FIRST BANCORP /NC/ 10-Q

Item 1 - Financial Statements First Bancorp and Subsidiaries Consolidated Balance Sheets ($ in thousands) June 30, 2022 (unaudited) December 31, 2021 ASSETS Cash and due from banks, noninterest-bearing $ 85,139 128,228 Due from banks, interest-bearing 348,964 332,934 Total cash and cash equivalents 434,103 461,162 Securities available for sale 2,532,624 2,630,414 Securities held to maturity (fair values of $ 452,658 and $ 511,699 ) 546,410 513,825 Presold mortgages in process of settlement at fair value 4,655 19,257 SBA and other loans held for sale 638 61,003 Loans 6,243,170 6,081,715 Allowance for credit losses on loans ( 82,181 ) ( 78,789 ) Net loans 6,160,989 6,002,926 Premises and equipment 135,143 136,092 Operating right-of-use lease assets 19,707 20,719 Accrued interest receivable 26,500 25,896 Goodwill 364,263 364,263 Other intangible assets 15,352 17,827 Foreclosed properties 658 3,071 Bank-owned life insurance 163,831 165,786 Other assets 161,342 86,660 Total assets $ 10,566,215 10,508,901 LIABILITIES Deposits: Noninterest-bearing checking accounts $ 3,699,725 3,348,622 Interest-bearing checking accounts 1,537,487 1,593,231 Money market accounts 2,572,118 2,562,283 Savings accounts 747,272 708,054 Time deposits of $100,000 or more 521,853 613,414 Other time deposits 281,293 299,025 Total deposits 9,359,748 9,124,629 Borrowings 67,445 67,386 Accrued interest payable 648 607 Operating lease liabilities 20,280 21,192 Other liabilities 55,751 64,512 Total liabilities 9,503,872 9,278,326 Commitments and contingencies SHAREHOLDERS’ EQUITY Preferred stock, no par value per share. Authorized: 5,000,000 shares Issued & outstanding: none as of June 30, 2022 and December 31, 2021 — — Common stock, no par value per share. Authorized: 60,000,000 shares Issued & outstanding: 35,683,595 shares and 35,629,177 shares as of June 30, 2022 and December 31, 2021, respectively 723,956 722,671 Retained earnings 587,739 532,874 Stock in rabbi trust assumed in acquisition ( 1,573 ) ( 1,803 ) Rabbi trust obligation 1,573 1,803 Accumulated other comprehensive loss ( 249,352 ) ( 24,970 ) Total shareholders’ equity 1,062,343 1,230,575 Total liabilities and shareholders’ equity $ 10,566,215 10,508,901 See accompanying notes to unaudited consolidated financial statements. Page 4 Index First Bancorp and Subsidiaries Consolidated Statements of Income Three Months Ended June 30, Six Months Ended June 30, ($ in thousands, except share data - unaudited) 2022 2021 2022 2021 INTEREST INCOME Interest and fees on loans $ 65,077 52,295 129,279 103,368 Interest on investment securities: Taxable interest income 13,385 7,789 26,595 13,702 Tax-exempt interest income 1,104 474 2,152 797 Other, principally overnight investments 881 581 1,530 1,281 Total interest income 80,447 61,139 159,556 119,148 INTEREST EXPENSE Savings, checking and money market accounts 1,047 1,136 2,232 2,450 Time deposits of $100,000 or more 378 681 808 1,539 Other time deposits 160 182 316 398 Borrowings 592 381 1,052 764 Total interest expense 2,177 2,380 4,408 5,151 Net interest income 78,270 58,759 155,148 113,997 Provision for credit losses — — 3,500 — Provision for (reversal of) unfunded commitments — 1,939 ( 1,500 ) 1,939 Total provision for credit losses — 1,939 2,000 1,939 Net interest income after provision for credit losses 78,270 56,820 153,148 112,058 NONINTEREST INCOME Service charges on deposit accounts 3,700 2,824 7,241 5,557 Other service charges and fees 7,882 6,496 14,887 12,018 Fees from presold mortgage loans 454 2,274 1,575 6,818 Commissions from sales of insurance and financial products 1,151 2,466 2,096 4,656 SBA consulting fees 704 2,187 1,484 4,951 SBA loan sale gains 841 2,996 4,102 5,326 Bank-owned life insurance income 942 614 1,918 1,234 Other gains, net 1,590 1,517 3,212 1,483 Total noninterest income 17,264 21,374 36,515 42,043 NONINTEREST EXPENSES Salaries expense 23,799 21,187 47,253 41,318 Employee benefits expense 6,310 4,084 11,888 8,658 Total personnel expense 30,109 25,271 59,141 49,976 Occupancy expense 3,122 2,668 6,506 5,572 Equipment related expenses 1,514 1,053 2,818 2,098 Merger and acquisition expenses 737 411 4,221 411 Intangibles amortization expense 953 845 1,970 1,742 Foreclosed property gains, net ( 292 ) ( 173 ) ( 372 ) ( 16 ) Other operating expenses 13,255 10,910 26,579 21,267 Total noninterest expenses 49,398 40,985 100,863 81,050 Income before income taxes 46,136 37,209 88,800 73,051 Income tax expense 9,551 7,924 18,246 15,572 Net income $ 36,585 29,285 70,554 57,479 Earnings per common share: Basic $ 1.03 1.03 1.98 2.02 Diluted 1.03 1.03 1.98 2.02 Dividends declared per common share $ 0.22 0.20 0.44 0.40 Weighted average common shares outstanding: Basic 35,474,664 28,331,456 35,476,902 28,344,633 Diluted 35,642,471 28,490,031 35,641,728 28,513,942 See accompanying notes to unaudited consolidated financial statements. Page 5 Index First Bancorp and Subsidiaries Consolidated Statements of Comprehensive Income Three Months Ended June 30, Six Months Ended June 30, ($ in thousands - unaudited) 2022 2021 2022 2021 Net income $ 36,585 29,285 70,554 57,479 Other comprehensive (loss) income: Unrealized (losses) gains on securities available for sale: Unrealized holding (losses) gains arising during the period, pretax ( 109,623 ) 4,326 ( 291,418 ) ( 19,909 ) Tax benefit (expense) 25,192 ( 994 ) 66,968 4,575 Postretirement Plans: Amortization of unrecognized net actuarial loss 44 205 88 376 Tax benefit ( 10 ) ( 77 ) ( 20 ) ( 117 ) Other comprehensive (loss) income ( 84,397 ) 3,460 ( 224,382 ) ( 15,075 ) Comprehensive (loss) income $ ( 47,812 ) 32,745 ( 153,828 ) 42,404 See accompanying notes to unaudited consolidated financial statements. Page 6 Index First Bancorp and Subsidiaries Consolidated Statements of Shareholders’ Equity ($ in thousands, except share data - unaudited) Common Stock Retained Earnings Stock in Rabbi Trust Assumed in Acquisition Rabbi Trust Obligation Accumulated Other Comprehensive Income (Loss) Total Shareholders’ Equity Shares Amount Three Months Ended June 30, 2021 Balances, April 1, 2021 28,489 $ 397,094 483,944 ( 2,256 ) 2,256 ( 4,185 ) 876,853 Net income 29,285 29,285 Cash dividends declared ($ 0.20 per common share) ( 5,698 ) ( 5,698 ) Change in Rabbi Trust obligation 328 ( 328 ) — Stock withheld for payment of taxes ( 4 ) ( 221 ) ( 221 ) Stock-based compensation 7 831 831 Other comprehensive income 3,460 3,460 Balances, June 30, 2021 28,492 $ 397,704 507,531 ( 1,928 ) 1,928 ( 725 ) 904,510 Three Months Ended June 30, 2022 Balances, April 1, 2022 35,640 $ 723,441 559,004 ( 1,814 ) 1,814 ( 164,955 ) 1,117,490 Net income 36,585 36,585 Cash dividends declared ($ 0.22 per common share) ( 7,850 ) ( 7,850 ) Change in Rabbi