* Less than 1%

Delinquent Section 16(a) Reports

16 Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”), requires the Company'sCompany’s officers, directors and persons who own more than ten percent of a registered class of the Company'sCompany’s equity securities to file reports of ownership and changes in ownership with the SEC and to furnish the Company with copies of all such reports.

Based solely on its review of the reports received by it, the Company believes that, during fiscal 2019,2020, no officers, directors or beneficial owners failed to file reports of ownership and changes of ownership on a timely basis.

Hedging Policy

NON-DIRECTORThe Company has an Insider Trading Policy that prohibits hedging transactions. The policy may be accessed at https://investors.thebancorp.com/corporate-information/governance-documents/default.aspx. The prohibition against hedging is as follows:

PROHIBITED TRANSACTIONS. The Company considers it improper and inappropriate for any employee, officer or director to engage in speculative transactions in Company securities. It therefore is Company policy that insiders may not engage in any of the following transactions:

Hedging Transactions. Certain forms of hedging or monetization transactions, such as zero-cost collars and forward sale contracts, allow an employee, officer or director to lock in much of the value of his or her stock holdings, often in exchange for all or part of the potential for upside appreciation in the stock. These transactions allow the employee, officer or director to continue to own the covered securities, but without the full risks and rewards of ownership. In these situations, the employee, officer or director may no longer have the same objectives as other shareholders. Therefore, employees, officers and directors are prohibited from engaging in any such transactions.

NAMED EXECUTIVE OFFICERS

Information is set forth below regarding the background of each of the Company'sCompany’s executive officers who is not also a director. For the Company'sCompany’s officer who is a director nominee, Damian Kozlowski, this information can be found above under "Proposal“Proposal 1. Election of Directors—Directors and Nominees."

”

Mark L. Connolly,age 52,53, joined The Bancorp in June 2016 and has served as Executive Vice President and Head of Credit Markets since February 2017. On December 18, 2019 he was also named2017 and Chief Credit Officer.Officer since December 2019. From 2013 to 2015, Mr. Connolly held a variety of senior management roles including Chief Financial Officer, Head of Operations and Head of Financial Services of Tresata, Inc., a data analytics software company. Previously, from 2010 to 2012, Mr. Connolly served as Managing Director – Private Bank Head of Products which included US Lending, Mortgages, Banking and Trust Services at Morgan Stanley Smith Barney.Wealth Management. Additionally, Mr. Connolly served as the Co-Chief Executive Officer/Chief Operating Officer of the U.S. Private Bank at Citi Global Wealth Management from 2009 to 2010 and served as the Head of U.S. Lending, Mortgages, Banking and Trust Services at Citi Global Wealth Management from 2005 to 2010.  Before joining Citigroup, Mr. Connolly also held a senior management position within Bank of America’s Corporate and Investment Bank from 1998 to 2005.

Paul Frenkiel, age 67,68, has served as Chief Financial Officer and Executive Vice President of Strategy at The Bancorp since joining the organization in September 2009; he also serves as the organization'sorganization’s Principal Accounting Officer. From November 2000 through October 2008 he was Chief Financial Officer and Executive Vice President of Republic First Bancorp Inc. From January 2005 through September 2009, Mr. Frenkiel also served as Chief Financial Officer and in other capacities for First Bank of Delaware, which was spun off from Republic First Bancorp Inc. Additionally, he served as Chief Financial Officer of JeffBanks, Inc., from 1987 through its acquisition by Hudson United Bancorp in 2000, and also served as Chief Financial Officer at Dominion Bank. A chartered bank auditor and certified public accountant, Mr. Frenkiel is a member of the American Institute of Certified Public Accountants.   

Gregor Garry,age 36,37, has served as the Chief Operating Officer and Executive Vice President at The Bancorp since July 2019. He has also served as the organization’s Chief Risk Officer, Deputy Chief Operating Officer, Chief Audit Executive, and Vice President of Internal Audit since joining The Bancorp in October 2014. From December 2009 – October 2014 he served as the Internal Audit Manager and in other capacities for The First National Bank in Sioux Falls, Sioux Falls, South Dakota. From July 2007 – December 2009 Mr. Garry was a Senior Management Consultant for Milo Belle Consultants. Mr. Garry is a Certified Internal Auditor, a Certified Fiduciary and Investment Risk Specialist, and holds a certification in Risk Management Assurance. He holds a Bachelor of Business Administration degree in economics and a Master of Business Administration from the University of South Dakota.

Thomas G. Pareigat, age 60,61, has served as General Counsel since February 2011. From 2003 to 2005 and from 2007 to 2011 he was a partner in the Minneapolis, Minnesota law firm of Lindquist & Vennum LLP, where he concentrated his practice on banking law and regulatory compliance matters as a member of the firm'sfirm’s Financial Institutions Practice Group.  Between 2005 and 2007 he served as Senior Vice President and Regulatory Counsel for Marshall BankFirst Corp. From 2001 to 2002, Mr. Pareigat was Vice President and Corporate Counsel for Marquette Bancshares, Inc. and its subsidiary banks until their acquisition by Wells Fargo. From 1989 to 2001 he served as Senior Attorney with Bankers Systems, Inc. (now Wolters Kluwer Financial Services). A frequent speaker on emerging risk issues within the financial services industry, Mr. Pareigat serves on the Editorial Board of the American Bankers Association'sAssociation’s Bank Compliance magazine and has served on the faculty of the ABA'sABA’s National Compliance School and Graduate School for Compliance Risk Management.

CORPORATE GOVERNANCE

Director Independence

The Company's Common Shares are listed on the NASDAQ Global Select Market under the symbol "TBBK" and the Company is subject to the listing standards thereof.“TBBK.” The Board of Directors has determined that Mr. Beach, Mr. Bradley, Mr. Cohn, Mr. Chrystal, Mr. Eggemeyer, Mr. Kozlov, Mr. Lamb, Ms. Mielke, Ms. Mudick, Mr. McEntee and Ms. Tuan, each of the directors meet the definition of an independent director set forth in the NASDAQ rules. listing standards and the Bancorp Director Independence Categorical Standards, or the Director Independence Standards, except for Messrs. Cohen and Kozlowski who are Chairman of the Board and Chief Executive Officer and President of the Company and the Bank, respectively. The Company’s independent directors are Mr. Beach, Mr. Bradley, Mr. Chrystal, Mr. Cohn, Mr. Eggemeyer, Mr. Kozlov, Mr. Lamb, Mr. McEntee, Ms. Mielke, Ms. Mudick and Ms. Tuan. In making these determinations, the Board of Directors reviewed information from each of these directors concerning all their respective relationships with the Company and its affiliates and analyzed the materiality of those relationships. In considering the independence of Mr. Kozlov, the Board considered that Mr. Kozlov is a partner at Duane Morris LLP, or Duane Morris, an international law firm, and that the Company paid amounts to Duane Morris for legal services described below under “Certain Relationships and Related Party Transactions.” The Board confirmed that these payments did not exceed 5% of Duane Morris’ consolidated gross revenues for 2020 and so did not preclude the Board determining Mr. Kozlov to be independent under NASDAQ listing standards and further determined that this relationship would not interfere with his exercise of independent judgment in carrying out his responsibilities as a director.

Board Leadership and Committee Structure and Role in Risk Oversight

Daniel G. Cohen serves as the Company’s Chairman of the Board and Damian M. Kozlowski serves as its Chief Executive Officer and as a director. The Company believes that the most effective leadership structure at the present time is to have separate Chairman of the Board and Chief Executive Officer positions because this allows the board to benefit from having two strong voices bringing separate views and perspectives to meetings. In addition, since August 2015, Michael J. Bradley has served as the lead independent director of the Board of Directors. In this role, Mr. Bradley acts as an alternative point of contact between other directors and the Chairman of the Board, and facilitates executive sessions held by the independent directors.

During 2020, five of the seven standing committees of the Board assisted the Board of Directors with risk oversight: the Risk Committee, the Complaint and Error Claim Committee, the Bank Secrecy Act, or BSA Committee, the Audit Committee and the Compensation Committee. These committees each perform risk-related oversight functions on behalf of the Board and report regularly to the Board of Directors, which also considers the Company’s entire risk profile, including additional strategic and reputational risks.

These committees receive reports from management regularly regarding the Company'sCompany’s assessment of risks and the adequacy and effectiveness of internal control systems. Through their interaction with the Company'sCompany’s senior management, these committees oversee credit risk, market risk (including liquidity and interest rate risk) and operational risk (including compliance and legal risk). The Chief Risk Officer meets at least quarterlyWith the Bank’s successful emergence from the terminated 2014 Consent Order and 2015 Consent Order, the Board evaluated the Board’s committee structure related to risk management and determined that it would be consistent with the Board’s commitment to effective risk oversight to consolidate the CECC and the BSA Committee into the oversight duties of the Risk Oversight CommitteeCommittee. The Board has determined to discuss potential risk or control issues involving management. The aforementioned Board committees report regularly to the Boardmake this consolidation effective as of Directors, which also considers the Company's entire risk profile, including additional strategic and reputational risks. April 1, 2021.

While the Board of Directors oversees the Company'sCompany’s risk management across the enterprise, senior management at the Company and Bank are responsible for the day-to-day risk management processes.processes and implementation of risk management programs. Senior management comprises the Bank'sCompany’s Enterprise Risk Management Committee which meets at least quarterly and addresses various risks, controls and related monitoring.  While the Board of Directors believes that this division of responsibility is the most effective approach for addressing the risks facing the Company, it will continue to re-examine this structure on a regular basis, recognizing that different structures may be appropriate in different situations faced by the Company.

Board Meetings

The Board of Directors held a total of 12 meetings during fiscal 2019.2020. During fiscal 20192020 all directors attended at least 75% of the aggregate of (a) the total number of meetings of the Board of Directors held during the period for which the director had been a director and (b) the total number of meetings held by all committees of the Board of Directors on which the director served during the periods that the director served. It is the policy of the Board of Directors that all directors attend the annual meeting of stockholders of the Company, if practicable. All directors attended the last annual meeting.

Communications with the Board

Stockholders, employees and others who wish to communicate with the Board of Directors may do so by sending their correspondence to The Bancorp, Inc., Attention: Paul Frenkiel, Secretary, 409 Silverside Road, Suite 105, Wilmington, Delaware 19809. The mailing envelope must contain a clear notation indicating that the enclosed letter is a "Stockholder-Board“Stockholder-Board Communication."” All such letters must identify the author as a stockholder of the Company and clearly state whether the intended recipients are all or individual members of the Board. The Secretary will make copies of all such letters and circulate them to the appropriate director or directors. The Secretary has been authorized to screen commercial solicitations and materials which pose security risks, are unrelated to the business or governance of the Company or are otherwise inappropriate.

Corporate Governance Materials

The Company'sCompany’s Code of Ethics and Business Conduct (the "Code“Code of Business Conduct"Conduct”), which applies to all employees, including our principal executive officer, principal financial officer and principal accounting officer, Corporate Governance Guidelines, Director Independence Standards, Insider Trading Policy and the charters of the Audit Committee, the Compensation Committee and the Nominating and Governance Committee are available on the Company'sCompany’s website:http: https://investors.thebancorp.com/govdocs.

corporate-information/governance-documents/default.aspx.

