The Company periodically reviews its investment portfolio to determine whether unrealized losses are other than temporary,~~Alternatively, held-to-maturity fair values may be based on an evaluation of the creditworthiness of the issuers/guarantors as well as the underlying collateral, if applicable, in addition to the continuing performance of the securities. The amount of the credit impairment is calculatedupon prices provided by ~~estimating the discounted cash flows for those securities. The Company did not recognize any other-than-temporary impairment charges~~securities dealers with expertise in the ~~first nine months of 2017.~~securities being evaluated, or actual trade data from an independent pricing service.

The table below indicates the length of time individual securities had been in a continuous unrealized loss position at September 30, ~~2017~~2019 (dollars in thousands):



Available-for-sale		Less than 12 months		12 months or longer		Total			Less than 12 months		12 months or longer		Total
	Number of securities	Fair Value	Unrealized losses	Fair Value	Unrealized losses	Fair Value	Unrealized losses	Number of securities	Fair Value	Unrealized losses	Fair Value	Unrealized losses	Fair Value	Unrealized losses
Description of Securities
U.S. Government agency securities	4	$ 17,266	$ (24)	$ -	$ -	$ 17,266	$ (24)	3	$ 3,074	$ (5)	$ 4,473	$ (144)	$ 7,547	$ (149)
Asset-backed securities	16	16,453	(20)	58,961	(419)	75,414	(439)	27	136,446	(538)	13,541	(195)	149,987	(733)
Tax-exempt obligations of states and
political subdivisions	2	-	-	2,148	(17)	2,148	(17)
Taxable obligations of states and
political subdivisions	14	14,844	(127)	977	(23)	15,821	(150)
Residential mortgage-backed securities	93	173,175	(1,573)	98,021	(1,847)	271,196	(3,420)	63	51,011	(131)	81,167	(974)	132,178	(1,105)
Collateralized mortgage obligation securities	26	62,244	(468)	30,937	(455)	93,181	(923)	21	25,706	(33)	20,232	(167)	45,938	(200)
Commercial mortgage-backed securities	8	23,434	(114)	243	-	23,677	(114)	5	43,979	(247)	24,297	(571)	68,276	(818)
Foreign debt securities	21	15,869	(68)	1,180	(20)	17,049	(88)
Corporate debt securities	20	11,658	(30)	4,514	(35)	16,172	(65)
Total temporarily impaired
investment securities	204	$ 334,943	$ (2,424)	$ 196,981	$ (2,816)	$ 531,924	$ (5,240)	119	$ 260,216	$ (954)	$ 143,710	$ (2,051)	$ 403,926	$ (3,005)



Held-to-maturity		Less than 12 months		12 months or longer		Total			Less than 12 months		12 months or longer		Total
	Number of securities	Fair Value	Unrealized losses	Fair Value	Unrealized losses	Fair Value	Unrealized losses	Number of securities	Fair Value	Unrealized losses	Fair Value	Unrealized losses	Fair Value	Unrealized losses
Description of Securities
Corporate and other debt securities:
Single issuers	1	$ -	$ -	$ 6,343	$ (2,761)	$ 6,343	$ (2,761)	1	$ -	$ -	$ 7,146	$ (2,060)	$ 7,146	$ (2,060)
Total temporarily impaired
investment securities	1	$ -	$ -	$ 6,343	$ (2,761)	$ 6,343	$ (2,761)	1	$ -	$ -	$ 7,146	$ (2,060)	$ 7,146	$ (2,060)

The table below indicates the length of time individual securities had been in a continuous unrealized loss position at December 31, ~~2016~~2018 (dollars in thousands):



Available-for-sale		Less than 12 months		12 months or longer		Total			Less than 12 months		12 months or longer		Total
	Number of securities	Fair Value	Unrealized losses	Fair Value	Unrealized losses	Fair Value	Unrealized losses	Number of securities	Fair Value	Unrealized losses	Fair Value	Unrealized losses	Fair Value	Unrealized losses
Description of Securities
U.S. Government agency securities	5	$ 7,414	$ (36)	$ 7,824	$ (56)	$ 15,238	$ (92)	10	$ 679	$ (2)	$ 41,719	$ (877)	$ 42,398	$ (879)
Asset-backed securities	23	10,186	(49)	93,375	(1,988)	103,561	(2,037)	26	148,753	(1,230)	11,506	(122)	160,259	(1,352)
Tax-exempt obligations of states and
political subdivisions	8	6,056	(118)	3,301	(19)	9,357	(137)	3	-	-	3,625	(45)	3,625	(45)
Taxable obligations of states and
political subdivisions	27	42,963	(633)	-	-	42,963	(633)	22	4,492	(19)	35,599	(501)	40,091	(520)
Residential mortgage-backed securities	68	180,357	(4,833)	54,254	(316)	234,611	(5,149)	118	17,168	(49)	302,407	(8,057)	319,575	(8,106)
Collateralized mortgage obligation securities	28	88,936	(1,004)	30,386	(441)	119,322	(1,445)	44	1,522	(3)	193,355	(3,991)	194,877	(3,994)
Commercial mortgage-backed securities	28	79,345	(963)	4,547	(45)	83,892	(1,008)	26	121,860	(2,020)	151,453	(3,887)	273,313	(5,907)
Foreign debt securities	34	26,696	(274)	700	-	27,396	(274)
Corporate debt securities	39	30,418	(414)	645	(4)	31,063	(418)
Total temporarily impaired
investment securities	260	$ 472,371	$ (8,324)	$ 195,032	$ (2,869)	$ 667,403	$ (11,193)	249	$ 294,474	$ (3,323)	$ 739,664	$ (17,480)	$ 1,034,138	$ (20,803)



Held-to-maturity		Less than 12 months		12 months or longer		Total			Less than 12 months		12 months or longer		Total
	Number of securities	Fair Value	Unrealized losses	Fair Value	Unrealized losses	Fair Value	Unrealized losses	Number of securities	Fair Value	Unrealized losses	Fair Value	Unrealized losses	Fair Value	Unrealized losses
Description of Securities
Corporate and other debt securities:
Single issuers	1	$ -	$ -	$ 6,039	$ (3,026)	$ 6,039	$ (3,026)	1	$ -	$ -	$ 7,278	$ (1,890)	$ 7,278	$ (1,890)
Total temporarily impaired
investment securities	1	$ -	$ -	$ 6,039	$ (3,026)	$ 6,039	$ (3,026)	1	$ -	$ -	$ 7,278	$ (1,890)	$ 7,278	$ (1,890)

~~Other securities included in the held-to-maturity classification at September 30, 2017 consisted of three securities secured by diversified portfolios of corporate securities and two single-issuer~~The Company owns one single issuer trust preferred ~~securities.~~

~~A total of $11.0 million of other debt securities - single issuers is comprised of the following: amortized cost of the two single-issuer trust preferred securities of $11.0 million, of which one~~ security ~~for $1.9 million was issued by a bank and one security for $9.1 million was~~ issued by an insurance company.

~~A total of $75.4 million of other debt securities – pooled~~The security is ~~comprised of three securities consisting of diversified portfolios of corporate securities.~~

~~The following table provides additional information related to the Company’s single issuer trust preferred securities as of~~not rated by any bond rating service. At September 30, ~~2017 (in thousands):~~2019, it had a book value of $9.2 million and a fair value of $7.1 million.

The Company has evaluated the securities in the above tables as of September 30, 2019 and has concluded that none of these securities has impairment that is other-than-temporary. The Company evaluates whether a credit impairment exists by considering primarily the following factors: (a) the length of time and extent to which the fair value has been 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 most of the securities that are in an unrealized loss position are in a loss position because of changes in market interest rates after the securities were purchased. Securities that have been in an unrealized loss position for 12 months or longer include other securities whose market values are sensitive to market interest rates. The Company’s unrealized loss for other debt securities, which include ~~two~~one single issuer trust preferred ~~securities,~~security, is primarily related to general market conditions, including a lack of liquidity in the market. The severity of the temporary impairments 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 review, the Company concluded that other-than-temporary impairment did not exist due to the Company’s ability and intention to hold these securities to recover their amortized cost basis.

The Company has several lending lines of business including SBA loans, direct lease financing, SBLOC and IBLOC and other specialty and consumer lending. The Company also originates loans for sale into commercial ~~mortgage backed~~mortgage-backed securitizations or to secondary government guaranteed loan markets. ~~These sales are accounted for as true sales and servicing rights on these loans are not retained. The~~At origination, the Company ~~has~~ elected fair value treatment for these loans held-for-sale to better reflect the economics of the transactions. At September 30, ~~2017,~~2019, the fair value of the loans ~~held for sale~~held-for-sale was ~~$383.0~~$489.2 million and their ~~book value~~amortized cost was ~~$378.2~~$484.3 million. Included in ~~the gain~~“Net realized and unrealized gains (losses) on ~~sale of~~ loans originated for sale” in the ~~Statements~~consolidated statements of ~~Operations were gains recognized from~~operations are changes in the estimate in fair value of ~~$1.9 million for~~unsold loans. For the nine months ended September 30, ~~2017.~~2019, unrealized gains recognized for such changes in fair value were $1.6 million. For the nine months ended September 30, 2018, unrealized losses similarly recognized were $2.3 million. There were no changes in fair value related to credit risk. Interest earned on loans ~~held for sale~~held-for-sale during the period held ~~are~~is recorded in Interest Income-Loans, including fees, onin the ~~Statements~~consolidated statements of ~~Operations.~~operations. The Bank also pledged the majority of its loans to the Federal Reserve Bank for that line of credit which it has never used. The amount of loans pledged varies and since the Bank does not utilize this line, the collateral may be unpledged at any time. The line is maintained consistent with the Bank’s liquidity policy which maximizes potential liquidity.

The Company has periodically sponsored the structuring of commercial mortgage loan securitizations. The loans sold to the commercial mortgage-backed securitizations are transitional commercial mortgage loans which are made to improve and rehabilitate existing properties which are already cash flowing. Servicing rights are not retained. Each of the securitizations is considered a variable interest entity of which the Company is not the primary beneficiary. Further, true sale accounting has been applicable to each of the securitizations, as supported by a review performed by an independent third-party consultant. In each of the securitizations, the Company has obtained a tranche of certificates which are accounted for as available-for-sale debt securities. The securities are recorded at fair value at acquisition, which is determined by an independent third party based on the discounted cash flow method using unobservable (level 3) inputs. The loans securitized are structured with some prepayment protection and with extension options which are common for rehabilitation loans. It was expected that those factors would generally offset the impact of prepayments which would therefore not be significant. Accordingly, prepayments on CRE securities were not originally assumed in the first four securitizations. However, as a result of higher than expected prepayments on CRE2, annual prepayments of 15% on CRE5 were assumed, beginning after the first-year anniversary of the CRE5 securitization. For CRE6, there was no premium or discount associated with the tranche purchased and prepayments were accordingly not estimated.

Because of credit enhancements for each security, cash flows were not reduced by expected losses. For each of the securitizations, the Company has recorded a gain which is comprised of (i) the excess of consideration received by the Company in the transaction over the carrying value of the loans at securitization, less related transactions costs incurred; and (ii) the recognition of previously deferred origination and exit fees.

A summary of securitizations and securities obtained from those securitizations for the periods ended September 30, 2019 and 2018 is as follows:

The Company analyzes credit risk prior to making loans on an individual loan basis. The Company considers relevant aspects of the

borrowers’ financial position and cash flow, past borrower performance, management’s knowledge of market conditions, collateral and the ratio of loan amounts to estimated collateral value in making its credit determinations.

Major classifications of loans, excluding loans ~~held for sale,~~held-for-sale, are as follows (in thousands):

* The preceding table shows small business loans (SBL) and SBL held-for-sale at the dates indicated (in thousands). While the majority of SBL are comprised of SBA loans, SBL also includes $16,953,000 of non-SBA loans as of September 30, 2019 and none at December 31, 2018.

** Securities Backed Lines of Credit (SBLOC) are collateralized by marketable securities, while Insurance Backed Lines of Credit (IBLOC) are collateralized by the cash surrender value of insurance policies.

*** Included in the table above under Other consumer loans are demand deposit overdrafts reclassified as loan balances totaling ~~$7.1 million~~$771,000 and ~~$2.4~~$7.2 million at September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively. ~~Overdraft~~Estimated overdraft charge-offs and recoveries are reflected in the allowance for loan and lease losses.

* The following table shows SBA loans and SBA loans held for sale at the dates indicated (in thousands):

The following table provides information about impaired loans at September 30, ~~2017~~2019 and December 31, ~~2016~~2018 (in thousands):

Recorded
investment

Unpaid
principal
balance

Related
allowance

Average
recorded
investment

Interest
income
recognized
September 30, 2017

Without an allowance recorded

SBA non real estate
$                      357

$                      357

$                        -

$                      274

$                           -
SBA commercial mortgage
-

-

-

-

-
Direct lease financing
284

396

-

71

-
Consumer - other
-

-

-

-

-
Consumer - home equity
1,700

1,700

-

1,716

-
With an allowance recorded

-
SBA non real estate
2,288

2,288

1,659

2,534

-
SBA commercial mortgage
1,226

1,226

185

761

-
Direct lease financing
-

-

-

506

-
Consumer - other
-

-

-

18

-
Consumer - home equity
-

-

-

-

-
Total

SBA non real estate
2,645

2,645

1,659

2,808

-

SBA commercial mortgage	1,226	1,226	185	761	-


						September 30, 2019
						Recorded investment	Unpaid principal balance	Related allowance	Average recorded investment	Interest income recognized
Without an allowance recorded
SBL non-real estate						$ 352	$ 2,478	$ -	$ 262	$ 4
SBL commercial mortgage						-	-	-	-	-
SBL construction						-	-	-	355	-
Direct lease financing	284	396	-	577	-	288	288	-	381	9
Consumer - other	-	-	-	18	-
Consumer - home equity						495	495	-	1,329	7
With an allowance recorded
SBL non-real estate						3,898	3,898	(3,037)	3,955	22
SBL commercial mortgage						458	458	(71)	458	-
SBL construction						711	711	(35)	178	-
Direct lease financing						136	136	(136)	305	16
Consumer - home equity						1,220	1,220	(204)	400	-
Total
SBL non-real estate						4,250	6,376	(3,037)	4,217	26
SBL commercial mortgage						458	458	(71)	458	-
SBL construction						711	711	(35)	533	-
Direct lease financing						424	424	(136)	686	25
Consumer - home equity	1,700	1,700	-	1,716	-	1,715	1,715	(204)	1,729	7
	5,855	5,967	1,844	5,880	-	$ 7,558	$ 9,684	$ (3,483)	$ 7,623	$ 58



December 31, 2016
						December 31, 2018
						Recorded investment	Unpaid principal balance	Related allowance	Average recorded investment	Interest income recognized
Without an allowance recorded
SBA non real estate	$ 191	$ 191	$ -	$ 336	$ -
SBL non-real estate						$ 175	$ 1,469	$ -	$ 334	$ -
SBL commercial mortgage						-	-	-	-	-
Direct lease financing	-	-	-	-	-	437	548	-	425	28
Consumer - other	-	-	-	259	-
Consumer - home equity	1,730	1,730	-	1,187	-	1,612	1,612	-	1,648	10
With an allowance recorded
SBA non real estate	2,183	2,183	938	1,277	-
SBL non-real estate						3,541	3,541	(2,806)	2,816	70
SBL commercial mortgage						458	458	(71)	505	-
Direct lease financing	734	734	216	147	-	434	434	(145)	617	66
Consumer - other	-	-	-	-	-
Consumer - home equity	-	-	-	549	-	129	129	(17)	26	-
Total
SBA non real estate	2,374	2,374	938	1,613	-
SBL non-real estate						3,716	5,010	(2,806)	3,150	70
SBL commercial mortgage						458	458	(71)	505	-
Direct lease financing	734	734	216	147	-	871	982	(145)	1,042	94
Consumer - other	-	-	-	259	-
Consumer - home equity	1,730	1,730	-	1,736	-	1,741	1,741	(17)	1,674	10
	4,838	4,838	1,154	3,755	-	$ 6,786	$ 8,191	$ (3,039)	$ 6,371	$ 174

The following tables summarize the Company’s non-accrual loans, loans past due 90 days and still accruing and other real estate owned for the periods indicated (the Company had no non-accrual leases at September 30, ~~2017~~2019 or December 31, ~~2016)~~2018) (in thousands):



	September 30,	December 31,	September 30,	December 31,
	2017	2016	2019	2018

Non-accrual loans
SBA non real estate	$ 2,310	$ 1,530
SBA commercial mortgage	1,226	-
SBL non-real estate			$ 3,803	$ 2,590
SBL commercial mortgage			458	458
SBL construction			711	-
Consumer	1,417	1,442	1,448	1,468
Total non-accrual loans	4,953	2,972	6,420	4,516

Loans past due 90 days or more	354	661
Loans past due 90 days or more and still accruing			2,788	954
Total non-performing loans	5,307	3,633	9,208	5,470
Other real estate owned	-	104	-	-
Total non-performing assets	$ 5,307	$ 3,737	$ 9,208	$ 5,470

Interest which would have been earned on loans classified as non-accrual for the nine months ended September 30, 2019 and 2018, was $356,000 and $188,000, respectively.

The Company’s loans that were modified as of September 30, ~~2017~~2019 and December 31, ~~2016~~2018 and considered troubled debt restructurings are as follows (dollars in thousands):



	September 30, 2017			December 31, 2016			September 30, 2019			December 31, 2018
	Number	Pre-modification recorded investment	Post-modification recorded investment	Number	Pre-modification recorded investment	Post-modification recorded investment	Number	Pre-modification recorded investment	Post-modification recorded investment	Number	Pre-modification recorded investment	Post-modification recorded investment
SBA non real estate	4	$ 1,013	$ 1,013	2	$ 844	$ 844
SBL non-real estate							6	$ 1,274	$ 1,274	5	$ 1,564	$ 1,564
Direct lease financing	1	285	285	1	734	734	2	423	423	3	870	870
Consumer	2	541	541	1	288	288	2	495	495	2	513	513
Total	7	$ 1,839	$ 1,839	4	$ 1,866	$ 1,866	10	$ 2,192	$ 2,192	10	$ 2,947	$ 2,947

The balances below provide information as to how the loans were modified as troubled debt ~~restructurings~~restructuring loans as of September 30, ~~2017~~2019 and December 31, ~~2016~~2018 (in thousands):



	September 30, 2017			December 31, 2016			September 30, 2019			December 31, 2018
	Adjusted interest rate	Extended maturity	Combined rate and maturity	Adjusted interest rate	Extended maturity	Combined rate and maturity	Adjusted interest rate	Extended maturity	Combined rate and maturity	Adjusted interest rate	Extended maturity	Combined rate and maturity
SBA non real estate	$ -	$ 144	$ 869	$ -	$ 144	$ 700
SBL non-real estate							$ -	$ 60	$ 1,214	$ -	$ 85	$ 1,479
Direct lease financing	-	-	285	-	-	734	-	136	287	-	434	436
Consumer	-	-	541	-	-	288	-	-	495	-	-	513
Total	$ -	$ 144	$ 1,695	$ -	$ 144	$ 1,722	$ -	$ 196	$ 1,996	$ -	$ 519	$ 2,428

The following table summarizes, as of September 30, ~~2017,~~2019, troubled debt restructuring loans that had been restructured within the last 12 months that have subsequently ~~defaulted.~~defaulted and which are included in the table above (dollars in thousands):



	Number	Pre-modification recorded investment	Number	Pre-modification recorded investment
SBA non real estate	2	$ 679
SBL non-real estate			1	$ 660
Total	2	$ 679	1	$ 660

~~As of September 30, 2017 and December 31, 2016, the~~The Company had no commitments to ~~lend~~extend additional ~~funds~~credit to ~~loan customers whose loan terms have been modified in~~loans classified as troubled debt ~~restructurings.~~restructurings as of September 30, 2019.

When loans are classified as troubled debt restructurings, their collateral is valued and a specific reserve is established if the collateral valuation, less deposition costs, is lower than the recorded value of the loan. As of September 30, 2019, there were 10 troubled debt restructured loans with a balance of $2.2 million which had specific reserves of $1.2 million. Approximately $1.0 million of these reserves related to the non-guaranteed portion of SBA loans for start-up businesses with the balance attributable to direct lease financing.

A detail of the changes in the allowance for loan and lease losses by loan category and summary of loans evaluated individually and collectively for impairment is as follows (in thousands):



	SBA non real estate	SBA commercial mortgage	SBA construction	Direct lease financing	SBLOC	Other specialty lending	Other consumer loans	Unallocated	Total	September 30, 2019
September 30, 2017
Beginning balance	$ 1,976	$ 737	$ 76	$ 1,994	$ 315	$ 32	$ 975	$ 227	$ 6,332
										SBL non-real estate	SBL commercial mortgage	SBL construction	Direct lease financing	SBLOC / IBLOC	Other specialty lending	Other consumer loans	Unallocated	Total

Beginning 1/1/2019										$ 4,636	$ 941	$ 250	$ 2,025	$ 393	$ 60	$ 108	$ 240	$ 8,653
Charge-offs	(343)	-	-	(780)	-	-	(113)	-	(1,236)	(995)	-	-	(391)	-	-	(3)	-	(1,389)
Recoveries	13	-	-	-	-	-	24	-	37	94	-	-	51	-	-	1	-	146
Provision (credit)	1,576	521	22	196	45	36	(220)	(26)	2,150	1,595	315	141	676	118	(48)	125	28	2,950
Ending balance	$ 3,222	$ 1,258	$ 98	$ 1,410	$ 360	$ 68	$ 666	$ 201	$ 7,283	$ 5,330	$ 1,256	$ 391	$ 2,361	$ 511	$ 12	$ 231	$ 268	$ 10,360

Ending balance: Individually evaluated for impairment	$ 1,659	$ 185	$ -	$ -	$ -	$ -	$ -	$ -	$ 1,844	$ 3,037	$ 71	$ 35	$ 136	$ -	$ -	$ 204	$ -	$ 3,483

Ending balance: Collectively evaluated for impairment	$ 1,563	$ 1,073	$ 98	$ 1,410	$ 360	$ 68	$ 666	$ 201	$ 5,439	$ 2,293	$ 1,185	$ 356	$ 2,225	$ 511	$ 12	$ 27	$ 268	$ 6,877

Loans:
Ending balance	$ 72,055	$ 132,997	$ 14,205	$ 369,069	$ 720,279	$ 36,664	$ 20,107	$ 8,684	$ 1,374,060	$ 84,181	$ 209,008	$ 38,116	$ 412,755	$ 920,463	$ 3,167	$ 6,388	$ 9,299	$ 1,683,377

Ending balance: Individually evaluated for impairment										$ 4,250	$ 458	$ 711	$ 424	$ -	$ -	$ 1,715	$ -	$ 7,558

Ending balance: Collectively evaluated for impairment										$ 79,931	$ 208,550	$ 37,405	$ 412,331	$ 920,463	$ 3,167	$ 4,673	$ 9,299	$ 1,675,819



	December 31, 2018
	SBL non-real estate	SBL commercial mortgage	SBL construction	Direct lease financing	SBLOC	Other specialty lending	Other consumer loans	Unallocated	Total
Beginning 1/1/2018	$ 3,145	$ 1,120	$ 136	$ 1,495	$ 365	$ 57	$ 581	$ 197	$ 7,096
Charge-offs	(1,348)	(157)	-	(637)	-	-	(21)	-	(2,163)
Recoveries	57	13	-	64	-	-	1	-	135
Provision (credit)	2,782	(35)	114	1,103	28	3	(453)	43	3,585
Ending balance	$ 4,636	$ 941	$ 250	$ 2,025	$ 393	$ 60	$ 108	$ 240	$ 8,653

Ending balance: Individually evaluated for impairment	$ 2,806	$ 71	$ -	$ 145	$ -	$ -	$ 17	$ -	$ 3,039

Ending balance: Collectively evaluated for impairment	$ 1,830	$ 870	$ 250	$ 1,880	$ 393	$ 60	$ 91	$ 240	$ 5,614

Loans:
Ending balance	$ 76,340	$ 165,406	$ 21,636	$ 394,770	$ 785,303	$ 31,836	$ 16,302	$ 10,383	$ 1,501,976

Ending balance: Individually evaluated for impairment	$ 3,716	$ 458	$ -	$ 871	$ -	$ -	$ 1,741	$ -	$ 6,786

2124

Ending balance: Individually evaluated for impairment

$              2,645

$              1,226

$                      -

$                284

$                   -

$                 -

$           1,700

$                      -

$                5,855

Ending balance: Collectively evaluated for impairment

$            69,410

$          131,771

$            14,205

$         368,785

$       720,279

$        36,664

$         18,407

$              8,684

$         1,368,205


Ending balance: Collectively evaluated for impairment		$ 72,624		$ 164,948		$ 21,636		$ 393,899		$ 785,303		$ 31,836		$ 14,561		$ 10,383		$ 1,495,190

December 31, 2016

Beginning balance

$                844

$                408

$                  48

$             1,022

$              762

$              199

$              936

$                181

$                4,400
Charge-offs

(128)

-

-

(119)

-

-

(1,211)

-

(1,458)
Recoveries

1

-

-

17

12

-

30
Provision (credit)

1,259

329

28

1,074

(447)

(167)

1,238

46

3,360
Ending balance

$             1,976

$                737

$                  76

$             1,994

$              315

$                32

$              975

$                227

$                6,332

Ending balance: Individually evaluated for impairment

$                938

$                     -

$                     -

$                216

$                   -

$                  -

$                   -

$                     -

$                1,154

Ending balance: Collectively evaluated for impairment

$             1,038

$                737

$                  76

$             1,778

$              315

$                32

$              975

$                227

$                5,178

Loans:

Ending balance

$           74,644

$         126,159

$             8,826

$         346,645

$       630,400

$         11,073

$         17,374

$             7,790

$         1,222,911

Ending balance: Individually evaluated for impairment

$             2,374

$                     -

$                     -

$                734

$                   -

$                  -

$           1,730

$                     -

$                4,838

Ending balance: Collectively evaluated for impairment

$           72,270

$         126,159

$             8,826

$         345,911

$       630,400

$         11,073

$         15,644

$             7,790

$         1,218,073



September 30, 2016
Beginning balance	$ 844	$ 408	$ 48	$ 1,022	$ 762	$ 199	$ 936	$ 181	4,400
										September 30, 2018
										SBL non-real estate	SBL commercial mortgage	SBL construction	Direct lease financing	SBLOC	Other specialty lending	Other consumer loans	Unallocated	Total
Beginning 1/1/2018										$ 3,145	$ 1,120	$ 136	$ 1,495	$ 365	$ 57	$ 581	$ 197	$ 7,096
Charge-offs	(76)	-	-	(63)	-	-	(39)	-	(178)	(1,079)	(157)	-	(532)	-	-	(20)	-	(1,788)
Recoveries	1	-	-	18	-	-	7	-	26	47	13	-	64	-	-	-	-	124
Provision (credit)	1,179	343	7	568	(451)	(143)	176	131	1,810	1,434	245	50	929	24	19	(44)	3	2,660
Ending balance	$ 1,948	$ 751	$ 55	$ 1,545	$ 311	$ 56	$ 1,080	$ 312	$ 6,058	$ 3,547	$ 1,221	$ 186	$ 1,956	$ 389	$ 76	$ 517	$ 200	$ 8,092

Ending balance: Individually evaluated for impairment	$ 939	$ -	$ -	$ -	$ -	$ -	$ 474	$ -	$ 1,413	$ 1,844	$ 71	$ -	$ 195	$ -	$ -	$ -	$ -	$ 2,110

Ending balance: Collectively evaluated for impairment	$ 1,009	$ 751	$ 55	$ 1,545	$ 311	$ 56	$ 606	$ 312	$ 4,645	$ 1,703	$ 1,150	$ 186	$ 1,761	$ 389	$ 76	$ 517	$ 200	$ 5,982

Loans:
Ending balance	$ 74,262	$ 117,053	$ 6,317	$ 332,632	$ 621,456	$ 20,076	$ 19,375	$ 7,066	$ 1,198,237	$ 74,408	$ 166,432	$ 17,978	$ 395,976	$ 778,552	$ 40,799	$ 12,172	$ 10,456	$ 1,496,773

Ending balance: Individually evaluated for impairment	$ 2,774	$ -	$ -	$ -	$ -	$ -	$ 2,707	$ -	$ 5,481	$ 2,972	$ 458	$ -	$ 1,125	$ -	$ -	$ 1,618	$ -	$ 6,173

Ending balance: Collectively evaluated for impairment	$ 71,488	$ 117,053	$ 6,317	$ 332,632	$ 621,456	$ 20,076	$ 16,668	$ 7,066	$ 1,192,756	$ 71,436	$ 165,974	$ 17,978	$ 394,851	$ 778,552	$ 40,799	$ 10,554	$ 10,456	$ 1,490,600

The Company did not have loans acquired with deteriorated credit quality at either September 30, ~~2017~~2019 or December 31, ~~2016.~~2018.