Trust obligation 241 ( 241 ) — Stock withheld for payment of taxes ( 14 ) ( 486 ) ( 486 ) Stock-based compensation 58 1,001 1,001 Other comprehensive loss ( 84,397 ) ( 84,397 ) Balances, June 30, 2022 35,684 $ 723,956 587,739 ( 1,573 ) 1,573 ( 249,352 ) 1,062,343 See accompanying notes to unaudited consolidated financial statements. Page 7 Index First Bancorp and Subsidiaries Consolidated Statements of Shareholders’ Equity ($ in thousands, except share data - unaudited) Common Stock Retained Earnings Stock in Rabbi Trust Assumed in Acquisition Rabbi Trust Obligation Accumulated Other Comprehensive Income (Loss) Total Shareholders’ Equity Shares Amount Six Months Ended June 30, 2021 Balances, January 1, 2021 28,579 $ 400,582 478,489 ( 2,243 ) 2,243 14,350 893,421 Net income 57,479 57,479 Adoption of new accounting standard ( 17,051 ) ( 17,051 ) Cash dividends declared ($ 0.40 per common share) ( 11,386 ) ( 11,386 ) Change in Rabbi Trust Obligation 315 ( 315 ) — Stock repurchases ( 107 ) ( 4,036 ) ( 4,036 ) Stock withheld for payment of taxes ( 7 ) ( 324 ) ( 324 ) Stock-based compensation 27 1,482 1,482 Other comprehensive loss ( 15,075 ) ( 15,075 ) Balances, June 30, 2021 28,492 $ 397,704 507,531 ( 1,928 ) 1,928 ( 725 ) 904,510 Six Months Ended June 30, 2022 Balances, January 1, 2022 35,629 722,671 532,874 ( 1,803 ) 1,803 ( 24,970 ) 1,230,575 Net income 70,554 70,554 Cash dividends declared ($ 0.44 per common share) ( 15,689 ) ( 15,689 ) Change in Rabbi Trust Obligation 230 ( 230 ) — Stock withheld for payment of taxes ( 17 ) ( 603 ) ( 603 ) Stock-based compensation 72 1,888 1,888 Other comprehensive loss ( 224,382 ) ( 224,382 ) Balances, June 30, 2022 35,684 $ 723,956 587,739 ( 1,573 ) 1,573 ( 249,352 ) 1,062,343 See accompanying notes to unaudited consolidated financial statements. Page 8 Index First Bancorp and Subsidiaries Consolidated Statements of Cash Flows Six Months Ended June 30, ($ in thousands-unaudited) 2022 2021 Cash Flows From Operating Activities Net income $ 70,554 57,479 Reconciliation of net income to net cash provided by operating activities: Provision for credit losses and unfunded commitments, net 2,000 1,939 Net security premium amortization 6,579 6,342 Loan discount accretion ( 3,216 ) ( 4,972 ) Other purchase accounting accretion and amortization, net ( 276 ) 61 Foreclosed property gains and write-downs, net ( 372 ) ( 16 ) Other gains, net ( 3,212 ) ( 1,483 ) (Decrease) increase in net deferred loan fees ( 901 ) 1,084 Bank-owned life insurance income ( 1,918 ) ( 1,234 ) Depreciation of premises and equipment 3,436 2,928 Amortization of operating lease right-of-use assets 1,012 808 Repayments of lease obligations ( 912 ) ( 697 ) Stock-based compensation expense 1,548 1,228 Amortization of intangible assets 1,970 1,742 Amortization and impairment of SBA servicing assets 1,531 1,014 Fees/gains from sale of presold mortgages and SBA loans ( 5,677 ) ( 12,144 ) Origination of presold mortgage loans in process of settlement ( 78,141 ) ( 170,132 ) Proceeds from sales of presold mortgage loans in process of settlement 94,052 204,588 Origination of SBA loans for sale ( 52,701 ) ( 60,135 ) Proceeds from sales of SBA and other loans 101,801 55,380 Decrease in accrued interest receivable ( 604 ) ( 85 ) (Increase) decrease in other assets ( 24,857 ) 2,467 Decrease (increase) in net deferred income tax asset 26,341 ( 44 ) Increase (decrease) in accrued interest payable 41 ( 194 ) Decrease in other liabilities ( 7,561 ) ( 4,826 ) Net cash provided by operating activities 130,517 81,098 Cash Flows From Investing Activities Purchases of securities available for sale ( 354,765 ) ( 857,070 ) Purchases of securities held to maturity ( 39,004 ) ( 133,916 ) Proceeds from maturities/issuer calls of securities available for sale 156,874 169,819 Proceeds from maturities/issuer calls of securities held to maturity 4,102 8,718 (Purchases) redemptions of FRB and FHLB stock, net ( 7,838 ) 1,836 Net increase in loans ( 143,223 ) ( 40,288 ) Proceeds from sales of foreclosed properties 2,904 2,462 Purchases of premises and equipment ( 2,702 ) ( 6,317 ) Proceeds from sales of premises and equipment 359 218 Net cash paid from sale of insurance operations — ( 555 ) Bank-owned life insurance death benefits 5,827 — Net cash used by investing activities ( 377,466 ) ( 855,093 ) Cash Flows From Financing Activities Net increase in deposits 235,521 897,789 Payments on long-term borrowings ( 67 ) ( 665 ) Cash dividends paid – common stock ( 14,961 ) ( 10,833 ) Repurchases of common stock — ( 4,036 ) Payment of taxes related to stock withheld ( 603 ) ( 324 ) Net cash provided by financing activities 219,890 881,931 (Decrease) increase in cash and cash equivalents ( 27,059 ) 107,936 Cash and cash equivalents, beginning of period 461,162 367,290 Cash and cash equivalents, end of period $ 434,103 475,226 (Continued) Page 9 Index First Bancorp and Subsidiaries Consolidated Statements of Cash Flows Six Months Ended June 30, ($ in thousands-unaudited) 2022 2021 Supplemental Disclosures of Cash Flow Information: Cash paid during the period for interest $ 4,644 5,345 Cash paid during the period for income taxes 15,719 16,326 Non-cash: Unrealized loss on securities available for sale, net of taxes ( 224,450 ) ( 15,334 ) Non-cash: Foreclosed loans transferred to other real estate 119 848 Non-cash: Accrued dividends at end of period 7,853 5,698 Non-cash: Initial recognition of operating lease right-of-use assets and operating lease liabilities — 444 Non-cash: Receivable recorded related to sale of insurance operations — 12,955 Non-cash: Derecognition of intangible assets related to sale of insurance operations — ( 10,229 ) See accompanying notes to consolidated financial statements. Page 10 Index First Bancorp and Subsidiaries Notes to Consolidated Financial Statements (unaudited) Note 1 - Organization and Basis of Presentation The consolidated financial statements include the accounts of First Bancorp (the “Company”) and its wholly owned subsidiary First Bank (the “Bank”). The Bank has three wholly owned subsidiaries that are fully consolidated, SBA Complete, Inc. (“SBA Complete”), Magnolia Financial, Inc. ("Magnolia Financial"), and First Troy SPE, LLC. All significant intercompany accounts and transactions have been eliminated. The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and notes necessary for complete financial statements in accordance with GAAP. In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the consolidated financial position of the Company as of June 30, 2022, the consolidated results of operations for the three and six months ended June 30, 2022 and 2021, and the consolidated cash flows for the six months ended June 30, 2022 and 2021. Any such adjustments