Copies of these documents are available, free of charge, upon written request to: The Bancorp, Inc., Attention: Andres Viroslav, Investor Relations, 409 Silverside Road, Suite 105, Wilmington, Delaware 19809. The Company will satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of the Code of Business Conduct by posting such information on the Company'sCompany’s website.

Board Committees

TheDuring 2020, the Board of Directors currently hashad seven standing committees: Audit Committee, Compensation Committee, Risk Committee, Complaint and Error Claim Committee, Bank Secrecy ActBSA Committee, Nominating and Governance Committee and Executive Committee. The committees on which directors serve, the chairmanchairperson of each committee, and the number of meetings held during 20192020 are set forth below. Mr. Kozlowski is not listed because he did not serve on any committee during 2020.

Audit Committee. The Audit Committee is appointed by the Board of Directors to assist the Board of Directors auditDirectors’ audit-related oversight of (a) the integrity of the Company'sCompany’s financial statements, (b) the Company's risk management processes, (c) the Company'sCompany’s compliance with legal and regulatory requirements, (d)(c) the independent auditor'sauditor’s qualifications and independence and (e)(d) the performance of the Company'sCompany’s internal audit function and independent auditors. The Audit Committee also prepares the audit committee reportAudit Committee Report required by the rules of the SEC to be included in the Company'sCompany’s annual proxy statement.

Proxy Statement. Each member of the Audit Committee meets the independence standards for audit committeeAudit Committee members set forth in applicable NASDAQ rules, as well as those set forth in Rule 10A-3(b)(1) of the Exchange Act. The Board of Directors has determined that Mr. Bradley qualifies as an "audit committee“Audit Committee financial expert"expert” as that term is defined in applicable SEC rules and regulations.

Compensation Committee.The Compensation Committee is appointed by the Board of Directors to have direct responsibility for approving the compensation of the Chief Executive Officer and certain other officers and the non-management directors of the Company as described in "Compensation“Compensation Committee Report"Report” and the related "Compensation“Compensation Discussion and Analysis” below. At all times during 2019, theThe Compensation Committee had direct responsibility foralso (a) administeringadministers the Company'sCompany’s equity-based compensation plans and (b) reviewingreviews any extraordinary bonus or other compensatory payments to any employee of the Company.  For officers and employees reporting to named executive officers, or NEOs, the Compensation Committee has delegated primary responsibility for recommending salary changes to the President and Chief Executive Officer and President.

Compensation Committee Interlocks and Insider Participation.The Compensation Committee consists of Messrs. Beach, Lamb and Kozlov.  None of such persons was an officer or employeeOfficer. All of the Company or anymembers of its subsidiaries during fiscal 2019 or was formerly an officer or employee ofthis committee have been determined by the Company. During fiscal 2019, none of the Company's executive officers served as a director or on the compensation committee of another entity, one of whose executive officers served on the Compensation Committee. During fiscal 2019, none of the Company's executive officers served on the compensation committee of another entity, any one of whose executive officers served on the Company's Board of Directors.

Directors to be independent under applicable NASDAQ and SEC rules and regulations, as well as the Director Independence Standards.

Risk Committee. The Risk Committee is appointed by the Board of Directors to assist inoversee the oversight ofCompany’s enterprise risk management framework, including management’s efforts related to risk assessment and risks inherentthe implementation of risk-related policies, programs and practices used in identifying and managing Company risks. The Committee meets at least quarterly with the Company's activities. The committee oversees the activities of theCompany’s Chief Risk Officer and meets with various members of management, as necessary or desirable, in its oversight of risk management.other key control function officers. A subset of members of this committee servesserved as the Bank’s Consent Order Oversight Committee for purposes of confirming compliance with the requirements of consent orders with federal banking authorities.the 2015 Consent Order which was terminated by the FDIC on November 17, 2020. Additionally, the members of this Committee served as members of the CECC and the BSA Committee, which focused on consumer compliance risks and BSA risks, respectively. See “—Board Leadership and Committee Structure and Role in Risk Oversight.”

Complaint and Error Claim Committee.The Complaint and Error Claim Committee is appointed by the Board of Directors to assist in the oversight of customer complaint resolution including claims of possible errors related to electronic fund transfers or inquiries related to such transfers, and resolutions of related agreed upon improvements required by consent orders with federal banking authorities. See “—Board Leadership and Committee Structure and Role in Risk Oversight.”

Bank Secrecy Act ("BSA") Committee. The BSA Committee is appointed by the Board of Directors to assist in the oversight of compliance with BSA/ Anti-Money Laundering requirements, including resolutions of agreed upon improvements required by the FDIC consent orders. See “—Board Leadership and Committee Structure and Role in Risk Oversight.”

Nominating and Governance Committee. The Nominating and Governance Committee is appointed by the Board of Directors to (a)(i) assist the Company and the Board of Directors in maintaining an effective and knowledgeable Board of Directors, including assisting the Board of Directors in identifying individuals qualified to become directors and recommending to the Board of Directors the director nominees for the next annual meeting of stockholdersstockholders; (ii) reviewing the Board’s committee composition and making membership recommendations as needed; and (iii) overseeing the directors to be appointed to each committee,Company’s environmental, social and (b) developgovernance, or ESG, practices and recommend for the Board of Director's consideration governance guidelines for the Company.related policies and practices including human capital management, diversity and inclusion, health and safety issues, corporate social responsibility and other ESG-related activities. All of the members of this committee have been determined by the Board of Directors to be independent under applicable NASDAQ and SEC rules and regulations.

regulations, as well as the Director Independence Standards.

The Nominating and Governance Committee will consider candidates for nomination as a director recommended by stockholders, directors, officers, third party search firms and other sources. The Company describes the procedures for nominations by stockholders are described below in "Stockholdera section titled “Stockholder Proposals and Nominations."Nominations”. The Company describes how it addresses such submissions in the “Submission of Director-Nominee Candidate” section of the Corporate Governance Guidelines which may be accessed at https://investors.thebancorp.com/corporate-information/governance-documents/default.aspx. In evaluating candidates, the Nominating and Governance Committee considers the attributes of the candidate (including skills, experience, diversity, age, and legal and regulatory requirements) and the needs of the Board of Directors, and will review all candidates in the same manner, regardless of the source of the recommendation.

The Nominating and Governance Committee has not adopted specific, minimum qualifications or specific qualities or skills that must be met by a Nominating and Governance Committee-recommended nominee. The Board will consider the overall experience and expertise represented by the Board as well as the qualifications of each candidate. During the evaluation process, the Committee and the Board will take the following standards into account:

The Nominating and Governance Committee seeks to ensure that the membership of the Board of Directors and each committee of the Board of Directors satisfies all relevant NASDAQ rules and applicable laws and regulations and all requirements of the Company'sCompany’s governance documents. The Nominating and Governance Committee seeks to achieve a mixture of skills that are related to the Company'sCompany’s business. The nature of the specific qualifications, qualities or skills that the Nominating and Governance Committee may look for in any particular director nominee depends on the qualifications, qualities and skills of the rest of the directors at the time of any vacancy on the Board of Directors.

Executive Committee.The Executive Committee has the delegated authority to act in lieu of the Company'sCompany’s Board of Directors in between meetings of the Board.

Compensation Committee Interlocks and Insider Participation

Messrs. Beach, Lamb, Kozlov and Ms. Tuan were all directors who served as a member of the Compensation Committee during 2020. Ms. Tuan served on the Compensation Committee since October 21, 2020. Mr. Kozlov served on the Compensation Committee during 2020 until he resigned from the Compensation Committee effective April 29, 2020. As described below under “Certain Relationships and Related Party Transactions,” Mr. Kozlov is a partner at Duane Morris LLP, or Duane Morris, an international law firm. The Company paid Duane Morris $1.7 million in 2020 for legal services.

No executive officer of the Company served on the board of directors or compensation committee of any entity that has one or more executive officers serving as members of the Company’s Board of Directors or Compensation Committee.

CERTAIN RELATIONSHIPS AND RELATED PARTY trANSACTIONSTRANSACTIONS

Under the Code of Business Conduct, the Company has established a procedure regarding the review and approval of transactions that would be required to be reported under Item 404 of Regulation S-K. Under this procedure, the Audit Committee must approve any such transaction and find it to be on terms comparable to those available on an arms'arms’ length basis from an unaffiliated third party or find that it otherwise does not create a conflict of interest. If the Audit Committee finds a conflict of interest to exist with respect to a particular transaction, that transaction is prohibited unless a waiver of the Code of Business Conduct is approved by the Audit Committee.

The Bank maintains deposits for various affiliated companies totaling approximately $0 million and $2.6 million as of December 31, 2019 and 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 lender. At December 31, 2019,2020, these loans were current as to principal and interest payments and did not involve more than normal risk of collectability.collectability or present other unfavorable features. At December 31, 2019 and 2018,2020, loans to these related parties amounted to $2.3 million and $2.0 million, respectively.$4.7 million.

The Bank has periodically purchased securities under agreements to resell and engaged in other securities transactions through J.V.B. Financial Group, LLC, (JVB),or 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 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 2020, the Company did not purchase any securities from JVB. In 2019, the Company purchased $2.3 million of government guaranteed SBA loans for Community Reinvestment Act purposes from JVB. Prices for the SBA loans are verified to market rates and no separate commissions or fees are paid to that firm. The Company previously purchased securities under agreements to resell through JVB primarily consisting of Government National Mortgage Association certificates which are full faith and credit obligations of the United States government issued at competitive rates. JVB fully complied with the terms of the repurchase agreements. There were no repurchase agreements outstanding at December 31, 2019 and 2018,2020 respectively.

Mr. Hersh Kozlov, a director of the Company, is a partner at Duane Morris LLP, or Duane Morris, an international law firm. The Company paid Duane Morris LLP $1.1$1.7 million in 2019, $3.0 million in 2018 and $3.5 million in 20172020 for legal services.

PROPOSAL 2. ADVISORY (NON-BINDING) VOTE ON EXECUTIVE COMPENSATION

Introduction

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"“Dodd-Frank Act”), which was signed into law by President Obama on July 21, 2010, requires public companies to provide their stockholders with a non-binding vote to approve executive compensation at least once every three years, or more frequently, as directed by stockholder vote. The Company is seeking this stockholder advisory vote on its executive compensation in accordance with Section 14A of the Exchange Act and Exchange Act Rule 14a-21(a)applicable SEC rules and pursuant to the stockholder vote of the Company'sCompany’s 2017 annual meeting that required the advisory vote to be on an annual basis.

The Board of Directors Supports a Say-On-Pay Vote and Will Consider the Results Carefully.