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



	30-59 Days	60-89 Days	90 Days		Total		Total	September 30, 2019
December 31, 2016	past due	past due	or greater	Non-accrual	past due	Current	loans
SBA non real estate	$ 559	$ -	$ -	$ 1,530	$ 2,089	$ 72,555	$ 74,644
SBA commercial mortgage	-	-	-	-	-	126,159	126,159
SBA construction	-	-	-	-	-	8,826	8,826
								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								$ 141	$ -	$ -	$ 3,803	$ 3,944	$ 80,237	$ 84,181
SBL commercial mortgage								-	-	-	458	458	208,550	209,008
SBL construction								-	-	-	711	711	37,405	38,116
Direct lease financing	11,856	1,998	661	-	14,515	332,130	346,645	1,898	930	2,788	-	5,616	407,139	412,755
SBLOC	-	-	-	-	-	630,400	630,400
SBLOC / IBLOC								2,561	-	-	-	2,561	917,902	920,463
Other specialty lending	-	-	-	-	-	11,073	11,073	-	-	-	-	-	3,167	3,167
Consumer - other	-	-	-	-	-	5,403	5,403	-	-	-	-	-	1,037	1,037
Consumer - home equity	155	-	-	1,442	1,597	10,374	11,971	-	-	-	1,448	1,448	3,903	5,351
Unamortized loan fees and costs	-	-	-	-	-	7,790	7,790	-	-	-	-	-	9,299	9,299
	$ 12,570	$ 1,998	$ 661	$ 2,972	$ 18,201	$ 1,204,710	$ 1,222,911	$ 4,600	$ 930	$ 2,788	$ 6,420	$ 14,738	$ 1,668,639	$ 1,683,377

The Company evaluates its loans under an internal loan risk rating system as a means of identifying problem loans. The following table provides information by credit risk rating indicator for each segment of the loan portfolio, excluding loans ~~held for sale,~~held-for-sale, at the dates indicated (in thousands):



September 30, 2017	Pass	Special mention	Substandard	Doubtful	Loss	Unrated subject to review *	Unrated not subject to review *	Total loans
SBA non real estate	$ 44,996	$ 3,981	$ 4,107	$ -	$ -	$ -	$ 18,971	$ 72,055
SBA commercial mortgage	110,059	279	1,226	-	-	2,163	19,270	132,997
SBA construction	14,205	-	-	-	-	-	-	14,205
									September 30, 2019
									Pass	Special mention	Substandard	Doubtful	Loss	Unrated subject to review *	Unrated not subject to review *	Total loans
SBL non-real estate *									$ 64,507	$ 1,948	$ 4,577	$ -	$ -	$ 9,148	$ 4,001	$ 84,181
SBL commercial mortgage *									194,949	268	5,011	-	-	7,889	891	209,008
SBL construction									37,284	-	711	-	-	-	121	38,116
Direct lease financing									397,612	-	9,535	-	-	2,256	3,352	412,755
SBLOC / IBLOC									865,695	-	-	-	-	-	54,768	920,463
Other specialty lending									3,167	-	-	-	-	-	-	3,167
Consumer									3,351	-	1,448	-	-	-	1,589	6,388
Unamortized loan fees and costs									-	-	-	-	-	-	9,299	9,299
									$ 1,566,565	$ 2,216	$ 21,282	$ -	$ -	$ 19,293	$ 74,021	$ 1,683,377

									December 31, 2018
									Pass	Special mention	Substandard	Doubtful	Loss	Unrated subject to review *	Unrated not subject to review *	Total loans
SBL non-real estate									$ 67,809	$ 1,641	$ 4,517	$ -	$ -	$ 347	$ 2,026	$ 76,340
SBL commercial mortgage									158,667	273	458	-	-	5,498	510	165,406
SBL construction									19,912	-	694	-	-	843	187	21,636
Direct lease financing	193,792	-	2,770	-	-	8,733	163,774	369,069	382,860	2,157	1,456	-	-	3,623	4,674	394,770
SBLOC	357,906	-	-	-	-	-	362,373	720,279	775,153	-	-	-	-	-	10,150	785,303
Other specialty lending	36,664	-	-	-	-	-	-	36,664	31,749	-	-	-	-	-	87	31,836
Consumer	8,791	283	1,885	-	-	-	9,148	20,107	5,849	-	1,742	-	-	-	8,711	16,302
Unamortized loan fees and costs	-	-	-	-	-	-	8,684	8,684	-	-	-	-	-	-	10,383	10,383
	$ 766,413	$ 4,543	$ 9,988	$ -	$ -	$ 10,896	$ 582,220	$ 1,374,060	$ 1,441,999	$ 4,071	$ 8,867	$ -	$ -	$ 10,311	$ 36,728	$ 1,501,976

December 31, 2016
SBA non real estate	$ 51,437	$ 2,723	$ 3,628	$ -	$ -	$ -	$ 16,856	$ 74,644
SBA commercial mortgage	92,485	-	-	-	-	15,164	18,510	126,159
SBA construction	8,060	-	-	-	-	-	766	8,826
Direct lease financing	122,571	-	3,736	-	-	30,881	189,457	346,645
SBLOC	277,489	-	-	-	-	-	352,911	630,400
Other specialty lending	11,073	-	-	-	-	-	-	11,073
Consumer	9,837	288	2,312	-	-	-	4,937	17,374
Unamortized loan fees and costs	-	-	-	-	-	-	7,790	7,790
	$ 572,952	$ 3,011	$ 9,676	$ -	$ -	$ 46,045	$ 591,227	$ 1,222,911

* For information on targeted loan review thresholds see “Allowance for Loan Losses” in the 2018 Form 10-K Report in the loans footnote and in this Form 10-Q in the Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The Bank maintains deposits for various affiliated companies totaling approximately ~~$3.5 million~~$0 and ~~$5.5~~$4.7 million as of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, 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 ~~Bank.~~lender. At September 30, ~~2017,~~2019, these loans were current as to principal and interest payments and did not involve more than normal risk of collectability. Loans to these related parties ~~included in Loans, net of deferred loan fees and costs,~~ amounted to ~~$1.4~~$2.0 million at September 30, ~~2017~~2019 and ~~$649,000 at~~ December 31, ~~2016.~~2018.

The Bank periodically purchases securities under agreements to resell and ~~engages~~engaged in other securities ~~transactions as follows. The Company executed~~ transactions through J.V.B. Financial Group, LLC, (JVB), a broker dealer in which the Company’s Chairman is a registered representative and has a minority interest. The Company’s Chairman also serves as ~~Vice Chairman~~the President, a director and the Chief Investment Officer of Cohen & Company Financial Limited (formerly Euro Dekania Management Ltd.), a wholly-owned subsidiary of Cohen & Company Inc. (formerly Institutional Financial Markets Inc.), the parent company of JVB. In ~~2017,~~2019, the Company purchased ~~$2.8~~$1.4 million of government guaranteed SBA loans ~~from JVB~~ for Community Reinvestment Act ~~purposes.~~purposes from JVB. Prices for these loans are verified to market rates and no separate commissions or fees are paid to that firm. The Company ~~also~~has purchased securities under agreements to resell through JVB primarily consisting of ~~G.N.M.A.~~Government National Mortgage Association certificates which are full faith and credit obligations of the United States government issued at competitive rates. JVB was in compliance with all of the terms of the agreements at September 30, ~~2017~~2019 and had complied with all terms for all prior repurchase agreements. There were ~~$65.1 million and $39.2 million of~~no repurchase agreements outstanding at September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, 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 ~~$2.5 million~~$915,000 and ~~$2.4~~$2.2 million for legal services for the nine months ended September 30, ~~2017~~2019 and ~~September 30, 2016,~~2018, respectively.

ASC 825, ~~“ Financial Instruments Available for Sale”~~“Financial Instruments”, requires disclosure of the estimated fair value of an entity’s assets and liabilities considered to be financial instruments. For the Company, as for most financial institutions, the majority of its assets and liabilities are considered to be financial instruments. However, many such instruments lack an available trading market as characterized by a willing

buyer and willing seller engaging in an exchange transaction. Accordingly, estimated fair values are determined by the Company using the best available data and an estimation methodology it believes to be suitable for each category of financial instruments. Also, it is the Company’s general practice and intent to hold its financial instruments to maturity whether or not categorized as “available-for-sale” and not to engage in trading or sales activities, except for the sale of commercial loans to secondary markets. For fair value disclosure purposes, the Company utilized certain value measurement criteria required under ~~the~~ ASC 820, “Fair Value Measurements and Disclosures”, ~~and~~as discussed below. In the third quarter of 2019, there were $100.7 million of transfers from level two to level three. The securities were transferred due to the difficulty in obtaining information related to significant observable inputs. The securities transferred were those which were acquired in the commercial real estate securitizations as described in Note 6.

~~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, the Company’s balance at the Federal Reserve Bank and securities purchased under agreements to resell, had recorded values of ~~$398.9~~$956.5 million and ~~$999.1~~$554.3 million as of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively, which approximated fair values.

The estimated fair values of investment securities are based on quoted market prices, if available, or estimated using a methodology based on management’s inputs. The fair values of the Company’s investment securities held-to-maturity and loans held for sale are based on using “unobservable inputs” that are the best information available in the circumstances. Level 3 investment ~~securities~~security 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.

FHLB and Atlantic Central Bankers Bank stock is held as required by those respective institutions and is carried at cost. Federal law requires a member institution of the FHLB to hold stock according to predetermined formulas. Atlantic Central Bankers Bank requires its correspondent banking institutions to hold stock as a condition of membership.

Commercial loans ~~held for sale~~held-for-sale generally have estimated fair values based upon ~~either~~ market indications of the sales price of such loans from recent sales ~~transactions or discounted~~transactions. If such information is not available, fair values reflect cash flow ~~analysis.~~analysis based upon pricing for similar loans.

The net loan portfolio ~~at September 30, 2017 and December 31, 2016 has been~~is valued using the present value of discounted cash flow where market prices were not available. The discount rate used in these calculations is the estimated current market rate adjusted for credit risk. Accrued interest receivable has a carrying value that approximates fair value.

On December 30, 2014, the Bank entered into an agreement for, and closed on, the sale of a portion of its discontinued commercial loan portfolio. The purchaser of the loan portfolio was a newly formed entity, 2014-1 LLC (Walnut Street). The price paid to the Bank for the loan portfolio which had a face value of approximately $267.6 million, was approximately $209.6 million, of which approximately $193.6 million was in the form of two notes issued by Walnut Street to the Bank; a senior note in the principal amount of approximately $178.2 million bearing interest at 1.5% per year and maturing in December 2024 and a subordinate note in the principal amount of approximately $15.4 million, bearing interest at 10.0% per year and maturing in December 2024. The balance of these notes comprises the balance of the investment in unconsolidated ~~entity.~~entity on the consolidated balance sheets, which is measured at fair value at each balance sheet date. The fair value was initially established by the sales price and ~~subsequently subjected~~the investment is marked quarterly to fair value, as determined

using a discounted cash flow analysis. The change in value of investment in unconsolidated entity in the ~~income statement includes interest paid and~~consolidated statements of operations reflects changes in estimated fair value. Interest paid to the bank on the note is credited to principal.

~~Discontinued assets held for sale as of September 30, 2017~~Assets held-for-sale from discontinued operations are ~~held~~recorded at the lower of cost basis or market value. For loans, market value was determined using the ~~income~~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. The fair values of the Company’s loans classified as assets ~~held for sale~~held-for-sale are based on “unobservable inputs” that are ~~the best information~~based on available ~~in the circumstances.~~information. Level 3 fair values are based on the present value of cash flows by unit of measurement. For commercial loans other than SBA loans, a market adjusted rate to discount expected cash flows from outstanding principal and interest to expected maturity at the measurement date was utilized. For SBA loans, market indications for similar loans were utilized on an individual loan basis. For other real estate owned, market value was based upon appraisals of the underlying collateral by ~~third party~~third-party appraisers, reduced by 7% to 10% for estimated selling costs.

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

Time deposits, when outstanding, and subordinated debentures have a fair value estimated using a discounted cash flow calculation that applies current interest rates to discount expected cash flows. ~~Based upon time deposit maturities at September 30, 2017, the carrying values approximate their fair values.~~ The carrying amount of accrued interest payable approximates its fair value.

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

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

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

The following tables provide information regarding carrying amounts and estimated fair values (in ~~thousands~~):

September 30, 2017

Quoted prices in

Significant other

Significant

active markets for

observable

unobservable

Carrying

Estimated

identical assets

inputs

inputs

amount

fair value

(Level 1)

(Level 2)

(Level 3)
Investment securities available-for-sale
$            1,196,956

$               1,196,956

$                            -

$               1,153,403

$                   43,553
Investment securities held-to-maturity
86,402

85,099

-

78,756

6,343
Securities purchased under agreements to resell
65,095

65,095

65,095

-

-
Federal Home Loan Bank and Atlantic Central Bankers Bank stock
991

991

-

-

991
Commercial loans held for sale
380,272

380,272

-

-

380,272
Loans, net of deferred loan fees and costs
1,374,060

1,373,325

-

-

1,373,325
Investment in unconsolidated entity, senior note
103,950

103,950

-

-

103,950
Investment in unconsolidated entity, subordinated note
3,761

3,761

-

-

3,761
Assets held for sale
314,994

314,994

-

-

314,994
Demand and interest checking
3,113,212

3,113,212

3,113,212

-

-
Savings and money market
452,183

452,183

452,183

-

-
Subordinated debentures
13,401

9,873

-

-

9,873
Securities sold under agreements to repurchase
180

180

180

-

-
Interest rate swaps, asset
722

722

-

722

-



	September 30, 2019
			Quoted prices in	Significant other	Significant
			active markets for	observable	unobservable
	Carrying	Estimated	identical assets	inputs	inputs
	amount	fair value	(Level 1)	(Level 2)	(Level 3)
Investment securities, available-for-sale	$ 1,382,437	$ 1,382,437	$ -	$ 1,260,867	$ 121,570
Investment securities, held-to-maturity	84,399	83,064	-	75,918	7,146
Federal Home Loan Bank and Atlantic Central Bankers Bank stock	4,342	4,342	-	-	4,342
Commercial loans held-for-sale	489,240	489,240	-	-	489,240
Loans, net of deferred loan fees and costs	1,683,377	1,681,081	-	-	1,681,081
Investment in unconsolidated entity	49,431	49,431	-	-	49,431
Assets held-for-sale from discontinued operations	162,098	162,098	-	-	162,098
Demand and interest checking	3,844,747	3,844,747	-	3,844,747	-
Savings and money market	25,950	25,950	-	25,950	-
Time deposits	475,000	475,000	-	475,000	-
Subordinated debentures	13,401	10,094	-	-	10,094
Securities sold under agreements to repurchase	93	93	93	-	-
Interest rate swaps, liability	790	790	-	790	-



	December 31, 2016					December 31, 2018
			Quoted prices in	Significant other	Significant			Quoted prices in	Significant other	Significant
			active markets for	observable	unobservable			active markets for	observable	unobservable
	Carrying	Estimated	identical assets	inputs	inputs	Carrying	Estimated	identical assets	inputs	inputs
	amount	fair value	(Level 1)	(Level 2)	(Level 3)	amount	fair value	(Level 1)	(Level 2)	(Level 3)
Investment securities available-for-sale	$ 1,248,614	$ 1,248,614	$ -	$ 1,248,614	$ -
Investment securities held-to-maturity	93,467	91,799	-	85,760	6,039
Securities purchased under agreements to resell	39,199	39,199	39,199	-	-
Investment securities, available-for-sale						$ 1,236,324	$ 1,236,324	$ -	$ 1,211,934	$ 24,390
Investment securities, held-to-maturity						84,432	83,391	-	76,113	7,278
Federal Home Loan Bank and Atlantic Central Bankers Bank stock	1,613	1,613	-	-	1,613	1,113	1,113	-	-	1,113
Commercial loans held for sale	663,140	663,140	-	-	663,140
Commercial loans held-for-sale						688,471	688,471	-	-	688,471
Loans, net of deferred loan fees and costs	1,222,911	1,219,625	-	-	1,219,625	1,501,976	1,503,780	-	-	1,503,780
Investment in unconsolidated entity, senior note	118,389	118,389	-	-	118,389
Investment in unconsolidated entity, subordinated note	8,541	8,541	-	-	8,541
Assets held for sale	360,711	360,711	-	-	360,711
Investment in unconsolidated entity						59,273	59,273	-	-	59,273
Assets held-for-sale from discontinued operations						197,831	197,831	-	-	197,831
Interest rate swaps, asset						1,681	1,681	-	1,681	-
Demand and interest checking	3,816,524	3,816,524	3,816,524	-	-	3,904,638	3,904,638	-	3,904,638	-
Savings and money market	421,780	421,780	421,780	-	-	31,076	31,076	-	31,076	-
Subordinated debentures	13,401	9,290	-	-	9,290	13,401	9,975	-	-	9,975
Securities sold under agreements to repurchase	274	274	274	-	-	93	93	93	-	-
Interest rate swaps, asset	3,207	3,207	-	3,207	-

The 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				Fair Value Measurements at Reporting Date Using
		Quoted prices in active	Significant other	Significant		Quoted prices in active	Significant other	Significant
		markets for identical	observable	unobservable		markets for identical	observable	unobservable
	Fair value	assets	inputs	inputs	Fair value	assets	inputs	inputs
	September 30, 2017	(Level 1)	(Level 2)	(Level 3)	September 30, 2019	(Level 1)	(Level 2)	(Level 3)

Investment securities available-for-sale
Investment securities, available-for-sale
U.S. Government agency securities	$ 35,225	$ -	$ 35,225	$ -	$ 54,528	$ -	$ 54,528	$ -
Asset-backed securities	264,939	-	264,939	-	259,008	-	259,008	-
Obligations of states and political subdivisions	86,432	-	86,432	-	68,860	-	68,860	-
Residential mortgage-backed securities	364,437	-	364,437	-	352,958	-	352,958	-
Collateralized mortgage obligation securities	129,093	-	129,093	-	238,834	-	238,834	-
Commercial mortgage-backed securities	153,648	-	110,095	43,553	408,249	-	286,679	121,570
Foreign debt securities	59,995	-	59,995	-
Corporate debt securities	103,187	-	103,187	-
Total investment securities available-for-sale	1,196,956	-	1,153,403	43,553	1,382,437	-	1,260,867	121,570
Loans held for sale	380,272	-	-	380,272
Investment in unconsolidated entity, senior note	103,950	-	-	103,950
Investment in unconsolidated entity, subordinated note	3,761	-	-	3,761
Interest rate swaps, asset	722	-	722	-
Commercial loans held-for-sale					489,240	-	-	489,240
Investment in unconsolidated entity					49,431	-	-	49,431
Assets held-for-sale from discontinued operations					162,098	-	-	162,098
Interest rate swaps, liability					790	-	790	-
	$ 1,685,661	$ -	$ 1,154,125	$ 531,536	$ 2,082,416	$ -	$ 1,260,077	$ 822,339



		Fair Value Measurements at Reporting Date Using				Fair Value Measurements at Reporting Date Using
		Quoted prices in active	Significant other	Significant		Quoted prices in active	Significant other	Significant
		markets for identical	observable	unobservable		markets for identical	observable	unobservable
	Fair value	assets	inputs	inputs	Fair value	assets	inputs	inputs
	December 31, 2016	(Level 1)	(Level 2)	(Level 3)	December 31, 2018	(Level 1)	(Level 2)	(Level 3)

Investment securities available-for-sale
Investment securities, available-for-sale
U.S. Government agency securities	$ 27,702	$ -	$ 27,702	$ -	$ 53,362	$ -	$ 53,362	$ -
Asset-backed securities	355,396	-	355,396	-	188,602	-	188,602	-
Obligations of states and political subdivisions	94,533	-	94,533	-	67,986	-	67,986	-
Residential mortgage-backed securities	342,569	-	342,569	-	369,741	-	369,741	-
Collateralized mortgage obligation securities	159,823	-	159,823	-	262,207	-	262,207	-
Commercial mortgage-backed securities	117,086	-	117,086	-	294,426	-	270,036	24,390
Foreign debt securities	56,497	-	56,497	-
Corporate debt securities	95,008	-	95,008	-
Total investment securities available-for-sale	1,248,614	-	1,248,614	-	1,236,324	-	1,211,934	24,390
Loans held for sale	663,140	-	-	663,140
Investment in unconsolidated entity, senior note	118,389	-	-	118,389
Investment in unconsolidated entity, subordinated note	8,541	-	-	8,541
Commercial loans held-for-sale					688,471	-	-	688,471
Investment in unconsolidated entity					59,273	-	-	59,273
Assets held-for-sale from discontinued operations					197,831	-	-	197,831
Interest rate swaps, asset	3,207	-	3,207	-	1,681	-	1,681	-
	$ 2,041,891	$ -	$ 1,251,821	$ 790,070	$ 2,183,580	$ -	$ 1,213,615	$ 969,965

In addition, ASC 820 ~~“Fair Value Measurements and Disclosures”,~~ establishes a common definition for fair value to be applied to assets and liabilities. It clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It also establishes a framework for measuring fair value and expands disclosures concerning fair value measurements. ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Level 1 valuation is based on quoted market prices for identical assets or liabilities to which the Company has access at the measurement date. Level 2 valuation is based on other observable inputs for the asset or liability, either directly or indirectly. This includes quoted prices for similar assets in active or inactive markets, inputs other than quoted prices that are observable for the asset or liability such as yield curves, volatilities, prepayment speeds, credit risks, default rates, or inputs that are derived principally from, or corroborated through, observable market data by market-corroborated reports. Level 3 valuation is based on “unobservable inputs” which the Company believes is the best information available in the circumstances. A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The ~~changes in the~~ Company’s Level 3 ~~assets measured at fair value on a recurring basis, segregated by fair value hierarchy level,~~asset activity for the categories shown for year to date are summarized below (in thousands):



	Fair Value Measurements Using				Fair Value Measurements Using
	Significant Unobservable Inputs				Significant Unobservable Inputs
	(Level 3)				(Level 3)

	Available-for-sale		Commercial loans		Available-for-sale		Commercial loans
	securities		held for sale		securities		held-for-sale
	September 30, 2017	December 31, 2016	September 30, 2017	December 31, 2016	September 30, 2019	December 31, 2018	September 30, 2019	December 31, 2018
Beginning balance	$ -	$ -	$ 663,140	$ 489,938	$ 24,390	$ 40,644	$ 688,471	$ 503,316
Transfers into level 3	-	-	-	-	100,664	-	-	-
Transfers out of level 3	-	-	-	-	-	(74,355)	-	-
Total gains or losses (realized/unrealized)
Total gains or (losses) (realized/unrealized)
Included in earnings	-	-	20,019	(3,078)	-	-	26,790	19,850
Included in other comprehensive income	-	-	-	-
Purchases, issuances, and settlements
Included in other comprehensive loss					(43)	(688)	-	-
Purchases, issuances, sales and settlements
Purchases	43,553				-	62,076	-	-
Issuances	-	-	398,410	528,584	-	-	1,099,719	866,303
Sales	-	-	(701,297)	(352,304)	-	-	(1,325,740)	(700,998)
Settlements	-	-	-	-	(3,441)	(3,287)	-	-
Ending balance	$ 43,553	$ -	$ 380,272	$ 663,140	$ 121,570	$ 24,390	$ 489,240	$ 688,471

The amount of total gains or (losses) for the period
included in earnings attributable to the change in
Total gains or (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.	$ -	$ -	$ 703	$ (2,674)
held at the reporting date as shown above.					$ -	$ -	$ 1,713	$ (922)

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


	Fair Value Measurements Using					Fair Value Measurements Using
	Significant Unobservable Inputs					Significant Unobservable Inputs
	(Level 3)					(Level 3)

	Investment in			Assets		Investment in			Assets held-for-sale
	unconsolidated entity			held for sale		unconsolidated entity			from discontinued operations
		September 30, 2017	December 31, 2016	September 30, 2017	December 31, 2016		September 30, 2019	December 31, 2018	September 30, 2019	December 31, 2018
Beginning balance		$ 126,930	$ 178,520	$ 360,711	$ 583,909		$ 59,273	$ 74,473	$ 197,831	$ 304,313
Transfers into level 3		-	-	-	-		-	-	-	-
Transfers out of level 3		-	-	-	-		-	-	-	-
Total gains or losses (realized/unrealized)
Total gains or (losses) (realized/unrealized)
Included in earnings		(20)	(39,816)	638	(48,836)		-	(3,689)	(123)	352
Included in other comprehensive income		-	-	-	-		-	-	-	-
Purchases, issuances, and settlements
Purchases, issuances, sales, settlements and charge-offs
Purchases		-	-	-	-		-	-	-	-
Issuances		-	-	-	-		-	-	922	1,664
Sales		-	-	-	(63,712)		-	-	(6,671)	(35,000)
Settlements		(19,199)	(11,774)	(33,400)	(110,650)		(9,842)	(11,511)	(27,907)	(62,754)
Charge-offs		-	-	(12,955)	-		-	-	(1,954)	(10,744)
Ending balance		$ 107,711	$ 126,930	$ 314,994	$ 360,711		$ 49,431	$ 59,273	$ 162,098	$ 197,831

The amount of total gains or (losses) for the period
included in earnings attributable to the change in
Total gains or (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.		$ (20)	$ (39,816)	$ (1,776)	$ (48,836)
held at the reporting date as shown above.							$ -	$ (3,689)	$ (123)	$ 352

Fair value at

Fair value at

Level 3 instruments only

September 30, 2017

December 31, 2016

Valuation techniques

Unobservable inputs

Range

Investment securities available-for-sale

$                         43,553

$     ��                           -

Discounted cash flow

Discount rate

7.0%-9.5%
Investment securities held-to-maturity

6,343

6,039

Discounted cash flow

Discount rate

8.00%
Federal Home Loan Bank and Atlantic

991

1,613

Cost

N/A

N/A
  Central Bankers Bank stock

Loans, net of deferred loan fees and costs

1,373,325

1,219,625

Discounted cash flow

Discount rate

3.5%-7.2%
Commercial loans held for sale

380,272

663,140

Discounted cash flow

Discount rate

4.85%-7.05%
Investment in unconsolidated entity,

103,950

118,389

Discounted cash flow

Discount rate

4.75%
senior note

Default rate

1.00%
Investment in unconsolidated entity,

3,761

8,541

Discounted cash flow

Discount rate

11.00%
subordinated note

Default rate

1.00%
Assets held for sale

314,994

360,711

Discounted cash flow

Discount rate

3.67%-9.32%
Subordinated debentures

9,873

9,290

Discounted cash flow

Discount rate

7.00%



	Level 3 instruments only
	Fair value at	Fair value at			Range at	Range at
	September 30, 2019	December 31, 2018	Valuation techniques	Unobservable inputs	September 30, 2019	December 31, 2018

Investment securities, available-for-sale	$ 121,570	$ 24,390	Discounted cash flow	Discount rate	4.00% - 7.45%	6.55%
Investment securities, held-to-maturity	7,146	7,278	Discounted cash flow	Discount rate	8.28%	8.80%
Federal Home Loan Bank and Atlantic	4,342	1,113	Cost	N/A	N/A	N/A
Central Bankers Bank stock
Loans, net of deferred loan fees and	1,681,081	1,503,780	Discounted cash flow	Discount rate	3.70% - 7.44%	4.22% - 6.93%
costs
Commercial - SBA	222,007	199,977	Traders' pricing	Offered quotes	$98.75 - $110	$99.125 - $110
Commercial - fixed	92,907	95,307	Discounted cash flow	Discount rate	4.10% - 7.06%	5.23% - 6.92%
Commercial - floating	174,326	393,187	Discounted cash flow	Discount rate	4.06% - 6.65%	5.41% - 7.75%
Commercial loans held-for-sale	489,240	688,471
Investment in unconsolidated entity	49,431	59,273	Discounted cash flow	Discount rate	5.87%	6.30%
				Default rate	1.00%	1.00%
Assets held-for-sale from discontinued	162,098	197,831	Discounted cash flow	Discount rate,	3.54% - 7.78%	4.26% - 8.36%
operations				Credit analysis
Subordinated debentures	10,094	9,975	Discounted cash flow	Discount rate	8.28%	8.81%

Fair values in the above table which are estimated by the discounted cash flow method, or using other valuation techniques, are subject to uncertainty resulting from the discount rate used, or other assumptions, including credit and collateral assessments as of the reporting date. The discount rates used are based on market comparables which vary with credit spreads and interest rate movements or expected interest rate movements. Changes in these factors could have a significant impact on estimated fair values.