were of a normal, recurring nature. These interim financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes in the Annual Report on Form 10-K for the year ended December 31, 2021. Operating results for interim period are not necessarily indicative of the results that may be expected for the full year. Reference is made to Note 1 of the 2021 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) for a discussion of accounting policies and other relevant information with respect to the financial statements. To maintain consistency and comparability, certain amounts from prior periods may have been reclassified to conform to current period presentation with no effect on net income or shareholders' equity as previously reported. The Company has evaluated all subsequent events through the date the financial statements were issued. Impact of COVID-19 Our market areas and local economies continue to show signs of recovery from the impact of the COVID-19 pandemic. However, the current pandemic is ongoing and dynamic in nature, and there are many related uncertainties, including, among other things, its severity and new variants that have and may continue to arise; its ultimate duration and infection spikes that may occur; its impact on our customers, employees and vendors; its impact on the financial services and banking industry; and the ongoing impact on the economy as a whole. The extent to which the COVID-19 pandemic has a further impact on our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the COVID-19 pandemic and actions taken by governmental authorities and other third parties in response to the COVID-19 pandemic. Note 2 – Accounting Pronouncements Accounting Standards Adopted in 2022 The Company did not adopt any accounting standards during the first six months of 2022. Accounting Standards Pending Adoption ASU 2022-02, "Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures." The amendments contained in this Accounting Standards Update ("ASU") eliminate the accounting guidance for troubled debt restructurings by creditors, while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. This ASU also requires entities to disclose current period gross write-offs by year of origination for financing receivables and net investment in leases. The amendments in this ASU will be effective for fiscal years beginning after December 15, 2022 including interim periods within those fiscal years and early adoption is permitted. The entity must have adopted the amendments in ASU 2016-13 ("CECL") to adopt the amendments in this ASU. The Company is Page 11 Index currently evaluating the impact of adopting the new guidance on the consolidated financial statements but does not expect it to have a material effect on its financial statements. ASU 2022-03, "Fair Value Measurements (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions." This ASU clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security, and, therefore, is not considered in measuring fair value. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The Company is currently evaluating this ASU for impact on the consolidated financial statements but does not expect it to have a material effect on its financial statements. Note 3 – Securities The book values and approximate fair values of investment securities at June 30, 2022 and December 31, 2021 are summarized as follows: ($ in thousands) June 30, 2022 December 31, 2021 Amortized Cost Fair Value Unrealized Amortized Cost Fair Value Unrealized Gains (Losses) Gains (Losses) Securities available for sale: U.S. Treasuries $ 174,236 172,195 — ( 2,041 ) — — — — Government-sponsored enterprise securities 71,954 60,917 — ( 11,037 ) 71,951 69,179 — ( 2,772 ) Mortgage-backed securities 2,564,559 2,254,549 19 ( 310,029 ) 2,545,150 2,514,805 9,489 ( 39,834 ) Corporate bonds 45,360 44,963 103 ( 500 ) 45,380 46,430 1,106 ( 56 ) Total available for sale $ 2,856,109 2,532,624 122 ( 323,607 ) 2,662,481 2,630,414 10,595 ( 42,662 ) Securities held to maturity: Mortgage-backed securities $ 17,190 16,754 — ( 436 ) 20,260 20,845 585 — State and local governments 529,220 435,904 10 ( 93,326 ) 493,565 490,854 2,955 ( 5,666 ) Total held to maturity $ 546,410 452,658 10 ( 93,762 ) 513,825 511,699 3,540 ( 5,666 ) All of the Company’s mortgage-backed securities were issued by government-sponsored enterprises, except for private mortgage-backed securities with a fair value of $ 0.8 million and $ 0.9 million as of June 30, 2022 and December 31, 2021, respectively. The following table presents information regarding securities with unrealized losses at June 30, 2022: Securities in an Unrealized Loss Position for Less than 12 Months Securities in an Unrealized Loss Position for More than 12 Months Total ($ in thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses U.S. Treasuries $ 172,195 2,041 — — 172,195 2,041 Government-sponsored enterprise securities 18,850 3,109 42,067 7,928 60,917 11,037 Mortgage-backed securities 1,505,339 189,853 761,606 120,612 2,266,945 310,465 Corporate bonds 13,593 407 907 93 14,500 500 State and local governments 392,160 80,374 41,878 12,952 434,038 93,326 Total unrealized loss position $ 2,102,137 275,784 846,458 141,585 2,948,595 417,369 Page 12 Index The following table presents information regarding securities with unrealized losses at December 31, 2021: Securities in an Unrealized Loss Position for Less than 12 Months Securities in an Unrealized Loss Position for More than 12 Months Total ($ in thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Government-sponsored enterprise securities $ 21,436 522 47,743 2,250 69,179 2,772 Mortgage-backed securities 1,773,022 25,977 404,484 13,857 2,177,506 39,834 Corporate bonds 999 1 945 55 1,944 56 State and local governments 228,279 3,797 34,398 1,869 262,677 5,666 Total unrealized loss position $ 2,023,736 30,297 487,570 18,031 2,511,306 48,328 As of June 30, 2022, the Company's securities portfolio held 669 securities of which 616 securities were in an unrealized loss position. As of December 31, 2021, the Company's securities portfolio held 648 securities of which 371 securities were in an unrealized loss position. In the above tables, all of the securities that were in an unrealized loss position at June 30, 2022 and December 31, 2021 are bonds that the Company has determined are in a loss position due primarily to interest rate factors and not credit quality concerns. In arriving at this conclusion, the Company reviewed third-party credit ratings and considered the severity of the impairment. The Company does not intend to sell these securities, and it is more likely than not that the Company will not be required to sell these securities before recovery of the amortized cost. At June 30, 