At its meeting held in 2019, 70%the Company’s 2020 Annual Meeting, 96% of the votes cast approved the Company’s 2019 executive compensation program, compared to 70% of the votes cast for the Company’s 2018 executive compensation program.program at the Company’s 2019 Annual Meeting. At its meeting held inthe Company’s 2018 Annual Meeting, 53% of the votes cast approved the Company’s 2017 executive compensation program. Notwithstanding that 70% of stockholders approved the 2018 program, in 2019, the Compensation Committee acted on stockholder feedback to increase the approval rate. Specifically, in 2019 theThe Compensation Committee implemented a restructure ofrestructured the CEO’s compensation to “pay for performance” and made other changes to address input from stockholders and their advisors. The restructuring of the CEO’s compensation and other changes are described in a chart in the Compensation Discussion and Analysis, ("or CD&A”)&A, below. The Board of Directors values the Company's stockholders'Company’s stockholders’ opinions. As it does each year, the Board of Directors intends to evaluate the results of the advisory vote on compensation carefully when making future decisions regarding compensation of the named executive officers.

Compensation of Named Executive Officers

As described in the CD&A below, the Compensation Committee has developed an executive compensation program designed to align the long-term interests of the Company'sCompany’s named executive officers with the long-term interests of its stockholders. The disclosure in the CD&A and the disclosure included in the section entitled "Executive“Executive and Director Compensation"Compensation” below have been provided in response to the requirements of SEC rules and explain the compensation policies under which the Company paid its named executive officers for 2019.

in 2020.

Advisory or Non-Binding Effect of Vote

Under the Dodd-Frank Act and the related SEC rules, your vote on this resolution is an advisory or "non-binding"“non-binding” vote. This means that the purpose of the vote is to provide stockholders with a method to give their opinion to the Board of Directors about certain issues, like executive compensation. The Board of Directors is not required by law to take any action in response to the stockholder vote. However, the Board of Directors values the Company's stockholders'Company’s stockholders’ opinions, and the Board of Directors intends to evaluate the results of the vote carefully when making future decisions regarding compensation of the named executive officers. The Company believes that providing its stockholders with an advisory vote on its executive compensation program will further enhance communication with stockholders, while also meeting the Company'sCompany’s obligations under the Dodd-Frank Act and applicable SEC'sSEC’s rules. 

Resolution

The Board of Directors recommends that stockholders approve the following resolution:

RESOLVED, that the stockholders approve the compensation program forpaid to named executive officers, as disclosed in the Company's proxy statement dated April 10, 2020.

Company’s Proxy Statement for its 2021 Annual Meeting of Stockholders pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.

The Board of Directors unanimously recommends a vote "FOR"“FOR” approval of the compensation of executive officers as described in this proxy statement.

Proxy Statement. 

COMPENSATION DISCUSSION AND ANALYSIS

General

The Company is required under SEC disclosure rules to provide information in this Proxy Statement regarding theits compensation program in place for its Chief Executive Officer, Chief Financial Officer and its three other most highly compensated executive officers. The Company must also provide compensation information for up to two additional individuals who would have been included but for the fact that they were not executive officers at the end of the fiscal year. There were no such additional individuals during 2020. This discussion refers to the Company'sCompany’s Chief Executive Officer, Chief Financial Officer and the three other most highly-compensated executive officers and one individual who would have been included but for the fact that he was not an executive officer at the end of the fiscal year as "Named“Named Executive Officers"Officers” or "NEOs."“NEOs.” This discussion should be read in conjunction with the detailed tables and narrative descriptions under "Executive“Executive and Director Compensation."

”

The Compensation Committee is responsible for formulating and presenting recommendations to the Board of Directors with respect to the compensation of the Company'sCompany’s NEOs. The Compensation Committee is also responsible for administering the Company'sCompany’s employee benefit plans, including incentive plans. The Compensation Committee is comprised solely of independent directors.

Executive Summary

Pay for Performance and “At-Risk” Compensation

The Compensation Committee has established specific pay for performance requirements which must be achieved beforewith significant “at-risk” compensation components. It emphasizes sustained multi-year performance in determining incentive compensation, which comprises the majority of CEO compensation, is awarded.compensation. In 2019,2020, approximately two-thirds84% of total CEO compensation werewas comprised of incentive compensation for achieving and exceeding these pre-established requirements for a multi-year period. Accordingly, most of the CEO compensation is “at risk” as it is dependent on the achievement of specific shareholder return, financial performance and other requirements. The Company periodically discloses its long-term strategic plans, financial goals have been establishedand guidance in advancepresentations it publicly furnishes to the SEC and are publiclymakes available on the Company’s website.its website (the most recent being available at https://investors.thebancorp.com/presentations/default.aspx). They include return on assets, or ROA, and return on equity, or ROE. As prior period financial performance requirements were achieved, the Company updated its website has been updated forin October 2020 with increased future financial performance requirements, which have been further increased.requirements. The “Balanced“Balanced Score Card: CEO Performance Matrix” below set forth in “Determination of Compensation Amounts” summarizes the requirements for incentive at-risk compensation.compensation for the CEO. In 2019,2020, the at-risk componentcomponents of the CEO’s total compensation was $1,600,000 (67%consisted of cash bonus and equity awards and amounted to $3,906,000, or 84% of total compensation), while basecompensation. Base salary of $755,000$750,000 comprised approximately one-third16% of total compensation.

The Compensation Committee evaluated our Chief Executive Officer, Damian Kozlowski’sIn addition to achieving specific pay for performance for 2019, 2018requirements, both the cash bonus and 2017, his first three full years of employment. Mr. Kozlowski was engaged as CEO in June 2016 and charged with engineering aequity awards are forward looking to motivate further progress toward the long-term financial turnaround from the losses in that year. In these years the Company has exceeded the required financial targetsgoals set by the Compensation Committee and Board of Directors and published on the BancorpCompany’s website. As part of the evaluation process, sustained multi-year financial progress toward those long-term goals is emphasized. Accordingly, in 2018, the cash bonus and equity compensation were maintained at the same level as 2017, at $300,000 each. After sustained incremental financial progress in 2018 and 2017, the cash bonus and equity compensation were both increased to $675,000 in 2019, with an additional $250,000 value assigned to stock options which were also awarded. In 2020, the CEO received $1,650,000 for cash bonus, $1,350,000 for equity, with a $906,000 value assigned to stock options which were also awarded, which reflected further sustained financial improvements.

Excluding the Company’s gain on sale of the of the Safe Harbor Individual Retirement Account (SHIRA) portfolio in 2018, income before tax increased to $72.5 million in 2019 netfrom $54.8 million in 2018 and $40.4 million in 2017. In 2020, further progress was made toward long term financial goals which were further increased, as income amountedbefore tax increased to $60 million excluding$108.3 million. Budgets, with formal quarterly reports of progress toward financial goals, are presented to the full Board of Directors which continuously monitors financial performance, to validate incentive compensation. Budget targets in each year since Mr. Kozlowski was engaged have been increased and have been met or exceeded. As published on the Company’s website, long-term targets have been increased to 20% for ROE and 2.00% for ROA. For 2019, the previously published goals were an ROA of 1.20% and an ROE of 14% which were achieved or exceeded. After adding back civil money penalties of $1.4 million and $7.5 million, which related to periods beforeorders and actions prior to Mr. Kozlowski’s employment, the CEO2019 ROA was employed.1.28% and the ROE was 13.5%. In 2018, the ROA and 2017,ROE were 2.07% and 24.3%, respectively, net income was $41 million and $22 million, after excludingwhich reflected the sale of the safe harbor IRA portfolio in 2018. deposit portfolio. In 2020, further progress was made toward the long-term goals noted above. ROA amounted to 1.34% while ROE amounted to 15.1%.

The Compensation Committee considered earningsbelieves that its forward-looking approach of providing cash bonus and equity to motivate future performance has been validated by the above historical results forsince Mr. Kozlowski’s tenure began in 2016, as income before tax has increased significantly each year under his leadership. Additionally, the Compensation Committee performs a three-year period in concluding thatpeer analysis to compare the turn-around had exceeded expectations.Company’s compensation analysis with its peers. The Compensation Committee monitors financial performance monthly. believes that the complexities of the Company’s niche lending business and payments businesses are only partially present in any single peer. Accordingly, peer comparisons are considered with the other factors discussed throughout this presentation.

In addition to the improvements in income noted above, other recent financial highlights are as follows:

Notwithstandingsummary, notwithstanding that the Company exceedingexceeded all requirements and metrics for the payment of bonus and equity grants, Mr. Kozlowski’s total compensation in 2018 was kept at 2017 levels as the Compensation Committee monitored financial performance sustainability. Cash bonus and equity increases in 2019 and 2020 reflected the sustained multi-year financial improvements in 2017, 2018 and 2019. Financial results in 2020 showed further improvements in financial performance as detailed throughout this report. Additionally, to address shareholder input, his base salary was lowered from $900,000 for 2018 to $755,000 in 2019 from $900,000 for 2018. Additionally,and it was maintained at approximately that lower level in 2020. Further, in 2019 and 2020, the Compensation Committee allocated a significant portion of equity grants to options instead of restricted stock units. The Compensation Committee utilizedsalary reduction and maintenance at that lower level and the allocation of a balanced score card matrixportion of equity grants to assess performanceoptions resulted from stockholder input, as follows:

noted in the chart appearing later in this report Balanced Score Card:“Stockholder Input and Company Actions”. The financial results described above and the other elements in the CEO Performance Matrix

As a result of a 70% affirmative advisory vote at were significant reasons why the 2019 annual meeting, the Company reached outCompensation Committee decided to its stockholders. The Chief Financial Officer and Chief Executive Officer are the Company’s primary representatives who meet with investors. In 2019, these officers met with stockholders owning more than 50% of the Company’s Common Shares. Related stockholder feedback resulted in structural changes tosubstantially increase the CEO’s total compensation determination. A summary ofthrough increased incentive compensation and equity compensation in the stockholder input and resulting actions are as follows:

years from 2018 to 2020.

Compensation Objectives and the Focus of Compensation Awards

The Company'sCompany’s compensation policies are intended to provide appropriate compensation packages to motivate, reward, attract and retain talented and experienced executive officers, and support the management succession plan. The policies are also intended to manage the Company'sCompany’s compensation costs.

The Compensation Committee believes that an appropriate compensation program should draw a balance between providing rewardsmotivation to executive officers while at the same time effectively controlling compensation costs. Executive officers are rewarded in ordercompensated at levels to attract and retain highly qualified individuals and to motivate them to perform in a manner that maximizes corporate performance.

The Company'sCompany’s executive compensation program consists of three elements to rewardcompensate and motivate its executive officers in line with the Compensation Committee'sCommittee’s objectives described above:

The criteria for CEO cash bonuses and long-term equity incentives are shown in the “Balanced Score Card: CEO Performance”.section. The Compensation Committee has required sustained multi-year improvements in financial performance, consistent with the financial goals which are posted to the Company’s website, as a determinant for cash bonuses and equity awards. This compensation is forward-looking, as motivation to achieve the long-term financial goals on the Company’s website. As published on the Company’s website, long-term targets have been increased to 20% for ROE and 2.00% for ROA, as the prior goals of 1.2% ROA and 14% ROE were achieved.