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



		Fair Value Measurements at Reporting Date Using				Fair Value Measurements at Reporting Date Using
		Quoted prices in active	Significant other	Significant		Quoted prices in active	Significant other	Significant
		markets for identical	observable	unobservable		markets for identical	observable	unobservable
	Fair value	assets	inputs	inputs	Fair value	assets	inputs	inputs
Description ~~(1)~~	September 30, 2017	(Level 1)	(Level 2)	(Level 3)	September 30, 2019	(Level 1)	(Level 2)	(Level 3)

Impaired loans - collateral dependent(1)	$ 4,011	$ -	$ -	$ 4,011	$ 4,075	$ -	$ -	$ 4,075
Other real estate owned	-	-	-	-
Intangible assets	5,185	-	-	5,185	2,698	-	-	2,698
	$ 9,196	$ -	$ -	$ 9,196	$ 6,773	$ -	$ -	$ 6,773



		Fair Value Measurements at Reporting Date Using				Fair Value Measurements at Reporting Date Using
		Quoted prices in active	Significant other	Significant		Quoted prices in active	Significant other	Significant
		markets for identical	observable	unobservable		markets for identical	observable	unobservable
	Fair value	assets	inputs	inputs	Fair value	assets	inputs	inputs
Description ~~(1)~~	December 31, 2016	(Level 1)	(Level 2)	(Level 3)	December 31, 2018	(Level 1)	(Level 2)	(Level 3)

Impaired loans - collateral dependent(1)	$ 3,685	$ -	$ -	3,685	$ 3,747	$ -	$ -	$ 3,747
Other real estate owned	104	-	-	104
Intangible assets	6,906	-	-	6,906	3,846	-	-	3,846
	$ 10,695	$ -	$ -	$ 10,695	$ 7,593	$ -	$ -	$ 7,593

At September 30, ~~2017,~~2019, principal on impaired loans and troubled debt restructurings, ~~that~~which is accounted for on the basis of the value of underlying collateral, is shown at estimated fair value of ~~$4.0~~$4.1 million. To arrive at that fair value, related loan principal of ~~$5.8~~$7.6 million was reduced by specific reserves of ~~$1.8~~$3.5 million within the allowance for loan losses as of that date, representing the deficiency between principal and estimated collateral values, which were reduced by costs to sell. When the deficiency is deemed uncollectible, it is charged off by reducing the specific reserve and decreasing principal. Included in the impaired balance at September 30, ~~2017~~2019 were ~~seven~~10 troubled debt restructured loans with a balance of ~~$1.8~~$2.2 million which had specific reserves of ~~$534,000.~~$1.2 million. Valuation techniques consistent with the market and/or cost approach were used to measure fair value and primarily included observable inputs for the individual

impaired loans being evaluated such as recent sales of similar assets 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. The fair value of other real estate owned is based on an appraisal of the property using the market approach for valuation.

The Company utilizes derivative instruments to assist in the management of interest rate sensitivity by modifying the repricing, maturity and option characteristics on commercial real estate loans ~~held for sale.~~held-for-sale. These instruments are not accounted for as effective hedges. As of September 30, ~~2017,~~2019, the Company had entered into ~~eleven~~seven interest rate swap agreements with an aggregate notional amount of ~~$59.7~~$40.3 million. These swap agreements provide for the Company to receive an adjustable rate of interest based upon the three-month London Interbank Offering Rate (LIBOR). The Company recorded a loss of $2.5 million for the nine months ended September 30, ~~2017~~2019 to recognize the fair value of the derivative instruments which is reported in ~~gain (loss)~~net realized and unrealized gains (losses) on commercial loans originated for sale in the consolidated statements of ~~loans.~~operations. The amount ~~receivable~~payable by the Company under these swap agreements was ~~$722,000~~$790,000 at September 30, ~~2017~~2019, which is reported in other ~~assets.~~liabilities. The Company had minimum collateral posting thresholds with certain of its derivative counterparties and had posted cash collateral of ~~$756,000~~$1.3 million as of September 30, ~~2017.~~2019.

The maturity dates, notional amounts, interest rates paid and received and fair value of the Company’s remaining interest rate swap agreements as of September 30, ~~2017~~2019 are summarized below (dollars in thousands):



	September 30, 2017				September 30, 2019
Maturity date	Notional amount	Interest rate paid	Interest rate received	Fair value	Notional amount	Interest rate paid	Interest rate received	Fair value
August 4, 2021	$ 10,300	1.12%	1.31%	$ 306	10,300	1.12%	2.29%	103
August 17, 2025	2,500	2.27%	1.31%	(15)	2,500	2.27%	2.12%	(108)
August 17, 2025	2,500	2.27%	1.31%	(15)
December 11, 2025	2,400	2.14%	1.32%	13
December 23, 2025	6,800	2.16%	1.33%	27	6,800	2.16%	2.16%	(262)
December 24, 2025	8,200	2.17%	1.33%	22	8,200	2.17%	2.13%	(325)
January 28, 2026	3,000	1.87%	1.31%	79	3,000	1.87%	2.26%	(65)
July 20, 2026	6,300	1.44%	1.31%	405	6,300	1.44%	2.28%	30
December 12, 2026	3,200	2.26%	1.31%	(2)	3,200	2.26%	2.13%	(163)
January 4, 2027	10,100	2.35%	1.30%	(79)
April 27, 2027	4,400	2.32%	1.32%	(19)
Total	$ 59,700			$ 722	$ 40,300			$ (790)

On November 29, 2012, the Company acquired certain software rights for approximately $1.8 million for use in managing prepaid cards in connection with an acquisition. The software is being amortized over eight years. Amortization expense is $217,000 per year ($~~610,000~~206,000 over the remainder of the amortization period). The gross carrying amount of the software is $1.8 million, and as of September 30, ~~2017,~~2019 and December 31, 2018, respectively, the accumulated amortization was ~~$1.3~~$1.6 million and $1.5 million.

The Company accounts for its prepaid card customer list in accordance with ASC 350, “Intangibles-Goodwill and Other”. The acquisition of the Stored Value Solutions division of Marshall Bank First in 2007 resulted in a customer list intangible of $12.0 million which is being amortized over a 12 year period. Amortization expense is $1.0 million per year ($~~2.3 million~~250,000 over the remainder of the amortization period). The gross carrying amount of the customer list intangible is $12.0 million, and as of September 30, ~~2017,~~2019 and December 31, 2018, the accumulated amortization was $~~9.8~~11.8 ~~million. For both 2017~~million and ~~2016, amortization expense for the first nine months was $750,000.~~$11.0 million.

In May 2016, the Company purchased approximately ~~$60~~$60.0 million of lease receivables which resulted in a customer list intangible of $3.4 million ~~which~~that is being amortized over a 10 year period. Amortization expense is $340,000 per year ($1.7 million over the next five years). The gross carrying amount of the customer list intangible is $3.4 million, and as of September 30, ~~2017,~~2019 and December 31, 2018, respectively, the accumulated amortization was ~~$471,000.~~$1.2 million and $908,000.

In May 2014, the FASB issued Accounting Standards Update (ASU) 2014-09, “Revenue from Contracts with Customers”. This ASU establishes a comprehensive revenue recognition standard for virtually all industries utilizing U.S. GAAP, including those that

previously followed industry-specific guidance such as the real estate and construction industries. The revenue standard’s core principle is built on the contract between a vendor and a customer for the provision of goods and services. It attempts to depict the exchange of rights and obligations between the parties in the pattern of revenue recognition based on the consideration to which the vendor is entitled. To accomplish this, the standard requires five basic steps: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) identify the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies the performance obligation. Three basic transition methods are available - full retrospective, retrospective with certain practical expedients, and a cumulative effect approach. We plan to adopt the standard using the cumulative effect approach. Under the cumulative effect alternative, an entity would apply the new revenue standard only to contracts that are incomplete under legacy U.S. GAAP at the date of initial application and recognize the cumulative effect of the new standard as an adjustment to the opening balance of retained earnings. The guidance in this ASU is effective for annual periods and interim reporting periods within those annual periods, beginning after December 15, 2017. Since the standard does not apply to revenue from loans, securities and other financial instruments, based on our evaluation to date, we do not expect the adoption of this standard to have a significant impact on our consolidated results of operations or our consolidated financial position. We are still evaluating the presentation of certain in-scope revenue on the income statement related to our payments business. We have commenced a contract review for those in-scope revenue streams. The Company’s contracts with its various third parties generally do not entail significant amounts of deferred revenues. Instead, services are performed monthly and amounts are billed either monthly or quarterly. Nonetheless, the Company is in process of conducting a review of its contracts and sources of income to ascertain that the standard will not have a material impact on the consolidated statement of operations or financial position. The review will include the non interest income producing categories of the Company which include prepaid cards, merchant acquiring, ACH, service fees on deposit accounts, gains and losses on other real estate owned, gains and losses on the sale of loans and other categories.

In August 2014, the FASB issued ASU 2014-14, “Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40): Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure”. The guidance in this ASU affects creditors that hold government-guaranteed mortgage loans, including those guaranteed by the Federal Home Administration (FHA) and the Veterans Administration (VA). It requires that a mortgage loan be derecognized and a separate other receivable be recognized upon foreclosure if the following conditions are met:

~~This standard did not have a significant impact on our consolidated results of operations or our consolidated financial position.~~

~~In January 2016, the FASB issued ASU 2016-11, “Financial Instruments-Overall (Subtopic 825-10) Recognition and Measurement of Financial Assets and Financial Liabilities”~~. This ASU revises an entity’s accounting related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. ~~The Company is currently assessing the impact that the adoption of this standard will have on the financial condition and results of operations of the Company.~~

In February 2016, the FASB issued ASU 2016-02, “Leases”. The FASB issued this ASU to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet by lessees for those leases classified as operating leases under current U.S. GAAP and disclosing key information about leasing arrangements. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018. ~~Early~~The Company adopted this guidance on its effective date using a modified retrospective transition approach, applying the new standard to all leases existing at the date of initial application, January 1, 2019. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019.

The new standard provides a number of optional practical expedients in transition. The Company has elected the practical expedients option which does not require reassessment of its prior conclusions about lease identification, lease classification and initial direct costs. The Company has not elected the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to it.

The effect of this ~~ASU is permitted~~adoption was the recognition at January 1, 2019 of a $16.4 million operating lease right-of-use (ROU) asset, which has been adjusted for ~~all entities.~~previously recorded accrued rent of $1.7 million, and an $18.1 million operating lease obligation. No opening retained earnings adjustments are necessary under the modified retrospective transition approach. The ~~Company is currently assessing the impact that the~~ adoption of this ~~standard will~~guidance did not have an impact on the ~~financial condition and~~consolidated results of operations of the Company.

The ASU also includes disclosure requirements for lessors which encompass the Company’s direct financing leases. The first disclosure requirement is to discuss significant shifts, if any, in the balance of unguaranteed residual assets and deferred selling profit on direct financing leases. The Company’s direct financing lease portfolio consists primarily of vehicles which are sold at the end of lease terms. The Company does not hold title to the vehicles prior to inception of the lease and, thus, selling profit is not expected or deferred. However, sales of the vehicles may result in income when sales prices exceed residual values. This income is reported in the consolidated statements of operations under non-interest income. Since the majority of the portfolio is comprised of vehicle leases, sales prices may differ from residual values as a result of changes in the used vehicle market for both commercial vehicles such as trucks or passenger vehicles.

Additionally, the Company is required to disclose the scheduled maturities of its direct financing leases reconciled to the total lease receivables in the consolidated balance sheet, which are as follows (in thousands):

In ~~March~~June 2016, the FASB issued ~~ASU 2016-09, “Compensation-Stock Compensation: Improvements to Employee Share-Based Payment Accounting”.~~ This ASU simplifies several areas of accounting for share based payment award transactions, including the income tax consequences, classification of awards as either equity or liabilities, and the classification on the statement of cash flows. For public companies, this is effective for annual periods beginning after December 15, 2016, and the interim periods within those annual periods. The Company adopted the guidance in the first quarter of 2017, and the adoption did not have a material impact on first quarter results.

~~In September 2016, the FASB issued~~an update ASU 2016-13 – “Financial Instruments – Credit Losses (Topic 326):Measurement of Credit Losses on Financial ~~Instruments-Update”~~Instruments”. The Update changes the accounting for credit losses on loans and debt securities. For loans and held-to-maturity debt securities, the Update requires ana current expected credit loss ~~model~~(CECL) approach to determine the allowance for credit losses. ~~The expected credit~~CECL requires loss ~~model~~ estimates ~~losses~~ for the remaining estimated life of the financial ~~asset. Expected credit losses reflect losses over the remaining contractual life of an~~ asset ~~considering the effect of voluntary prepayments and considering available information about the collectability~~

~~of cash flows, including information about past events,~~using historical experience, current conditions, and reasonable and supportable forecasts. ~~The resulting~~Also, the Update eliminates the existing guidance for purchased credit impaired loans, but requires an allowance for ~~credit losses reflects the portion of the amortized cost basis that the entity does not expect to collect. Additional quantitative and qualitative disclosures are required upon adoption.~~ purchased financial assets with more than insignificant deterioration since origination. In addition, the Update modifies the ~~other-than-temporary~~OTTI impairment model for available-for-sale debt securities to require an allowance for credit impairment instead of a direct write-down, which allows for reversal of credit impairments in future ~~periods.~~periods based on improvements in credit. The guidance is effective in the first quarter of 2020 with a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. ~~Early adoption is permitted beginning in the first quarter of 2019.~~ The Company is evaluating the impact of the Update ~~will have~~ on the consolidated financial statements. The Company’s implementation team includes loan review, finance, representatives of the lending department and a third-party advisor. The Company’s third-party advisor is in the process of analyzing additional Company-specific historical information. After the Company has analyzed all available information, it will finalize its determination of the most appropriate CECL methodology. The Company expects to run its processes and controls for estimating expected credit losses parallel to its provisions for loan losses prior to implementation to ensure it

has established sufficient and appropriate processes and controls for estimating expected credit losses. The Company expects the Update will result in an increase in the allowance for credit losses given the change to estimated losses over the contractual life adjusted for expected prepayments, as well as the addition of an allowance for debt securities. The amount of the increase will be impacted by the portfolio composition and credit quality at the adoption date as well as economic conditions and forecasts at that time.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820) Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” which eliminates certain fair value disclosures, adds new disclosures and amends another disclosure applicable to the Company as follows. The amendment states that disclosure of measurement uncertainty of the fair values to changes in inputs will be required for the reporting date and not future dates. New fair value disclosures consist of disclosure of: a) total gains and losses in OCI from fair value changes in Level 3 assets and liabilities that are held on the balance sheet date; b) the range and weighted average of inputs and how the weighted average was calculated and c) if weighted average is not meaningful, other quantitative information that better reflects the distribution of inputs. ASU 2018-13 is effective for annual periods beginning after December 15, 2019.

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

Various federal and state statutory provisions limit the amount of dividends that subsidiary banks can pay to their holding companies without regulatory approval. Under Delaware banking law, the Bank’s directors may declare dividends on common or preferred stock of so much of its net profits as they judge expedient, but the Bank must, before the declaration of a dividend on common stock from net profits, carry 50% of its net profits from the preceding period for which the dividend is paid to its surplus fund until its surplus fund amounts to 50% of its capital stock and thereafter must carry 25% of its net profits for the preceding period for which the dividend is paid to its surplus fund until its surplus fund amounts to 100% of its capital stock.

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. In August 2015, the Bank entered into an Amendment to a 2014 Consent Order with the FDIC pursuant to which the Bank may not pay dividends without prior FDIC approval. On May 11, 2015, the Company ~~had~~ received a Supervisory Letter pursuant to which the Company may not pay dividends without prior Federal Reserve approval. The Federal Reserve approved the payment of the interest on the Company’s trust preferred securities which ~~were~~was due ~~September~~June 15, ~~2017.~~2019. Future payments are subject to future approval by the Federal Reserve.

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~~.

The Company received a subpoena from the SEC, dated March 22, 2016, relating to an investigation by the SEC of the Company's restatement of its financial statements for the years ended December 31, 2010 through December 31, 2013 and the interim periods ended March 31, 2014, ~~September~~June 30, 2014 and September 30, 2014, which restatement was filed with the SEC on September 28, 2015, and the facts and circumstances underlying the restatement. The Company ~~is cooperating~~cooperated fully with the SEC's investigation. ~~The costs to respond to~~As previously reported in an 8-K dated September 20, 2019, the ~~subpoena and cooperate with the SEC's investigation have been material, and we expect such costs to continue to be material at least through the completion~~Company agreed, without admitting or denying any of the SEC’s ~~investigation.~~allegations, to resolve the investigation by consenting to the entry of an order by the SEC that: (1) the Company will cease and desist from committing or causing any violations of the books-and-records provisions of the Securities Exchange Act and the relevant rules thereunder; and (2) the Company will pay a penalty of $1.4 million (the “Settlement Payment”) to the SEC. Settlement of this matter was effective on September 20, 2019. The Company recognized a charge in its third fiscal quarter in the amount of the Settlement Payment. Further, as a result of the settlement certain costs to the Company related to the investigation will cease, including the legal costs of the investigation, compliance with the SEC’s subpoena, and cooperation with the SEC.

On ~~September 30, 2016, the Company received written notice from the Internal Revenue Service that it will be conducting an audit~~July 16, 2018, certain investors in a hotel project of one of the ~~Company's tax returns~~Bank’s former borrowers, 550 Seabreeze Development LLC (“Seabreeze Development”), filed an adversary action against the Bank and others in the United States Bankruptcy Court of the Southern

District of Florida. The note for the ~~tax years 2012, 2013~~related loan was sold in the second quarter of 2018 and ~~2014.~~the loan is no longer on the Bank’s books. The ~~audit~~adversary action was filed within the context of a Chapter 11 bankruptcy proceeding in which Seabreeze Development is the debtor, and alleged that the Bank and others defrauded the plaintiffs into investing a total of $10.5 million in ~~process.~~the project. Three causes of actions were asserted against the Bank: (i) fraud in the inducement; (ii) civil conspiracy; and (iii) aiding and abetting fraud. The Bank believed the claims were without merit and vigorously defended against them. On November 1, 2018, the bankruptcy court entered an order dismissing the claims against the Bank for lack of jurisdiction. The order further stated that the dismissal was without prejudice, and that the plaintiffs may file their causes of action in an appropriate forum. On February 7, 2019, certain investors filed a new action in the Circuit Court of the 11th Judicial Circuit in and for Miami-Dade Country, Florida, asserting: (i) fraudulent misrepresentation; (ii) negligent misrepresentation; (iii) aiding and abetting fraud; and (iv) civil conspiracy. Three additional investors were included as plaintiffs in the matter, increasing the total amount at issue to $12 million. The Bank filed a motion to dismiss the state court action as to the Bank and on October 16, 2019, the state court granted the Bank’s motion and dismissed the plaintiffs’ claims against the Bank without prejudice.

~~The Company received~~On June 12, 2019, the Bank was served with a letter dated August 1, 2016, demanding inspection of its books and records pursuant to Section 220 of the Delaware General Corporation Law, or DCGL, from legal counsel representing a shareholder (the "Demand Letter"). The Company, through outside legal counsel, responded to the Demand Letter by permitting the shareholder to inspect certain of the Company’s books and records and by objecting to other requests. On January 30, 2017, the shareholderqui tam lawsuit filed ~~a complaint~~ in the Superior Court ~~of Chancery~~ of the State of Delaware, ~~seeking an order from the court, pursuant to Section 220~~New Castle County. The Delaware Department of the DGCL, compelling the Company to permit the shareholder to inspect additional books and records of the Company. The Company believes that its original response to the Demand Letter was appropriate in all respects and continues to defend against the complaint. On July 27, 2017, the Court of Chancery ruled in favor of the Company and granted an Order of Final Judgment Denying Plaintiff’s Demand To Inspect The Books And Records of Defendant. The court’s Order was subject to an appeal right which has now expired; no appeal was filed. Both the Demand Letter and the complaint threaten the commencement of a shareholder’s derivative suit against certain officers and directors of the Company

~~seeking damages and other remedies on behalf of the Company. We have been advised by our counsel~~Justice intervened in the ~~matter that reasonably possible losses cannot be estimated, but we and our counsel continue to believe the claim~~litigation. The case is ~~without merit.~~

~~On October 17, 2017, the Federal Deposit Insurance Corporation (the “FDIC”) informed~~titled The State of Delaware, Plaintiff, Ex rel. Russell S. Rogers, Plaintiff-Relator, v. The Bancorp Bank, ~~(the “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 denies the allegations and is defending itself. The Bank filed a ~~wholly owned subsidiary of The Bancorp, Inc. (the “Company”), that it intends~~motion to ~~pursue an Order For Restitution (“Restitution Order”)~~dismiss the action and ~~Order~~the matter is pending before the court. At this time, the Company is unable to ~~Pay Civil Money Penalty (“CMP Order”) in an amount up to $2,576,000. The FDIC’s action principally emanates from one~~determine whether the ultimate resolution of the Bank’s third-party payment processors (“Third Party Processor”) suffering an internal system programming glitch. This inadvertently resulted in consumers that engaged in signature-based point of sale transactions during the period from December 2010 to November 2014 being chargedmatter will have a greater fee than what was disclosed by the Bank. Impacted consumers are being reimbursed by the Third Party Processor at its own expense. The Restitution Order would require the Bank to make such reimbursements if not otherwise made by the Third Party Processor, however, the Bank is indemnified by the Third Party Processor for such reimbursements. Although the Bank is still evaluating its position with regard to the Restitution Order and the CMP Order, the Company accrued $2,500,000 of related expense in itsmaterial adverse effect on our financial ~~statements for the quarter ended September 30, 2017 in connection with the CMP Order. Any amounts owed from the CMP Order would not be subject to any indemnification~~condition or ~~recovery from any third party.~~

The independent investor in Walnut Street, the securitization into which the Bank sold certain loans when it discontinued its Philadelphia commercial loan operations, has taken actions which may result in litigation. Specifically, counsel for the independent investor has requested that the Note Administrator hold monthly distribution payments in escrow until the independent investor’s alternative interpretation of the order of payments, as compared to the interpretation of the Bank and the Note Administrator, is resolved. Based on the independent investor’s request, the Note Administrator withheld the September 2017 payment to the independent investor and the Bank and indicated that it would continue to do so until this issue was resolved. Management of the Company, based on advice of its counsel, believes it is unlikely that the Bank and Note Administrator’s interpretation will be overturned. However, if such interpretation is overturned, based upon the current model used to value Walnut Street, an estimated $8 million loss may be recognized, based on currently estimated cash flows which would be redirected from the Bank to the independent investor.operations.

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

The Company performed a strategic evaluation of its businesses in the third quarter of 2014. As a result of the evaluation, the Company decided to discontinue its commercial lending operations, as described in Note 15, Discontinued Operations. The shift from a traditional bank balance sheet led the Company to evaluate its continuing operations. Based on the continuing operations of the Company, it was determined that there would be four segments of the business: specialty finance, payments, corporate and discontinued operations. The chief decision maker for these segments is the Chief Executive Officer. Specialty finance includes commercial loan sales and securitization, SBA loans, ~~leasing~~direct lease financing and ~~SBLOCs~~security-backed lines of credit, cash value insurance policy-backed lines of credit and ~~any~~ deposits generated by those business lines. Payments include prepaid ~~cards, merchant~~card accounts, card payments, ACH processing and ~~affinity accounts.~~deposits generated by those business lines. Corporate includes the Company’s investment portfolio, corporate overhead and ~~other~~ non-allocated expenses. Investment income is ~~allocated~~reallocated to the payments segment. These operating segments reflect the way the Company views its current operations.



	For the nine months ended September 30, 2017					For the three months ended September 30, 2019
	Specialty finance	Payments	Corporate	Discontinued operations	Total	Specialty finance	Payments	Corporate	Discontinued operations	Total
	(in thousands)					(in thousands)
Interest income	$ 59,861	$ -	$ 31,315	$ -	$ 91,176	$ 35,210	$ -	$ 13,165	$ -	$ 48,375
Interest allocation	-	31,315	(31,315)	-	-	-	13,165	(13,165)	-	-
Interest expense	2,627	7,567	989	-	11,183	353	7,236	3,226	-	10,815
Net interest income	57,234	23,748	(989)	-	79,993
Provision	2,150	-	-	-	2,150
Net interest income (loss)						34,857	5,929	(3,226)	-	37,560
Provision for loan and lease losses						650	-	-	-	650
Non-interest income	24,507	45,625	1,267	-	71,399	14,719	18,767	29	-	33,515
Non-interest expense	42,251	54,829	21,949	-	119,029	15,791	16,289	9,971	-	42,051
Income (loss) from continuing operations before taxes	37,340	14,544	(21,671)	-	30,213	33,135	8,407	(13,168)	-	28,374
Income tax benefit	-	-	(457)	-	(457)
Income tax expense						-	-	7,975	-	7,975
Income (loss) from continuing operations	37,340	14,544	(21,214)	-	30,670	33,135	8,407	(21,143)	-	20,399
Income from discontinued operations	-	-	-	3,438	3,438	-	-	-	26	26
Net income (loss)	$ 37,340	$ 14,544	$ (21,214)	$ 3,438	$ 34,108	$ 33,135	$ 8,407	$ (21,143)	$ 26	$ 20,425



	For the nine months ended September 30, 2016						For the three months ended September 30, 2018
	Specialty finance		Payments	Corporate	Discontinued operations	Total	Specialty finance	Payments	Corporate	Discontinued operations	Total
	(in thousands)						(in thousands)
Interest income	$ 48,712		$ 2	$ 25,613	$ -	$ 74,327	$ 24,957	$ -	$ 13,699	$ -	$ 38,656
Interest allocation	-		25,613	(25,613)	-	-	-	13,699	(13,699)	-	-
Interest expense	2,139		5,779	1,421	-	9,339	1,760	5,723	541	-	8,024
Net interest income	46,573		19,836	(1,421)	-	64,988
Provision	1,810		-	-	-	1,810
Net interest income (loss)							23,197	7,976	(541)	-	30,632
Provision for loan and lease losses							1,060	-	-	-	1,060
Non-interest income	(6,787)	*	48,245	6,674	-	48,132	75,282	15,639	49	-	90,970
Non-interest expense	47,828		96,376	12,241	-	156,445	14,462	15,720	7,117	-	37,299
Loss from continuing operations before taxes	(9,852)		(28,295)	(6,988)	-	(45,135)
Income tax benefit	-		-	(15,324)	-	(15,324)
Income (loss) from continuing operations before taxes							82,957	7,895	(7,609)	-	83,243
Income tax expense							-	-	21,942	-	21,942
Income (loss) from continuing operations	(9,852)		(28,295)	8,336	-	(29,811)	82,957	7,895	(29,551)	-	61,301
Loss from discontinued operations	-		-	-	(37,909)	(37,909)	-	-	-	(24)	(24)
Net income (loss)	$ (9,852)		$ (28,295)	$ 8,336	$ (37,909)	$ (67,720)	$ 82,957	$ 7,895	$ (29,551)	$ (24)	$ 61,277
* Reflects writedown of investment in unconsolidated entity

September 30, 2017

Specialty finance

Payments

Corporate

Discontinued operations

Total

(in thousands)
Total assets

$        1,818,646

$             38,155

$        1,821,823

$           314,994

$        3,993,618
Total liabilities

$           645,265

$        2,702,958

$           305,934

$                       -

$        3,654,157



	For the nine months ended September 30, 2019
	Specialty finance	Payments	Corporate	Discontinued operations	Total
	(in thousands)
Interest income	$ 95,573	$ -	$ 40,460	$ -	$ 136,033
Interest allocation	-	40,460	(40,460)	-	-
Interest expense	1,087	23,947	4,890	-	29,924
Net interest income (loss)	94,486	16,513	(4,890)	-	106,109
Provision for loan and lease losses	2,950	-	-	-	2,950
Non-interest income	27,794	55,733	102	-	83,629
Non-interest expense	47,196	50,211	23,392	-	120,799
Income (loss) from continuing operations before taxes	72,134	22,035	(28,180)	-	65,989
Income tax expense	-	-	17,585	-	17,585
Income (loss) from continuing operations	72,134	22,035	(45,765)	-	48,404
Income from discontinued operations	-	-	-	1,301	1,301
Net income (loss)	$ 72,134	$ 22,035	$ (45,765)	$ 1,301	$ 49,705



	December 31, 2016					December 31, 2018
	Specialty finance	Payments	Corporate	Discontinued operations	Total	Specialty finance	Payments	Corporate	Discontinued operations	Total
	(in thousands)					(in thousands)
Total assets	$ 2,019,180	$ 27,935	$ 2,450,288	$ 360,711	$ 4,858,114	$ 2,181,499	$ 43,737	$ 2,014,844	$ 197,831	$ 4,437,911
Total liabilities	$ 596,574	$ 3,401,142	$ 561,435	$ -	$ 4,559,151	$ 281,326	$ 3,545,877	$ 203,932	$ -	$ 4,031,135

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 loans which constitute the commercial loan portfolio are in the process of ~~disposition.~~disposition including transfers to other financial institutions. As such, financial results of the commercial lending operations are presented as separate from continuing operations on the consolidated statements of operations and assets of the commercial lending operations to be disposed are presented as assets ~~held for sale~~held-for-sale on the consolidated balance sheets.