2022 and December 31, 2021, the Company determined that expected credit losses associated with held to maturity debt securities were insignificant. The book values and approximate fair values of investment securities at June 30, 2022, by contractual maturity, are summarized in the table below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities Available for Sale Securities Held to Maturity ($ in thousands) Amortized Cost Fair Value Amortized Cost Fair Value Due within one year $ 26,094 26,149 435 436 Due after one year but within five years 176,752 174,759 998 907 Due after five years but within ten years 87,704 76,260 28,037 24,715 Due after ten years 1,000 907 499,750 409,846 Mortgage-backed securities 2,564,559 2,254,549 17,190 16,754 Total securities $ 2,856,109 2,532,624 546,410 452,658 At June 30, 2022 and December 31, 2021 investment securities with carrying values of $ 812.7 million and $ 951.4 million, respectively, were pledged as collateral for public deposits. At June 30, 2022 and December 31, 2021, there were no holdings of securities of any one issuer, other than U.S. Government and its agencies or government-sponsored enterprises, in an amount greater than 10% of shareholders equity. Included in “Other assets” in the Consolidated Balance Sheets are investments in Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank of Richmond (“FRB”) stock totaling $ 30.2 million and $ 22.3 million at June 30, 2022 and December 31, 2021, respectively. These investments do not have readily determinable fair values. The FHLB stock had a cost and fair value of $ 5.3 million and $ 4.6 million at June 30, 2022 and December 31, 2021, respectively, and serves as part of the collateral for the Company’s line of credit with the FHLB and is also a requirement for membership in the FHLB system. The FRB stock had a cost and fair value of $ 24.9 million and $ 17.8 million at June 30, 2022 and December 31, 2021, respectively, and is a requirement for FRB member bank qualification. Periodically, both the FHLB and FRB recalculate the Company’s required level of holdings, and the Page 13 Index Company either buys more stock or redeems a portion of the stock at cost. The Company determined that neither stock was impaired at either period end. The Company owns 12,356 Class B shares of Visa, Inc. (“Visa”) stock that were received upon Visa’s initial public offering. These shares are expected to convert into Class A Visa shares subsequent to the settlement of certain litigation against Visa, to which the Company is not a party. The Class B shares have transfer restrictions, and the conversion rate into Class A shares is periodically adjusted as Visa settles litigation. The conversion rate at June 30, 2022 was approximately 1.61 , which means the Company would have received approximately 19,843 Class A shares if the stock had converted on that date. This Class B stock does not have a readily determinable fair value and is carried at zero . If a readily determinable fair value becomes available for the Class B shares, or upon their conversion to Class A shares, the Company will adjust the carrying value of the stock to its market value with a credit to earnings. Note 4 – Loans, Allowance for Credit Losses, and Asset Quality Information The following is a summary of the major categories of total loans outstanding: ($ in thousands) June 30, 2022 December 31, 2021 Amount Percentage Amount Percentage All loans: Commercial, financial, and agricultural $ 596,874 10 % $ 648,997 11 % Real estate – construction, land development & other land loans 824,723 13 % 828,549 13 % Real estate – mortgage – residential (1-4 family) first mortgages 1,097,810 18 % 1,021,966 17 % Real estate – mortgage – home equity loans / lines of credit 325,617 5 % 331,932 5 % Real estate – mortgage – commercial and other 3,338,322 53 % 3,194,737 53 % Consumer loans 60,627 1 % 57,238 1 % Subtotal 6,243,973 100 % 6,083,419 100 % Unamortized net deferred loan fees ( 803 ) ( 1,704 ) Total loans $ 6,243,170 $ 6,081,715 Included in the line item "Commercial, financial, and agricultural" in the table above are Paycheck Protection Program ("PPP") loans totaling $ 3.0 million and $ 39.0 million at June 30, 2022 and December 31, 2021, respectively. PPP loans are fully guaranteed by the small business administration ("SBA"). Included in unamortized net deferred loan fees are approximately $ 0.3 million and $ 2.6 million at June 30, 2022 and December 31, 2021, respectively, in unamortized net deferred loan fees associated with these PPP loans. These fees are being amortized under the effective interest method over the terms of the loans. Accelerated amortization is recorded in the periods in which principal amounts are forgiven in accordance with the terms of the Program. Included in the table above are credit card balances outstanding totaling $ 40.8 million and $ 37.9 million at June 30, 2022 and December 31, 2021, respectively. At June 30, 2022, approximately 54 % of total credit card balances were business credit cards included in "commercial, financial and agricultural" above and the remaining 46 % were personal credit cards included in consumer loans in the table above. Also included in the table above are various non-PPP SBA loans, with additional information on these loans presented in the table below. ($ in thousands) June 30, 2022 December 31, 2021 Guaranteed portions of non-PPP SBA loans included in table above $ 30,559 48,377 Unguaranteed portions of non-PPP SBA loans included in table above 120,168 122,772 Total non-PPP SBA loans included in the table above $ 150,727 171,149 Sold portions of SBA loans with servicing retained - not included in tables above $ 408,925 414,240 At June 30, 2022 and December 31, 2021, there was a remaining unaccreted discount on the retained portion of sold non-PPP SBA loans amounting to $ 5.4 million and $ 6.0 million, respectively. Page 14 Index Loans in the amount of $ 5.0 billion and $ 4.3 billion were pledged as collateral for certain borrowings at June 30, 2022 and December 31, 2021, respectively. The loans above also include loans to executive officers and directors serving the Company at June 30, 2022 and to their related persons, totaling approximately $ 6.3 million and $ 0.6 million at June 30, 2022 and December 31, 2021, respectively. For the six months ended June 30, 2022 t here were $ 5.8 million in new loans due to the addition of new directors, $ 66,000 in advances on loans, and repayments of $ 192,000 . The loans were made on terms and conditions applicable to similarly situated borrowers and management does not believe these loans involve more than the normal risk of collectability or present other unfavorable features. As of June 30, 2022 and December 31, 