A. Full title of the plan and the address of the plan,
if different from that of the issuer named below:
The Bancorp, Inc. 401(k) Plan
B: Name of issuer of the securities
held pursuant to the plan and the address of its principal executive office:
The Bancorp, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
NOTE A - DESCRIPTION OF THE PLAN
The following brief description of The Bancorp, Inc.
401(k) Plan (the Plan) provides only general information. Participants should refer to the Plan document for a more complete description
of the Plan’s provisions.
1. General
The Plan is a defined contribution plan of The Bancorp,
Inc. and its subsidiary (collectively, the Company) covering all employees. Full-time employees shall become eligible to participate in
the Plan on the date of their employment. Participants may start contributing to the Plan the first day of each month after becoming eligible.
The Plan is subject to the provisions of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the
Employee Retirement Income Security Act of 1974, as amended (ERISA).
2. Contributions
Contributions to the Plan are made by eligible employees
and the Company. Each year, participants may contribute on pre-tax and after-tax basis up to the Internal Revenue Service (IRS) maximum
allowable limit, as defined in the Plan. The Company matches 50% of the first 6% of eligible compensation that a participant contributes
to the Plan. Participants may also contribute amounts representing rollovers from other qualified plans. The Plan contains an automatic
enrollment feature of 6%. Discretionary amounts may be contributed at the option of the Company’s board of directors. There were
no discretionary amounts contributed in 2022. Contributions are subject to certain limitations.
3. Participant Accounts
Individual accounts are maintained for each participant.
Each participant’s account is credited with the participant’s contributions and allocation of (a) the Company’s matching
contributions and (b) Plan earnings and is charged with (a) withdrawals and (b) allocation of administrative expenses and Plan losses.
Allocations are based on participant’s earnings or account balances, as defined. The benefit to which a participant is entitled
is the benefit that can be provided from the participant’s vested account.
4. Vesting
Participants are immediately vested in their contributions
plus actual earnings thereon. Vesting in the Company’s matching and discretionary contribution portion of their accounts plus actual
earnings thereon is based on years of continuous service, as defined. A participant is 50% vested after two years of service and 100%
vested after three years of service.
Participants attaining their normal retirement age
and those who become disabled or die are entitled to 100% of their accrued benefits, regardless of credited service period.
5. Investment Options
The Plan’s trustee is Fidelity Management Trust
Company and record-keeper is Fidelity Workplace Service LLC. Participants are able to direct contributions into any of thirty-two investment
options.
All investments are included in the financial statements
at fair market value (Note D).
The Bancorp, Inc. 401(k) Plan
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
6. Notes Receivable from Participants
Participants may borrow from their fund accounts a
minimum of $1,000 up to a maximum equal to $50,000 or 50% of their vested account balance, reduced by the highest outstanding loan balance
in the prior twelve-month period. Loan terms range from one to five years, with longer terms available for the purchase of a primary residence.
The loans are secured by the balance in the participant’s account and bear an interest rate set at 1% above the prime rate. Interest
rates on outstanding loans ranged from 4.25% to 8.00% at December 31, 2022, and 4.25% to 6.50% at December 31, 2021. Principal and interest
are paid ratably through monthly payroll deductions and are deposited into the participant’s account. A fee based on the loan term
is charged to cover administrative costs.
7. Benefit Payments
Upon termination of service due to death, disability
or retirement, a participant may elect to receive either a lump-sum amount equal to the value of the participant’s vested interest
in their account, or annual installments over an agreed-upon period. For termination of service due to other reasons, a participant may
receive the value of the vested interest in their account as a lump-sum distribution. Minimum required distributions for participants
who have reached age 72 also apply per IRS regulations.
8. In-Service Withdrawals
Participants in the Plan, while employed with the
Company, may make withdrawals for the following circumstances: they have reached the age of 59-1/2, have a “qualifying” hardship
withdrawal request, or they have rollover contributions invested in their account. Once a participant has reached 59-1/2 years of age,
they may withdraw all or a portion of their vested account. A Plan participant who has rollover contributions may withdraw all or a portion
of their rollover contribution account. A participant who has a “qualifying” hardship withdrawal, in instances of immediate
and heavy financial hardship, may withdraw up to 100% of their accounts in the following priority: elective deferral contributions, catch-up
contributions, and the vested portion of the employer matching contributions account.
9. Forfeited Accounts
Forfeitures are used to reinstate previously forfeited
balances of former employees, with any remaining portion available to reduce future employer contributions. At December 31, 2022 and 2021,
forfeited non-vested accounts totaled $142,273 and $151,657, respectively. Forfeitures of $185,679, were used to reduce employer contributions
during the year ended December 31, 2022.
10. Voting Rights
Each participant is entitled to exercise voting rights
attributable to the Company shares allocated to their account through their holdings and is notified by the Trustee prior to the time
that such rights are to be exercised. The Trustee is required to vote any unallocated shares held by the Plan and any allocated shares
for which instructions have not been given by a participant in the same proportion as the shares for which voting instructions have been
received, subject to the power, responsibility and obligation of the Plan Administrator to direct the Trustee to act with respect to the
voting of such shares in a different manner, if the Plan Administrator determines that such action is consistent with and/or required
by its fiduciary obligations under ERISA.