The following table presents financial results of the commercial lending business included in net income (loss) from discontinued operations for the three ~~months~~ and nine months ended September 30, ~~2017~~2019 and ~~2016~~2018 (in thousands).

For the three months ended September 30,

For the nine months ended September 30,

2017

2016

2017

2016
Interest income
$                             3,098

$                            3,891

$                             9,594

$                          15,037
Interest expense
-

-

-

-
Provision for loan and lease losses
-

-

-

-
Net interest income after provision
3,098

3,891

9,594

15,037

Non interest income
549

575

1,001

678
Non interest expense
2,818

25,956

5,107

53,788

Income (loss) before taxes
829

(21,490)

5,488

(38,073)
Income tax (benefit) provision
318

2,531

2,050

(164)
Net income (loss)
$                               511

$                        (24,021)

$                             3,438

$                        (37,909)



	For the three months ended September 30,		For the nine months ended September 30,
	2019	2018	2019	2018
Interest income	$ 1,609	$ 2,295	$ 5,293	$ 6,888
Interest expense	-	-	-	-
Net interest income	1,609	2,295	5,293	6,888

Non-interest income	9	14	33	883
Non-interest expense	1,467	2,679	3,451	8,035

Income (loss) before taxes	151	(370)	1,875	(264)
Income tax expense (benefit)	125	(346)	574	(345)
Net income (loss)	$ 26	$ (24)	$ 1,301	$ 81

~~The Company utilizes~~Non-interest expense included fair value adjustments of $0 for the three and nine months ended September 30, 2019 and $427,000 and $1.4 million, respectively, for the three and nine months ended September 30, 2018. Discontinued operations loans are recorded at the lower of their cost or ~~market valuations for~~fair value. Fair value is determined using a discontinued ~~operations loans which~~cash flow analysis where projections of cash flows are ~~updated based on internal loan officers’ information, third party consultant information,~~developed in consideration of internal loan review analysis and ~~third party review~~default/prepayment assumptions for smaller pools of ~~impairments. Based on that review, weighted average fair values were applied~~loans. These credit and collateral related assumptions are subject to ~~the loans not specifically reviewed.~~uncertainty. The results of discontinued operations do not include any future severance payments. Of the approximately $1.1 billion in book value of loans in that portfolio as of the September 30, 2014 date of discontinuance of operations, ~~$315.0~~$162.1 million of loans and other real estate owned remain in assets ~~held for sale~~held-for-sale on the September 30, 2019 consolidated balance sheet as a result of loan sales, principal paydowns and fair value ~~charges.~~charges as of September 30, 2019. The Company is attempting to ~~sell~~dispose of those remaining ~~loans.~~ loans and other real estate owned.

Additionally, the consolidated balance sheet reflects ~~$107.7~~$49.4 million in investment in unconsolidated entity, which is comprised of notes owned by the Company as a result of the sale of certain discontinued loans to Walnut Street, see Note 8, Fair Value Measurements. The investment in Walnut Street is classified as continuing operations in the accompanying consolidated financial statements.

The Company evaluated its September 30, ~~2017~~2019 consolidated financial statements for subsequent events through the date the consolidated financial statements were issued. The Company is not aware of any subsequent events which would require recognition or disclosure in the financial statements, not otherwise disclosed herein.

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

When used in this Form 10-Q, the words “believes”, “anticipates”, “expects” and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties more particularly described in Item 1A, under the caption “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2018 and in other of our public filings with the Securities and Exchange Commission. These risks and uncertainties could cause actual results to differ materially from those expressed or implied in this Form 10-Q. We caution readers not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances after the date of this report except as required by applicable law.

In the following discussion we provide information about our results of operations, financial condition, liquidity and asset quality. We intend that this information facilitate your understanding and assessment of significant changes and trends related to our financial condition and results of operations. You should read this section in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018.

We are a Delaware financial holding company and our primary subsidiary, which we wholly ~~owned,~~own, is The Bancorp Bank, which we refer to as the Bank. The vast majority of our revenue and income is currently generated through the Bank. In our continuing ~~lending~~ operations, we have four primary lines of specialty lending: securities-backed lines of credit ~~or SBLOC, automobile fleet~~(SBLOC) and ~~other equipment~~insurance policy cash value-backed lines of credit (IBLOC), leasing (direct lease financing), Small Business Administration ~~or SBA, and~~(SBA) loans, and loans generated for sale into capital markets primarily through commercial loan securitizations ~~or CMBS.~~(CMBS). SBLOCs and IBLOCs are loans which are generated through institutional banking affinity groups and are respectively collateralized by marketable ~~securities.~~securities and the cash value of insurance policies. SBLOCs are typically offered in conjunction with brokerage accounts and are offered nationally. ~~Automobile~~Vehicle fleet and other equipment leases are generated in a number of Atlantic ~~coast~~Coast and other states. SBA loans and commercial loans generated for sale ~~into CMBS capital markets~~ are made nationally.

InThe majority of our deposit accounts and non-interest income are generated in our payments business line which consists of consumer deposit accounts accessed by prepaid or debit cards, or issuing, automated clearing house, or ACH accounts and the collection of payments through credit card companies on behalf of merchants. The issuing deposit accounts are comprised of debit and prepaid card accounts that are generated with the assistance of independent companies that market directly to end users. Our issuing deposit account types are diverse and include: consumer and business debit, general purpose reloadable prepaid, pre-tax medical spending benefit, payroll, gift, government, corporate incentive, reward, business payment accounts and others. Our ACH accounts facilitate payments such as payroll and 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. We also provide banking ~~operations, we focus on providing our~~ services ~~on a national basis~~ to organizations with a pre-existing customer base ~~who can use one or more selected banking services~~ tailored to support or complement the services provided by these organizations to their customers. These services include ~~private label banking; credit~~loan and ~~debit card processing~~deposit accounts for ~~merchants affiliated with independent service organizations; and prepaid cards, also known as stored value cards, for insurers, incentive plans, large retail chains and consumer service organizations.~~investment advisory companies through our institutional banking department. We typically provide these services under the name and through the facilities of each organization with whom we develop a relationship. We refer to this, generally, as affinity ~~group~~ banking. ~~Our private label banking, merchant processing and prepaid card programs are a source of fee income and low-cost deposits.~~

In the third quarter of 2014, we decided to discontinue our Philadelphia-based commercial lending operations. The loans which constitute that portfolio are in the process of disposition. This represents a strategic shift to a focus on our national specialty lending programs, including small fleet leasing, SBLOC, CMBS origination and SBA lending. We have been and anticipate using the proceeds from disposition to acquire investment securities and to provide liquidity to fund growth in our continuing specialty lending lines. Yields we obtain from reinvestment of the proceeds will be subject to economic and other conditions at the time of reinvestment, including market interest rates, many of which will be beyond our control. We cannot predict whether income resulting from the reinvestment of loans we hold for sale resulting from discontinued operations will match or exceed the amount from the sold loans. Of the approximate $1.1 billion in book value of loans in that commercial and residential portfolio as of the September 30, 2014 date of discontinuance of operations, ~~$315.0~~$162.1 million of loans and other real estate owned remain in assets ~~held for sale~~held-for-sale from discontinued operations on the September 30, 2019 balance sheet, which reflects the impact of related sales, paydowns and fair value charges. Additionally, ~~the~~that balance sheet reflects ~~$107.7~~$49.4 million in investment in unconsolidated entity, Walnut Street, which is comprised of notes owned by the Company as a result of the sale of certain discontinued loans. In

Net income of $20.4 million for the third quarter of 2019 compared to $61.3 for the ~~independent investor in Walnut Street took actions which may~~third quarter of 2018, primarily as a result ~~in litigation which may result in financial loss to~~of the ~~Bank, although~~$65.0 million gain on sale of our IRA portfolio in the ~~opinion~~third quarter of ~~counsel that is unlikely (see note 13 to the financial statements).~~

The results of the first nine months of 2017 reflected a return to profitability, consistent with our business plan and budget. The improvement reflected revenue growth, expense reductions, the conclusion of BSA lookback expense in 2016 and credit related charges in discontinued operations in 2016. Year to date net income for 2017 was $34.1 million.2018. Continuing growth in net interest income, ~~resulted~~which increased $6.9 million, reflected a $6.4 million increase in interest on commercial real estate loans originated for securitization. Related average balances increased 147% to $770.5 million between these periods. Net interest income also reflected increases of $1.7 million for SBLOC and IBLOC and $1.8 million for SBA interest. SBLOC and IBLOC loans comprise our largest loan portfolio and totaled $920.5 million at September 30, 2019, compared to $837.7 million at June 30, 2019, reflecting 9.9% quarterly growth as origination volume

increased. Over the same period, leases increased to $412.8 million from ~~loan~~$407.9 million, reflecting 1.2% quarterly growth. The accelerated third quarter 2019 growth ~~including SBLOC balances~~in these categories reflected progress toward our 2019 strategic plan, which ~~grew 16% year over year with leasing and~~included growth strategies unique to each of those portfolios. Similarly, SBA ~~balances each growing 11% year over year. In addition~~loans during the quarter increased to $559.4 million from $516.6 million, reflecting 8.3% quarterly growth. The increases in interest income also reflected the impact of ~~loan growth,~~2018 Federal Reserve rate increases which exceeded reductions which occurred in the third quarter of 2019. While also ~~resulted in higher interest income, while~~reflecting the impact of Federal Reserve rate increases, interest expense increased to a significantly lesser ~~extent.~~extent, resulting in the increase in net interest income. The Bank’s largest funding source, prepaid and debit card ~~deposits,~~accounts, contractually adjust to only a ~~fraction~~portion of increases or decreases in market rates. ~~Expense reductions also~~Commercial real estate loan originations were increased compared to comparable prior year periods, which resulted in their higher average balances and resulting higher interest income. While semi-annual gains on sales into securitizations, including a September 2019 gain of $13.7 million, have contributed to ~~the first nine months of 2017 earnings,~~non-interest income, prepaid and ~~non-interest expense was $8.3 million less than the first nine months of 2016, excluding Bank Secrecy Act lookback expenses. Additional expense reductions are being pursued~~debit card and may impact future periods; however, timing of such expense reductions is difficult to project. In the third quarter of 2017, the FDIC notified the Bank that it intended to pursue a civil money penalty to be paid by the Bank. While the

~~Bank is still evaluating its position with respect to the penalty, $2.5 million of expense was accrued in the third quarter (see note 13 to the financial statements). Prepaid~~related fees and ACH, card and other payment processing fees are the largest ~~driver~~drivers of non-interest income. ~~Fees~~Such fees for third quarter 2019 increased 20.9% over the comparable 2018 period and totaled $18.7 million. For those periods, non-interest expense increased 12.7% Excluding a $1.4 million SEC settlement in the first nine months of 2017 were comparable to the first nine months of 2016 reflecting the exit of a client which changed ownership and the termination of several programs whose sponsors decided to exit prepaid cards. Those volumes were partially offset by organic growth in other programs. A decrease in assets from $4.2 billionthird quarter 2019, non-interest expense increased 9.0%. The holding company leverage ratio was 9.53% at September 30, ~~2016 to $4.0 billion at September 30, 2017 reflected the exit of less profitable deposit relationships.~~2019.

Our accounting and reporting policies conform with accounting principles generally accepted in the United States and general practices within the financial services industry. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates. We believe that the determination of our allowance for loan and lease losses, our determination of the fair value of financial instruments and the level in which an instrument is placed within the valuation hierarchy, our determination of ~~other than temporary~~other-than-temporary impairment, and income taxes involve a higher degree of judgment and complexity than our other significant accounting policies.

We determine our allowance for loan and lease losses with the objective of maintaining a reserve level we believe to be sufficient to absorb our estimated probable credit losses. We base our determination of the adequacy of the allowance on periodic evaluations of our loan portfolio and other relevant factors. However, this evaluation is inherently subjective as it requires material estimates, including, among others, expected default probabilities, the amount of loss we may incur on a defaulted loan, expected commitment usage, the amounts and timing of expected future cash flows on impaired loans, value of collateral, estimated losses on consumer loans and residential mortgages, and general amounts for historical loss experience. We also evaluate economic conditions and uncertainties in estimating losses and inherent risks in our loan portfolio. To the extent actual outcomes differ from our estimates, we may need additional provisions for loan losses. Any such additional provisions for loan losses will be a direct charge to our earnings. See “Allowance for Loan and Lease Losses”.

The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. We estimate the fair value of a financial instrument using a variety of valuation methods. Where financial instruments are actively traded and have quoted market prices, quoted market prices are used for fair value. When the financial instruments are not actively traded, other observable market inputs, such as quoted prices of securities with similar characteristics, may be used, if available, to determine fair value. When observable market prices do not exist, we estimate fair value. Our valuation methods and inputs consider factors such as types of underlying assets or liabilities, rates of estimated credit losses, interest rate or discount rate and collateral. Our best estimate of fair value involves assumptions including, but not limited to, various performance indicators, such as historical and projected default and recovery rates, credit ratings, current delinquency rates, loan-to-value ratios and the possibility of obligor refinancing.

At the end of each quarter, we assess the valuation hierarchy for each asset or liability measured. From time to time, assets or liabilities may be transferred within hierarchy levels due to changes in availability of observable market inputs to measure fair value at the measurement date. Transfers into or out of hierarchy levels are based upon the fair value at the beginning of the reporting period.

We periodically review our investment portfolio to determine whether unrealized losses on securities are temporary, based on evaluations of the creditworthiness of the issuers or guarantors, and underlying collateral, as applicable. In addition, we consider the continuing performance of the securities. We recognize credit losses through the ~~income statement.~~Consolidated Statements of Operations. If management believes market value losses are temporary and that we have the ability and intention to hold those securities to maturity, we recognize the reduction in other comprehensive income, through equity. We evaluate whether an other-than-temporary impairment exists by considering primarily the following factors: (a) the length of time and extent to which the fair value has been 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. If other-than-temporary impairment is determined, we estimate expected future cash flows to determine the credit loss amount with a quantitative and qualitative process that incorporates information received from third-party sources and internal assumptions and judgments regarding the future performance of the security.

We account for our stock-based compensation plans based on the fair value of the awards made, which include stock options, restricted stock, and performance based shares. To assess the fair value of the awards made, management makes assumptions as to expected stock price volatility, option terms, forfeiture rates and dividend rates. All of these estimates and assumptions may be susceptible to significant change that may impact earnings in future periods.

We account for income taxes under the liability method whereby we determine deferred tax assets and liabilities based on the difference between the carrying values on our consolidated financial statements and the tax basis of assets and liabilities 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. ~~We currently use the tax expenses as calculated on year-to-date numbers, since small changes in annual estimates would have a significant change in the annual effective rate.~~

We have adjusted our financial statement presentation for items related to discontinued operations. Separately, we have restated our financial statements for periods from 2010 through September 30, 2014, the last date through which financial statements previously had been filed prior to our ~~2015~~ filing of our Annual Report on Form 10-K for the year ended December 31, ~~2014.~~2014 in September 2015. The restatement reflected the recognition of provisions for loan losses and loan charge-offs for discontinued operations in periods earlier than those in which those charges were initially recognized. The majority of these loan charges were originally recognized in 2014, primarily in the third quarter, when commercial lending operations were discontinued. ~~An additional $28.5 million of discontinued operations losses that were not~~

In connection with the financial restatement discussed above and, as previously reported, ~~were included within these periods. Also, $12.7~~we received a subpoena from the Securities and Exchange Commission (“SEC”), dated March 22, 2016. Throughout the investigation, we cooperated with the SEC. We have now agreed, without admitting or denying any of the SEC’s allegations, to resolve the investigation by consenting to the entry of an order by the SEC that: (1) We will cease and desist from committing or causing any violations of the books-and-records provisions of the Securities Exchange Act and the relevant rules thereunder; and (2) We have paid a penalty of $1.4 million (the “Settlement Payment”) to the SEC. Settlement of ~~losses incurred~~this matter was effective on September 20, 2019 and we recognized a charge in ~~2015 related to loans that were resolved~~

before the issuance date of our financial statements and were reflected in our 2014 financial statements. Substantially all of the losses and corresponding restatement adjustments resulted from the discontinued commercial loan operations.Regulatory Actions

The Bank ~~has~~ entered into a Stipulation and Consent to the Issuance of a Consent Order with the FDIC effective August 7, 2012, which we refer to as the 2012 Consent Order. The Bank took this action without admitting or denying any charges of unsafe or unsound banking practices or violations of law or regulation. Under the 2012 Consent Order, the Bank agreed to increase its supervision of third-party relationships, develop new written compliance and related internal audit compliance programs, develop a new third-party risk management program and screen new third-party relationships as provided in the Consent Order. As part of the Consent Order, the Bank agreed to pay a civil money penalty in the amount of $172,000, which was paid in 2012. The 2012 Consent Order was amended and restated in 2015 as noted below.

On June 5, 2014, the Bank entered into a Stipulation and Consent to the Issuance of a Consent Order with the ~~Federal Deposit Insurance Corporation, or~~ FDIC, which ~~became effective on September 5, 2014.~~we refer to as the 2014 Consent Order. The Bank took this action without admitting or denying any charges of unsafe or unsound banking practices or violations of law or regulation relating to the Bank’s Bank Secrecy Act, or BSA, compliance program.

The 2014 Consent Order ~~requires~~required the Bank to take certain affirmative actions to comply with its BSA ~~obligations, among them: appoint a qualified BSA/OFAC (Office~~obligations. Satisfaction of Foreign Assets Control) officer; revise the written BSA Compliance Program; develop and implement additional policies and procedures for suspicious activity monitoring and reporting; review and enhance customer due diligence and risk assessment processes; review past account activity to determine whether suspicious activity was properly identified and reported; strengthen internal controls, including augmenting oversight by the Bank’s Board of Directors of BSA activities; establish an independent testing program; and develop policies and procedures to govern staffing and training for BSA compliance.

~~To date, the Bank has implemented multiple upgrades that address~~ the requirements of the 2014 Consent Order ~~such as appointing a qualified BSA/OFAC officer, increasing oversight and staffing~~is subject to the review of the FDIC and the Delaware State Bank Commissioner. The Bank has and expects to continue to expend significant management and financial resources to address the Bank’s BSA compliance ~~function, improving practices~~program which will reduce our net income. Expenses associated with the required look-back review were significant in 2015 and ~~procedures~~2016. The look-back review was completed in the third quarter of 2016. The 2014 Consent Order reserves the right for our federal or state banking regulators or any other federal or state agency or department to ~~monitor~~take additional action against the Bank or any of the Bank’s current or former institution-affiliated parties which, based on the alleged violations, could include civil or criminal proceedings and ~~report transactions, and increasing training, as well as adopting an independent testing program to ensure adherence to more effective BSA standards.~~ civil money penalties.

Until the Bank submits to the FDIC ~~(and the FDIC approves)~~ a ~~BSA~~ report summarizing the completion of ~~its~~certain BSA-related corrective ~~actions,~~action (“BSA Report”), the 2014 Consent Order ~~places some restrictions on certain activities as follows:~~restricts the Bank ~~is restricted~~ from signing and boarding new independent sales organizations, ~~issuing new non-benefit related reloadable prepaid card programs,~~ establishing new ~~distribution channels for existing~~ non-benefit reloadable prepaid card programs and originating Automated Clearing House transactions for new merchant-related payments. ~~Until we receive~~The BSA Report will be filed when the ~~FDIC’s approval, restrictions in these specific areas may potentially impact their growth. We do not believe that these restrictions will have a material impact on current revenue levels. The~~ Bank ~~utilized one primary consultant~~is able to demonstrate the sustained adequacy of BSA policies and procedures, training, and internal controls related to ~~its BSA-AML (Anti-Money Laundering) program refinement and one primary consultant related to conducting a lookback review~~the restricted activities, including validation of ~~historical transactions to confirm that suspicious activity was properly identified and reported in accordance with applicable law. The consultant assisting with~~ the ~~BSA-AML program refinement completed its work in 2014. The consultant performing~~same by the Bank’s independent BSA testing function. Until the BSA ~~lookback completed its work~~Report is submitted to and approved by the FDIC and Delaware State Bank Commissioner, those aspects of the growth of our card payment processing and prepaid card operations will be affected, which, unless offset by growth from existing customers and new customers in ~~July 2016,~~other areas of our prepaid card operations, could reduce growth of our deposits and nonon-interest income and, possibly, limit our ability to raise additional ~~related fees are expected to be incurred. Suspicious activity reports resulting from the lookback have been filed.~~capital on acceptable terms.

On August 27, 2015, the Bank entered into an Amendment to Consent Order, or the 2014 Consent Order Amendment, with the FDIC, amending the 2014 Consent Order. The Bank took this action without admitting or denying any additional charges of unsafe or unsound banking practices or violations of law or regulation relating to continued weaknesses in the Bank’s BSA compliance program. The 2014 Consent Order Amendment provides that the Bank ~~may~~shall not declare or pay any dividend without the prior written consent of the FDIC and for certain assurances regarding management.

On May 11, 2015, the Federal Reserve issued a letter, or the Supervisory Letter, to the Bank as a result of the 2014 Consent Order and the 2014 Consent Order Amendment (which, at the time of the Supervisory Letter, was in proposed form), which provides that we ~~may~~shall not pay any dividends on our common stock ~~make any distributions to our European entities~~ or make any interest payments on our trust preferred securities, without the prior written approval of the Federal Reserve. It further provides that we may not incur any debt (excluding payables in the ordinary course of business) or redeem any shares of our stock, without the prior written approval of the Federal Reserve. ~~The Federal Reserve approved the payment of the interest on our trust preferred securities which was due September 15, 2017. Future payments are subjectto future approval by the Federal Reserve.~~

On December 23, 2015, the Bank entered into a Stipulation and Consent to the Issuance of an Amended Consent Order, Order for Restitution, and Order to Pay Civil Money Penalty with the FDIC, which we refer to as the 2015 Consent Order. The Bank took this action without admitting or denying any charges of violations of law or regulation. The 2015 Consent Order ~~supercedes~~amended and restated in its entirety the terms of ~~a previous consent order entered into in 2012.~~

the 2012 Consent Order. The 2015 Consent Order was based on FDIC allegations regarding electronic fund transfer, or EFT, error resolution practices, account termination practices and fee practices of various third parties with whom the Bank had previously provided, or currently provides, deposit-related products, ~~which~~whom we refer to as Third Parties. The specific operational practices of the third parties identified by the FDIC were the following: practices related to the termination of a third-party rewards program tied to deposit accounts, including the timing of the notice of termination, and the disclosure of the effects of such termination on the consumer’s ability to obtain unredeemed rewards; practices performed by third parties related to the time frames within which we must respond to a consumer’s notice of error related to electronic transactions related to various types of deposit accounts; and, practices related to the timing and frequency of disclosed account fees and the manner by which the accountholder is notified of these fees in periodic statements which are generated by third parties. The 2015 Consent Order continues the Bank's obligations originally set forth in the 2012 Consent Order, including its obligations to increase board oversight of the Bank's compliance management system, or CMS, improve the Bank's CMS, enhance its

internal audit program, increase its management and oversight of Third Parties, and correct any apparent violations of law. The

In addition to restating the general terms of the 2012 Consent Order, the 2015 Consent Order ~~also~~ directs the Bank’s Board of Directors to establish a Complaint and Error Claim Oversight and Review Committee, which we refer to as the Complaint and Error Claim Committee, to review and oversee the Bank’s processes and practices for handling, monitoring and resolving consumer complaints and EFT error claims (whether received directly or through Third Parties) and to review management's plans for correcting any weaknesses that may be found in such processes and practices; and implement a corrective action plan regarding those prepaid cardholders who asserted or attempted to assert EFT error claims and to provide restitution to cardholders harmed by EFT error resolution practices. The Bank’s Board of Directors appointed the required Complaint and Error Claim Committee on January 29, 2016.

The 2015 Consent Order also requires the Bank to implement a corrective action plan, or CAP, to remediate and provide restitution to those prepaid cardholders who asserted or attempted to assert, or were discouraged from initiating EFT error claims and to provide restitution to cardholders harmed by EFT error resolution practices. The 2015 Consent Order requires that if, through the CAP, the Bank identifies prepaid cardholders who have been adversely affected by a denial or failure to resolve an EFT error claim, the Bank will ensure that monetary restitution is made. Neither we nor the Bank can predict the amount of any restitution which may be required, or the amount, if any, that the Bank may pay in ~~process.~~connection therewith. Under the Bank's agreements with Third Parties, we believe that restitution is reimbursable to the Bank. The CAP is currently being implemented. To date, $285,773.12 in restitution has been paid.

~~We received~~The 2015 Consent Order also imposed a ~~subpoena from~~$3 million civil money penalty on the ~~SEC, dated March 22, 2016, relating to an investigation by~~Bank, which the ~~SEC~~Bank has paid and which was recognized as expense in the fourth quarter of the restatement of our financial statements for the years ended December 31, 2010 through December 31, 2013 and the interim periods ended March 31, 2014, September 30, 2014 and September 30, 2014, which restatement was filed with the SEC on September 28, 2015, and the facts and circumstances underlying the restatement. We are cooperating fully with the SEC's investigation. The costs to respond to the subpoena and cooperate with the SEC's investigation have been material, and we expect such costs to continue to be material at least through the completion of the SEC’s investigation.2015.