2021, unamortized discounts on all acquired loans totaled $ 14.0 million and $ 17.2 million, respectively. Loan discounts are generally amortized as yield adjustments over the respective lives of the loans, so long as the loans perform. Nonperforming assets are defined as nonaccrual loans, troubled debt restructured loans ("TDRs"), loans past due 90 or more days and still accruing interest, and foreclosed real estate. Nonperforming assets are summarized as follows. ($ in thousands) June 30, 2022 December 31, 2021 Nonaccrual loans $ 28,715 34,696 TDRs - accruing 11,771 13,866 Accruing loans > 90 days past due — 1,004 Total nonperforming loans 40,486 49,566 Foreclosed real estate 658 3,071 Total nonperforming assets $ 41,144 52,637 At June 30, 2022 and December 31, 2021, the Company had $ 1.0 million and $ 1.5 million, respectively, in residential mortgage loans in process of foreclosure. The following table is a summary of the Company’s nonaccrual loans by major categories as of June 30, 2022. ($ in thousands) Nonaccrual Loans with No Allowance Nonaccrual Loans with an Allowance Total Nonaccrual Loans Commercial, financial, and agricultural $ 3,909 7,533 11,442 Real estate – construction, land development & other land loans 890 243 1,133 Real estate – mortgage – residential (1-4 family) first mortgages 159 3,120 3,279 Real estate – mortgage – home equity loans / lines of credit — 797 797 Real estate – mortgage – commercial and other 6,333 5,587 11,920 Consumer loans — 144 144 Total $ 11,291 17,424 28,715 The following table is a summary of the Company’s nonaccrual loans by major categories as of December 31, 2021. ($ in thousands) Nonaccrual Loans with No Allowance Nonaccrual Loans with an Allowance Total Nonaccrual Loans Commercial, financial, and agricultural $ 3,947 8,205 12,152 Real estate – construction, land development & other land loans 495 137 632 Real estate – mortgage – residential (1-4 family) first mortgages 858 4,040 4,898 Real estate – mortgage – home equity loans / lines of credit — 694 694 Real estate – mortgage – commercial and other 7,648 8,583 16,231 Consumer loans — 89 89 Total $ 12,948 21,748 34,696 Page 15 Index There was no interest income recognized during the six month period ended June 30, 2022 or the year ended December 31, 2021 on nonaccrual loans. The Company follows its nonaccrual policy of reversing contractual interest income in the income statement when the Company places a loan on nonaccrual status. The following table represents the accrued interest receivables written off by reversing interest income during each period indicated. ($ in thousands) Six Months Ended June 30, 2022 For the Year Ended December 31, 2021 Six Months Ended June 30, 2021 Commercial, financial, and agricultural $ 33 195 156 Real estate – construction, land development & other land loans 16 6 — Real estate – mortgage – residential (1-4 family) first mortgages 25 31 15 Real estate – mortgage – home equity loans / lines of credit 6 14 7 Real estate – mortgage – commercial and other 102 453 390 Consumer loans 2 — — Total $ 184 699 568 The following table presents an analysis of the payment status of the Company’s loans as of June 30, 2022. ($ in thousands) Accruing 30-59 Days Past Due Accruing 60-89 Days Past Due Accruing 90 Days or More Past Due Nonaccrual Loans Accruing Current Total Loans Receivable Commercial, financial, and agricultural $ 817 110 — 11,442 584,505 596,874 Real estate – construction, land development & other land loans 3,678 — — 1,133 819,912 824,723 Real estate – mortgage – residential (1-4 family) first mortgages 2,202 974 — 3,279 1,091,355 1,097,810 Real estate – mortgage – home equity loans / lines of credit 879 172 — 797 323,769 325,617 Real estate – mortgage – commercial and other 688 — — 11,920 3,325,714 3,338,322 Consumer loans 136 80 — 144 60,267 60,627 Total $ 8,400 1,336 — 28,715 6,205,522 6,243,973 Unamortized net deferred loan fees ( 803 ) Total loans 6,243,170 Page 16 Index The following table presents an analysis of the payment status of the Company’s loans as of December 31, 2021. ($ in thousands) Accruing 30-59 Days Past Due Accruing 60-89 Days Past Due Accruing 90 Days or More Past Due Nonaccrual Loans Accruing Current Total Loans Receivable Commercial, financial, and agricultural $ 377 93 — 12,152 636,375 648,997 Real estate – construction, land development & other land loans 4,046 — 286 632 823,585 828,549 Real estate – mortgage – residential (1-4 family) first mortgages 6,571 1,488 — 4,898 1,009,009 1,021,966 Real estate – mortgage – home equity loans / lines of credit 489 124 718 694 329,907 331,932 Real estate – mortgage – commercial and other 164 1,496 — 16,231 3,176,846 3,194,737 Consumer loans 116 62 — 89 56,971 57,238 Total $ 11,763 3,263 1,004 34,696 6,032,693 6,083,419 Unamortized net deferred loan fees ( 1,704 ) Total loans $ 6,081,715 Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. The Company reviews individually evaluated loans on nonaccrual with a net book balance of $350,000 or greater for designation as collateral dependent loans, as well as certain other loans that may still be accruing interest and/or are less than $350,000 in size that management of the Company designates as having higher risk. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the allowance for credit losses ("ACL"). The following table presents an analysis of collateral-dependent loans of the Company as of June 30, 2022. ($ in thousands) Residential Property Business Assets Land Commercial Property Total Collateral-Dependent Loans Commercial, financial, and agricultural $ — 8,516 — — 8,516 Real estate – construction, land development & other land loans — — 890 — 890 Real estate – mortgage – residential (1-4 family) first mortgages 159 — — — 159 Real estate – mortgage – commercial and other — — — 8,182 8,182 Total $ 159 8,516 890 8,182 17,747 The following table presents an analysis of collateral-dependent loans of the Company as of December 31, 2021. ($ in thousands) Residential Property Business Assets Land Commercial Property Total Collateral-Dependent Loans Commercial, financial, and agricultural $ — 7,886 — — 7,886 Real estate – construction, land development & other land loans — — 533 — 533 Real estate – mortgage – residential (1-4 family) first mortgages 871 — — — 871 Real estate – mortgage – commercial and other — — — 10,743 10,743 Total $ 871 7,886 533 10,743 20,033 Under CECL, for collateral dependent loans, the Company has adopted the practical expedient to measure the allowance for credit losses based on the fair value of collateral. The allowance for credit losses is calculated on an Page 17 Index individual loan basis based on the shortfall between the fair value of the loan's collateral, which is adjusted