The Bancorp, Inc. 401(k) Plan
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Basis of Accounting
The financial statements of the Plan are prepared
on the accrual basis of accounting under accounting principles generally accepted in the United States of America (U.S. GAAP).
2. Use of Estimates
The preparation of financial statements in conformity
with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes
therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
3. Investment Valuation and Income Recognition
The Plan’s investments are reported at fair
value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. See Note D for a discussion of fair value investments.
Purchases and sales of securities are recorded on
a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Net appreciation
or depreciation includes the Plan’s gains and losses on investments bought and sold, as well as held during the year.
4. Administrative Expenses
Certain administrative expenses of the Plan are paid
by the Plan unless otherwise paid by the Company at the Company’s discretion.
5. Benefit Payments
Benefit payments and distributions are recorded when
paid. At December 31, 2022 and 2021, there were no benefits processed and approved for payment but not paid.
6. Notes Receivable from Participants
Notes receivable from participants are measured at
their unpaid principal balance plus any accrued but unpaid interest. Income is recorded on the accrual basis. There was no material unpaid
interest at December 31, 2022 and 2021. No allowance for credit losses has been recorded as of December 31, 2022 and 2021. If a participant
ceases to make loan repayments and the Plan administrator deems the participant loan to be in default, delinquent participant loans are
reclassified as distributions based upon the terms of the Plan document and a benefit payment is recorded.
7. Risks and Uncertainties
The Plan invests in various investment securities.
Investments are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain
investment securities, it is at least reasonably possible that changes in the values of investments will occur in the near term and that
such changes could materially affect participants’ account balances and the amounts reported in the statements of net assets available
for benefits.
The Bancorp, Inc. 401(k) Plan
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
The Plan is subject to concentrations of credit risks
in its investments. Credit risk with respect to investments is limited to the Plan’s investments in the Company’s common stock
representing 13% and 10% of the total assets as of December 31, 2022 and 2021, respectively (Note C).
NOTE C - RELATED PARTIES AND PARTIES-IN-INTEREST TRANSACTIONS
Investments include 334,303 and 334,197 shares of
the Company’s common stock valued at $9,487,513 and $8,458,514 as of December 31, 2022 and 2021, respectively. During 2022, the
Plan purchased 12,340 shares at a cost of $316,406 and sold 12,234 shares at a cost of $115,218; in addition, the price per share of Company’s
common stock increased from $25.31 to $28.38 as of December 31, 2021 and 2022, respectively. There are no additional contributions made
on Company’s common stock in 2022 and 2021. The Plan also permits notes receivable from participants. These transactions qualify
as parties-in-interest transactions which are exempt from the prohibited transaction rules.
Certain Plan investments are shares of mutual funds
and units of a collective trust managed by Fidelity Investments. Fidelity Investments is an affiliate of the Trustee of the Plan and,
therefore, these transactions qualify as party-in-interest transactions. Additionally, the Plan paid administrative fees of $24,966 to
Fidelity Investments for the year ended December 31, 2022.
NOTE D - FAIR VALUE MEASUREMENTS
In general, fair value is an exit price, representing
the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.
Accounting guidelines establish a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements)
and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
Level 1 Inputs to the
valuation methodology are unadjusted quoted prices for identical assets in active markets that the Plan has the ability to access;
Level 2 Quoted prices
in markets that are not active or inputs that are observable, either directly or indirectly, for substantially the full term of the asset
or liability; and
Level 3 Prices or
valuation techniques that require inputs are both significant to the fair value measurement and unobservable (i.e., supported by little
or no market activity).
Following is a description of the valuation methodologies
used for assets at fair value:
Mutual funds: Valued at the net asset
value (NAV) of shares held by the Plan at year end based on quoted market prices.
Common stock: Valued at the closing
price of shares held by the Plan at year end as reported in the active market in which the stock is traded.
The Bancorp, Inc. 401(k) Plan
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
Collective trust: Valued at fair value
of the underlying securities held by the fund, which represents NAV of the units held by the Plan at year end.
Money Market Fund: Valued at fair
value of the short-term cash investments held by the fund, which represents NAV of the shares held by the Plan at periodic basis. Shares
can be redeemed on a same day basis but only directly from the Fund. Such transactions do not constitute an active market.