Generally, the Compensation Committee reviews annually the Company'sCompany’s mix of short-term performance incentives versus longer-term incentives.  It primarily focuses compensation on base salary and equity incentives with additional consideration for cash bonuses. The Compensation Committee has not established set percentages of short-term versus long-term incentives. Instead, it looks to provide a reasonable balance between those incentives and base salary. The Compensation Committee'sCommittee’s policy for allocating between long-term and currently paid compensation is to set base compensation at levels adequate to attract and retain personnel, while providing incentives to maximize long-term value for the Company and its stockholders. As discussed in "Specific“Specific Elements of the Compensation Program,"” below, the Company provides cash compensation in the form of base salary to meet competitive salary norms. The Company also provides non-cash equity compensation to align this form of compensation with shareholder interests and the Company'sCompany’s long-term strategic goals. Cash bonuses provide a shorter-term incentive which may align with competitive norms, acknowledge and reward specific accomplishmentsmotivate the achievement of individual goals and assist in compensation expense management. They are also forward looking to motivate management to sustain performance and reach the longer-term financial goals of 2% ROA and 20% ROE and other Company goals as published on its website. Because of performance generally in years prior to 2017, cash bonuses were not previously paid. As a result of either achieving or exceeding pre-established financial goals, including revenue increases and sustainable expense reductions, cash bonuses were subsequently paid to selected named executive officers with theofficers. See rationales and conclusions noted in “Determination of Compensation Amounts”. As noted previously, the Compensation Committee has required sustained multi-year improvements in financial performance, which it has monitored and validated since Mr. Kozlowski’s tenure began in 2016.

In 2019, pretax income was $81 million, excluding civil money penalties relatedorder to periods before Mr. Kozlowski was employed. In 2018, pretax income amounted to $55 million, excludingfurther confirm its objectives, the sale of the safe harbor IRA as shown in the related graph in “Determination of Compensation Amounts” below. In 2017, pretax income was $40 million.

The Compensation Committee also "benchmarks"“benchmarks” the Company'sCompany’s compensation programs to a peer group of banking institutions based upon its review of financial statements and other publicly available data. The level of these institution'sinstitution’s total assets and their regional location are factors the Compensation Committee considers in establishing the peer group. In 2019, the Compensation Committee added two peers with certain lines of business similar to that of the Company: Greendot Corporation (prepaid card accounts) and Axos Financial, Inc. (specialized banking products). Additionally, the Compensation Committee’s peer group includes other banks supplied by McLagan, a company which provides salary databases for peer comparisons. This expanded peer group of twenty-six banks provides a wider peer group on which to assess the Company’s performance, especially return on assetsROA and equity.ROE. The peer group is also used to compare the CEO’s compensation to peers. Although considerable knowledge about the competitiveness of the Company'sCompany’s compensation programs is gained through the benchmarking process, the Compensation Committee recognizes that each financial institution is unique and that significant differences in executive compensation practices exist. The Compensation Committee also considered the added complexity and earnings stream resulting from the payments businesses unique to Bancorp.the Company. For instance, while GreendotGreen Dot Corporation and Meta Financial Group Inc. also engaged in certain payments businesses, they did not engage in the specialized SBLOC SBA and commercial real estate securitizationSBA businesses. While the Compensation Committee considered CEO salaries in the whole 26

bank peer group, it concluded that the following banks withhad the most comparable lines of business and related complexities were more relevant. Accordingly, it consideredand would be the CEO compensation ofmost relevant: Axos Financial, Inc., Green Dot Tri-State,Corporation, Live Oak Bancshares Inc., Meta Financial Group Inc. and Live Oak. For 2018 the CEO compensation for those banks ranged from $1.0 million to $26.9 million, with four banks higher and one bank lower than Bancorp’s 2019 compensation of $2.4 million. The base salaries of CEOs for these banks ranged from $510,000 to $945,000. Bancorp’s CEO had a base salary of $755,000 with three banks higher, one bank lower and one bank approximately equal to that amount. For 2019, the base salary of Bancorp’s CEO was reduced to approximate the peer median. The $755,000 base salary for 2019 represented a 16% decrease from 2018.TriState Holdings Inc. After the additions discussed above, the expanded peer group is comprised of the following banks.

The median asset size of the peer group is approximately $6.5 billion at December 31, 2019 and Bancorp’s asset size at December 31, 2019 was $5.7 billion. The range of revenues for the peer group was $150-$380 million during 2019 and Bancorp’s revenues for 2019 were $245 million.

The Compensation Committee believes that the combination of short and long-term compensation that the Company provides fulfills its objectives of providing a competitive level of compensation and benefits in order to attract and retain key executives. The Compensation Committee also believes that the Company'sCompany’s incentive programs appropriately rewardmotivate performance to achieve sustained profitability and growth to achieve its financial goals while at the same time allowing the Company to maintain controls over its compensation costs.

The Company did not utilize an outside compensation consultant in assessing compensation.

Compensation Methodology

The Compensation Committee ordinarily determines compensation amounts for individual NEOs for
12-month periods. The Chief Executive Officer typically provides the Compensation Committee with key elements of both the Company'sCompany’s and the NEOs'NEOs’ (other than the Chief Executive Officer's)Officer’s) performance as well as recommendations to assist it in determining compensation levels. The Compensation Committee determines the amount of equity awards and cash bonuses, if any, at its discretion and reviews the prior year’sCompany’s performance during the firstfourth quarter of each year and at interim periods at its discretion.

With the full Board of Directors, the Compensation Committee compares financial performance to the financial goals published on the Company’s website on a quarterly basis.

Specific Elements of the Compensation Program

Below are the specific elements of the Company'sCompany’s compensation program for named executive officers. A chart showing the percentage of each component to the total of salary, cash bonus and equity in 2020 is as follows:

Note: Hugh McFadden is not included above as he retired effective December 31, 2019.

Base Salary.Salary. The Company believes that it is important to maintain a competitive salary structure to retain its existing qualified executive officers and awhich includes base pay structure consistent with similarly situated executives at similarly sized banking institutions. The Company believes that a key objective of its salary structure is to maintain reasonable "fixed"“fixed” compensation costs by targeting base salaries at a competitive average, considering the Company'sCompany’s and the individual'sindividual’s performance. Messieurs Frenkiel, Connolly and Pareigat did not receive increases to their base salary in either 2018 or 2017. For 2019, the base salary of each of those officers was increased in consideration of peer data for their positions. The peer data utilized was provided by McLagan, a company which provides salary databases for peer comparisons. The data consisted of regional and community banks for Messieurs Frenkiel, Pareigat and Garry, and regional and national banks for Mr. Connolly. Mr. Garry received increases to base salary in both 2019 and 2018. Those increases reflected Mr. Garry’s promotions from Chief Audit Officer, to Deputy Operations Officer and then to Chief Operating Officer in that three-year period and reflected the aforementioned peer comparisons. The CEO’s base salary was lowered from $900,000 in 2018 to $755,000 in 2019 reflecting an adjustment based on the median of the Compensation Committee’s peer group. A chart showing the changes in base salary in 2019 compared to 2018 with footnotes detailing the ranges in the peer data utilized is as follows.

Base salaries are paid to executive officers on a bi-weekly basis and are generally reviewed annually by the Compensation Committee as described in "Compensation“Compensation Methodology,"” above. Base pay change, if any, is normally determined after considering:

The CEO’s base salary was lowered from $900,000 in 2018 to $755,000 in 2019 reflecting an adjustment based on the median of the Compensation Committee’s peer group and stockholder input. It was further lowered to $750,000 in 2020. For 2019, the base salary of Messrs. Frenkiel, Connolly and Pareigat was increased from 2018 in consideration of peer data for their positions, with further low single digit increases in 2020 as shown in the table below. The peer data utilized was provided by McLagan, a company which provides salary databases for peer comparisons. The data consisted of regional and community banks for Messrs. Frenkiel, Pareigat and Garry, and regional and national banks for Mr. Connolly. Mr. Garry received increases to base salary from 2018 to 2019 and from 2019 to 2020. Those increases reflected Mr. Garry’s promotions from Chief Audit Officer, to Deputy Operations Officer and then to Chief Operating Officer in that period and reflected the peer comparisons. A chart showing the changes in base salary in 2020 compared to 2019 detailing the ranges in the peer data utilized is as follows.

Cash Bonus. The Compensation Committee evaluated the CEO for 2017, 2018 and 2019, his first three full years of employment. Notwithstanding the Company exceeding all requirements and metrics for the payment ofIn evaluating providing a cash bonus and equity grants, Mr. Kozlowski’s total compensation in 2018 was kept at 2017 levels asto an NEO, the Compensation Committee monitored financial performance sustainability. Additionally, to address shareholder input, his base salary was lowered to $755,000 from $900,000 effective January 1, 2019, and the Compensation Committee in 2019 did, and in the future will, allocate a significant portion of any equity grants to options instead of restricted stock units. Thus, a greater proportion of Mr. Kozlowski’s total compensation will be performance-based compensation, which may include a cash bonus.

The Compensation Committee particularlyprimarily focuses on the contributionsustained contributions made to the Company by the NEO under consideration. The Chief Executive Officer makes recommendations to the Compensation Committee with respect to annual bonuses for the other named executive officers, based on their respective sustained contributions to the performance of the areas for which they are responsible. Because of improved financial performance, in 2019, 2018 and 2017, cash bonuses werehave been awarded since 2017. While the Compensation Committee examines pre-established requirements in those years. determining whether to pay a cash bonus to any NEO and the amount of such bonus, the Compensation Committee has determined it is in the Company’s best interest to retain full discretion with respect to these cash bonuses to retain flexibility as opposed to requiring set payments for various levels of satisfying these requirements.

The primary factor in the CEO cash bonus awards in 2019award was achieving or exceeding pre-established requirements on a sustained basis as detailed in the “Balanced“Balanced Score Card: CEO Performance Matrix”Matrix” under “Determination of Compensation Amounts”. In 2019 eachSustained multi-year financial performance and achievement of financial performance goals published on the Company’s website are central to compensation decisions. Each of the pre-established criteria as shown in that matrix was determined to have been exceeded. The Compensation Committee also considered the cash bonus as a percentage of base salary. For the Chief Executive Officer, the 20192020 cash bonus of $1.65 million compared to $675,000 (compared to $300,000 in 20182019 and $300,000 in 2017)2018. Cash bonus represented approximately 89% of2.2x base salary in 2020, compared to 33%89% in the prior year. The increase reflected the improved financial performance of the Company and the reduction in base salary, such that incentive compensation reflectedwhich had been sustained for a larger proportion of total compensation.multi-year period. Please see the chart entitled “Balanced“Balanced Score Card: CEO Performance Matrix” in the “Determination of Compensation Amounts” for the performance metrics for a cash bonus for the CEO. Please see the chart and footnotes under “Determination of Compensation Amounts- “Other NEOs”NEO Compensation”, which summarize the metrics and other factors for a cash bonus for the other NEOs. For the Chief Financial Officer, Paul Frenkiel, the cash bonus of $125,000 (compared to $100,000 in 2018 and $0 in 2017) was 32% of his base salary. Mr. Frenkiel’s responsibilities include all financial functions of the Company, including supporting each line of business in managing their financial operations. Mr. Frenkiel is responsible for managing the balance sheet to achieve or exceed the 8.50% tier one capital ratio. At December 31, 2019 the tier one ratio was 9.6%, after having been sustained above 9%. Mr. Frenkiel is also responsible for the investment portfolio which has ranked in the upper quartile of peers. The upper quartile peer ranking requirement was based on the yields reported in the Uniform Bank Performance Report for FDIC insured banks. For the Head of Credit Markets, Mr. Connolly, the cash bonus of $300,000 (compared to $225,000 in 2018 and $100,000 in 2017) was 86% of his base salary. Mr. Connolly oversees all lending operations and is also responsible for the disposition of the balance of discontinued operations to maximize shareholder value. Under Mr. Connolly’s leadership, loan revenues have continued their consistent increases and amounted to $127 million in 2019 compared to $95 million in 2018 and $79 million in 2017. These higher revenues reflected 22% and 30% respective growth in 2019 year-end loan balances for SBA and SBLOC with a 9% increase in year over year lease balances, after a 17% increase in yearend 2018 SBA balances. Additionally, Mr. Connolly exceeded his targeted 25% year over year reduction in discontinued assets, which were reduced 29% to $140.7 million at year end 2019, and 35% to $197.8 million at year end 2018 from $304.3 million at year end 2017.  For the Chief Operating Officer, Gregor Garry, the cash bonus of $100,000 (compared to $50,000 in 2018 and $37,500 in 2017) was 31% of his base salary. Mr. Garry is responsible for Operations, Financial Crimes Risk Management, Enterprise Risk Management, and Consumer Compliance.