for liquidation costs/discounts, and amortized cost. If the fair value of the collateral exceeds the amortized cost, no allowance is required. The Company's policy is to obtain third-party appraisals on any significant pieces of collateral. For loans secured by real estate, the Company's policy is to write nonaccrual loans down to 90 % of the appraised value, which considers estimated selling costs. For real estate collateral that is in industries which may be undergoing heightened stress due to economic or other external factors, the Company may reduce the collateral values by an additional 10 - 25 % of appraised value to recognize additional discounts that are estimated to be incurred in a near-term sale. For non real-estate collateral secured loans, the Company generally writes nonaccrual loans down to 75 % of the appraised value, which provides for selling costs and liquidity discounts that are usually incurred when disposing of non real-estate collateral. For reviewed loans that are not on nonaccrual basis, the Company assigns a specific allowance based on the parameters noted above. The Company does not believe that there is significant excess collateral for any of the loan types noted above. Page 18 Index The following table presents the activity in the ACL on loans for each of the periods indicated. ($ in thousands) Commercial, Financial, and Agricultural Real Estate – Construction, Land Development & Other Land Loans Real Estate – Residential (1-4 Family) First Mortgages Real Estate – Mortgage – Home Equity Lines of Credit Real Estate – Mortgage – Commercial and Other Consumer Loans Unallocated Total As of and for the three months ended June 30, 2022 Beginning balance $ 16,013 16,057 8,159 2,074 37,327 2,439 — 82,069 Charge-offs ( 728 ) — — — ( 818 ) ( 214 ) — ( 1,760 ) Recoveries 223 130 11 128 1,300 80 — 1,872 Provisions / (Reversals) ( 58 ) ( 16 ) 480 ( 116 ) ( 615 ) 325 — — Ending balance $ 15,450 16,171 8,650 2,086 37,194 2,630 — 82,181 As of and for the six months ended June 30, 2022 Beginning balance $ 16,249 16,519 8,686 4,337 30,342 2,656 — 78,789 Charge-offs ( 1,518 ) — — ( 41 ) ( 863 ) ( 381 ) — ( 2,803 ) Recoveries 470 267 15 361 1,455 127 — 2,695 Provisions / (Reversals) 249 ( 615 ) ( 51 ) ( 2,571 ) 6,260 228 — 3,500 Ending balance $ 15,450 16,171 8,650 2,086 37,194 2,630 — 82,181 ($ in thousands) Commercial, Financial, and Agricultural Real Estate – Construction, Land Development & Other Land Loans Real Estate – Residential (1-4 Family) First Mortgages Real Estate – Mortgage – Home Equity Lines of Credit Real Estate – Mortgage – Commercial and Other Consumer Loans Unallocated Total As of and for the year ended December 31, 2021 Beginning balance $ 11,316 5,355 8,048 2,375 23,603 1,478 213 52,388 Adjustment for implementation of CECL 3,067 6,140 2,584 2,580 ( 257 ) 674 ( 213 ) 14,575 Allowance for acquired PCD loans 2,917 165 222 92 1,489 10 — 4,895 Charge-offs ( 3,722 ) ( 245 ) ( 273 ) ( 400 ) ( 2,295 ) ( 667 ) — ( 7,602 ) Recoveries 1,744 948 761 578 533 358 — 4,922 Provisions/(Reversals) 927 4,156 ( 2,656 ) ( 888 ) 7,269 803 — 9,611 Ending balance $ 16,249 16,519 8,686 4,337 30,342 2,656 — 78,789 Page 19 Index ($ in thousands) Commercial, Financial, and Agricultural Real Estate – Construction, Land Development & Other Land Loans Real Estate – Residential (1-4 Family) First Mortgages Real Estate – Mortgage – Home Equity Lines of Credit Real Estate – Mortgage – Commercial and Other Consumer Loans Unallocated Total As of and for the three months ended June 30, 2021 Beginning balance $ 13,606 10,134 8,996 4,309 26,507 2,297 — 65,849 Charge-offs ( 550 ) — ( 76 ) ( 8 ) ( 1,324 ) ( 173 ) — ( 2,131 ) Recoveries 153 392 236 218 78 227 — 1,304 Provisions/(Reversals) 1,600 ( 422 ) ( 505 ) ( 782 ) 97 12 — — Ending balance $ 14,809 10,104 8,651 3,737 25,358 2,363 — 65,022 As of and for the six months ended June 30, 2021 Beginning balance $ 11,316 5,355 8,048 2,375 23,603 1,478 213 52,388 Adjustment for implementation of CECL 3,067 6,140 2,584 2,580 ( 257 ) 674 ( 213 ) 14,575 Charge-offs ( 1,988 ) ( 66 ) ( 114 ) ( 139 ) ( 1,834 ) ( 307 ) — ( 4,448 ) Recoveries 667 686 323 229 340 262 — 2,507 Provisions/(Reversals) 1,747 ( 2,011 ) ( 2,190 ) ( 1,308 ) 3,506 256 — — Ending balance $ 14,809 10,104 8,651 3,737 25,358 2,363 — 65,022 Page 20 Index Credit Quality Indicators The Company tracks credit quality based on its internal risk ratings. Upon origination, a loan is assigned an initial risk grade, which is generally based on several factors such as the borrower’s credit score, the loan-to-value ratio, the debt-to-income ratio, etc. Loans that are risk-graded as substandard during the origination process are declined. After loans are initially graded, they are monitored regularly for credit quality based on many factors, such as payment history, the borrower’s financial status, and changes in collateral value. Loans can be downgraded or upgraded depending on management’s evaluation of these factors. Internal risk-grading policies are consistent throughout each loan type. The following describes the Company’s internal risk grades in ascending order of likelihood of loss: Risk Grade Description Pass: 1 Loans with virtually no risk, including cash secured loans. 2 Loans with documented significant overall financial strength. These loans have minimum chance of loss due to the presence of multiple sources of repayment – each clearly sufficient to satisfy the obligation. 3 Loans with documented satisfactory overall financial strength. These loans have a low loss potential due to presence of at least two clearly identified sources of repayment – each of which is sufficient to satisfy the obligation under the present circumstances. 4 Loans to borrowers with acceptable financial condition. These loans could have signs of minor operational weaknesses, lack of adequate financial information, or loans supported by collateral with questionable value or marketability. 5 Loans that represent above average risk due to minor weaknesses and warrant closer scrutiny by management. Collateral is generally required and felt to provide reasonable coverage with realizable liquidation values in normal circumstances. Repayment performance is satisfactory. P (Pass) Consumer loans (<$500,000) that are of satisfactory credit quality with borrowers who exhibit good personal credit history, average personal financial strength and moderate debt levels. These loans generally conform to Bank policy, but may include approved mitigated exceptions to the guidelines. Special Mention: 6 Existing loans with defined weaknesses in primary source of repayment that, if not corrected, could cause a loss to the Bank. Classified: 7 An existing loan inadequately protected by the current sound net worth and paying capacity of the obligor or the collateral pledged, if any. These loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. 