The preceding methods described may produce a fair
value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Plan
believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions
to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
The following tables set forth by level, within the
fair value hierarchy, the Plan’s assets at fair value as of
December 31:
| | |
Assets at fair value as of December 31, 2022 |
| | |
Level 1 | |
Level 2 | |
Level 3 | |
Total |
| | |
| |
| |
| |
|
| Mutual Funds | |
$ | 59,056,004 | | |
$ | — | | |
$ | — | | |
$ | 59,056,004 | |
| Stock Fund: | |
| | | |
| | | |
| | | |
| | |
| Money Market Fund | |
| — | | |
| 1,314 | | |
| — | | |
| 1,314 | |
| Common Stock | |
| 9,487,513 | | |
| — | | |
| — | | |
| 9,487,513 | |
| | |
| | | |
| | | |
| | | |
| | |
| | |
$ | 68,543,517 | | |
$ | 1,314 | | |
$ | — | | |
| 68,544,831 | |
| Investment measured at NAV (a) | |
| | | |
| | | |
| | | |
| 2,087,915 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total investments, at fair value | |
| | | |
| | | |
| | | |
$ | 70,632,746 | |
| | |
Assets at fair value as of December 31, 2021 |
| | |
Level 1 | |
Level 2 | |
Level 3 | |
Total |
| | |
| |
| |
| |
|
| Mutual Funds | |
$ | 69,930,947 | | |
$ | — | | |
$ | — | | |
$ | 69,930,947 | |
| Stock Fund: | |
| | | |
| | | |
| | | |
| | |
| Money Market Fund | |
| — | | |
| 1,279 | | |
| — | | |
| 1,279 | |
| Common Stock | |
| 8,458,514 | | |
| — | | |
| — | | |
| 8,458,514 | |
| | |
| | | |
| | | |
| | | |
| | |
| | |
$ | 78,389,461 | | |
$ | 1,279 | | |
$ | — | | |
| 78,390,740 | |
| Investment measured at NAV (a) | |
| | | |
| | | |
| | | |
| 2,267,011 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total investments, at fair value | |
| | | |
| | | |
| | | |
$ | 80,657,751 | |
(a) In accordance with Accounting Standards
Codification (ASC) Subtopic 820-10, Fair Value Measurement, certain investments that are measured at fair value using the NAV per
share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in
these tables are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statements of net assets
available for benefits.
The Bancorp, Inc. 401(k) Plan
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
Investments Measured Using the NAV per Share as a
Practical Expedient.
The following table summarizes investments for which
fair value is measured using the NAV per share practical expedient as of December 31, 2022 and 2021. There are no participant redemption
restrictions for these investments; the redemption notice period is applicable only to the Plan.
| |
|
Fair value December 31, 2022 |
|
Fair value December 31, 2021 |
|
Unfunded commitments |
|
Redemption frequency |
|
Redemption
notice period |
| |
|
|
|
|
|
|
|
|
|
|
| Collective trust |
$2,087,915 |
|
$2,267,011 |
|
N/A |
|
See below |
|
See below |
| |
|
|
|
|
|
|
|
|
|
|
The Plan is applying the practical expedient as of
December 31, 2022 and 2021 to its investment in Fidelity’s Managed Income Portfolio (MIP), a collective trust fund. Participants’
ownership of the MIP is represented as units. Units are issued and redeemed daily at the MIP’s constant NAV of $1 per unit. The
MIP allows for daily liquidity, with no additional days’ notice required for redemption for participant level transactions; however,
the Plan is required to give twelve-month notice prior to liquidation. It is the policy of the MIP to use its best efforts to maintain
a stable NAV of $1 per unit, although there is no guarantee that the MIP will be able to maintain this value. There are no unfunded commitments
as of December 31, 2022 and 2021.
Gains and losses (realized and unrealized) included
in changes in net assets for the period above are reported in net appreciation (depreciation) in fair value of investments in the statement
of changes in net assets available for benefits.
The availability of observable market data is monitored
to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based
valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer
is reported at the beginning of the reporting period.
NOTE E - PLAN TERMINATION
Although it has not expressed any intent to do so,
the Company has the right under the Plan to discontinue its contributions at any time and terminate the Plan subject to the provisions
of ERISA. In the event of Plan termination, participants would become 100% vested in their accounts.
NOTE F - INCOME TAX STATUS
The Plan is a Fidelity Volume Submitter Plan.
The IRS has determined and informed Fidelity by letter dated June 30, 2020, that the Plan is designed in accordance with the
applicable sections of the Internal Revenue Code (IRC). The Plan has been amended since that date, however, the Plan administrator
believes that the Plan is currently designed and being operated in compliance, in all material respects, with the applicable
requirements of the IRC and is, therefore, tax exempt.
The Bancorp, Inc. 401(k) Plan
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
U.S. GAAP requires Plan management to evaluate tax
positions taken by the Plan and recognize a tax liability (or asset) if the Plan has taken an uncertain position that more likely than
not would not be sustained upon examination by the IRS. The Plan administrator has analyzed the tax positions taken by the Plan, and has
concluded that as of December 31, 2022 and 2021, there are no uncertain positions taken or expected to be taken that would require recognition
of a liability (or asset) or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however,
there are currently no audits for any tax periods in progress.
NOTE G - SUBSEQUENT EVENTS
The Plan has evaluated all subsequent events through
June 23, 2022 which represents when the financial statements were issued, to ensure that the Plan’s financial statements include
appropriate disclosure of events both recognized in the financial statements as of December 31, 2022, and events which occurred subsequent
to December 31, 2022, but were not recognized in the financial statements.
The Plan Administrator is not aware of any subsequent
events, which would require recognition or disclosure in the financial statements.
SUPPLEMENTARY INFORMATION