On ~~October 5, 2016,~~March 7, 2018, the Consumer Financial Protection Bureau (CFPB) released its final Prepaid Card Rule (Final Prepaid Rule), which it first proposed by publication on December 23, 2014. The general effective date of the Final Prepaid Rule was October 1, 2017, but applicability of certain requirements of the Final Prepaid Rule are delayed until October 1, 2018. However, on April 20, 2017 the CFPB releasedBank entered into a ~~final rule delaying the general effective date of the Final Prepaid Rule until April 1, 2018. The Final Prepaid Rule regulates certain prepaid products, including physical cards as well as codes~~Stipulation and other access devices. The Final Prepaid Rule did not materially deviate from the terms of the proposed rule that we have disclosed in previous filings. The Final Prepaid Rule among other things, causes prepaid productsConsent to be fully-covered by Regulation E, which implements the Electronic Fund Transfer Act, and to be covered by Regulation Z, which implements the Truth in Lending Act, to the extent the prepaid product accesses a “credit” feature.

The Final Prepaid Rule and related commentary is over 1,600 pages in length and provides significant discussion, materials and commentary that we are currently assessing. The Final Prepaid Rule includes a significant number of changes to the regulatory frameworkOrder for prepaid products, some of which include: (a) establishing a definition of “prepaid account” within Regulation E that includes reloadable and non-reloadable physical cards, as well as codes or other devices, and focuses on how the product is issued and used; (b) modifying Regulation E to require that short form and long form disclosures be provided to a consumer prior to a consumer agreeing to acquire a prepaid account with certain exceptions and with specified forms that, if used, would provide a safe harbor for financial institutions; (c) extending to prepaid accounts the periodic transaction history and statement requirements of Regulation E, with certain specified permissible alternatives to the provision of periodic statements; (d) extending the error resolution and limited liability provisions of Regulation E to prepaid cards, with some modifications specific to prepaid cards; (e) requiring financial institutions to provide prepaid account agreements to the CFPB and to either post them to the issuer’s website or provide them upon request of the consumer in specified manner and timeframes; (f) extending Regulation Z’s credit card rules and disclosure requirements to prepaid accounts that provide overdraft protection and other credit features and incorporating into Regulation Z a new definition of “hybrid prepaid-credit card”; (g) requiring an issuer to obtain a prepaid account holder’s consent prior to adding overdraft services or other credit features and prohibiting the issuer from adding overdraft services or other credit features for at least 30 calendar days after a consumer registers the prepaid account; and (h) prohibiting the application of different terms and conditions, such as charging different fees, to a prepaid account depending on whether the consumer elects to link the prepaid account to overdraft services or other credit features.

The Final Prepaid Rule represents a material change in the rules and regulations governing prepaid cards. We rely on prepaid cards as the largest single component of our deposits and the largest single component of our non-interest income. We are continuing to evaluate the Prepaid Card Rule and the impact it may have on our business and our results of operations. We are in the process of evaluating and building implementation plans for the Prepaid Card Rule and, as such, we cannot reasonably quantify the financial impact, if any, that implementation of the Prepaid Card Rule may have on the Bank’s business, financial condition, or results of operations.

On July 10, 2017, the CFPB issued a final rule to regulate arbitration agreements in contracts for specified consumer financial product and services (Arbitration Rule). The Arbitration Rule prohibits covered providers of certain consumer financial products and services from using an agreement with a consumer that provides for arbitration of any future dispute between the parties to bar the consumer from filing or participating in a class action concerning the covered consumer financial product or service. The Arbitration Rule also requires covered providers that are involved in an arbitration pursuant to a pre-dispute arbitration agreement to submit specified arbitral records to the CFPB together with specified court records. The Arbitration Rule becomes effective on March 19, 2018; however, on November 1, 2017, President Trump signed legislation to repeal the Arbitration Rule.

inadvertently resulted in consumers that engaged in signature-based point of sale transactions during the period from December 2010 to November 2014 being charged a greater fee than what was disclosed by the Bank. ~~Impacted~~The FDIC alleged the Bank’s incorrect fee imposition due to the Third-Party Processor error was an unfair or deceptive act or practice and violated Section 5 of the Federal Trade Commission Act. The 2018 Restitution Order requires the Bank to develop a written Restitution Plan, subject to independent audit and FDIC non-objection, to ensure impacted consumers are ~~being reimbursed by the Third Party Processor at its own expense.~~compensated for any incorrectly charged fees. The 2018 Restitution Order ~~would require~~requires the Bank to make such reimbursements if not otherwise made by the ~~Third Party~~Third-Party Processor ~~however,~~and the Bank is indemnified by the ~~Third Party~~Third-Party Processor for such reimbursements. ~~Although~~Impacted consumers have been reimbursed by the Third-Party Processor at its own expense. The Bank has completed the process of complying with the all the requirements of the Restitution Order. The 2018 CMP Order imposed a $2 million civil money penalty on the Bank ~~is still evaluating its position with regard to~~which the ~~Restitution Order~~Bank has paid, and ~~the CMP Order, the Company accrued $2,500,000 of related~~was recognized as expense ~~in its financial statements for the quarter ended~~on September 30, ~~2017 in connection with the CMP Order. Any amounts owed from the CMP Order would~~2017. The civil money penalty is not be subject to any indemnification or recovery from any third party.

Net Income:~~The improvement~~ Income from continuing operations before income taxes was $28.4 million in ~~net income in~~the third quarter ~~2017~~of 2019 compared to $83.2 million in the third quarter ~~2017 reflected revenue growth, expense reductions, the conclusion~~ of ~~BSA lookback expense in 2016 and credit related charges in discontinued operations in 2016.~~ 2018. Net income from continuing operations for the third quarter of ~~2017~~2019 was ~~$6.8~~$20.4 million, or ~~$0.12~~$0.36 per diluted share, compared to ~~net loss of $1.5~~$61.3 million, or ~~$0.03~~$1.07 per diluted share, for the third quarter of ~~2016.~~2018. Income from continuing operations decreased between those respective periods primarily as a result of the $65.0 million gain on sale of our safe harbor IRA portfolio in the third quarter of 2018, partially offset by higher net interest income and prepaid and debit card and payments related fees. After discontinued operations, net income for the third quarter of ~~2017 was $7.3~~2019 amounted to $20.4 million, compared to ~~a net loss of $25.6~~$61.3 million for the third quarter of ~~2016.~~2018. Net interest income for the third quarter of ~~2017 compared~~2019 increased 22.6%, to $37.6 million from $30.6 million in the third quarter of ~~2016 increased to $27.9 million from $23.5 million~~2018 primarily as a result of higher loan balances and higher yields. The higher yields ~~reflecting~~reflected the impact of the Federal Reserve’s 2018 rate ~~increases.~~increases, which exceeded the impact of Federal Reserve reductions in third quarter 2019. The provision for loan and lease losses ~~increased $50,000~~decreased $410,000 to ~~$800,000~~$650,000 in the third quarter of ~~2017~~2019 compared to ~~$750,000~~$1.1 million in the third quarter of ~~2016.~~2018. Non-interest income (excluding security gains and losses) ~~increased$9.6~~decreased $57.5 million, ~~which resulted primarily from an increase in~~reflecting the $65.0 million gain on sale of ~~loans into two securitizations. Non-interest expense~~the IRA portfolio in third quarter 2018. There was a 20.9% increase in prepaid and debit card and related fees and ACH, card and other payment processing fees, the total of which amounted to $18.7 million in the third quarter of ~~2017 was comparable to~~2019. These increases more than offset a $394,000 reduction in service fees on deposit accounts which resulted from the sale of the safe harbor individual retirement (IRA) portfolio in the third quarter ~~2016. Cost reductions~~of 2018. Non-interest expense increased $4.8 million to $42.1 million in ~~data processing, consulting and other expenses were largely offset by a $2.5 million civil money penalty in~~the third quarter ~~2017 (see note 13~~of 2019 compared to $37.3 million in the ~~financial statements) and a $1.1 million contractual exit fee. The exit fee was for a data processing contracts which will be significantly exceeded by future savings. Lower data processing~~third quarter 2018. Third quarter 2019 expense reflected a $1.4 million settlement with the impact of a renegotiated data processing contract and the phase out of an affinity program. A $21.5 million loss from discontinued operations in third quarter 2016 resulted primarily from the writedown of a $42 million loan secured by a shopping mall.SEC. Diluted income per share was ~~$0.13~~$0.36 in the third quarter of ~~2017~~2019 compared to ~~$0.54 loss~~$1.07 diluted income per share in the third quarter of ~~2016~~2018 primarily reflecting the factors noted above.

Net Interest Income: Our net interest income for the third quarter of ~~2017~~2019 increased to ~~$27.9~~$37.6 million, an increase of ~~$4.4~~$6.9 million, or ~~18.5%~~22.6% from ~~$23.5~~$30.6 million in the third quarter of ~~2016.~~2018. Our interest income for the third quarter of ~~2017~~2019 increased to ~~$31.9~~$48.4 million, an increase of ~~$5.2~~$9.7 million, or ~~19.4%~~25.1% from ~~$26.7~~$38.7 million for the third quarter of ~~2016.~~2018. The increase in interest income resulted primarily from higher loan balances and higher yields. Our average loans and leases increased to ~~$1.84~~$2.62 billion for the third quarter of ~~2017~~2019 from ~~$1.68~~$2.00 billion for the third quarter of ~~2016,~~2018, an increase of ~~$154.7 million.~~$622.3 million, or 31.1%. Related interest income increased ~~$3.7~~$10.3 million on a tax equivalent basis. The increase in average loans reflected ~~organic~~ growth in ~~leasing,~~commercial loans generated for securitization, SBLOC and IBLOC, SBA and leasing. Average commercial mortgages originated for securitization increased $459.1 million in third quarter 2019, or 147% from third quarter 2018. Of the total $10.3 million increase in loan interest income, the largest increases were $6.4 million for commercial loans originated for securitization to $11.1 million, $1.7 million for SBLOC ~~lending.~~and IBLOC to $9.4 million and $1.8 million for SBA to $7.8 million. Our average investment securities ~~decreased to $1.25~~of $1.44 billion for the third quarter of ~~2017~~2019 increased slightly from ~~$1.42~~the $1.37 billion for the third quarter of ~~2016, as investment securities were replaced with higher yielding loans. Notwithstanding the decrease in average balances, related~~2018. Related tax equivalent interest income ~~increased $412,000 on a tax equivalent basis as a result of~~decreased $430,000 reflecting higher ~~yields.~~premium amortization resulting from prepayments. Yields on ~~both~~ loans ~~and investment securities~~ increased as a result of the impact of the Federal Reserve’s 2018 rate increases on variable rate loans and ~~securities. Rates paid on deposits and resulting interest expense adjusted~~securities, which were only partially tooffset by the Federal Reserve’s 2019 rate ~~increases.~~decreases. While interest income increased by the aforementioned $9.7 million, interest expense increased by $2.8 million as deposits also repriced to the higher rate environment, but to a lesser degree. The increase in interest expense also reflected higher balances of overnight borrowings and certificates of deposits with terms of three months or less. We used these liquidity sources to fund loan originations prior to their securitization on September 16, 2019.

Our net interest margin (calculated by dividing net interest income by average interest earning assets) for the third quarter of ~~2017 increased~~2019 was 3.35% compared to ~~3.26% from 2.69% in~~3.22% for the third quarter of ~~2016,~~2018, an increase of 5713 basis points. While the yield on interest earning assets increased 28 basis points, the cost of deposits and interest bearing liabilities increased 13 basis points, or a net change of 15 basis points. The increase in the net interest margin reflected higher yields on loans, ~~and investment securities~~ reflecting ~~the impact of~~ the aforementioned Federal Reserve ~~rate~~ increases, ~~on variable rate~~and a higher proportion of higher yielding commercial real estate loans ~~and securities.~~originated for securitization. In the third quarter of ~~2017,~~2019, the average yield on our loans increased to ~~4.66%~~5.38% from ~~4.19%~~4.99% for the third quarter of ~~2016,~~2018, an increase of 4739 basis points. Yields on taxable investment securities in the third quarter of ~~2017 increased~~2019 decreased to ~~2.86%~~2.93% compared to ~~2.43%~~3.20% for the third quarter of ~~2016, an increase~~2018, a decrease of 4327 basis points. The ~~net~~decrease reflected increased amortization of premiums resulting from increased prepayments. The interest ~~margin~~cost of total deposits and interest bearing liabilities increased 13 basis points to 0.98% for the third quarter of 2019 compared to 0.83% in the third quarter of 2018 reflecting the impact of the aforementioned Federal Reserve increases. It also ~~benefited from the reinvestment~~reflected increased higher rate overnight borrowing and short-term certificate of ~~maturities of investment securities into higher yielding loans.~~deposit balances used to fund loans originated for securitizations. Average interest earning deposits at the Federal Reserve Bank increased ~~$42.5~~$28.7 million, or ~~13.1%~~6.4%, to ~~$366.7~~$474.5 million in the third quarter of ~~2017~~2019 from ~~$324.2~~$445.8 million in the third quarter of ~~2016.~~2018. That difference ~~reflects~~reflected a minimal percentage of total deposits, and resulted primarily from daily fluctuations in deposits and loans. The interest cost of total deposits and interest bearing liabilities increased to 0.43% for the third quarter of 2017 as compared to 0.33% in the third quarter of 2016. The cost of deposits increased significantly less than the increase in variable rates on loans and investments primarily due to contractual provisions related to prepaid card deposits. Those contracts result in only partial adjustment to Federal Reserve rate increases.

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



	Three months ended September 30,						Three months ended September 30,
	2017			2016			2019			2018
	Average		Average	Average		Average	Average		Average	Average		Average
	Balance	Interest	Rate	Balance	Interest	Rate	Balance	Interest	Rate	Balance	Interest	Rate
	(dollars in thousands)						(dollars in thousands)
Assets:
Interest earning assets:
Loans net of unearned fees and costs **	$ 1,816,751	$ 21,147	4.66%	$ 1,661,807	$ 17,425	4.19%	$ 2,608,427	$ 35,103	5.38%	$ 1,980,814	$ 24,708	4.99%
Leases - bank qualified*	20,787	419	8.06%	21,006	418	7.96%	14,067	252	7.17%	19,343	346	7.16%
Investment securities-taxable	1,235,615	8,847	2.86%	1,373,776	8,350	2.43%	1,429,222	10,485	2.93%	1,362,529	10,906	3.20%
Investment securities-nontaxable*	13,238	133	4.02%	48,683	218	1.79%	6,172	54	3.50%	8,145	63	3.09%
Interest earning deposits at Federal Reserve Bank	366,724	1,190	1.30%	324,179	397	0.49%	474,499	2,545	2.15%	445,765	2,239	2.01%
Federal funds sold and securities purchased under agreement to resell	65,008	371	2.28%	39,392	146	1.48%
Federal funds sold and securities purchased under
agreement to resell							-	-	-	64,186	480	2.99%
Net interest earning assets	3,518,123	32,107	3.65%	3,468,843	26,954	3.11%	4,532,387	48,439	4.27%	3,880,782	38,742	3.99%

Allowance for loan and lease losses	(6,961)			(5,267)			(9,988)			(7,971)
Assets held for sale from discontinued operations	325,912	3,098	3.80%	459,400	3,891	3.39%
Loans held-for-sale from discontinued operations							145,347	1,609	4.43%	233,732	2,295	3.93%
Other assets	235,070			246,171			298,191			141,204
	$ 4,072,144			$ 4,169,147			$ 4,965,937			$ 4,247,747

Liabilities and shareholders' equity:
Deposits:
Demand and interest checking	$ 3,224,167	$ 3,136	0.39%	$ 3,249,801	$ 2,379	0.29%	$ 3,829,457	$ 7,644	0.80%	$ 3,418,878	$ 6,224	0.73%
Savings and money market	439,688	552	0.50%	392,045	423	0.43%	26,444	52	0.79%	419,121	1,466	1.40%
Time	-	-	0.00%	76,931	104	0.54%	269,464	1,338	1.99%	-	-	0.00%
Total deposits	3,663,855	3,688	0.40%	3,718,777	2,906	0.31%	4,125,365	9,034	0.88%	3,837,999	7,690	0.80%

Short-term borrowings	51,413	175	1.36%	102,243	153	0.60%	256,945	1,595	2.48%	25,602	148	2.31%
Repurchase agreements	189	-	0.00%	376	-	0.00%	93	-	0.00%	160	-	0.00%
Subordinated debt	13,401	150	4.48%	13,401	131	3.91%	13,401	186	5.55%	13,401	186	5.55%
Total deposits and interest bearing liabilities	3,728,858	4,013	0.43%	3,834,797	3,190	0.33%
Total deposits and liabilities							4,395,804	10,815	0.98%	3,877,162	8,024	0.83%

Other liabilities	8,046			19,670			98,980			8,374
Total liabilities	3,736,904			3,854,467			4,494,784			3,885,536

Shareholders' equity	335,240			314,680			471,153			362,211
	$ 4,072,144			$ 4,169,147			$ 4,965,937			$ 4,247,747

Net interest income on tax equivalent basis *		$ 31,192			$ 27,655			$ 39,233			$ 33,013

Tax equivalent adjustment		193			222			64			86

Net interest income		$ 30,999			$ 27,433			$ 39,169			$ 32,927

Net interest margin *			3.26%			2.69%			3.35%			3.22%

* Full taxable equivalent basis, using a 35% statutory tax rate.
** Includes loans held for sale.
* Full taxable equivalent basis, using a statutory tax rate of 21% for 2019 and 2018, respectively.
** Includes loans held-for-sale.

For the third quarter of ~~2017,~~2019, average interest earning assets increased to ~~$3.52~~$4.53 billion, an increase of ~~$49.3~~$651.6 million, or ~~1.4%~~16.8%, from ~~$3.47~~$3.88 billion in the third quarter of ~~2016.~~2018. The increase reflected ~~increases in~~increased average balances of loans and leases of ~~$154.7~~$622.3 million, or ~~9.2%~~31.1%, and ~~$42.5~~increased average investment securities of $64.7 million, or 13.1%, of average interest earning deposits at the Federal Reserve Bank, net of decreases in average balances of investment securities. For third quarter 2017 compared to third quarter 2016, average securities decreased $173.6 million, or 12.2%, to $1.25 billion from $1.42 billion.4.7%. For those respective periods, average demand and interest ~~checking deposits decreased $25.6 million,~~

checking deposits increased $410.6 million, or ~~0.8%~~12.0%, ~~to $3.22 billion from $3.25 billion.~~primarily as a result of deposit growth in prepaid and debit card accounts. The $392.7 million decrease in savings and money market reflected the ~~planned exit~~sale of ~~certain less profitable deposit relationships, which was partially offset by growth~~the safe harbor IRA portfolio in ~~payments related deposits.~~ the third quarter of 2018.

Provision for Loan and Lease Losses. Our provision for loan and lease losses was ~~$800,000~~$650,000 for the third quarter of ~~2017~~2019 compared to ~~$750,000~~$1.1 million for the third quarter of ~~2016.~~2018. The allowance for loan losses increased to ~~$7.3~~$10.4 million, or ~~0.53%~~0.62%, of total loans at September 30, ~~2017,~~2019, from ~~$6.3~~$8.7 million, or ~~0.52%~~0.58%, of total loans at December 31, ~~2016~~. 2018. We believe that our allowance is adequate to cover expected ~~losses~~losses. For more information about our provision and allowance for loan and lease losses and our loss experience, see “Financial Condition-Allowance for loan and lease losses”, “-Net charge-offs,” and “-Non-performing loans, loans 90 days delinquent and still accruing, and troubled debt restructurings,” below and Note 6 to the financial statements.

Non-Interest Income. Non-interest income was ~~$28.5~~$33.5 million in the third quarter of ~~2017~~2019 compared to ~~$18.9~~$91.0 million in the third quarter of ~~2016 before gains~~2018. The $57.5 million, or 63.2%, decrease between those respective periods primarily reflected the $65.0 million gain on sale of ~~investment securities of $506,000~~our IRA portfolio in the third quarter of ~~2017~~2018. Net realized and ~~$981,000 in~~unrealized gains (losses) on commercial loans originated for sale increased to $13.7 million from $9.0 million, primarily as a result of a higher gain on the third quarter 2019 securitization compared to the third quarter 2018 securitization. The impact of ~~2016. The $9.6~~a decrease in market spreads between those periods was offset by the size of the 2019 securitization, which was $778.2 million compared to $341.0 million in the prior year.Any gain or loss on securitizations is subject to market conditions. Prepaid and debit card and related fees increased $2.9 million, or ~~50.6% increase between those respective periods reflected an $815,000 decrease in the change in value of investment in unconsolidated entity. Gain on sale of loans increased~~22.2%, to ~~$11.4~~$16.1 million for the third quarter of ~~2017 from $903,000~~2019 compared to $13.2 million in ~~the~~ third quarter 2018. The increase reflected higher transaction volume. Related fees in this category include income related to the use of ~~2016 which resulted primarily from the sale of loans into a securitization~~cash in ~~2017. Prepaid~~ATMs for prepaid payroll cardholders. ACH, card and other payment processing fees increased ~~by $242,000~~$309,000, or ~~2.0%~~13.5%, to ~~$12.5~~$2.6 million for the third quarter of ~~2017~~2019 compared to ~~$12.2~~$2.3 million in the third quarter ~~2016.~~of 2018. The increase ~~reflected organic growth~~resulted from higher transaction volume, including fees earned from a new payment service which ~~more than offset the impact of a client whose ownership changed and clients who decided~~permits payment transfers in minutes. Leasing related income decreased $169,000, or 22.3%, to ~~terminate card programs. Service fees on deposit accounts increased $190,000 or 12.6% to $1.7 million~~$589,000 for the third quarter of ~~2017~~2019 from ~~$1.5 million~~$758,000 for the third quarter of 2016, reflecting increases in service charges on safe harbor individual retirement accounts. Leasing income increased $117,000 or 19.9% to $705,000 for the third quarter of 2017 from $588,000 for the third quarter of 2016,2018, which reflected ~~higher~~lower gains on disposition of leased vehicles in ~~2017.~~2019. Affinity fees decreased by ~~$816,000,~~$84,000, or ~~74.8%~~100.0%, to ~~$275,000~~$0 for the third quarter of ~~2017~~2019 from ~~$1.1 million~~$84,000 for the third quarter of ~~2016.~~2018. The decrease resulted from the exit of one affinity relationship whose ownership had changed. ~~Other non-interest income increased $64,000,~~Service fees on deposit accounts decreased $394,000, or ~~20.5%~~98.0%, to ~~$376,000~~$8,000 for the third quarter of ~~2017~~2019 from ~~$312,000~~$402,000 for the third quarter of 2018, reflecting the impact of the sale of the IRA portfolio. In July 2018, the safe harbor IRA portfolio was sold which resulted in the elimination of the vast majority of service fees on deposit accounts. Other non-interest income increased $170,000, or 53.1%, to $490,000 for the third quarter of 2019 from $320,000 in the third quarter of ~~2016.~~2018.

Non-Interest Expense. Total non-interest expense was ~~$43.9~~$42.1 million for the third quarter of ~~2017, a decrease~~2019, an increase of ~~$288,000,~~$4.8 million, or ~~0.7%~~12.7%, compared to ~~$44.2~~$37.3 million for the third quarter of ~~2016. Decreases~~2018. Increases in ~~ongoing data processing expenses, consulting fees and BSA lookback expense~~salaries were partially offset by ~~a proposed $2.5 million civil money penalty which was accrued, a $1.1 million~~decreases in FDIC insurance, data processing, ~~contract exit fee~~software and ~~higher~~ legal expenses. ~~The exit~~In the third quarter of 2019, expense of $1.4 million was recognized to record a settlement with the SEC in that amount, related to a restatement of the data processing contract will result in future savings significantly greater than the exit fee and the BSA lookback expenses concluded in third quarter 2016. The civil money penalty resulted from a programming glitch within one of the Bank’s third party processors. As a result, a higher fee was assessed to consumers for certain point of sale transactions during the period from December 2010 to November 2014.financial statements (see “Financial Statement Restatement”). Salaries and employee benefits increased to ~~$21.8~~$24.5 million for the third quarter of ~~2017,~~2019, an increase of ~~$280,000,~~$5.3 million, or ~~1.3%~~27.5%, from ~~$21.5~~$19.2 million for the third quarter of ~~2016.~~2018. The increase reflected higher commercial mortgage securitization incentive, SBLOC, prepaid card, information technology and other incentive compensation expense related to the gain on sale of loans into securitizations and other revenue and performance based compensation. Those increases offset the impact of staffing levels which had been reduced compared to the prior year in most departments.expense. Depreciation and amortization decreased ~~$161,000~~$114,000, or ~~13.0%~~11.4%, to ~~$1.1 million~~$885,000 in the third quarter of ~~2017~~2019 from ~~$1.2 million~~$999,000 in the third quarter of ~~2016. The decrease~~2018 which reflected reduced spending on fixed assets and equipment. Rent and occupancy ~~decreased $270,000~~increased $89,000, or ~~16.5%~~6.6%, to $1.4 million in the third quarter of ~~2017~~2019 from ~~$1.6~~$1.3 million in the third quarter of ~~2016~~2018. The ~~decrease~~increase reflected ~~a reduction in~~newly leased space ~~and more efficient use of office space.~~for the commercial mortgage securitization department. Data processing decreased by ~~$1.6 million,~~$188,000, or ~~45.1%~~13.6%, to ~~$1.9~~$1.2 million in the third quarter of ~~2017~~2019 from ~~$3.5~~$1.4 million in the third quarter of ~~2016.~~2018. The decrease reflected the impact of a renegotiated data processing contract and lower account and transaction volume ~~as a result of~~from the planned exit of an affinity program which had ~~changed ownership. It also reflected~~an ownership change, and the ~~impact~~sale of the ~~consolidation of our call centers as an efficiency and cost cutting measure.~~safe harbor IRA portfolio. Printing and supplies decreased ~~$543,000~~$121,000, or ~~65.8%~~42.5%, to ~~$282,000~~$164,000 in the third quarter of ~~2017~~2019 from ~~$825,000~~$285,000 in the third quarter of ~~2016, which~~2018 and reflected ~~elevated expense in 2016 due to service charge and other communications in that year.~~decreases resulting from the impact of the safe harbor IRA sale. Audit expense ~~increased $147,000~~decreased $69,000, or ~~59.8%~~14.6%, to ~~$393,000~~$402,000 in the third quarter of ~~2017~~2019 from ~~$246,000~~$471,000 in the third quarter of ~~2016~~2018, which reflected ~~increased~~decreased regulatory and tax compliance audit fees. Legal expense ~~increased $1.9 million~~decreased $144,000, or ~~237.1%~~8.9%, to ~~$2.7~~$1.5 million in the third quarter of ~~2017~~2019 from ~~$814,000~~$1.6 million in the third quarter of ~~2016,~~2018, reflecting decreased costs associated with an SEC subpoena related to the restatement of the financial statements (see “Financial ~~Statements; Regulatory Actions”~~Statement Restatement”) and other regulatory related legal fees. Amortization of intangible assets was $382,000 for both the third quarters of 2019 and 2018. FDIC insurance expense decreased ~~$17,000,~~$1.4 million, or ~~4.3%~~61.6%, to ~~$377,000~~$860,000 for the third quarter of ~~2017~~2019 from $394,000 for the third quarter of 2016 reflecting amortization of an intangible resulting from the 2016 purchase of $60 million of lease receivables. FDIC insurance expense decreased $373,000 or 15.3% to $2.1 million for the third quarter of 2017 from $2.4$2.2 million in the third quarter of ~~2016 reflecting~~2018 primarily due to a $1.1 million credit in the third quarter of 2019 which was made to banks with less than $10 billion in assets, and a decrease in ~~average deposits and a reduction in~~the FDIC assessment rate. Software expense ~~increased $56,000~~decreased $394,000, or ~~1.8%~~11.0%, to ~~$3.1~~$3.2 million in the third quarter of ~~2017~~2019 from ~~$3.0~~$3.6 million in the third quarter of ~~2016 as a result of additional~~2018 reflecting reduced expenditures for information technology infrastructure to improve efficiency and scalability, including BSA software required to satisfy regulatory requirements. Insurance expense ~~increased $2,000~~decreased $10,000, or ~~0.3%~~1.5%, to ~~$633,000 in the third quarter 2017 compared to $631,000~~$663,000 in the third quarter of ~~2016.~~2019 compared to $673,000 in the third quarter of 2018. Telecom and IT network communications ~~decreased $156,000~~increased $85,000, or ~~26.8%~~25.6%, to ~~$426,000~~$417,000 in the third quarter of ~~2017~~2019 from ~~$582,000~~$332,000 in the third quarter of ~~2016. The decrease reflected cost cutting efforts which included the elimination of corporate sponsored cell phones.~~2018. Consulting decreased ~~$1.2 million~~$196,000, or ~~70.3%~~17.3%, to ~~$505,000~~$934,000 in the third quarter of ~~2017~~2019 from ~~$1.7~~$1.1 million in the third quarter of ~~2016~~2018 reflecting ~~reduced~~decreased BSA and other regulatory ~~related consulting expense.~~compliance consulting. Other non-interest expense ~~decreased $702,000~~increased $512,000, or ~~16.4%~~14.2%, to $4.1 million in the third quarter of 2019 from $3.6 million in the third quarter of ~~2017 from $4.3 million in the third quarter~~2018. The $512,000 increase reflected increases of ~~2016, which reflected decreases of $448,000~~$319,000 for ~~travel~~outside services to assist with regulatory compliance and ~~entertainment expenses and $384,000 of customer identification expense. The decrease~~$221,000 in travel ~~and entertainment expenses reflected the impact of staff reductions and other cost cutting measures. The decrease in customer~~expenses.