Mr. Garry also served as the Chief Risk Officer for most of 2019. In addition to supporting cost reductions related to operations, Mr. Garry continued the build out of an infrastructure which managed all outstanding regulatory issues and made additional personnel changes necessary to accelerate related progress. He also played a role in the maturation of the financial crimes Center of Excellence. Additionally, Mr. Garry assisted in the implementation of milestones in an Integrated Compliance Plan which addressed root causes for regulatory issues. This performance was acknowledged by the Compensation Committee even though Mr. Garry’s contributions were not immediately reflected in financial results. For the General Counsel, Thomas Pareigat, the cash bonus of $150,000 (compared to $100,000 in 2018 and $50,000 in 2017) represented 38% of base salary. Mr. Pareigat’s primary responsibilities include oversight, management and resolution of all legal matters affecting the Company. Mr. Pareigat reports on legal matters to the Board of Directors at its monthly meetings. The Board of Directors includes several attorneys who can assess Mr. Pareigat’s performance. Mr. Pareigat also manages a legal staff which is charged with minimizing external legal costs. Mr. Pareigat’s performance was determined to exceed expectations in these areas.

Long-Term Equity Incentive Compensation. Long-term equity incentives arein 2020 were provided to named executive officersNamed Executive Officers through the Company’s 20182020 Equity Incentive Plan, (“2018 Plan”).or the 2020 Plan. The 20182020 Plan permits the grant of stock options, restricted stock awards, stock appreciation rights and phantom units. Stock options are granted to named executive officersNEOs at exercise prices equal to the then current market price of the Company'sCompany’s Common Shares. Awards under the 20182020 Plan are granted based on the Company'sCompany’s financial performance and each executive'sexecutive’s contribution to such performance. Overall, the objective of long-term equity incentive compensation awards is to tie the interests of named executive officers directly to increases in stockholder value. The criteria utilized for each NEO is that which is used for cash bonuses as discussed directly above under “Cash Bonus” and presented in a chart under “Other NEOs”. In 2019,2020, to balance the short-term incentive of cash bonus, equity grants were madegranted equal in value to 45% of the same dollar amounts as thetotal of cash bonuses. These equity awards for 2019 consist of restricted stock units which vest over three years.bonus and equity. Additionally, Mr. Kozlowski received $250,000 of300,000 stock options, as pricedwhich were valued on the day of grant under the black- scholes method.Black-Scholes method at $3.02 each.

Compensation Risk Analysis

As a financial holding company regulated by the Federal Reserve Bank, which has a subsidiary bank regulated by the FDIC and the State of Delaware, the Company adheres to defined risk guidelines, practices and controls to ensure the safety and soundness of the institution.  The Company'sCompany’s management and Board of Directors conduct regular reviews of its business to ensure that it is operating within appropriate regulatory guidelines and with appropriate practices, supplemented by its internal audit function.

During 2019,On an annual basis, the Compensation Committee reviewedreviews the Company'sCompany’s compensation practices to determine that (1) base salaries are appropriately competitive in light of overall compensation; (2) the Company'sCompany’s use of equity grants provides appropriate long term incentives; (3) the Company offered an appropriate mix of cash and equity compensation to facilitate the alignment of the interests of the Company'sCompany’s senior executives with those of the Company and its stockholders; and (4) cash bonuses are balanced with other compensation to incent financial performance and safety and soundness while managing compensation expense. In light of regulatory releases, the ultimate goal of the review wasis to assess the design, governance, policies and procedures of the Company'sCompany’s compensation structure to ensure that, as designed and executed, it does not motivate excessive risk-taking that could adversely impact the long-term value of the Company.

After conducting the review, the Compensation Committee concluded that the Company'sCompany’s incentive programs do not motivate or encourage unnecessary or excessive risk taking.risk-taking.  This conclusion reflected a review of the Company'sCompany’s structure to determine that credit and other new business approvals are independent of new business efforts.  Other factors, such as fostering an appropriate risk management culture, were also considered. The Company will continue to review and monitor its compensation programs to ensure that they continue to not motivate excessive risk takingrisk-taking that could adversely impact the long-term value of the Company.

Tax and Accounting Considerations

The Company claims tax deductions in connection with stock awards under its equity compensation plans in an amount equal to the ordinary income reported to the I.R.S. for the recipient. The amount reported as ordinary income to the recipient, and deducted by the Company, is based on the stock price at the date stock options are exercised or restricted stock vests, subject to a $1 million limit for each named executive officer. While the Compensation Committee considers the deductibility of compensation as one factor in determining executive compensation, the Compensation Committee retains the discretion to award and pay compensation that is not deductible as it believes that it is in the best interests of our stockholders to maintain flexibility in our approach to executive compensation and to structure a program that we consider to be the most effective in attracting, motivating and retaining key employees.

The compensation that we pay to our executive officers is expensed in our financial statements as required by U.S. generally accepted accounting principles. As one of many factors, the Compensation Committee considers the financial statement impact in determining the amount of, and allocation among the elements of, compensation. Stock-based compensation is accounted for as required under Financial Accounting Standards Board Accounting Standards Codification Topic 718.

Determination of Compensation Amounts

CEO Compensation Determination Factors

Pay for Performance and “At-Risk” Compensation

Compensation. The Compensation Committee has established specific pay for performance requirements which must be achieved before incentive compensation, which comprises the majority of CEO compensation, is awarded. In 2019,2020, approximately two-thirds84% of total CEO compensation werewas comprised of incentive compensation for achieving and exceeding these pre-established requirements Accordingly, most of the CEO compensation is “at risk” as it is dependent on the achievement of specific shareholder return, financial performance and other requirements. The financial goals have been established in advance and are publicly available on the Company’s website. As prior period financial performance requirements were achieved, the website has been updated for future financial performance requirements, which have been further increased. The “Balanced“Balanced Score Card: CEO Performance Matrix” below summarizes the requirements for incentive at-risk compensation. In 2019,2020, the at-risk component of the CEO’s total compensation was $1,610,000 (67%$3,906,000 (84% of total compensation), while base salary of $755,000$750,000 comprised approximately one-third16% of total compensation.

Forward-Looking. In addition to achieving specific pay for performance requirements and sustained financial performance, both the cash bonus and equity awards are forward looking to motivate further progress toward the long-term financial goals set by the Board of Directors and published on the Company’s website. As part of the evaluation process, sustained multi-year financial progress toward those long-term goals is emphasized. Accordingly, in 2018, the cash bonus and equity compensation were maintained at the same level as 2017, at $300,000 each. After sustained incremental financial progress in 2018 and 2017, the cash bonus and equity compensation were both increased to $675,000 in 2019. In 2020, $1,650,000 for cash bonus and $1,350,000 for equity compensation were awarded, which reflected multi-year sustained financial improvements in 2019. Excluding the gain on sale of the safe harbor in 2018, income before tax increased to $72.5 million in 2019 from $54.8 million in 2018 and $40.4 million in 2017. In 2020, further progress was made toward long term financial goals, as income before tax increased to $108.3 million. Budgets, with formal quarterly reports of progress toward financial goals, are presented to the full Board of Directors reflecting a continuous monitoring of financial performance, to validate incentive compensation. Budget targets in each year since Mr. Kozlowski was engaged have been met or exceeded. As published on the Company’s website, long-term targets for 2020 have been increased from 2019 to 20% for ROE and 2.00% for ROA. For 2019, the previously published goals were: ROA of 1.20% and ROE of 14%, which were achieved. After adding back civil money penalties of $1.4 million and $7.5 million, which related to orders and actions prior to Mr. Kozlowski’s employment, the 2019 ROA was 1.28% and the ROE was 13.5%. In 2018, the ROA and ROE were 2.07% and 24.3%, which reflected the sale of the safe harbor IRA deposit portfolio. In 2020, further progress was made toward the long-term goals noted above, as ROA amounted to 1.34% while ROE amounted to 15.1%.

CEO Compensation Determination Factors

The Compensation Committee evaluatedbelieves that its forward-looking approach of providing cash bonus and equity to motivate future performance, has been validated by the performanceabove historical results since Mr. Kozlowski’s 2016 tenure began. Additionally, the Compensation Committee performs a peer analysis to compare the Company’s compensation analysis with its peers. The Compensation Committee believes that the complexities of our Chief Executive Officer, Damian Kozlowski, for 2017, 2018the Company’s niche lending businesses and 2019, his first three full years of employment since his hirepayments businesses are only partially present in 2016. Notwithstandingany single peer. Accordingly, peer comparisons are considered with the other factors noted above and in the “Balanced Scorecard: CEO Performance Matrix” below.

Financial Performance. The Compensation Committee monitors financial performance. In addition to the improvements in income noted above, other recent financial highlights are as follows:

In summary, notwithstanding that the Company exceedingexceeded all requirements and metrics for the payment of bonus and equity grants, Mr. Kozlowski’s total compensation in 2018 was kept at 2017 levels as the Compensation Committee monitored financial performance sustainability. Cash bonus and equity increases in 2019 and 2020 reflected the sustained multi-year financial improvements in 2017, 2018 and 2019. Financial results in 2020 showed further improvements in financial performance as noted above. Additionally, to address shareholder input, his base salary was lowered from $900,000 for 2018 to $755,000 from $900,000 effective January 1,in 2019 and then to $750,000 in 2020. Further, in 2019 and 2020, the Compensation Committee determined to allocateallocated a significant portion of any future equity grants to options instead of restricted stock units beginningunits. The salary reduction and maintenance at that lower level and the allocation of a portion of equity grants to options resulted from stockholder input, as noted in 2019.the chart appearing later in this report “Stockholder Input and Company Actions”. Cash bonus was increased after financial goals published on the Company’s website were met and ultimately exceeded, and the other requirements on the balanced scorecard were also exceeded for a sustained multi-year period.

Metrics and other criteria. An analysis of the metrics and other criteria for the payment of CEO compensation is as follows.