8 Loans that have a well-defined weakness that make the collection or liquidation in full highly questionable and improbable. Loss appears imminent, but the exact amount and timing is uncertain. 9 Loans that are considered uncollectible and are in the process of being charged-off. This grade is a temporary grade assigned for administrative purposes until the charge-off is completed. F (Fail) Consumer loans (<$500,000) with a well-defined weakness, such as exceptions of any kind with no mitigating factors, history of paying outside the terms of the note, insufficient income to support the current level of debt, etc. In the tables that follow, substantially all of the "Classified Loans" have grades of 7 or Fail, with those categories having similar levels of risk. The amount of revolving lines of credit that converted to term loans during the period was immaterial. The tables below present the Company’s recorded investment in loans by credit quality indicators by year of origination or renewal as of the periods indicated. Acquired loans are presented in the year originated, not in the year of acquisition. Page 21 Index Term Loans by Year of Origination ($ in thousands) 2022 2021 2020 2019 2018 Prior Revolving Total As of June 30, 2022 Commercial, financial, and agricultural Pass $ 82,022 145,908 96,143 60,488 59,675 25,201 108,819 578,256 Special Mention — 188 608 1,441 2,872 296 94 5,499 Classified 429 2,067 906 1,413 6,941 620 743 13,119 Total commercial, financial, and agricultural 82,451 148,163 97,657 63,342 69,488 26,117 109,656 596,874 Real estate – construction, land development & other land loans Pass 273,339 420,336 62,604 34,122 5,946 10,861 9,839 817,047 Special Mention 109 36 618 4,084 104 — — 4,951 Classified 1,013 422 40 927 67 113 143 2,725 Total real estate – construction, land development & other land loans 274,461 420,794 63,262 39,133 6,117 10,974 9,982 824,723 Real estate – mortgage – residential (1-4 family) first mortgages Pass 121,779 308,026 199,903 106,905 69,983 267,244 7,421 1,081,261 Special Mention — 333 378 317 110 3,196 100 4,434 Classified 375 669 251 487 888 8,504 941 12,115 Total real estate – mortgage – residential (1-4 family) first mortgages 122,154 309,028 200,532 107,709 70,981 278,944 8,462 1,097,810 Real estate – mortgage – home equity loans / lines of credit Pass 814 2,256 389 274 883 1,995 311,230 317,841 Special Mention 47 183 — — — 18 1,116 1,364 Classified 16 160 95 78 — 319 5,744 6,412 Total real estate – mortgage – home equity loans / lines of credit 877 2,599 484 352 883 2,332 318,090 325,617 Real estate – mortgage – commercial and other Pass 603,662 1,249,549 644,611 312,994 162,805 266,653 62,875 3,303,149 Special Mention 2,069 1,195 4,418 4,753 4,042 2,468 1,046 19,991 Classified 235 4,191 119 2,701 4,837 2,894 205 15,182 Total real estate – mortgage – commercial and other 605,966 1,254,935 649,148 320,448 171,684 272,015 64,126 3,338,322 Consumer loans Pass 10,109 29,684 5,087 1,814 1,207 701 11,822 60,424 Special Mention — — — — — — — — Classified 6 129 2 1 — 15 50 203 Total consumer loans 10,115 29,813 5,089 1,815 1,207 716 11,872 60,627 Total $ 1,096,024 2,165,332 1,016,172 532,799 320,360 591,098 522,188 6,243,973 Unamortized net deferred loan fees ( 803 ) Total loans 6,243,170 Page 22 Index Term Loans by Year of Origination ($ in thousands) 2021 2020 2019 2018 2017 Prior Revolving Total As of December 31, 2021 Commercial, financial, and agricultural Pass $ 204,945 138,540 71,369 66,645 16,009 17,492 112,933 627,933 Special Mention 225 1,255 1,313 2,729 225 9 2,348 8,104 Classified 1,609 793 1,703 7,096 511 96 1,152 12,960 Total commercial, financial, and agricultural 206,779 140,588 74,385 76,470 16,745 17,597 116,433 648,997 Real estate – construction, land development & other land loans Pass 573,613 133,888 69,066 12,455 9,764 8,190 13,737 820,713 Special Mention 41 737 5,095 110 104 2 9 6,098 Classified 1,541 49 47 83 14 4 — 1,738 Total real estate – construction, land development & other land loans 575,195 134,674 74,208 12,648 9,882 8,196 13,746 828,549 Real estate – mortgage – residential (1-4 family) first mortgages Pass 241,619 224,617 120,097 82,531 86,074 234,950 11,051 1,000,939 Special Mention 888 615 516 229 323 3,237 94 5,902 Classified 419 156 535 1,185 653 11,246 931 15,125 Total real estate – mortgage – residential (1-4 family) first mortgages 242,926 225,388 121,148 83,945 87,050 249,433 12,076 1,021,966 Real estate – mortgage – home equity loans / lines of credit Pass 3,111 498 439 1,304 245 1,649 317,319 324,565 Special Mention 194 — 15 — — 19 1,341 1,569 Classified 75 97 71 — — 607 4,948 5,798 Total real estate – mortgage – home equity loans / lines of credit 3,380 595 525 1,304 245 2,275 323,608 331,932 Real estate – mortgage – commercial and other Pass 1,328,156 796,992 355,885 211,118 197,165 197,659 66,104 3,153,079 Special Mention 1,759 4,849 5,801 3,741 2,072 1,801 1,440 21,463 Classified 7,147 413 2,110 6,025 3,897 603 — 20,195 Total real estate – mortgage – commercial and other 1,337,062 802,254 363,796 220,884 203,134 200,063 67,544 3,194,737 Consumer loans Pass 14,960 25,431 2,965 1,722 673 525 10,810 57,086 Special Mention — 4 — — — — — 4 Classified — 73 — 8 — 25 42 148 Total consumer loans 14,960 25,508 2,965 1,730 673 550 10,852 57,238 Total $ 2,380,302 1,329,007 637,027 396,981 317,729 478,114 544,259 6,083,419 Unamortized net deferred loan fees ( 1,704 ) Total loans 6,081,715 Page 23 Index Troubled Debt Restructurings The restructuring of a loan is considered a TDR if both (i) the borrower is experiencing financial difficulties and (ii) the creditor has granted a concession. Concessions may include interest rate reductions or below market interest rates, principal forgiveness, extension of terms and other actions intended to minimize potential losses. The vast majority of the Company’s TDRs modified during the periods ended June 30, 2022 and June 30, 2021 related to interest rate reductions combined with extension of terms. The Company does not generally grant principal forgiveness. The Company’s TDRs can be classified as either nonaccrual or accruing based on the loan’s payment status. The TDRs that are nonaccrual are reported within the nonaccrual loan totals presented previously. At June 30, 2022, there were three loans with immaterial commitments to lend additional funds to debtors whose loans were modified as a TDR. At December 31, 2021, there were no commitments to lend additional funds to debtors whose loans were modified as a TDR. The following table presents information related to loans modified in a TDR during the