~~identification expense primarily reflected the exit of one affinity group and reduced health savings volume due to the sale of that business.~~

Income Taxes. Income tax expense for continuing operations was ~~$5.5~~$8.0 million for the third quarter of ~~2017~~2019 compared to ~~$55,000~~$21.9 million in the third quarter of ~~2016. The 45%~~2018. A 28.1% effective tax rate in ~~2016~~2019 and a 26.4% effective tax rate in 2018 primarily ~~was higher than the statutory~~reflected a 21% federal tax rate ~~of 34%~~ and ~~reflected~~ the impact of ~~taxes related to European operations which were being exited in 2017.~~various state income taxes.

Net Income:~~The improvement~~ Income from continuing operations before income taxes was $66.0 million in ~~net income in third quarter 2017~~the first nine months of 2019 compared to ~~third quarter 2017 reflected revenue growth, expense reductions,~~$111.0 million in the ~~conclusion~~first nine months of ~~BSA lookback expense in 2016 and credit related charges in discontinued operations in 2016.~~ 2018. Net income from continuing operations for the first nine months of ~~2017~~2019 was ~~$30.7~~$48.4 million, or ~~$0.55~~$0.85 per diluted share, compared to ~~net loss of $29.8~~$81.5 million, or ~~$0.73~~$1.43 per diluted share, for the first nine months of ~~2016.~~2018. Net income from continuing operations decreased between those respective periods as a result of the $65.0 million gain on sale of our IRA portfolio in the third quarter of 2018, partially offset by higher net interest income and prepaid and debit card and payments related fees. After discontinued operations, net income for the first nine months of ~~2017~~ 2019 amounted to~~was $34.1~~ $49.7 million, compared to ~~net loss of $67.7~~$81.6 million for the first nine months of ~~2016.~~2018. Net interest income increased ~~$15.0 million~~17.6% to ~~$80.0~~$106.1 million for the first nine months of ~~2017~~2019, compared to ~~$65.0~~$90.2 million for the first nine months of ~~2016~~2018 primarily as a result of higher loan balances and higher yields which reflected the impact of the Federal Reserve’s rate increases. The provision for loan and lease losses increased ~~$340,000~~$290,000 to ~~$2.2~~$3.0 million in the first nine months of ~~2017~~2019 compared to ~~$1.8~~$2.7 million in the first nine months of ~~2016.~~2018. Non-interest income ~~increased $24.8~~decreased $53.5 million, ~~(excluding security gains and losses),~~ from ~~$45.0~~$137.1 million ~~for~~to $83.6 million between those respective periods primarily as a result of the ~~first nine months of 2016, to $69.8 million. The increase reflected a $12.3~~$65.0 million ~~change in the value of investment in unconsolidated entity and $17.5 million of~~ gain on sale of ~~loans into securitizations in 2017. In 2017, a $2.5 million gain on the sale of~~ our health savings accounts was more than offset by a loss of $3.4 million on the sale of our European prepaid operations. A $3.8 million decrease in other income, from $4.7 million in 2016 to $892,000 in 2017, resulted primarily from a second quarter 2016 gain on the sale of Visa Europe to Visa U.S.A., in which members of Visa Europe sharedIRA portfolio in the ~~sales proceeds.~~third quarter of 2018. Non-interest expense ~~reflected a $29.1~~increased $7.1 million decrease in BSA lookback-related consulting expenses and an $8.3 million decrease in other non interest expenses, which reflected a $4.5 million decrease in salaries and employee benefits and a $2.9 million decrease in data processing expense.between the periods. Diluted income per share was ~~$0.61~~$0.87 for the first nine months of ~~2017~~2019 compared to diluted ~~loss~~income per share of ~~$1.65~~$1.43 for the first nine months of ~~2016.~~2018.

Net Interest Income:Our net interest income for the first nine months of ~~2017~~2019 increased to ~~$80.0~~$106.1 million, an increase of ~~$15.0~~$15.9 million, or ~~23.1%~~17.6%, from ~~$65.0~~$90.2 million in the first nine months of ~~2016.~~2018. Our interest income for the first nine months of ~~2017~~2019 increased to ~~$91.2~~$136.0 million, an increase of ~~$16.8~~$26.7 million, or ~~22.7%~~24.4%, from ~~$74.3~~$109.3 million for the first nine months of ~~2016.~~2018. The increase in interest income resulted primarily from higher balances of loans and higher yields. Our average loans and leases increased ~~$197.8~~$441.9 million, or 22.8%, to ~~$1.76~~$2.38 billion for the first nine months of ~~2017~~2019 from ~~$1.56~~$1.94 billion for the first nine months of ~~2016,~~2018, while related interest income increased ~~$10.1~~$25.5 million on a tax equivalent basis. The increase in average loans reflected ~~organic~~ growth in ~~leasing,~~commercial loans generated for securitization, SBLOC and IBLOC, SBA and ~~SBLOC lending.~~leasing. Our average investment securities ~~decreased to $1.28~~were $1.40 billion for both the first nine months of ~~2017 from $1.34 billion for the first nine months of 2016~~2019 and 2018 while related interest income increased ~~$3.6~~$1.2 million on a tax equivalent basis primarily as a result of higher yields. Yields on both loans and investment securities increased as a result of the impact of the Federal Reserve’s 2018 rate increases on variable rate loans and ~~securities. Deposit rates and resulting interest expense adjusted only~~securities, partially tooffset by the Federal Reserve’s 2019 rate ~~increases.~~decreases. While interest income increased by the aforementioned $26.7 million, interest expense increased by $10.8 million as deposits also repriced to the higher rate environment, but to a lesser degree.

Our net interest margin (calculated by dividing net interest income by average interest earning assets) for the first nine months of ~~2017~~2019 increased to ~~3.02%~~3.40% from ~~2.57%~~3.15% in the first nine months of ~~2016,~~2018, an increase of 4525 basis points. While the yield on interest earning assets increased 53 basis points, the cost of deposits and interest bearing liabilities increased 33 basis points, or a net change of 21 basis points. The increase in the net interest margin reflected higher yields on loans and investment securities, reflecting the aforementioned Federal Reserve ~~increases.~~2018 increases, which were partially offset by their third quarter 2019 decreases. In the first nine months of ~~2017,~~2019, the average yield on our loans increased to ~~4.46%~~5.36% from ~~4.15%~~4.83% for the first nine months of ~~2016,~~2018, an increase of 3153 basis points. Yields on taxable investment securities were higher at ~~2.83%~~3.12% compared to ~~2.37%~~3.01%, an increase of 4611 basis points. The ~~net~~ interest ~~margin also benefited from~~cost of total deposits and interest bearing liabilities increased 33 basis points to 0.97% for the ~~reinvestment~~first nine months 2019 compared to 0.64% for the first nine months of ~~maturities of investment securities into higher yielding loans.~~2018. Average interest earning deposits at the Federal Reserve Bank ~~increased $42.2~~decreased $29.3 million, or ~~8.6%~~6.2%, to ~~$532.2~~$439.4 million in the first nine months of ~~2017~~2019 from ~~$490.0~~$468.7 million in the first nine months of ~~2016~~. 2018. That difference ~~reflects~~reflected a minimal percentage of total deposits, and resulted primarily from daily fluctuations in deposits and loans. The interest cost of total deposits and interest bearing liabilities was relatively stable at 0.38% for the first nine months of 2017 compared to 0.32% in the first nine months of 2016. The cost of deposits increased significantly less than the increase in variable rates on loans and investments primarily due to contractual provisions related to prepaid card deposits. Those contracts result in only partial adjustment to Federal Reserve rate increases.



	Nine months ended September 30,						Nine months ended September 30,
	2017			2016			2019			2018
	Average		Average	Average		Average	Average		Average	Average		Average
	Balance	Interest	Rate	Balance	Interest	Rate	Balance	Interest	Rate	Balance	Interest	Rate
	(dollars in thousands)						(dollars in thousands)
Assets:
Interest earning assets:
Loans net of unearned fees and costs **	$ 1,740,655	$ 58,266	4.46%	$ 1,543,448	$ 48,061	4.15%	$ 2,365,317	$ 95,001	5.36%	$ 1,918,950	$ 69,451	4.83%
Leases - bank qualified*	21,167	1,231	7.75%	20,618	1,334	8.63%	15,755	947	8.01%	20,192	1,017	6.72%
Investment securities-taxable	1,269,922	26,990	2.83%	1,280,692	22,782	2.37%	1,394,234	32,649	3.12%	1,391,175	31,375	3.01%
Investment securities-nontaxable*	14,423	351	3.24%	59,892	983	2.19%	6,771	168	3.31%	8,907	201	3.01%
Interest earning deposits at Federal Reserve Bank	532,223	3,961	0.99%	490,037	1,677	0.46%	439,414	7,502	2.28%	468,691	6,166	1.75%
Federal funds sold and securities purchased under agreement to resell	60,119	931	2.06%	27,414	301	1.46%
Federal funds sold and securities purchased under
agreement to resell							-	-	-	64,234	1,369	2.84%
Net interest earning assets	3,638,509	91,730	3.36%	3,422,101	75,138	2.93%	4,221,491	136,267	4.30%	3,872,149	109,579	3.77%

Allowance for loan and lease losses	(6,793)			(4,538)			(9,537)			(7,378)
Assets held for sale from discontinued operations	337,102	9,594	3.79%	528,168	15,037	3.80%
Loans held-for-sale from discontinued operations							157,630	5,293	4.48%	269,857	6,888	3.40%
Other assets	251,629			283,171			285,843			197,114
	$ 4,220,447			$ 4,228,902			$ 4,655,427			$ 4,331,742

Liabilities and shareholders' equity:
Deposits:
Demand and interest checking	$ 3,433,027	$ 8,836	0.34%	$ 3,325,047	$ 7,217	0.29%	$ 3,840,141	$ 25,260	0.88%	$ 3,463,756	$ 15,547	0.60%
Savings and money market	434,768	1,718	0.53%	390,202	1,028	0.35%	28,073	129	0.61%	469,511	2,751	0.78%
Time	-	-	0.00%	103,624	447	0.58%	90,808	1,338	1.96%	-	-	0.00%
Total deposits	3,867,795	10,554	0.36%	3,818,873	8,692	0.30%	3,959,022	26,727	0.90%	3,933,267	18,298	0.62%

Short-term borrowings	19,498	197	1.35%	58,056	263	0.60%	137,860	2,624	2.54%	17,367	261	2.00%
Repurchase agreements	245	-	0.00%	812	1	0.16%	92	-	0.00%	178	-	0.00%
Subordinated debt	13,401	432	4.30%	13,401	383	3.81%	13,401	573	5.70%	13,401	524	5.21%
Total deposits and interest bearing liabilities	3,900,939	11,183	0.38%	3,891,142	9,339	0.32%
Total deposits and liabilities							4,110,375	29,924	0.97%	3,964,213	19,083	0.64%

Other liabilities	431			21,306			99,577			9,517
Total liabilities	3,901,370			3,912,448			4,209,952			3,973,730

Shareholders' equity	319,077			316,454			445,475			358,012
	$ 4,220,447			$ 4,228,902			$ 4,655,427			$ 4,331,742

Net interest income on tax equivalent basis *		$ 90,141			$ 80,836			$ 111,636			$ 97,384

Tax equivalent adjustment		554			811			234			256

Net interest income		$ 89,587			$ 80,025			$ 111,402			$ 97,128

Net interest margin *			3.02%			2.57%			3.40%			3.15%

* Full taxable equivalent basis, using a 35% statutory tax rate.
** Includes loans held for sale.
* Full taxable equivalent basis, using a statutory tax rate of 21% for 2019 and 2018, respectively.
** Includes loans held-for-sale.

For the first nine months of ~~2017,~~2019, average interest earning assets increased to ~~$3.64~~$4.22 billion, an increase of ~~$216.4~~$349.3 million, or ~~6.3%~~9.0%, from ~~$3.42~~$3.87 billion in the first nine months of ~~2016.~~2018. The increase reflected increased average balances of loans and leases of ~~$197.8~~$441.9 million, or ~~12.6%~~22.8%, and ~~increased average balances of~~a decrease in interest earning deposits at the Federal Reserve Bank of ~~$42.2~~$29.3 million, or ~~8.6%~~6.2%. ~~Average securities decreased $56.2 million or 4.2% as lower yielding securities were replaced with higher yielding loans.~~ Average demand and

interest checking deposits increased ~~$108.0~~$376.4 million, or ~~3.2% due~~10.9%, primarily toas a result of deposit growth in ~~payments related deposits.~~prepaid and debit card accounts. The $441.4 million decrease in savings and money market reflected the sale of the safe harbor IRA portfolio in the third quarter of 2018.

Provision for Loan and Lease Losses. Our provision for loan and lease losses increased ~~$340,000,~~$290,000 to ~~$2.2~~$3.0 million for the first nine months of ~~2017~~2019 compared to ~~$1.8~~$2.7 million for the first nine months of ~~2016.~~2018. The increase in the provision is based on our evaluation of

the adequacy of our allowance for loan and leases losses, particularly in light of current economic conditions. At September 30, ~~2017,~~2019, our allowance for loan and lease losses amounted to ~~$7.3~~$10.4 million, or ~~0.53%~~0.62%, of total loans compared to ~~$6.3~~$8.7 million, or ~~0.52%~~0.58% of total loans at December 31, ~~2016.~~2018. For more information about our provision and allowance for loan and lease losses and our loss experience, see “Financial Condition-Allowance for loan and lease losses”, “-Net charge-offs,” and “-Non-performing loans, loans 90 days delinquent and still accruing, and troubled debt restructurings,” below and Note 6 to the financial statements.

Non-Interest Income. Non-interest income was ~~$69.8~~$83.6 million in the first nine months of ~~2017~~2019 compared to ~~$45.0~~$137.1 million in the first nine months of ~~2016, before~~2018. The $53.5 million, or 39.0%, reduction resulted primarily from the $65.0 million gain on sale of the IRA portfolio in 2018. It also reflected a $7.7 million increase in prepaid and debit card and related fees, and ACH, card and other payment processing fees. Prepaid and debit card and related fees increased $6.6 million, or 15.8%, to $48.1 million for the first nine months of 2019 from $41.6 million for the first nine months of 2018. The increase reflected higher transactional volume. Related fees in this category include income related to the use of cash in ATMs for prepaid payroll cardholders. ACH, card and other payment processing fees increased $1.1 million, or 18.2%, to $7.4 million for the first nine months of 2019 compared to $6.3 million for the first nine months of 2018. The increase resulted from an increase in transaction volume including fees earned from a new payment service which permits payment transfers in minutes. Net realized and unrealized gains (losses) on ~~securities of $1.6~~commercial loans originated for sale increased to $24.3 million in the first nine months of ~~2017 and $3.1~~2019 from $20.3 million in the ~~first nine months~~comparable prior year period. While spreads decreased in 2019, the amount of ~~2016. The $24.8 million,~~the securitizations was larger, resulting in a higher gain in 2019. Any gain or 55.1%, increase between those respective periods reflected a $12.3 million change in value of investment in unconsolidated entity. It also reflected a $16.7 million increase in gain on sale of loans into securitizations resulting primarily from two securitizations in 2017. In the second quarter of 2017 we had a $2.5 million gain on the sale of a portion of our health savings portfolio which was more than offset by a $3.4 million loss on ~~the sale of our European prepaid card operations. Gain on sale of loans increased~~securitizations is subject to ~~$17.5~~market conditions. Leasing related income decreased $42,000, or 1.8%, to $2.3 million for the first nine months of ~~2017~~2019 from ~~$809,000 in the first nine months of 2016 primarily as a result of gain on sale of loans into two securitizations. Service fees on deposit accounts increased $1.6 million, or 46.8%, to $4.9~~$2.4 million for the first nine months of ~~2017 from $3.3 million~~2018. Affinity fees decreased to $0 for the first nine months of ~~2016 reflecting increases in service charges on safe harbor individual retirement accounts. Prepaid card fees decreased $61,000, or 0.2% to $39.3 million~~2019 from $271,000 for the first nine months of 2017 from $39.3 million for the first nine months of 2016 which reflected decreased volumes from a client as a result of its change in ownership and several programs whose sponsors decided to exit prepaid cards. Those volume decreases were largely offset with organic growth in other programs. Leasing income increased $632,000 or 43.4% to $2.1 million for the first nine months of 2017 from $1.5 million for the first nine months of 2016, which reflected higher gains on disposition of leased vehicles in 2017. Affinity fees decreased $2.1 million, or 58.8%, to $1.4 million for the first nine months of 2017 from $3.5 million for the first nine months of 2016.2018. The decrease resulted ~~primarily~~ from the planned exit of one affinity relationship which had a change of ownership. ~~Other non-interest income~~Service fees on deposit accounts decreased ~~$3.8~~$3.6 million, or ~~81.0%~~98.1%, to ~~$892,000~~$69,000 for the first nine months of ~~2017~~2019 from ~~$4.7~~$3.6 million for the first nine months of 2018, reflecting the impact of the sale of the IRA portfolio. In July 2018, the safe harbor IRA portfolio was sold which resulted in the elimination of the vast majority of service fees on deposit accounts. Other non-interest income increased $649,000, or 88.9%, to $1.4 million in the first nine months of ~~2016. The decrease resulted primarily~~2019 from ~~a gain on the sale of Visa Europe to Visa U.S.A., in which members of Visa Europe shared~~$730,000 in the ~~sales proceeds, which occurred in the second quarter~~first nine months of ~~2016.~~2018.

Non-Interest Expense. Total non-interest expense was ~~$119.0~~$120.8 million for the first nine months of ~~2017, a decrease~~2019, an increase of ~~$37.4~~$7.1 million, or ~~23.9%~~6.3%, from ~~$156.4~~$113.7 million for the first nine months of ~~2016. The decrease reflected a decrease of $29.1 million in Bank Secrecy Act lookback expense which concluded in the third quarter of 2016.~~2018. Salaries and employee benefits expense ~~also decreased~~increased to ~~$57.9~~$70.2 million, ~~a decrease~~an increase of ~~$4.5~~$11.0 million, or ~~7.2%~~18.5%, from ~~$62.4~~$59.2 million for the first nine months of ~~2016.~~2018. The ~~decrease in salaries~~increase reflected higher commercial real estate securitization incentive, SBLOC, information technology, compliance and ~~employee benefits reflected bankwide staff reductions in the third quarter of 2016 which reduced total staff by approximately 20%.~~incentive compensation expense. Depreciation and amortization decreased ~~$346,000,~~$187,000, or ~~9.2%~~6.2%, to ~~$3.4~~$2.8 million in the first nine months of ~~2017~~2019 from ~~$3.8~~$3.0 million in the first nine months of ~~2016~~2018 which reflected reduced spending on fixed assets and equipment. Rent and occupancy ~~decreased $570,000~~increased $227,000, or ~~11.9%~~5.6%, to ~~$4.2~~$4.3 million in the first nine months of ~~2017~~2019 from ~~$4.8~~$4.1 million in the first nine months of ~~2016.~~2018. The ~~decrease~~increase reflected ~~a reduction in~~newly leased space ~~and more efficient use of office space.~~ for the commercial mortgage securitization department. Data processing expense decreased ~~$2.9~~$1.1 million, or ~~26.5%~~22.3%, to ~~$8.0~~$3.7 million in the first nine months of ~~2017~~2019 from ~~$10.9~~$4.7 million in the first nine months of ~~2016.~~2018. The decrease reflected the impact of a renegotiated data processing contract and lower account and transaction volume ~~as a result of~~from the planned exit of an affinity program which had an ownership ~~change. It also reflected~~change, and the ~~impact~~sale of the ~~consolidation of our call centers as an efficiency and cost cutting measure.~~safe harbor IRA portfolio. Printing and supplies decreased ~~$1.1 million~~$273,000, or ~~49.0%~~35.0%, to ~~$1.1 million~~$506,000 in the first nine months of ~~2017~~2019 from ~~$2.2 million~~$779,000 in the first nine months of ~~2016,~~2018, which reflected ~~elevated expense in 2016 due to service charge and other communications in that year.~~reductions resulting from the sale of the safe harbor IRA portfolio. Audit expense ~~increased $524,000~~decreased $288,000, or ~~70.2%~~18.5%, to $1.3 million in the first nine months of ~~2017~~2019 from ~~$746,000~~$1.6 million in the first nine months of ~~2016~~2018 which reflected ~~increased~~decreased regulatory and tax compliance audit fees. Legal expense ~~increased $2.1~~decreased $1.5 million, or ~~56.1%~~25.6%, to ~~$5.9~~$4.3 million for the first nine months of ~~2017~~2019 from ~~$3.8~~$5.8 million in the first nine months of ~~2016~~2018, which reflected decreased costs associated with an SEC subpoena related to the restatement of the financial statements (see “Financial ~~Statements; Regulatory Actions”~~Statements Restatement”) and other regulatory related legal fees. ~~The year to date increase was net of insurance coverage.~~ Amortization of intangible assets ~~increased $101,000,~~was $1.1 million for both the first nine months of 2019 and 2018. FDIC insurance expense decreased $2.5 million, or ~~9.8%~~33.9%, to ~~$1.1~~$4.9 million for the first nine months of ~~2017~~2019 from $1.0 million for the first nine months of 2016. The increase resulted primarily from the amortization of the intangible asset resulting from the 2016 purchase of the $60 million of lease receivables. FDIC insurance expense increased $468,000, or 6.6% to $7.6 million for the first nine months of 2017 from $7.1$7.4 million in the first nine months of ~~2016,~~2018, which reflected a $1.1 million credit in the ~~impact~~third quarter of ~~an increase~~2019 which was made to banks with less than $10 billion in assets, and a decrease in the FDIC assessment rate. Software expense ~~increased $1.1 million,~~decreased $699,000, or ~~12.8%~~7.1%, to ~~$9.3~~$9.2 million in the first nine months of ~~2017~~2019 from ~~$8.3~~$9.9 million in the first nine months of ~~2016~~2018 which reflected ~~additional~~reduced expenditures for information technology infrastructure to improve efficiency and scalability, including BSA software required to satisfy regulatory requirements. Insurance expense ~~increased $158,000,~~decreased $93,000, or ~~9.3%~~4.7%, to $1.9 million in the first nine months of ~~2017~~2019 from ~~$1.7~~$2.0 million in the first nine months of ~~2016. The increase reflected higher cyber and director and officer coverages.~~2018. Telecom and IT network communications expense ~~decreased $104,000~~increased $89,000, or ~~6.7%~~9.2%, to ~~$1.4~~$1.1 million in the first nine months of ~~2017~~2019 from ~~$1.5~~$971,000 in the first nine months of 2018. Consulting expense decreased $82,000, or 3.1%, to $2.6 million in the first nine months of 2016. The decrease reflected cost cutting efforts which included the elimination of corporate sponsored cell phones. Securitization and servicing expense decreased $647,000 or 86.6%, to $100,000 in the first nine months of 20172019 from $747,000 in the first nine months of 2016. Expense in 2016 reflected expenditures related to a potential securitization for loans which were instead sold directly to a single buyer. Consulting expense decreased $2.5 million, or 58.6% to $1.7$2.7 million in the first nine months of ~~2017~~2018, reflecting decreased BSA and other regulatory consulting. Lease termination expense increased $513,000, or 129.9%, to $908,000 in the first nine months of 2019 from ~~$4.2~~$395,000 in the first nine months of 2018. Lease termination expenses should be more than offset by future savings. Other non-interest expense increased $604,000, or 6.0%, to $10.7 million in the first nine months of ~~2016. The decrease reflected reduced regulatory related and investor relations consulting. Other non-interest expense decreased $3.8 million, or 27.0% to $10.3~~2019 from $10.1 million in the first nine months of ~~2017 from $14.1~~2018. The $604,000 increase reflected increases of $454,000 in travel expense and $162,000 for outside services to assist with regulatory compliance.

Income Taxes. Income tax expense for continuing operations was $17.6 million for the first nine months of 2019 compared to $29.6 million in the first nine months of ~~2016. The $3.8 million decrease reflected decreases of $1.8 million~~2018. A 26.6% effective tax rate in ~~travel~~2019 and ~~entertainment expenses, $815,000~~a 26.6% effective tax rate in ~~customer identification expense, $512,000 in~~

~~postage expense, $299,000 in expense related to third party origination of SBA loans and $190,000 in other leasing expense. The decrease in customer identification expense~~2018 primarily reflected the exit of one affinity group and reduced health savings volume due to the sale of that business. The decrease in postage expense reflected the impact of the sale of the health savings business and also reflected elevated expense in 2016 due to service charge and other communications mailings in that year. The decrease in travel and entertainment expense reflected the impact of staff reductions and a ~~concerted effort to reduce travel and related expenses.~~

~~Income Taxes.~~ ~~Income~~21% federal tax benefit for continuing operations was $457,000 for the first nine months of 2017 compared to $15.3 million in the first nine months of 2016. The tax benefit in 2017 reflected the impact of approximately $12 million of deferred tax valuation allowance reversals. That tax benefit was largely offset by the application of statutory federal and state tax rates against $30.2 million of pre tax income. The 35% effective tax benefit rate in 2016 reflected the statutory 34% rate and the impact of various state income taxes.

Liquidity defines our ability to generate funds to support asset growth, meet deposit withdrawals, satisfy borrowing needs and otherwise operate on an ongoing basis. We invest the funds we do not need for daily operations primarily in overnight federal funds or in our interest-bearing account at the Federal Reserve.

Our primary source of funding has been deposits. We have been exiting deposit relationships to reduce excess balances at the Federal Reserve which earn relatively low rates of interest. While such exits continued in the third quarter of 2017, they were offset by growth in prepaid card and other payments deposits. Accordingly, overnightInterest-bearing balances at the Federal Reserve Bank, maintained on an overnight basis, averaged ~~$366.7~~$474.5 million for the third quarter of ~~2017, which was higher than~~2019, compared to the prior year third quarter average of ~~$324.2~~$445.8 million. Average deposits in third quarter 2019 increased by $287.4 million, or 7.5%, to $4.13 billion. A decrease in average savings and money market accounts of $392.7 million resulted primarily from the sale of the safe harbor IRA portfolio in the third quarter of 2018 and was largely offset by prepaid and debit card account and other payments deposit growth. In the third quarter of 2019, we averaged $269.5 million of time deposits with terms of 90 days and less, to fund a planned increase in commercial loans originated for securitizations. Additionally, overnight borrowings also utilized to fund those originations in the third quarter of 2019, averaged $256.9 million.