Balanced Score Card: CEO Performance Matrix

categories increased by 8%, and in 2019 balances increased by 30%. B. Expand commercial real estate securitizations: Commercial real estate securitizations were expanded with greater than projected results. The total of loans securitized increased from $459 million in 2017 to $638 million in 2018 and $1.2 billion in 2019, or respective year over year increases of 39% and 94%. C. Institutionalize the innovation process: The innovation process was institutionalized, by creating a formal application and submission protocol, vetting process and formal award and recognition process.

As

Stockholder Input and Company Actions

Notwithstanding receiving more than a result of a 70%90% affirmative advisory vote on executive compensation at the 2019its 2020 annual meeting, the Company reached out to its stockholders to obtain feedback on company performance and any other matters of interest to stockholders. The Chief Financial Officer and Chief Executive Officer are the Company’s primary representatives who meet with investors. Mr. Frenkiel addressed executive compensation with stockholders. In 2019,2020, these officers met with stockholders owning more than 50% of the Company’s Common Shares.Shares as they had in previous years. Related stockholder feedback from prior meetings had resulted in structural changes to the CEO’s compensation determination.determination and other changes which were sustained. A summary of the stockholder input and resulting actions are as follows:

Other Considerations

Impacting CEO Compensation

Mr. Kozlowski was named the Company’s CEO in June 2016, a year in which the Company had significant regulatory requirements outstanding, and in which it incurred losses. He was engaged because of his proven experience in:

in financial turnaround, improving compliance with regulatory requirements, and reducing financial and regulatory risk, while sustaining financial performance. The Compensation Committee evaluatedcommittee continues to evaluate the Company’s performance in each of the areas above as follows:

follows. Mr. Kozlowski was engaged as CEO in June 2016 and charged with engineering a financial turnaround from the losses in that year. The Company has since exceeded the required financial targets set by the Board of Directors and published on the Bancorp website. In 2019, net income amounted to $60 million excluding civil money penalties related to periods before he was employed. In 2018 and 2017, respectively, net income was $41 million and $22 million, after excludingExcluding the gain on sale of the safe harbor IRA portfolio in 2018.2018, income before tax increased to $72.5 million in 2019 from $54.8 million in 2018 and $40.4 million in 2017. In 2020, further progress was made toward long term financial goals which were further increased, as income before tax increased to $108.3 million. The Compensation Committee considered earnings results for a three-yearthe above multi-year period in concluding that the turn-around had exceeded expectations.

The Board of Directors including the Compensation Committee has monitored the implementation of a unique software system for BSA, as well as other infrastructure improvements. These include the creation of a Center of Excellence for BSA and related regulatory requirements. The system and infrastructure have been largely implemented and enhancements continue to be made. Virtually all the itemsBased on its monitoring, these improvements were concluded to have been sustained. Significant multi-year progress in addressing FDIC regulatory issues culminated in the regulatory “encyclopedia”, a compendiumlifting of all outstanding regulatory findings or recommendations, have been validated.

FDIC consent orders. During Mr. Kozlowski’s 3.5-year tenure, the Company has sold or otherwise disposed of the majority of its higher risk discontinued assets and related investment in unconsolidated entity. Additionally, higher risk lines of business such as European operations were sold, while lower charge-off lending lines have grown significantly, with total loans outstanding increasing 21% at yearendyear-end 2019 over the prior year end with a comparable 8% increase at yearendyear end 2018.

In 2020, loan growth continued, and loans outstanding were 49% higher than the prior year-end. In addition to the key areas set forth above, under the oversight of the CEO, new sources of revenue, including the rapid funds product, were initiated, an innovation framework and process was created, operating platforms were reengineered, including a securities-backed line of credit platform to facilitate scalability, and corporate culture was enhanced to include a formal diversity and inclusion program.

A graphic representation of income before taxes, in thousands, shows the improvement in income from 2016. The three full years in which Mr. Kozlowski has served as CEO showsince June 2016 and financial performance during his tenure shows dramatic sustained improvements. Excluding the gain on sale of the safe harbor in 2018, income before tax increased to $72.5 million in 2019 from $54.8 million in 2018 and $40.4 million in 2017. In 2020, income before tax amounted to $108.3 million.

CEO Compensation

The following factors impact the Compensation Committee’s determination of the amounts of cash bonus and equity awards for pay for performance:

1. Sustaining Improved Financial Performance Validated by Pre-established, Publicly Disclosed Financial Goals

In determining the Chief Executive Officer’s compensation, the Compensation Committee established specific, pre-set financial goals. See “Balanced Score Card: CEO Performance Matrix” above. For transparency, these goals were posted on the Company’s website. These goals were achieved sooner than expected and the goals for 2019 were increased and updated on the Company’s website. Achievingwebsite in October 2020. Mr. Kozlowski has maintained a consistent record of achieving and exceeding these goals since he joined the Company in June 2016. His performance through 2018 validated maintenance of base salary for 2018 at the original level necessary to retain the services of the current CEO.him. After further sustained financial improvement, and exceeding pre-set financial and other targets, cash bonus and equity compensation were increased in 2019. Base salary was decreased in that year, to emphasize “pay for performance”. and continued to be maintained at the lower level in 2020. After sustained, multi-year improvements in financial performance, his cash and equity awards were further increased in 2020 to reflect that performance, while his salary was maintained at approximately the same level as the prior year. At the CEO’s request and as determined appropriate by the compensation committee, his total compensation in 2018 was maintained at the same level as 2017. Both the CEO and the committee were focused on sustaining financial improvements as a primary determinant for additional compensation, which was awarded beginning in 2019.

2. Performance versus Peers

The Compensation Committee refined its peer group in 2019 as detailed under “Compensation Objectives and the Focus of Compensation Awards”. While it did review the results of comparisons with its prior smaller peer group, the Compensation Committee now utilizes only one peer group, comprised of twenty-six banks. TheFor 2018, the Company’s 2.07% return on assetsROA was significantly more than thatthe peer group which averaged in the 1.2% range, which was also the approximate median. The Company’s 24.26% return on equityROE also significantly exceeded peer averages in the 11% range, which was also the approximate median. Both the return on assetsROA and return on equityROE were in the top quartile of these peer groups. For 2019, peer groups were also exceeded. In 2020, while the peer group financial performance generally declined, Bancorp’s ROA and ROE respectively increased to 1.34% and 15.1%. The Company’s progress toward ultimately achieving 2018 performance in the top quartile of peers validated maintenance of CEO base salary for 2018 at the original level necessary to engage the CEO in 2016. It also validated the 2018 cash and restricted stock equity awards at the levels necessary to retain the CEO’s service. The sustained multiyear improvements in financial performance validated the 2019subsequent increases in cash bonus and equity compensation. As noted previously, base salary was nonetheless reduced to the approximate median of the Compensation Committee’s peer group effective January 2, 2019, to increase the pay for performance element of compensation.

3. Multi-Year Analysis of CEO Compensation and Comparison of CEO Total Compensation to Peers

Mr. Kozlowski’s total compensation was $1.5 million in both 2017 and 2018. In 2018, the Compensation Committee considered the following: a.(a) that pre-established financial goals were exceeded ahead of schedule, b.(b) financial performance was in the upper quartile ofnow exceeded peers, and c.(c) the other pre-established goals set by the Board of Directors had been satisfied. Nonetheless, total compensation in 2018 was maintained at the same level as 2017. For 2017 and 2018, the CEO’s total compensation was below the 2017 total compensation (the most recent year available) of the Compensation Committee’s 26 bank peer group. Mr. Kozlowski’s total compensation for 2018 of $1.5 million, compared to 2017 median compensation of $2.0 million for the 26-bank peer group. As discussed above in item 2, Performance versus Peers, Mr. Kozlowski’s performance in the top quartile and his total compensation below the median supported the relatively high base salary in 2018 and equity grants as restricted stock in 2018. However, since the Compensation Committee decided that the initial turn-around period since Mr. Kozlowski’s June 2016 hire date concluded in 2018, 2019 base salary was reduced. After monitoring the sustained multi-year financial performance of the Company and the exceeding of financial and non-financial metrics, the Compensation Committee increased cash bonus and equity awards in subsequent years. While various peer comparisons show that total compensation in subsequent years is above average, sustained multi-year financial improvement and the exceeding of all items on the balanced scorecard validate above average performance. While the Compensation Committee considered CEO salaries in the whole 26 bank peer group, it concluded that the banks with the most comparable lines of business and related complexities were more relevant. Accordingly, it considered the CEO compensation of Axos, Green Dot, Tri-State, Meta and Live Oak for 2019. The CEO compensation for those banks ranged from $511,000 to $6.1 million, with two banks higher and two banks lower than Bancorp’s 2020 compensation of $4.7 million, with one bank approximately the same.

4. Other Goals

In addition to pre-established and publicly disclosed financial parameters on the Company’s website and financial performance comparisons with peer groups, the Board of Directors pre-established other goals in the form of a strategic agenda. The strategic agenda was comprised of the following: institutionalize the innovation process, capture securities backed lines of credit and insurance backed lines of credit market share with a newly automated origination application, build out rapid funds transfer capability, improve data analysis, expand commercial real estate securitization, improve the leasing platform, mature financial crimes center of excellence and create core value statement and strengthen the Bancorp community. The Board of Directors and Compensation Committee were advised of progress on these goals and determined that results exceeded these targets. The Compensation Committee reviewed each of these goals and determined that they had been either fully implemented or significant progress had been made to satisfy the Compensation Committee as outlined above. Especially important to the Compensation Committee was the progress made on regulatory issues.

5. Risk Considerations

The Compensation Committee viewed the Board of Director’s financial and other publicly disclosed goals in tandem with the institution’s risk profile. For financial performance especially, levels of risk required ongoing consideration so as not to incentivize excessive risk taking. Accordingly, specific percentages of additional compensation were not assigned to specific measures of performance. Instead, risk would be considered as part of a balanced scorecard approach. Upon its review, the Compensation Committee determined that risk had been reduced, while financial performance had been significantly improved. Significant reductions in higher risk discontinued operations loans had been exceeded by growth in lower credit loss lines of business such as securities-backed lines of credit. The sale of the IRA portfolio concluded the sale of niche deposit lines of business which had unique risk elements. A significant component of the improvement in financial performance resulted from expense reductions which also had been demonstrated not to result in additional risk. Accordingly, risk had been reduced, while financial performance had been significantly improved.improved over a sustained period.

All five factors above supported increased 2019 compensation levels. All the pre-established financial goals were either achieved or significantly exceeded while risk was decreased. Performance of return on assets and return on equity versus peers placed the Company in the upper quartile of its 26-bank peer group. while total CEO compensation in 2019 was less than peer medians. Pre-established strategic, non-quantifiable goals, which would impact financial performance in the future were all either met or showed expected progress. The Compensation Committee received frequent updates from Board subcommittees and other reporting to monitor the regulatory related and other goals to reach this conclusion.

As a result of the Company’s progressIn addition to achieving specific pay for performance requirements as described above, Chief Executive Officer Damianboth the cash bonus and equity awards are forward looking to motivate further progress toward the long-term financial goals set by the Board of Directors and published on the Company’s website. As part of the evaluation process, sustained multi-year financial progress toward those long-term goals is emphasized. Accordingly, in 2018, the cash bonus and equity compensation were maintained at the same level as 2017, at $300,000 each. After sustained incremental financial progress in 2018 and 2017, the cash bonus and equity compensation were both increased to $675,000 in 2019. In 2020, $1,650,000 for cash bonus and $2,256,000 for equity compensation were awarded, which reflected further sustained financial improvements in 2019. Total compensation in 2020 was comprised of the $1,650,000, the $2,256,000 and $750,000 base salary, for a total of $4,656,000. The amount of compensation exceeding $1,000,000 is not deductible for federal tax purposes. At the federal tax rate of 21% for 2020, the resulting impact on tax expense was considered, as it was reflected in tax expense for the year ended 2020. Excluding the gain on sale of the safe harbor in 2018, income before tax increased to $72.5 million in 2019 from $54.8 million in 2018 and $40.4 million in 2017. In 2020, further progress was made toward long term financial goals, as income before tax increased to $108.3. Budgets, with formal quarterly reports of progress toward financial goals, are presented to the full Board of Directors reflecting a continuous monitoring of financial performance, to validate incentive compensation. Budget targets in each year since Mr. Kozlowski was awarded $675,000engaged have been met or exceeded. As published on the Company’s website, long-term targets have been increased to 20% for ROE and 2.00% ROA. For 2019, the previously published goals were: ROA of restricted stock units vesting over three years1.20% and a $675,000 cash bonus. Additionally, $250,000ROE of his total compensation was allocated14%, which were achieved. After adding back civil money penalties of $1.4 million and $7.5 million, which related to stock options, vesting over four years. To better alignorders and actions prior to Mr. Kozlowski’s pay for performance,employment, the 2019 ROA was 1.28% and be responsivethe ROE was 13.5%. In 2018, the ROA and ROE were 2.07% and 24.3%, which reflected the sale of the safe harbor IRA deposit portfolio. In 2020, further progress was made toward the long-term goals noted above. ROA amounted to stockholder input, his annual base salary of $900,000 for both 2017 and 2018, was reduced1.34% while ROE amounted to $755,000, effective January 1, 2019. 15.1%.

The Compensation Committee will continue to evaluate Mr. Kozlowski’s performance with respect to histhe Company’s multi-year plan which projects increasing profitability in each year.

For shareholder transparency, financial goals are published on the Company’s website and as a result of the achievement of prior goals, long-term targets have been increased to 20% for ROE and 2.00% for ROA.

Other NEOs

NEO Compensation

A chart of NEO compensation is as follows: The footnotes to the chart list the pre-establishedperformance requirements which must be sustained for cash bonus and equity grants. The 2019 equity grants consisted of restricted stock units vesting over three years. Additionally, Mr. Kozlowski received $250,000 of stock options vesting over four years.

In addition to supporting cost reductions related to operations, Mr. Garry continued the build out of an infrastructure which managed all outstanding regulatory issues and made additional personnel changes necessary to accelerate related progress. He also played a role in the maturation of the financial crimes Center of Excellence. This performance was acknowledged by the Compensation Committee even though Mr. Garry’s contributions were not immediately reflected in financial results. Additionally, Mr. Garry also assisted in the implementation of milestones in an Integrated Compliance Plan which addressed root causes for regulatory issues.

2019, Mr. McFadden provided daily oversight in the resolution of those issues. He also oversaw the implementation of milestones in an Integrated Compliance Plan which addressed root causes for regulatory issues. Additionally, Mr. McFadden played an executive role in the formation of the financial crimes Center of Excellence which was initiated and matured during his tenure. The above represented Mr. McFadden’s requirements for bonus and equity compensation, which did not have immediate financial impact but were crucial in satisfying regulatory requirements.

Director Compensation

The Compensation Committee also oversees an annual compensation evaluation of the Board of Directors. A survey of twenty-four institutions was performed to confirm that Board of Director compensation fell within appropriate peer ranges based on that survey. The Compensation Committee granted equity with a market value at date of grant of approximately $73,800$90,000 to independent directors in 2019,2020, to align their interests with other stockholders. The $73,800$90,000 was added to cash compensation and that total was compared to the survey of other institutions. Independent Directors also received an annual fee of $75,000 and are paid separately for committee meetings. The annual fee and per meeting fees werefor Independent Directors have not been increased in 2019 compared tosince 2018. See “Director Compensation Table.”

Compensation Recoupment Policy

The Compensation Committee reiterated its previously approved compensation recoupment policy as follows:

Compensation Recoupment Policy

The compensation recoupment policy applies if the Company is required to provide an accounting restatement for any of the prior three fiscal years for which audited financial statements have been completed, due to material noncompliance with any financial reporting requirement under the federal securities laws. In the event of such a restatement, the Compensation Committee will determine, in its discretion, whether (1) NEOs, regardless of whether they were directly responsible for the restatement, or (2) all other recipients of cash-based or equity-based incentive compensation who were directly responsible for the restatement, have received any cash-based or equity-based incentive compensation that they would not have been entitled to receive under the restated results. In the event of any future financial restatements, the Audit Committee will evaluate the facts and formally consider whether any compensation recoupment (clawback) from any Company officer is warranted.

The Compensation Committee then will take such actions as it deems necessary or appropriate, depending on all the facts and circumstances as determined during its review, including (i) the recoupment of all or part of any such excess compensation, (ii) recommending disciplinary actions to the Board of Directors, up to and including termination, and/or (iii) the pursuit of other available remedies.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis above and has discussed that analysis with management. Based on its review and discussions with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statementProxy Statement and incorporated by reference in the Company'sCompany’s Annual Report on Form 10-K for the year ended December 31, 2019. 

2020. 

Walter T. Beach, Chairman

Hersh Kozlov

William H. Lamb
Mei-Mei H. Tuan

EXECUTIVE AND DIRECTOR COMPENSATION

Summary Compensation Table

The following table provides information concerning total compensation earned or paid to the NEOs for the years ended December 31, 2020, 2019 2018 and 2017.2018.

Ratio of Chief Executive Officer Pay to Median Pay

Ratio of Chief Executive Officer Pay to Median Pay

For 2019,2020, the median of the annual total compensation of all employees of the Company, other than the Chief Executive Officer (CEO), was $78,832,$89,421, and the total compensation of the CEO was $2,365,476,$4,665,714, as reported in the Summary Compensation Table above.  Based on this information, for 2019,2020, the CEO’s annual total compensation was 3052 times that of the median of the annual total compensation of all employees.

To identify the median of the annual total compensation of all of the Company’s employees, as well as to determine the annual total compensation of the median employee and the CEO, the Company took the following steps:

Equity Compensation Plan Information

Grants of Plan-Based Awards

Outstanding Equity Awards at Fiscal Year-End Table

The following table provides information on the current holdings by the Company's NEOs of stock options and stock awards that have not vested.

Option Exercises and Stock Vested

The following table provides information for the Company's NEOs regarding stock vested and options exercised in 2019. *

* No options were exercised in 2019.

Director Compensation Table

The following table provides information concerning the compensation of the Company's non-employee directors for fiscal 2019. Directors who are employees or officers of the Company receive no compensation for their services as members of the Board of Directors or any committees. Each non-employee director receives annual cash compensation of $75,000, paid quarterly. In addition, each non-employee director receives $500 for each meeting of a committee of the Board of Directors he or she attends; the Chairman of the Audit Committee and the Chairman of the Risk Oversight Committee receives $1,500 for each committee meeting attended; and the chairmen of the other committees receive $1,000 for each committee meeting attended. The independent lead director, Michael J. Bradley, receives additional annual cash compensation of $20,000 per annum. As independent lead director, Mr. Bradley serves on the executive, audit, risk and compensation committees, which allows him to provide independent leadership. The Compensation Committee granted equity with a market value at date of grant of $73,800 to independent directors who served for the majority of the year in 2019, to align their interests with other stockholders. The annual cash compensation of $75,000 and individual meeting fees were not increased in 2019 compared to the prior year.

$18 million in 2017. Additionally, the Company earns interest income on these loans between origination and sale.

AUDIT COMMITTEE REPORT

In connection with the preparation and filing of the Company's Annual Report on Form 10-K for the year ended December 31, 2019 (the "2019 Annual Report on Form 10-K"):

The Audit Committee of the Board of Directors of the Company has provided this report. This report shall not be deemed to be filed under, nor shall it be deemed to be incorporated by reference by any general statement incorporating this Proxy Statement into any filing under the Securities Act of 1933, as amended, and the Exchange Act (collectively, the "Acts"), except to the extent the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.

Michael J. Bradley, Chairman

Matthew Cohn

John Chrystal

Stephanie Mudick

PROPOSAL 3.-APPROVAL OF THE BANCORP, INC. 2020 EQUITY INCENTIVE PLAN 

The Board of Directors has adopted, subject to stockholder approval, The Bancorp, Inc. 2020 Equity Incentive Plan (the “2020 Equity Incentive Plan”) to provide additional incentives for our officers, employees and directors to promote our growth and performance and to further align their interests with those of our stockholders. By approving the 2020 Equity Incentive Plan, stockholders will give us the flexibility we need to continue to attract, motivate and retain highly qualified officers, employees and directors by offering a competitive compensation program that is linked to the performance of our stock.

Why We Are Seeking Approval of the 2020 Equity Incentive Plan

How We Determined the Size and Terms of the 2020 Equity Incentive Plan

When determining the size and terms of the 2020 Equity Incentive Plan, the Board and Compensation Committee considered a number of factors, including: 1) a review of peer compensation, 2) industry practices related to the adoption of equity-incentive plans, 3) applicable regulations related to the adoption of equity-incentive plans, 4) guidance provided by proxy advisory firms regarding equity-based incentive plans, and 5) the size and terms of the 2018 Equity Incentive Plan and awards made thereunder.

Highlights of the 2020 Equity Incentive Plan

Equity Compensation Plan Information

 If the 2020 Equity Incentive Plan is approved by stockholders, no future equity awards will be granted under the 2018 Equity Incentive Plan. As of December 31, 2019,2020, the status of our equity compensation plans is as follows. Please seefollows:

Grants of Plan-Based Awards

The following table provides information concerning each grant of an award made to an NEO during 2020 under any plan of the “StatusCompany. In the following table, the values of All Equity Plans at March 23, 2020” table below forstock awards were determined by multiplying the current equity compensation plan information.grant date closing price of the stock by the number of shares granted. The values of stock options granted were determined in accordance with FASB ASC Topic 718. The assumptions utilized in determining the fair value of stock options are described in footnote M to the annual financial statements. The stock options vest over a period of four years from grant date, while the stock awards vest over a period of two years and eight months from grant date.

Material Features of the 2020Outstanding Equity Incentive PlanAwards at Fiscal Year-End Table

The following is a summarytable provides information on the holdings by the Company’s NEOs as of the material features of theyear-end December 31, 2020 Equity Incentive Plan, which is qualified in its entirety by reference to the provisions of the 2020 Equity Incentive Plan, attached hereto as Appendix A.