Investment securities available-for-sale ~~also~~ provide a ~~significant~~primary source of balance sheet liquidity. In excess of $800 million of our investments are issued by U.S. government agencies and are accordingly highly liquid, and may be pledged as collateral for our FHLB line of credit. Loan repayments, also a source of funds, were exceeded by new loan disbursements during the first nine months of ~~2017.~~ 2019. As a result, loans outstanding at September 30, 2019 totaled $1.68 billion, compared to $1.50 billion at December 31, 2018, an increase of $181.4 million. Over that period, commercial loans held-for-sale decreased $199.2 million to $489.2 million as a result of the $778 million September 2019 securitization. In 2019 and previous years, we have sold loans into securitizations at six month intervals. Such sales create an additional source of liquidity. However, we cannot assure that future securitizations will occur, as their execution, or at least timing, is dependent on market conditions.

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. ~~We believe that the rate on our deposits is at or below competitors’ rates. However, the focus~~The majority of our deposit accounts are obtained with the assistance of third parties and as a result are classified as brokered by the FDIC. The FDIC guidance for classification of deposit accounts as brokered is relatively broad, and generally includes accounts which were referred to or “placed” with the institution by other companies. If the Bank ceases to be categorized as “well capitalized” under banking regulations, it will be prohibited from accepting, renewing or rolling over brokered deposits without the consent of the FDIC. In such a case, the FDIC’s refusal to grant consent to our accepting, renewing or rolling over brokered deposits could effectively restrict or eliminate the ability of the Bank to operate its business ~~model is~~lines as presently conducted.

We focus on customer service which we believe has resulted in a history of customer loyalty. Stability, lower cost and customer loyalty comprise key characteristics of core deposits which we believe are comparable to ~~identify affinity groups that control significant~~core deposits ~~as part~~ of their business. A key component to the model is that the affinity group deposits are both stable and “sticky,” in the sense that they do not react to fluctuations in the market. Nonetheless, certainpeers with branch systems. Certain components of ~~the~~our deposits do experience seasonality, creating greater excess liquidity at certain ~~times during the year, especially~~times. The largest deposit inflows occur in the first quarter ~~as a result~~ of the year when certain of our accounts are credited with tax refund ~~prepaid card balances.~~payments from the U.S. Treasury.

~~Historically, we have also used sources outside of our deposit products to fund our loan growth,~~While consumer transaction accounts including ~~Federal Home Loan Bank advances, repurchase agreements, and institutional (brokered) certificates of deposit. In the first nine months of 2017,~~prepaid accounts comprise the vast majority of our funding was derived from prepaid cards and transaction accounts. While the FDIC now classifies prepaid and most of our other deposits obtained with the cooperation of third parties as brokered, these deposits have demonstrated stability and low cost for an extended historical period. Weneeds, we maintain secured borrowing lines with the ~~Federal Home Loan Bank of Pittsburgh, or~~ FHLB and the Federal ~~Reserve Bank.~~Reserve. As of September 30, ~~2017,~~2019, we had ~~approximately $573.7 million available on~~ a ~~line of credit with the Federal Home Loan Bank and $179.8 million available on a~~$1.17 billion line of credit with the Federal Reserve, ~~Bank. These lines~~which may be collateralized by ~~specified~~various types of loans and securities. We have never used the Federal Reserve line of credit, which as a matter of that institution’s policy, is available for limited periods in times of financial stress. We may access our line of credit with the FHLB after pledging U.S. government agency securities, which is permitted at any time, to allow daily access to the line. As of September 30, 2019, we had eligible securities which would result in more than $800 million of availability. As of September 30, 2019, we had no amount outstanding on the Federal Reserve line or ~~securities, and we~~the FHLB line. We expect to continue to maintain ~~these facilities.~~our facilities with the FHLB and Federal Reserve. We actively monitor our positions and contingent funding sources ~~on a daily basis. As of September 30, 2017, we did not have any borrowings outstanding on our lines of credit.~~daily.

As a holding company conducting substantially all of our business through our subsidiaries, our need for liquidity consists principally of cash needed to make required interest payments on our trust preferred securities. As of September 30, ~~2017,~~2019, we had cash reserves of approximately ~~$13.0~~$13.3 million at the holding company. Current quarterly interest payments on the $13.4 million of trust preferred securities are approximately ~~$150,000~~$180,000 based on a floating rate of 3.25% over LIBOR. We expect that when the conditions under which the amendment to the 2014 Consent Order was issued ~~will have been~~are remediated, the FDIC and Federal Reserve will permit the Bank to resume paying dividends to us to fund holding company operations. There can, however, be no assurance that the FDIC will, in fact, allow the resumption of Bank dividends to us at the end of that period or at all and, accordingly, there is risk that we will need to obtain alternate sources of funding. There can be no assurance that such sources would be available to us on acceptable terms or at all.

Included in our cash and cash-equivalents at September 30, ~~2017~~2019 were ~~$328.0~~$932.4 million of interest earning deposits which primarily consisted of deposits with the Federal Reserve and included deposits for reserve requirements.

Funding was directed primarily at cash outflows required for net loan growth of $152.5 million for the nine months ended September 30, 2017, and $120.3 million for the nine months ended September 30, 2016. Net ~~redemptions~~purchases of investment securities for the nine months ended September 30, ~~2017,~~2019 were ~~$87.2~~$35.0 million compared to net ~~purchases~~redemptions of ~~$251.1~~$34.6 million for the prior year. We had outstanding commitments to fund loans, including unused lines of credit, of ~~$1.31~~$2.29 billion and ~~$1.09~~$1.68 billion as of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively. The majority of our commitments are variable rate and originate with security backed lines of credit. Such commitments are normally based on the full amount of collateral in a ~~customers~~customer’s investment account. However, such commitments have historically been drawn at only a fraction of the total commitment. The funding requirements for such commitments occur on a measured basis over time and would be funded by normal deposit growth.

We must comply with capital adequacy guidelines issued by the FDIC. A bank must, in general, have a Tier 1 leverage ratio of 5.00%, a ratio of Tier I capital to risk-weighted assets of 8.0%, a ratio of total capital to risk-weighted assets of 10.0% and a ratio of common equity tier 1 to risk weighted assets of 6.5% to be considered “well capitalized.” The Tier I leverage ratio is the ratio of Tier 1 capital to average assets for the period. “Tier I capital” includes common shareholders’ equity, certain qualifying perpetual preferred stock and minority interests in equity accounts of consolidated subsidiaries, less intangibles. At September 30, ~~2017,~~2019, we were “well capitalized” under banking regulations.

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



	Tier 1 capital	Tier 1 capital	Total capital	Common equity	Tier 1 capital	Tier 1 capital	Total capital	Common equity
	to average	to risk-weighted	to risk-weighted	tier 1 to risk	to average	to risk-weighted	to risk-weighted	tier 1 to risk
	assets ratio	assets ratio	assets ratio	weighted assets	assets ratio	assets ratio	assets ratio	weighted assets

As of September 30, 2017
As of September 30, 2019
The Bancorp, Inc.	8.24%	16.27%	16.62%	16.27%	9.53%	25.09%	25.64%	25.09%
The Bancorp Bank	8.05%	15.95%	16.31%	15.95%	9.40%	24.52%	25.07%	24.52%
"Well capitalized" institution (under FDIC regulations-Basel III)	5.00%	8.00%	10.00%	6.50%	5.00%	8.00%	10.00%	6.50%

As of December 31, 2016
As of December 31, 2018
The Bancorp, Inc.	6.90%	13.34%	13.63%	13.34%	10.11%	20.64%	21.07%	20.64%
The Bancorp Bank	6.84%	13.24%	13.53%	13.24%	9.70%	20.18%	20.61%	20.18%
"Well capitalized" institution (under FDIC regulations)	5.00%	8.00%	10.00%	6.50%	5.00%	8.00%	10.00%	6.50%

The management of rate sensitive assets and liabilities is essential to controlling interest rate risk and optimizing interest margins. An interest rate sensitive asset or liability is one that, within a defined time period, either matures or experiences an interest rate change in line with general market rates. Interest rate sensitivity measures the relative volatility of an institution’s interest margin resulting from changes in market interest rates.

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

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

The following table sets forth the estimated maturity or repricing structure of our interest earning assets and interest bearing liabilities at September 30, ~~2017.~~2019. We estimate the repricing characteristics of deposits based on historical performance, past experience at other institutions 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. The table does not assume any prepayment of ~~fixed-rate loans~~bank loans. Mortgage-backed and ~~mortgage-backed~~other callable securities ~~which~~ are scheduled based on their anticipated cash flow, including prepayments based on historical data and current market trends. The table does not necessarily indicate the impact of general interest rate movements on our net interest income because the repricing of certain categories of assets and liabilities is beyond our control as, for example, prepayments of loans and withdrawal

of deposits. As a result, certain assets and liabilities indicated as repricing within a stated period may in fact reprice at different times and at different rate levels.



	1-90	91-364	1-3	3-5	Over 5	1-90	91-364	1-3	3-5	Over 5
	Days	Days	Years	Years	Years	Days	Days	Years	Years	Years
	(dollars in thousands)					(dollars in thousands)
Interest earning assets:
Commercial loans held for sale	$ 169,953	$ 19,356	$ 50,267	$ 21,181	$ 119,515
Commercial loans held-for-sale						$ 335,597	$ 24,446	$ 32,920	$ 3,370	$ 92,907
Loans net of deferred loan costs	905,299	124,564	150,922	183,104	10,171	1,182,680	70,132	254,364	157,882	18,319
Investment securities	357,407	153,315	181,936	199,881	390,819	676,361	55,413	132,672	294,372	308,018
Interest earning deposits	328,023	-	-	-	-	932,440	-	-	-	-
Securities purchased under agreements to resell	65,095	-	-	-	-
Total interest earning assets	1,825,777	297,235	383,125	404,166	520,505	3,127,078	149,991	419,956	455,624	419,244

Interest bearing liabilities:
Demand and interest checking	2,012,233	66,386	66,386	-	-	2,501,164	56,826	56,826	-	-
Savings and money market	113,046	226,091	113,046	-	-	6,487	12,976	6,487	-	-
Time deposits						475,000	-	-	-	-
Securities sold under agreements to repurchase	180	-	-	-	-	93	-	-	-	-
Subordinated debenture	13,401	-	-	-	-
Subordinated debentures						13,401	-	-	-	-
Total interest bearing liabilities	2,138,860	292,477	179,432	-	-	2,996,145	69,802	63,313	-	-
Gap	$ (313,083)	$ 4,758	$ 203,693	$ 404,166	$ 520,505	$ 130,933	$ 80,189	$ 356,643	$ 455,624	$ 419,244
Cumulative gap	$ (313,083)	$ (308,325)	$ (104,632)	$ 299,534	$ 820,039	$ 130,933	$ 211,122	$ 567,765	$ 1,023,389	$ 1,442,633
Gap to assets ratio	-8%	*	5%	10%	13%	3%	2%	7%	9%	8%
Cumulative gap to assets ratio	-8%	-8%	-3%	8%	21%	3%	4%	11%	21%	29%

* While demand deposits are non-interest bearing, related fees paid to affinity groups may reprice according to specified indices.

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

General. Our total assets at September 30, ~~2017~~2019 were ~~$3.99~~$4.94 billion, of which our total loans were ~~$1.37~~$1.68 billion. At December 31, ~~2016,~~2018, our total assets were ~~$4.86~~$4.44 billion, of which our total loans were ~~$1.22~~$1.50 billion. The ~~decrease~~increase in assets reflected $475.0 million of certificates of deposit with terms less than ninety days, which were utilized to fund commercial loan originations for securitizations. The certificates mature in October 2019, and after the ~~exit of less profitable~~September 26th, 2019 securitization, were invested in interest earning deposits at the Federal Reserve Bank. The change in assets also reflects variability in daily deposit ~~relationships.~~balances and higher equity resulting from earnings and unrealized securities gains.

Interest earning deposits and federal funds sold. At September 30, ~~2017,~~2019, we had a total of ~~$328.0~~$932.4 million of interest earning deposits compared to ~~$955.7~~$551.9 million at December 31, ~~2016, a decrease~~2018, an increase of ~~$627.7~~$380.6 million, or ~~65.7%~~69.0%. These deposits were comprised primarily of balances at the Federal Reserve, which pays interest on such balances. ~~Reductions~~The increase reflected excess cash balances at the Federal Reserve which resulted after the previously discussed $778 million securitization was monetized at the end of September 2019. The September 30, 2019 balance of $932.4 million will likely be reduced by $475.0 million of short term time deposits maturing in ~~such balances reflected deployment of such funds into higher yielding loans and securities and the exit of less profitable deposit relationships.~~October 2019.

Investment portfolio. For detailed information on the composition and maturity distribution of our investment portfolio, see Note 5 to the Financial Statements. Total investment securities ~~decreased~~increased to ~~$1.28~~$1.47 billion at September 30, ~~2017, a decrease~~2019, an increase of ~~$58.7~~$146.1 million, or ~~4.4%~~11.1%, from ~~year-end 2016.~~December 31, 2018. The ~~decrease~~increase resulted from the reinvestment of securities maturities in ~~investment securities was primarily a result of prepayments on collateralized loan obligation securities.~~early 2019. Other securities included in the held-to-maturity classification at September 30, ~~2017,~~2019, consisted of three securities secured by diversified portfolios of corporate securities and ~~two~~one single-issuer trust preferred ~~securities.~~security.

The trust preferred is an unrated security issued by an insurance company with a book value of $9.2 million and a fair value of $7.1 million at September 30, 2019.

A total of $11.0 million of other debt securities - single issuers is comprised of the following: amortized cost of two single-issuer trust preferred securities of $11.0 million, of which one security for $1.9 million was issued by a bank and one security for $9.1 million was issued by an insurance company.

~~A total of $75.4~~$75.2 million of other debt securities – pooled is comprised of three securities consisting of diversified portfolios of corporate ~~securities.~~securities, which have a fair value of $75.9 million at September 30, 2019.

~~The following table provides additional information related to our single issuer trust preferred securities as of September 30, 2017 (in thousands):~~

Under the accounting guidance related to the recognition of other-than-temporary impairment charges on debt securities, an impairment on a debt security is deemed to be other-than-temporary if it meets the following conditions: (i) we intend to sell or it is more likely than not we will be required to sell the security before a recovery in value, or (ii) we do not expect to recover the entire amortized cost basis of the security. If we intend to sell or it is more likely than not we will be required to sell the security before a recovery in value, a charge is recorded in net realized capital losses equal to the difference between the fair value and amortized cost basis of the security. For those other-than-temporarily impaired debt securities which do not meet the first condition and for which we do not expect to recover the entire amortized cost basis, the difference between the security’s amortized cost basis and the fair value is separated into the portion representing a credit impairment, which is recorded in net realized capital losses, and the remaining impairment, which is recorded in other comprehensive income. Generally, a security’s credit impairment is the difference between its amortized cost basis and the best estimate of its expected future cash flows discounted at the security’s effective yield prior to impairment. The previous amortized cost basis less the impairment recognized in net realized capital losses becomes the security’s new cost basis. For the nine months ended September 30, ~~2017~~2019 and ~~September 30, 2016,~~2018, we recognized no other-than-temporary impairment charges related to trust preferred securities classified in our held-to-maturity portfolio.

Investments in Federal Home Loan and Atlantic Central Bankers Bank stock are recorded at cost and amounted to ~~$991,000~~$4.3 million at September 30, ~~2017,~~2019, compared to ~~$1.6~~$1.1 million at December 31, ~~2016.~~2018. The ~~decrease~~increase resulted from ~~a decrease in the amount~~larger amounts of Federal Home Loan stock, which were required to permit larger borrowings. Both the FHLB and Atlantic Central Bankers Bank require its correspondent banking institutions to hold stock ~~that entity periodically requests be adjusted to its level~~as a condition of ~~services.~~ membership.

Investment securities with a ~~carrying~~fair value of ~~$606.8~~approximately $258.9 million at September 30, ~~2017~~ 2019 and ~~$607.2~~$116.0 million at December 31, ~~2016,~~2018, were pledged as collateral ~~for Federal Home Loan Bank advances and letters~~to secure a line of credit ~~as required or permitted by law.~~with the FHLB. At September 30, 2019, and December 31, 2018, investment securities with a fair value of approximately $165.0 million and $169.5 million, respectively, were pledged to secure a line of credit with the Federal Reserve Bank.

Loans ~~held for sale~~held-for-sale. Loans ~~held for sale~~held-for-sale are comprised of commercial mortgage loans and SBA loans originated for sale or securitization in the secondary market. The fair value of commercial mortgage loans and the SBA loans originated for sale is based on purchase commitments, quoted prices for the same or similar loans or fair market valuations based on other market ~~information.~~information on an individual loan basis. Commercial loans ~~held for sale~~held-for-sale decreased to ~~$380.3~~$489.2 million at September 30, ~~2017~~2019 from ~~$663.1~~$688.5 million at December 31, ~~2016.~~2018. The decrease ~~reflected a difference~~resulted from the securitization which occurred in ~~the timing of loan originations and related sales. The December balance had accumulated until its recording as a sale in first quarter 2017 while the lower~~ September ~~balance reflected the impact of a sale in third quarter 2017.~~2019.

Loan portfolio. Total loans increased to ~~$1.37~~$1.68 billion at September 30, ~~2017~~2019 from ~~$1.22~~$1.50 billion at December 31, ~~2016.~~2018.

The following table summarizes our loan portfolio, ~~not including~~excluding loans ~~held for sale,~~held-for-sale, by loan category for the periods indicated (in thousands):

*The ~~following~~preceding table shows ~~SBA~~small business loans (SBL) and ~~SBA loans held for sale~~SBL held-for-sale at the dates indicated (in thousands):. While the majority of SBL are comprised of SBA loans, SBL also includes $16,953,000 of non-SBA loans as of September 30, 2019 and none at December 31, 2018.

*** Included in the table above under Other consumer loans are demand deposit overdrafts reclassified as loan balances totaling $771,000 and $7.2 million at September 30, 2019 and December 31, 2018, respectively. Estimated overdraft charge-offs and recoveries are reflected in the allowance for loan and lease losses.

Allowance for loan and lease losses. We review the adequacy of our allowance for loan and lease losses on at least a quarterly basis to determine that the provision for loan losses is made in an amount necessary to maintain our allowance at a level that is appropriate, based on management’s estimate of inherent losses. Our estimates of loan and lease losses are intended to, and, in management’s opinion, do, meet the criteria for accrual of loss contingencies in accordance with ASC 450, “Contingencies”, and ASC 310, “Receivables”. The process of evaluating this adequacy has two basic elements: first, the identification of problem loans or leases based on current financial information and the fair value of the underlying collateral; and second, a methodology for estimating general loss reserves. For loans or leases classified as “special ~~mention,”~~mention” or “substandard” ~~or “doubtful,”~~, we reserve all losses inherent in the portfolio at the time we classify the loan or lease. This “specific” portion of the allowance is the total of potential, although unconfirmed, losses for individually classified loans. In this process, we establish specific reserves based on an analysis of the most probable sources of repayment and liquidation of collateral. While each impaired loan is individually evaluated, not every loan requires a reserve when the collateral value and estimated cash flows exceed the current balance. When loans are classified as troubled debt restructurings, their collateral is valued and a specific reserve is established if the collateral valuation, less disposition costs, is lower than the recorded value of the loan. At September 30, 2019 there were 10 troubled debt restructured loans with a balance of $2.2 million which had specific reserves of $1.2 million. Approximately $1.0 million of these reserves related to the non-guaranteed portion of SBA loans for start-up businesses with the balance attributable to leasing.

The second phase of our analysis represents an allocation of the allowance. This methodology analyzes pools of loans that have similar characteristics and applies historical loss experience and other factors for each pool including management’s experience with similar loan and lease portfolios at other institutions, the ~~historic~~historical loss experience of our peers and a review of statistical information from various industry reports to determine the allocable portion of the allowance. This estimate is intended to represent the potential unconfirmed and inherent losses within the portfolio. Individual loan pools are created for the following major loan categories: SBLOCs and IBLOCs, SBA loans, direct lease financing and other specialty lending and consumer loans. We augment historical experience for each loan pool by accounting for such items as current economic conditions, current loan portfolio performance, loan policy or

management changes, loan concentrations, increases in our lending limit, average loan size and other factors as appropriate. Our Chief Credit Officer oversees the loan review department processes and measures the adequacy of the allowance for loan and lease losses independently of loan production officers.

At September 30, 2019, the allowance for loan losses amounted to $10.4 million which represented a $1.7 million increase over the $8.7 million at December 31, 2018. In addition to growth in the loan portfolio, the increase reflected higher allowance allocations for the non-guaranteed portion of SBA loans, which include start-up business loans with a higher risk of default. The increase also reflected higher allocations for leasing.

At September 30, ~~2017,~~2019, in excess of 50% of the total continuing loan portfolio had been ~~reviewed as a result of the coverage of each loan portfolio type.~~reviewed. The targeted coverages and scope of the reviews are risk-based and vary according to each portfolio. These thresholds are maintained as follows:

Securities Backed Lines of Credit (SBLOC) – The targeted review threshold for ~~2017~~2019 is 40%, with the largest 25% of SBLOCs by commitment to be reviewed annually. A random sampling of a minimum of 20 of the remaining loans will be reviewed each quarter. At September 30, ~~2017,~~2019, approximately ~~50%~~52% of the SBLOC portfolio had been reviewed.

Insurance Backed Lines of Credit (IBLOC) – The targeted review threshold for 2019 is 40% with the largest 25% of IBLOCs by commitment to be reviewed annually. A random sample of the remaining loans will also be reviewed and a minimum of 20 loans will be reviewed each quarter. At September 30, 2019, approximately 31% of the IBLOC portfolio had been reviewed.

SBA Loans – The targeted review threshold for ~~2017~~2019 is 100%, to be reviewed within 90 days of funding, less guaranteed portions of any purchased loans. The 100% coverage includes ~~loan review work performed~~loans rated by designated SBA department ~~personnel.~~personnel, with a review threshold for the independent loan review department of loans exceeding $1.0 million and any classified loans. At September 30, ~~2017,~~2019, approximately 100% of the government guaranteed loan portfolio had been rated and/or reviewed. ~~The review threshold for the independent loan review department is $1,000,000.~~

Leasing – The targeted review threshold for ~~2017~~2019 is 35%. At September 30, ~~2017,~~2019, approximately ~~53%~~57% of the leasing portfolio had been reviewed. The loan balance review threshold is ~~$1,000,000.~~$1.0 million.

CMBS (Floating Rate) – The targeted review threshold for ~~2017~~2019 is 100%. Floating rate loans will be reviewed initially within 90 days of funding and will be monitored on an ongoing basis as to payment status. Subsequent reviews will be performed based on a sampling each quarter. Each floating rate loan will be reviewed if any available extension options are exercised. At September 30, ~~2017,~~2019, approximately 100% of the CMBS floating rate loans on the books for more than 90 days had been reviewed.

CMBS (Fixed Rate) – 100% of fixed rate loans that are unable to be readily sold on the secondary market and remain on the Bank's books after nine months will be reviewed at least annually. At September 30, ~~2017,~~2019, 100% of the CMBS fixed rate portfolio had been reviewed.

Specialty Lending – Specialty Lending, defined as commercial loans unique in nature that do not fit into other established categories, will have a review coverage threshold of 100% for ~~non CRA~~non-Community Reinvestment Act (“CRA”) loans. At September 30, ~~2017,~~2019, approximately 100% of the ~~non CRA~~non-CRA loans had been reviewed.

Home Equity Lines of Credit (HELOC) – The targeted review threshold for ~~2017~~2019 is 50%. The largest 25% of HELOCs by commitment will be reviewed annually. A random sampling of a minimum of ten of the remaining loans will be reviewed each quarter. At September 30, ~~2017,~~2019, approximately ~~84%~~90% of the HELOC portfolio had been reviewed.

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



	30-59 Days	60-89 Days	90 Days		Total		Total	September 30, 2019
September 30, 2017	past due	past due	or greater	Non-accrual	past due	Current	loans
SBA non real estate	$ 272	$ 165	$ -	$ 2,310	$ 2,747	$ 69,308	$ 72,055
SBA commercial mortgage	-	-	-	1,226	1,226	131,771	132,997
SBA construction	-	-	-	-	-	14,205	14,205
								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								$ 141	$ �� -	$ -	$ 3,803	$ 3,944	$ 80,237	$ 84,181
SBL commercial mortgage								-	-	-	458	458	208,550	209,008
SBL construction								-	-	-	711	711	37,405	38,116
Direct lease financing	5,065	1,060	354	-	6,479	362,590	369,069	1,898	930	2,788	-	5,616	407,139	412,755
SBLOC	-	-	-	-	-	720,279	720,279
SBLOC / IBLOC								2,561	-	-	-	2,561	917,902	920,463
Other specialty lending	-	-	-	-	-	36,664	36,664	-	-	-	-	-	3,167	3,167
Consumer - other	-	-	-	-	-	9,585	9,585	-	-	-	-	-	1,037	1,037
Consumer - home equity	144	-	-	1,417	1,561	8,961	10,522	-	-	-	1,448	1,448	3,903	5,351
Unamortized loan fees and costs	-	-	-	-	-	8,684	8,684	-	-	-	-	-	9,299	9,299
	$ 5,481	$ 1,225	$ 354	$ 4,953	$ 12,013	$ 1,362,047	$ 1,374,060	$ 4,600	$ 930	$ 2,788	$ 6,420	$ 14,738	$ 1,668,639	$ 1,683,377



	30-59 Days	60-89 Days	90 Days		Total		Total	December 31, 2018
December 31, 2016	past due	past due	or greater	Non-accrual	past due	Current	loans
SBA non real estate	$ 559	$ -	$ -	$ 1,530	$ 2,089	$ 72,555	$ 74,644
SBA commercial mortgage	-	-	-	-	-	126,159	126,159
SBA construction	-	-	-	-	-	8,826	8,826
								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								$ 346	$ 125	$ -	$ 2,590	$ 3,061	$ 73,279	$ 76,340
SBL commercial mortgage								-	-	-	458	458	164,948	165,406
SBL construction								-	694	-	-	694	20,942	21,636
Direct lease financing	11,856	1,998	661	-	14,515	332,130	346,645	2,594	1,572	954	-	5,120	389,650	394,770
SBLOC	-	-	-	-	-	630,400	630,400	487	-	-	-	487	784,816	785,303
Other specialty lending	-	-	-	-	-	11,073	11,073	108	-	-	-	108	31,728	31,836
Consumer - other	-	-	-	-	-	5,403	5,403	-	-	-	-	-	9,147	9,147
Consumer - home equity	155	-	-	1,442	1,597	10,374	11,971	-	-	-	1,468	1,468	5,687	7,155
Unamortized loan fees and costs	-	-	-	-	-	7,790	7,790	-	-	-	-	-	10,383	10,383
	$ 12,570	$ 1,998	$ 661	$ 2,972	$ 18,201	$ 1,204,710	$ 1,222,911	$ 3,535	$ 2,391	$ 954	$ 4,516	$ 11,396	$ 1,490,580	$ 1,501,976

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

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



	As of or
	for the nine months ended		For the nine months
	September 30,		ended September 30,
	2017	2016	2019	2018

Ratio of the allowance for loan losses to total loans	0.53%	0.51%	0.62%	0.54%
Ratio of the allowance for loan losses to nonperforming loans *	137.23%	87.12%
Ratio of nonperforming assets to total assets *	0.13%	0.16%
Ratio of the allowance for loan losses to non-performing loans *			112.51%	154.16%
Ratio of non-performing assets to total assets *			0.19%	0.13%
Ratio of net charge-offs to average loans	0.07%	0.01%	0.05%	0.09%
Ratio of net charge-offs to average loans annualized	0.09%	0.01%	0.07%	0.12%

* Includes loans 90 days past due still accruing interest.