Subject to permitted adjustments for certain corporate transactions, the 2020 Equity Incentive Plan authorizes the issuance or delivery to participants of up to 3,300,000 shares of The Bancorp, Inc. (the “Company”) common stock pursuant to grants of restricted stock awards, restricted stock units, incentivedetails unexercised stock options and non-qualified stock options. Awards may be granted in any combination of incentive and non-qualified stock options, restricted stock awards or restricted stock units and all awards may be granted as either restricted stock awards, restricted stock units or stock options, in the discretion of the Compensation Committee, and all stock options may be granted as incentive stock options.that have not vested.

 The 2020 Equity Incentive Plan will be administered by the members of the Company’s Compensation Committee (the “Committee”) who are “Disinterested Board Members,” as defined in the 2020 Equity Incentive Plan. The Committee has the authority and discretion to select the persons who will receive awards; establishing the terms and conditions relating to each award; adopting rules and regulations relating to the 2020 Equity Incentive Plan; and interpreting the 2020 Equity Incentive Plan. The 2020 Equity Incentive Plan also permits the Committee to delegate all or any portion of its responsibilities and powers to another committee of the Board.

 The Committee may grant an award under the 2020 Equity Incentive Plan as an alternative to or replacement of an existing award under the 2020 Equity Incentive Plan or any other plan of the Company or any subsidiary, or as the form of payment for grants or rights earned or due under any other plan or arrangement of the Company or its subsidiaries, including the plan of any entity acquired by the Company or any subsidiary.

Eligibility

Employees and directors of, and consultants to, the Company or its subsidiaries are eligible to receive awards under the 2020 Equity Incentive Plan, except that non-employees may not be granted incentive stock options. As of March 31, 2020, there were 11 non-employee directors, approximately 620 employees and approximately one consultant eligible to receive awards under the 2020 Equity Incentive Plan.

Types of Awards

The Committee may determine the type and terms and conditions of awards under the 2020 Equity Incentive Plan, which will be set forth in an award agreement delivered to each participant. At least 95% of all awards under the 2020 Equity Incentive Plan will be subject to a vesting requirement of at least one year of service following the grant of the award. Awards under the 2020 Equity Incentive Plan will be granted to employees with a minimum vesting schedule of two years and nine months and non-employee directors with a minimum vesting schedule of one year, with the first installment vesting no earlier than the one-year anniversary of the date of grant. The Committee will specify the vesting schedule or conditions of each Award. Awards may be granted in any combination of incentive and non-qualified stock options, restricted stock awards and restricted stock units.

Stock Options. A stock option is the right to purchase shares of common stock at a specified price for a specified period of time. Under the 2020 Equity Incentive Plan, the exercise price may not be less than the fair market value of a share of our common stock on the date the stock option is granted. Fair market value, for purposes of the 2020 Equity Incentive Plan, means (i) if the stock is listed on a national securities exchange, the closing sales price on such exchange on such date, or, in the absence of reported sales on such date, the closing sales price on the immediately preceding date on which sales were reported, or (ii) if the stock is not listed on a securities exchange, “fair market value” will mean a price determined by the Committee in accordance with Section 422 of the Internal Revenue Code and applicable requirements of Section 409A of the Internal Revenue Code. Further, the Committee may not grant a stock option with a term that is longer than 10 years.

Option Exercises and Stock Vested

The following disclosures provide information for the Company’s NEOs regarding restricted stock units vested and options are either “incentive” stock optionsexercised in 2020.

Potential Payments Upon Termination or “non-qualified” stock options. Incentive stock options have certain tax advantages that areChange in Control

The following discussion presents the potential payments for each of our named executive officers upon a termination of employment or change in control. Pursuant to applicable SEC rules, the analysis contained in this discussion does not availableconsider or include payments made to non-qualified stock options, and must complya named executive officer with respect to contracts, agreements, plans or arrangements to the requirementsextent they do not discriminate in scope, terms or operation in favor of Section 422 of the Internal Revenue Code. Onlynamed executive officers and employees are eligible to receive incentive stock options. Non-Employee directors may only receive non-qualified stock options under the 2020 Equity Incentive Plan. Shares of common stock purchased upon the exercise of a stock option must be paid for at the time of exercise in cash or by such other means as the Committee may from time to time permit, including: (i) by personal, certified or cashier’s check, (ii) by tendering stock of the Company owned by the participant in satisfaction of the exercise price, (iii) by a “cashless exercise” through a third party, (iv) by a net settlement of the stock option, using a portion of the shares obtained on exercise in payment of the exercise price of the stock option, or (v) by a combination of the foregoing.and that are available generally to all salaried employees. The total number of sharesactual amounts that may be acquired upon the exercise of a stock option will be rounded down to the nearest whole share, with cash-in-lieu paid by the Company, at its discretion, for the value of any fractional share.

Restricted Stock. A restricted stock award is a grant of common stock, subject to vesting requirements, to a participant for no consideration or such minimum consideration as may be required by applicable law. Restricted stock awards may be granted only in whole shares of common stock and are subject to vesting conditions and other restrictions established by the Committee as set forth in the 2020 Equity Incentive Plan or the award agreement. Prior to their vesting, unless otherwise determined by the Committee, the recipient of a restricted stock award may exercise any voting rights with respect to common stock subject to an award but such recipient will not receive dividends or any distributions declared prior to the vesting date of those shares.

Restricted Stock Units. Restricted stock units may be denominated in shares of common stock and are similar to restricted stock awards except that no share of common stock is actually issued to the award recipient at the time of grant of a restricted stock unit. Restricted stock unit awards willwould be paid in sharesupon a named executive officer’s termination of our common stock, or in the sole discretion of the Committeeemployment can only be determined at the time of settlement,such executive officer’s termination. Due to the number of factors that affect the nature and amount of any compensation or benefits provided upon the termination events, any actual amounts paid or distributed may be higher or lower than reported below. Among other factors that could affect these amounts are the timing during the year of any such event and our stock price. This discussion assumes the relevant trigger event occurred on December 31, 2020, in cash or a combination of cash and shares of stock, and are subject to vesting conditions and other restrictions set forth in the 2020 Equity Incentive Plan or the award agreement. Participants have no voting rightsaccordance with respect to any restricted stock units granted under the 2020 Equity Incentive Plan. Dividends will not be paid on any restricted stock units.

Limitation on Awards under the 2020 Equity Incentive PlanSEC rules.

The maximum number of shares of stock that are available for awards as stock options, restricted stock awards and restricted stock units is 3,300,000. Awards under the 2020 Equity Incentive Plan may be granted in any combination of shares of restricted stock awards, restricted stock units or stock options, inCompany’s named executive officers serve at the discretion of the Committee,Board of Directors. We have not entered into formal employment agreements with any of our named executive officers. In connection with Mr. Kozlowski’s hire in 2016, however, we provided him with a Letter Agreement, or the DK Letter Agreement, outlining his basic compensation terms and all stock options may be granted as incentive stock options.

providing for grants of equity compensation, among other things. The 2020 Equity Incentive Plan does not use liberal share recycling in determining the number of shares available for issuance under the 2020 Equity Incentive Plan. Accordingly, to the extent (i) a stock option is exercisedDK Letter Agreement specified that his employment was terminable by using an actualeither party at any time with or constructive exchange of shares of stock to pay the exercise price, (ii) shares of stock are withheld to satisfy withholding taxes upon exercisewithout cause or vesting of an award, or (iii) shares are withheld to satisfy the exercise price of stock options in a net settlement, the number of shares of stock available under the 2020 Equity Incentive Plan shall be reduced by the gross number of stock options or stock awards exercised or vested rather than by the net number of shares of stock issued. In addition, shares of stock purchased on the open market with the cash proceeds from the exercise of a stock option will not be added back to the number of shares of stock authorized for grant under the 2020 Equity Incentive Plan.

advance notice. In the event of a corporate transaction involving the stocknamed executive officer’s termination of the Company (includingemployment for any recapitalization, reclassification, stock split, reverse split, combination or exchange of shares, stock dividendreason whatsoever, any severance benefits or other distribution payable in capital stock), the number and kind of shares for which grants of stock options, restricted stock, or restricted stock unit awards maycash payments, if any, would be made under the 2020 Equity Incentive Plan will be adjusted proportionately by the Committee. In addition, the number and kind of shares for which grants are outstanding will be adjusted proportionately so that the proportionate interest of the grantee immediately following such event will, to the extent practicable, be the same as immediately before such event. In addition, the Committee is authorized to adjust the terms and conditions of, and the criteria included in, stock options, restricted stock awards and restricted stock units.negotiated on an individual basis.

Limitations on Grants to Employees, Directors and Consultants

Awards Under the Company’s Equity Compensation Plans

The maximum numberCompany has granted awards of shares of stock, in the aggregate, that may be subject to stock options, restricted stock units orand restricted stock awardsto each of the NEOs under one or more of the Company’s Stock Option and Equity Plan of 2011, Stock Option and Equity Plan of 2013, 2018 Equity Incentive Plan and 2020 Equity Incentive Plan (collectively, the “Equity Compensation Plans”). The currently outstanding wards granted to the NEOs are described above in the “Outstanding Equity Awards at Fiscal Year-End” table. These awards are subject to certain trigger events which would affect their terms and as a result represent our only obligation to make any employee, non-employee directorpotential payments upon termination or consultantchange of control of our NEOs. As described in any calendar year will be 500,000 shares.this table, these awards are comprised of unvested options (not exercisable) and vested options (exercisable) and unvested RSUs.

Vesting of Awards

The Committee will specifyMr. Kozlowski received stock options from the vesting schedule or conditions of each award. At least 95% of all awards under2018 Equity Incentive Plan and the 2020 Equity Incentive Plan will bePlan. With respect to such vested options, in the event of death, disability or retirement, the exercise period is one year from the trigger date, subject to termination on the expiration date of this option, if earlier. In the event of an involuntary termination following a vesting requirement of at least one year of service followingchange in control, all options would remain exercisable (subject to the grant ofexpiration provisions otherwise applicable to the award. Awards under the 2020 Equity Incentive Plan willoption) and would be granted to employees withexercisable for a minimum vesting schedule of two years and nine months and non-employee directors with a minimum vesting scheduleperiod of one year withfollowing such termination. If his employment is terminated for cause, all options that have not been exercised will expire and be forfeited. If his employment terminates for any other reason, these options may thereafter be exercised, to the first installment vesting no earlier thanextent exercisable at the time of such termination, for a period of three months following termination, subject to termination on the option’s expiration date, if earlier.

With respect to unvested options, in the event of death, disability or retirement, such options would vest on the one year anniversary of the date of grant,termination of service and, since the one year vesting period would coincide with the one year permitted exercise period, notice of exercise would be required to be provided prior to the expiration of the one year period following termination, with exercise permitted immediately after the one year period, provided that no option would become vested after the expiration of its term and subject to acceleration of vesting, to the extent permitted by the Committee, including inrestrictions based on ISO treatment. In the event of death, disability, retirement oran involuntary termination following a change in control, all options would become exercisable (subject to the expiration provisions otherwise applicable to the option) and would be exercisable for a period of one year following such termination. If employment has been terminated for cause or for any other reason, these options would expire and be forfeited.

With respect to unvested RSUs, in a manner consistent with the 2020 Equity Incentive Plan.

Change in Control