The ratio of the allowance for loan and lease losses to total loans ~~was 0.53%~~increased to 0.62% at September 30, ~~2017, compared to 0.51%~~2019 from 0.54% at September 30, ~~2016.~~2018. The increase reflected higher ~~current period ratio reflected an increase in~~allowance allocations for both the ~~allowance which exceeded proportional loan growth during the period.~~non-guaranteed portion of SBA loans and leases. The ratio of the allowance for loan losses to non-performing loans ~~increased~~decreased to ~~137.23%~~112.51% at September 30, ~~2017,~~2019, from ~~87.12%~~154.16% at September 30, ~~2016,~~2018, primarily as a result of ~~a decrease in non-performing loans and~~ an increase in ~~the allowance.~~non-performing loans. The ratio of non-performing assets to total assets ~~decreased~~increased to 0.19% at September 30, 2019, from 0.13% at September 30, ~~2017, from 0.16% at September 30, 2016, primarily~~2018, as a result of ~~a decrease~~an increase in non-performing loans. Net charge-offs to

average loans ~~increased~~decreased to ~~0.07%~~0.05% for the nine months ended September 30, ~~2017,~~2019 from ~~0.01%~~0.09% for the nine months ended September 30, ~~2016, primarily as a result~~2018. The lower ratio in 2019 resulted from fewer charge-offs in 2019 for both the non guaranteed portion of ~~higher net charge offs.~~ SBA loans and leasing. As noted above, allowance allocations for those categories increased year over year.

Net charge-offs. Net charge-offs were $1.2 million for the nine months ended September 30, ~~2017, an increase~~2019, a decrease of ~~$1.0 million~~$421,000 from net charge-offs of ~~$152,000~~$1.7 million during the same period of ~~2016.~~2018. The majority of the charge-offs in 2019 and 2018 resulted from the ~~first nine months~~non-guaranteed portion of ~~2017 were associated with leasing relationships. The majority of the charge-offs in the first nine months of 2016 were associated with~~non-real estate SBA ~~non real estate and leasing relationships.~~loans.

Non-performing loans, loans 90 days delinquent and still accruing, and troubled debt restructurings. Loans are considered to be non-performing if they are on a non-accrual basis or they are past due 90 days or more and still accruing interest. A loan which is past due 90 days or more and still accruing interest remains on accrual status only when it is both adequately secured as to principal and interest, and is in the process of collection. Troubled debt restructurings are loans with terms that have been renegotiated to provide a reduction or deferral of interest or principal because of a weakening in the financial positions of the borrowers. The following tables summarize our non-performing loans, other real estate owned and loans past due 90 days or more still accruing interest (in thousands).:

Loans that were modified as of September 30, ~~2017~~2019 and December 31, ~~2016~~2018 and considered troubled debt restructurings are as follows (dollars in thousands):



	September 30, 2017			December 31, 2016			September 30, 2019			December 31, 2018
	Number	Pre-modification recorded investment	Post-modification recorded investment	Number	Pre-modification recorded investment	Post-modification recorded investment	Number	Pre-modification recorded investment	Post-modification recorded investment	Number	Pre-modification recorded investment	Post-modification recorded investment
SBA non real estate	4	$ 1,013	$ 1,013	2	$ 844	$ 844
SBL non-real estate							6	$ 1,274	$ 1,274	5	$ 1,564	$ 1,564
Direct lease financing	1	285	285	1	734	734	2	423	423	3	870	870
Consumer	2	541	541	1	288	288	2	495	495	2	513	513
Total	7	$ 1,839	$ 1,839	4	$ 1,866	$ 1,866	10	$ 2,192	$ 2,192	10	$ 2,947	$ 2,947

The balances below provide information as to how the loans were modified as troubled debt restructurings loans at September 30, ~~2017~~2019 and December 31, ~~2016~~2018 (in thousands).



	September 30, 2017			December 31, 2016			September 30, 2019			December 31, 2018
	Adjusted interest rate	Extended maturity	Combined rate and maturity	Adjusted interest rate	Extended maturity	Combined rate and maturity	Adjusted interest rate	Extended maturity	Combined rate and maturity	Adjusted interest rate	Extended maturity	Combined rate and maturity
SBA non real estate	$ -	$ 144	$ 869	$ -	$ 144	$ 700
SBL non-real estate							$ -	$ 60	$ 1,214	$ -	$ 85	$ 1,479
Direct lease financing	-	-	285	-	-	734	-	136	287	-	434	436
Consumer	-	-	541	-	-	288	-	-	495	-	-	513
Total	$ -	$ 144	$ 1,695	$ -	$ 144	$ 1,722	$ -	$ 196	$ 1,996	$ -	$ 519	$ 2,428

The following table summarizes, as of September 30, ~~2017,~~2019, loans that had been restructured within the last 12 months that have subsequently ~~defaulted.~~defaulted and which are included in the table above (dollars in thousands).



	Number	Pre-modification recorded investment	Number	Pre-modification recorded investment
SBA non real estate	2	$ 679
SBL non-real estate			1	$ 660
Total	2	$ 679	1	$ 660

~~As of September 30, 2017 and December 31, 2016, we~~The Company had no commitments to lend additional funds to ~~loan~~ customers whose loan terms have been modified in troubled debt ~~restructurings.~~restructurings as of September 30, 2019. The Company had a commitment to extend $27,000 on one loan classified as a troubled debt restructuring as of December 31, 2018.

The following table provides information about impaired loans at September 30, ~~2017~~2019 and December 31, ~~2016:~~2018 (dollars in thousands):



	September 30, 2019
	Recorded investment	Unpaid principal balance	Related allowance	Average recorded investment	Interest income recognized
Without an allowance recorded
SBL non-real estate	$ 352	$ 2,478	$ -	$ 262	$ 4
SBL commercial mortgage	-	-	-	-	-
SBL construction	-	-	-	355	-
Direct lease financing	288	288	-	381	9
Consumer - home equity	495	495	-	1,329	7
With an allowance recorded
SBL non-real estate	3,898	3,898	(3,037)	3,955	22
SBL commercial mortgage	458	458	(71)	458	-
SBL construction	711	711	(35)	178	-
Direct lease financing	136	136	(136)	305	16
Consumer - home equity	1,220	1,220	(204)	400	-
Total
SBL non-real estate	4,250	6,376	(3,037)	4,217	26
SBL commercial mortgage	458	458	(71)	458	-
SBL construction	711	711	(35)	533	-
Direct lease financing	424	424	(136)	686	25
Consumer - home equity	1,715	1,715	(204)	1,729	7
	$ 7,558	$ 9,684	$ (3,483)	$ 7,623	$ 58



December 31, 2016
						December 31, 2018
						Recorded investment	Unpaid principal balance	Related allowance	Average recorded investment	Interest income recognized
Without an allowance recorded
SBA non real estate	$ 191	$ 191	$ -	$ 336	$ -
SBL non-real estate						$ 175	$ 1,469	$ -	$ 334	$ -
SBL commercial mortgage						-	-	-	-	-
Direct lease financing	-	-	-	-	-	437	548	-	425	28
Consumer - other	-	-	-	259	-
Consumer - home equity	1,730	1,730	-	1,187	-	1,612	1,612	-	1,648	10
With an allowance recorded
SBA non real estate	2,183	2,183	938	1,277	-
SBL non-real estate						3,541	3,541	(2,806)	2,816	70
SBL commercial mortgage						458	458	(71)	505	-
Direct lease financing	734	734	216	147	-	434	434	(145)	617	66
Consumer - other	-	-	-	-	-
Consumer - home equity	-	-	-	549	-	129	129	(17)	26	-
Total
SBA non real estate	2,374	2,374	938	1,613	-
SBL non-real estate						3,716	5,010	(2,806)	3,150	70
SBL commercial mortgage						458	458	(71)	505	-
Direct lease financing	734	734	216	147	-	871	982	(145)	1,042	94
Consumer - other	-	-	-	259	-
Consumer - home equity	1,730	1,730	-	1,736	-	1,741	1,741	(17)	1,674	10
	4,838	4,838	1,154	3,755	-	$ 6,786	$ 8,191	$ (3,039)	$ 6,371	$ 174

We had ~~$5.0~~$6.4 million of non-accrual loans at September 30, ~~2017~~2019 compared to ~~$3.0~~$4.5 million of non-accrual loans at December 31, ~~2016.~~2018. The ~~$2.0~~$1.9 million increase in non-accrual loans was primarily due to ~~$3.7~~$4.5 million of loans placed on non-accrual status partially offset by ~~$1.1~~$1.6 million of loan payments and ~~$589,000~~$995,000 of charge-offs. Loans past due 90 days or more still accruing interest amounted to ~~$354,000~~$2.8 million at September 30, ~~2017~~2019 and ~~$661,000~~$954,000 at December 31, ~~2016.~~2018. The ~~$307,000 decrease~~$1.8 million increase reflected ~~$1.7~~$3.8 million of additions partially offset by ~~$1.3 million~~$853,000 of loan payments, ~~$144,000~~$82,000 of charge-offs and ~~$526,000~~$1.1 million of loans moved to repossessed assets.

We had no other real estate owned at September 30, ~~2017~~2019 and ~~$104,000 at~~ December 31, ~~2016 with no additional activity during the intervening period.~~2018.

The following table classifies our loans (not including loans ~~held for sale)~~held-for-sale) by categories which are used throughout the industry as of September 30, ~~2017~~2019 and December 31, ~~2016:~~2018 (dollars in thousands):



September 30, 2017	Pass	Special mention	Substandard	Doubtful	Loss	Unrated subject to review *	Unrated not subject to review *	Total loans
SBA non real estate	$ 44,996	$ 3,981	$ 4,107	$ -	$ -	$ -	$ 18,971	$ 72,055
SBA commercial mortgage	110,059	279	1,226	-	-	2,163	19,270	132,997
SBA construction	14,205	-	-	-	-	-	-	14,205
									September 30, 2019
									Pass	Special mention	Substandard	Doubtful	Loss	Unrated subject to review *	Unrated not subject to review *	Total loans
SBL non-real estate *									$ 64,507	$ 1,948	$ 4,577	$ -	$ -	$ 9,148	$ 4,001	$ 84,181
SBL commercial mortgage *									194,949	268	5,011	-	-	7,889	891	209,008
SBL construction									37,284	-	711	-	-	-	121	38,116
Direct lease financing									397,612	-	9,535	-	-	2,256	3,352	412,755
SBLOC / IBLOC									865,695	-	-	-	-	-	54,768	920,463
Other specialty lending									3,167	-	-	-	-	-	-	3,167
Consumer									3,351	-	1,448	-	-	-	1,589	6,388
Unamortized loan fees and costs									-	-	-	-	-	-	9,299	9,299
									$ 1,566,565	$ 2,216	$ 21,282	$ -	$ -	$ 19,293	$ 74,021	$ 1,683,377

									December 31, 2018
									Pass	Special mention	Substandard	Doubtful	Loss	Unrated subject to review *	Unrated not subject to review *	Total loans
SBL non-real estate									$ 67,809	$ 1,641	$ 4,517	$ -	$ -	$ 347	$ 2,026	$ 76,340
SBL commercial mortgage									158,667	273	458	-	-	5,498	510	165,406
SBL construction									19,912	-	694	-	-	843	187	21,636
Direct lease financing	193,792	-	2,770	-	-	8,733	163,774	369,069	382,860	2,157	1,456	-	-	3,623	4,674	394,770
SBLOC	357,906	-	-	-	-	-	362,373	720,279	775,153	-	-	-	-	-	10,150	785,303
Other specialty lending	36,664	-	-	-	-	-	-	36,664	31,749	-	-	-	-	-	87	31,836
Consumer	8,791	283	1,885	-	-	-	9,148	20,107	5,849	-	1,742	-	-	-	8,711	16,302
Unamortized loan fees and costs	-	-	-	-	-	-	8,684	8,684	-	-	-	-	-	-	10,383	10,383
	$ 766,413	$ 4,543	$ 9,988	$ -	$ -	$ 10,896	$ 582,220	$ 1,374,060	$ 1,441,999	$ 4,071	$ 8,867	$ -	$ -	$ 10,311	$ 36,728	$ 1,501,976

December 31, 2016
SBA non real estate	$ 51,437	$ 2,723	$ 3,628	$ -	$ -	$ -	$ 16,856	$ 74,644
SBA commercial mortgage	92,485	-	-	-	-	15,164	18,510	126,159
SBA construction	8,060	-	-	-	-	-	766	8,826
Direct lease financing	122,571	-	3,736	-	-	30,881	189,457	346,645
SBLOC	277,489	-	-	-	-	-	352,911	630,400
Other specialty lending	11,073	-	-	-	-	-	-	11,073
Consumer	9,837	288	2,312	-	-	-	4,937	17,374
Unamortized loan fees and costs	-	-	-	-	-	-	7,790	7,790
	$ 572,952	$ 3,011	$ 9,676	$ -	$ -	$ 46,045	$ 591,227	$ 1,222,911

* For information on targeted loan review thresholds see “Allowance for Loan Losses”.

Premises and equipment, net. Premises and equipment amounted to ~~$21.1~~$17.9 million at September 30, ~~2017~~2019 compared to ~~$24.1~~$18.9 million at December 31, ~~2016.~~2018. The decrease reflected depreciation and reduced purchases compared to prior periods.

Investment in Unconsolidated Entity. On December 30, 2014, the Bank entered into an agreement for, and closed on, the sale of a portion of its discontinued commercial loan portfolio. The purchaser of the loan portfolio was a newly formed entity, Walnut Street 2014-1 Issuer, LLC (“Walnut Street”). The price paid to the Bank for the loan portfolio, which had a face value of approximately $267.6 million, was approximately $209.6 million, of which approximately $193.6 million was in the form of two notes issued by Walnut Street to the Bank; a senior note in the principal amount of approximately $178.2 million bearing interest at 1.5% per year and maturing in December 2024 and a subordinate note in the principal amount of approximately $15.4 million, bearing interest at 10.0% per year and maturing in December 2024. The balance of these notes comprise the ~~$107.7~~$49.4 million investment in unconsolidated entity at September 30, ~~2017.~~2019

~~The independent investor in~~. A $30 million credit, collateralized by a commercial retail property with multiple tenants, is comprised of a $17.0 million loan which had been sold to Walnut Street, ~~the securitization into~~and $13.0 million which ~~the Bank sold certain~~is included in commercial loans ~~when it discontinued its Philadelphia commercial~~held for sale. The loan ~~operations, has taken actions which may result~~is performing in litigation. Specifically, counsel for the independent investor has requested that the Note Administrator hold monthly distribution payments in escrow until the independent investor’s alternative interpretation of the order of payments, as comparedaccordance with restructured terms and was previously marked to the interpretation of the Bank and the Note Administrator, is resolved. Based on the independent investor’s request, the Note Administrator withheld the September 2017 payment to the independent investor and the Bank and indicated that it would continue to do so until this issue was resolved. Management of the Company, based on advice of its counsel, believes it is unlikely that the Bank and Note Administrator’s interpretation will be overturned. However, if such interpretation is overturned,$28.1 million, based upon ~~the current model used~~an “as is” appraisal in June 2018. The retail space is partially leased and appears to ~~value Walnut Street, an estimated $8 million loss may~~ be ~~recognized,~~on a path toward stabilization, based ~~on currently estimated cash flows which would be redirected from the Bank to the independent investor.~~upon negotiations with prospective tenants.

Assets ~~held for sale.~~held-for-sale from discontinued operations. Assets ~~held for sale~~held-for-sale as a result of discontinued operations, primarily commercial, commercial mortgage and construction loans, amounted to ~~$315.0~~$162.1 million at September 30, ~~2017 compared~~2019 and were comprised of $136.1 million of net loans and $26.0 million of other real estate owned. The September 30, 2019 balance of other real estate owned includes a Florida mall which has been written down to ~~$360.7~~$15.0 million. We expect to continue our efforts to disposeof the mall, which was appraised in September 2018 for $16.9 million. The September 30, 2019 loan balance includes a loan, secured by multiple commercial properties, which has been written down to $12.8 million, atbased on August 2018 appraisals less estimated disposition costs. We expect to continue to market the underlying properties through a court appointed and bank approved broker. At December 31, ~~2016. The decrease resulted primarily from loan repayments.~~2018, discontinued assets of $197.8 million were comprised of $170.6 million of net loans and $27.2 million of other real estate owned. We continue our efforts to transfer the loans to other financial institutions, and dispose of the other real estate owned.

Deposits. Our primary source of funding is deposit acquisition. We offer a variety of deposit accounts with a range of interest rates and terms, including demand, checking and money market accounts. ~~However, the~~The majority of our deposits are generated through prepaid card and other payments related ~~deposits.~~deposit accounts. One strategic focus is growing these accounts through affinity groups. At September

30, ~~2017,~~2019, we had total deposits of ~~$3.57~~$4.35 billion compared to ~~$4.24~~$3.94 billion at December 31, ~~2016, a decrease~~2018, an increase of $~~672.9~~410.0 million or ~~15.9%~~10.4%. The ~~decrease~~change reflected a $475.0 million increase in short term time deposits to fund increased commercial real estate loans originations, prior to their securitization at the ~~planned exit~~end of ~~higher cost deposit relationships which did not have adequate income components.~~September. Those time deposits mature in October, 2019. The following table presents the average balance and rates paid on deposits for the periods indicated (in thousands):



		For the nine months ended		For the year ended			For the nine months ended		For the year ended
		September 30, 2017		December 31, 2016			September 30, 2019		December 31, 2018
		Average	Average	Average	Average		Average	Average	Average	Average
		balance	rate	balance	rate		balance	rate	balance	rate

Demand and interest checking *	Demand and interest checking *	$ 3,433,027	0.34%	$ 3,347,191	0.28%	Demand and interest checking *	$ 3,840,141	0.88%	$ 3,499,288	0.66%
Savings and money market	Savings and money market	434,768	0.53%	394,434	0.39%	Savings and money market	28,073	0.61%	362,267	0.79%
Time		-	0.00%	77,576	0.58%		90,808	1.96%	-	-
	Total deposits	$ 3,867,795	0.36%	$ 3,819,201	0.30%	Total deposits	$ 3,959,022	0.90%	$ 3,861,555	0.67%

* Non-interest bearing demand accounts are not paid interest. The amount shown as interest reflects the fees paid to affinity groups, which are based upon a rate index, and therefore classified as interest expense.

Short-term borrowings. Short-term borrowings consist of amounts borrowed on our line of credit with the FHLB. There were no amounts outstanding at either September 30, 2019 or December 31, 2018. We generally utilize overnight borrowings to manage our daily reserve requirements at the Federal Reserve. Period end and year to date information for the dates shown is as follows.

Borrowings. At September 30, ~~2017,~~2019, we had long-term borrowings of ~~$42.5~~$41.2 million compared to ~~$263.1~~$41.7 million at December 31, ~~2016.~~2018. The ~~$42.5 million outstanding at September 30, 2017, reflected the proceeds from two~~borrowings consisted of sold loans which were ~~sold in which we retained a participating interest. Long-term borrowings of $263.1 million at December 31, 2016 reflected the proceeds of loans sold into a securitization which, at that date, was~~ accounted for as a secured ~~borrowing. In the first quarter of 2017, the documentation required~~borrowing because they did not qualify for true sale ~~accounting was completed, and the sale was recorded in that quarter.~~accounting. We do not have any policy prohibiting us from incurring debt.

Other liabilities. Other liabilities amounted to ~~$32.7~~$59.0 million at September 30, ~~2017~~2019 compared to ~~$44.1~~$40.3 million at December 31, ~~2016,~~2018, representing an increase of ~~$11.4~~$18.8 million. ~~Other~~The increase reflected liabilities ~~consist primarily~~from the implementation of ~~investment payables and accrued expenses.~~a recent accounting pronouncement, which resulted in the capitalization of future lease obligations which were offset by related liabilities as described in Note 11 to the financial statements.

~~Off~~Off- balance sheet arrangements. There were no off-balance sheet arrangements during the nine months ended September 30, ~~2017~~2019 that have or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our interests.

Except as discussed in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” there has been no material change in our assessment of our sensitivity to market risk since our presentation in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, or 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 and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Members of our operational management and internal audit meet regularly to provide an established structure to report any weaknesses or other issues with controls, or any matter that has not been reported previously, to our Chief Executive Officer and Chief Financial Officer, and, in turn to the Audit Committee of our Board of Directors. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

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

There has been no change in our internal control over financial reporting that occurred during the quarter ended September 30, ~~2017~~2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

5962

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

For a discussion of Legal Proceedings, see Part I, Financial Information, “Notes to Unaudited Consolidated Financial Statements, Note 13.” which is incorporated herein by reference.

For a discussion of certain regulatory proceedings involving the FDIC and FRB, see Part I - Item ~~2 “Management’s~~2. “Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations-Financial Statement Restatement;~~ Operations—Regulatory ~~Actions”.~~

On September 30, 2016, the Company received written notice from the Internal Revenue Service that it will be conducting an audit of the Company's tax returns for the tax years 2012, 2013 and 2014. The audit is in process.

The Company received a letter, dated August 1, 2016, demanding inspection of its books and records pursuant to Section 220 of the Delaware General Corporation Law, or DCGL, from legal counsel representing a shareholder (the "Demand Letter"). The Company, through outside legal counsel, responded to the Demand Letter by permitting the shareholder to inspect certain of the Company’s books and records and by objecting to other requests. On January 30, 2017, the shareholder filed a complaint in the Court of Chancery of the State of Delaware seeking an order from the court, pursuant to Section 220 of the DGCL, compelling the Company to permit the shareholder to inspect additional books and records of the Company. The Company believes that its original response to the Demand Letter was appropriate in all respects and continues to defend against the complaint. On July 27, 2017, the Court of Chancery ruled in favor of the Company and granted an Order of Final Judgment Denying Plaintiff’s Demand To Inspect The Books And Records of Defendant. The court’s Order was subject to an appeal right which has now expired; no appeal was filed. Both the Demand Letter and the complaint threaten the commencement of a shareholder’s derivative suit against certain officers and directors of the Company seeking damages and other remedies on behalf of the Company. We have been advised by our counsel in the matter that reasonably possible losses cannot be estimated, but we and our counsel continue to believe the claim is without merit.

On October 17, 2017, the Federal Deposit Insurance Corporation (the “FDIC”) informed The Bancorp Bank (the “Bank”), a wholly owned subsidiary of The Bancorp, Inc. (the “Company”), that it intends to pursue an Order For Restitution (“Restitution Order”) and Order to Pay Civil Money Penalty (“CMP Order”) in an amount up to $2,576,000. The FDIC’s action principally emanates from one of the Bank’s third-party payment processors (“Third Party Processor”) suffering an internal system programming glitch. This inadvertently resulted in consumers that engaged in signature-based point of sale transactions during the period from December 2010 to November 2014 being charged a greater fee than what was disclosed by the Bank. Impacted consumers are being reimbursed by the Third Party Processor at its own expense. The Restitution Order would require the Bank to make such reimbursements if not otherwise made by the Third Party Processor, however, the Bank is indemnified by the Third Party Processor for such reimbursements. Although the Bank is still evaluating its position with regard to the Restitution Order and the CMP Order, the Company accrued $2,500,000 of related expense in its financial statements for the quarter ended September 30, 2017 in connection with the CMP Order. Any amounts owed from the CMP Order would not be subject to any indemnification or recovery from any third party.

In addition, we are a party to various routine legal proceedings arising out of the ordinary course of our business. Management believes that none of these actions, individually or in the aggregate, will have a material adverse effect on our financial condition or operations.Actions.”

6063

Item 6. Exhibits

The Exhibits furnished as part of this Quarterly Report on Form 10-Q are identified in the Exhibit Index immediately following the signature page of this Report. Such Exhibit Index is incorporated herein by reference.


Exhibit No.		Description

31.1		Rule 13a-14(a)/15d-14(a) Certifications * *

31.2		Rule 13a-14(a)/15d-14(a) Certifications * *

32.1		Section 1350 Certifications * *

32.2		Section 1350 Certifications * *

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

*		Filed herewith

SIGNATURES

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


		THE BANCORP, ~~INC~~INC.
		(Registrant)

November ~~9, 2017~~8, 2019		/s/S/ DAMIAN KOZLOWSKI
Date		Damian Kozlowski
		~~President/~~Chief Executive Officer

November ~~9, 2017~~8, 2019		/s/S/ PAUL FRENKIEL
Date		Paul Frenkiel Executive Vice President of Strategy,
		Chief Financial Officer and Secretary

6164


Delaware		23-3016517
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

409 Silverside Road, Wilmington, DE 19809		(302) 385-5000
(Address of principal executive offices and zip code)		(Registrant's telephone number, including area code)



Large accelerated filer ~~[ ]~~☐	Accelerated filer ~~[X]~~☒	Non-accelerated filer ~~[ ]~~☐
Smaller reporting company ~~[ ]~~☐	Emerging growth company ~~[ ]~~☐


Title of Each Class	Trading Symbol(s)	Name of each Exchange on Which Registered
Common Stock	TBBK	Nasdaq Global Select


		Page
Part I Financial Information
Item 1	Financial Statements:	34

	Consolidated Balance Sheets – September 30, ~~2017~~2019 (unaudited) and December 31, ~~2016~~2018	34

	Unaudited Consolidated Statements of Operations – Three and nine months ended September 30, ~~2017~~2019 and ~~201~~20186	45

	Unaudited Consolidated Statements of Comprehensive Income – Nine months ended September 30, ~~2017~~2019 and ~~2016~~2018	67

	Unaudited Consolidated Statements of Changes in Shareholders’ Equity – Nine months ended September 30, ~~2017~~2019 and 2018	78

	Unaudited Consolidated Statements of Cash Flows – Nine months ended September 30, ~~2017~~2019 and ~~2016~~2018	810

	Notes to Unaudited Consolidated Financial Statements	1011

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3840

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6062

Item 4.	Controls and Procedures	6062

Part II Other Information

Item 1.	Legal ~~proceedings~~Proceedings	6163
Item 6.	Exhibits	6264

Signatures		6264



	September 30,
	2019	2018
Risk-free interest rate	2.63%	-
Expected dividend yield	-	-
Expected volatility	41.83%	-
Expected lives (years)	1.0 - 6.3	-


~~[X]~~☒		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
		SECURITIES EXCHANGE ACT OF 1934



~~[ ]~~☐		TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE
		SECURITIES EXCHANGE ACT OF 1934

Other	3,574	4,276	10,306	14,127
Total non-interest expense	43,883	44,171	119,029	156,445
Income (loss) from continuing operations before income taxes	12,225	(1,475)	30,213	(45,135)
Income tax expense (benefit)	5,455	55	(457)	(15,324)
Net income (loss) from continuing operations	$ 6,770	$ (1,530)	$ 30,670	$ (29,811)
Discontinued operations
Income (loss) from discontinued operations before income taxes	829	(21,490)	5,488	(38,073)
Income tax expense (benefit)	318	2,531	2,050	(164)
Income (loss) from discontinued operations, net of tax	511	(24,021)	3,438	(37,909)
Net income (loss) available to common shareholders	$ 7,281	$ (25,551)	$ 34,108	$ (67,720)

Net income (loss) per share from continuing operations - basic	$ 0.12	$ (0.03)	$ 0.55	$ (0.73)
Net income (loss) per share from discontinued operations - basic	$ 0.01	$ (0.51)	$ 0.06	$ (0.92)
Net income (loss) per share - basic	$ 0.13	$ (0.54)	$ 0.61	$ (1.65)

Net income (loss) per share from continuing operations - diluted	$ 0.12	$ (0.03)	$ 0.55	$ (0.73)
Net income (loss) per share from discontinued operations - diluted	$ 0.01	$ (0.51)	$ 0.06	$ (0.92)
Net income (loss) per share - diluted	$ 0.13	$ (0.54)	$ 0.61	$ (1.65)



Single issuer	Book value	Fair value	Unrealized gain/(loss)	Credit rating
Security A	$ 1,913	$ 2,031	$ 118	Not rated
Security B	9,104	6,343	(2,761)	Not rated

Class: All of the above are trust preferred securities.

Ending balance: Individually evaluated for impairment	$ 2,645	$ 1,226	$ -	$ 284	$ -	$ -	$ 1,700	$ -	$ 5,855

Ending balance: Collectively evaluated for impairment	$ 69,410	$ 131,771	$ 14,205	$ 368,785	$ 720,279	$ 36,664	$ 18,407	$ 8,684	$ 1,368,205


Remaining 2019		$ 40,096
2020		117,691
2021		86,382
2022		51,675
2023		26,048
2024 and thereafter		9,394
Total undiscounted cash flows		331,286
Residual value *		125,938
Difference between undiscounted cash flows and discounted cash flows		(44,469)
Present value of lease payments recorded as lease receivables		$ 412,755