three months ended June 30, 2022 and 2021. ($ in thousands) For the three months ended June 30, 2022 For the three months ended June 30, 2021 Number of Contracts Pre- Modification Restructured Balances Post- Modification Restructured Balances Number of Contracts Pre- Modification Restructured Balances Post- Modification Restructured Balances TDRs – Accruing Commercial, financial, and agricultural 1 $ 161 $ 161 — $ — $ — Real estate – construction, land development & other land loans 1 131 131 — — — Real estate – mortgage – residential (1-4 family) first mortgages — — — 1 33 33 Real estate – mortgage – home equity loans / lines of credit 2 203 203 — — — TDRs – Nonaccrual Commercial, financial, and agricultural 2 259 259 2 715 715 Real estate – construction, land development & other land loans — — — 1 75 75 Real estate – mortgage – residential (1-4 family) first mortgages — — — 1 263 263 Real estate – mortgage – commercial and other 1 244 244 3 1,569 1,569 Total TDRs arising during period 7 $ 998 $ 998 8 $ 2,655 $ 2,655 The following table presents information related to loans modified in a TDR during the six months ended June 30, 2022 and 2021. Page 24 Index ($ in thousands) For the six months ended June 30, 2022 For the six months ended June 30, 2021 Number of Contracts Pre- Modification Restructured Balances Post- Modification Restructured Balances Number of Contracts Pre- Modification Restructured Balances Post- Modification Restructured Balances TDRs – Accruing Commercial, financial, and agricultural 1 $ 161 $ 161 — $ — $ — Real estate – construction, land development & other land loans 1 131 131 — — — Real estate – mortgage – residential (1-4 family) first mortgages 1 36 36 1 33 33 Real estate – mortgage – home equity loans / lines of credit 2 203 203 — — — Real estate – mortgage – commercial and other — — — 1 160 160 TDRs – Nonaccrual Commercial, financial, and agricultural 3 300 300 3 826 823 Real estate – construction, land development & other land loans — — — 1 75 75 Real estate – mortgage – residential (1-4 family) first mortgages 1 36 36 1 263 263 Real estate – mortgage – commercial and other 2 784 784 3 1,569 1,569 Total TDRs arising during period 11 $ 1,651 $ 1,651 10 $ 2,926 $ 2,923 The Company considers a TDR loan to have defaulted when it becomes 90 or more days delinquent under the modified terms, has been transferred to nonaccrual status, or has been transferred to foreclosed real estate. There were no accruing TDRs that were modified in the previous twelve months and that defaulted during the three or six months ended June 30, 2022 or 2021. Concentration of Credit Risk Most of the Company's business activity is with customers located within the markets where it has banking operations. Therefore, the Company’s exposure to credit risk is significantly affected by changes in the economy within its markets. Approximately 89 % of the Company's loan portfolio is secured by real estate and is therefore susceptible to changes in real estate valuations. Allowance for Credit Losses - Unfunded Loan Commitments In addition to the ACL on loans, the Company maintains an ACL for lending-related commitments such as unfunded loan commitments and letters of credit. The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for lending-related commitments on off-balance sheet credit exposures is adjusted as a provision for unfunded commitments expense. The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information, and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss rates that are used in computing the ACL on loans. The ACL for unfunded loan commitments of $ 12.0 million and $ 13.5 million at June 30, 2022 and December 31, 2021, respectively, is separately classified on the Consolidated Balance Sheets within "Other liabilities". The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the six months ended June 30, 2022. Page 25 Index ($ in thousands) Total Allowance for Credit Losses - Unfunded Loan Commitments Beginning balance at December 31, 2021 $ 13,506 Charge-offs — Recoveries — Reversal of provision for unfunded commitments ( 1,500 ) Ending balance at June 30, 2022 $ 12,006 Allowance for Credit Losses - Securities Held to Maturity The ACL for securities held to maturity was immaterial at June 30, 2022 and December 31, 2021. Note 5 – Goodwill and Other Intangible Assets The following is a summary of the gross carrying amount and accumulated amortization of amortizable intangible assets as of June 30, 2022 and December 31, 2021, and the carrying amount of unamortized intangible assets as of those same dates. June 30, 2022 December 31, 2021 ($ in thousands) Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Amortizable intangible assets: Customer lists $ 2,700 1,616 2,700 1,386 Core deposit intangibles 29,050 19,803 29,050 18,076 SBA servicing assets 12,958 7,991 11,932 6,460 Other 100 46 100 33 Total $ 44,808 29,456 43,782 25,955 Unamortizable intangible assets: Goodwill $ 364,263 364,263 Amortization expense of all other intangible assets, excluding the SBA servicing assets, totaled $ 1.0 million and $ 0.8 million for the three months ended June 30, 2022 and 2021, respectively, and $ 2.0 million and $ 1.7 million for the six months ended June 30, 2022 and 2021, respectively. SBA servicing assets are recorded for the portions of SBA loans that the Company has sold but continues to service for a fee. Servicing assets are initially recorded at fair value and amortized over the expected lives of the related loans and are tested for impairment on a quarterly basis. SBA servicing asset amortization expense is recorded within noninterest income as an offset to SBA servicing fees within the line item "Other service charges, commissions, and fees." The following table presents the changes in the SBA servicing assets for the three and six months ended June 30, 2022 and 2021. Three months ended June 30, Six months ended June 30, ($ in thousands) 2022 2021 2022 2021 Beginning balance, net $ 5,591 5,925 5,472 5,788 New servicing assets 281 708 1,026 1,315 Amortization and impairment expense 905 544 1,531 1,014 Ending balance, net $ 4,967 6,089 4,967 6,089 A t June 30, 2022 and December 31, 2021, the Company serviced SBA loans totali ng $ 408.9 million a nd $ 414.2 million, respectively, for others. There were no other loans serviced in any period presented. There were no changes to the carrying amounts of goodwill for the six months ended June 30, 2022 . Goodwill is evaluated for impairment on at least an annual basis, with the annual evaluation occurring as of October 31 of each year. The Company performed the required annual impairment testing in the fourth quarter of 2021. Page 26 Index Management evaluated the events and circumstances in the second quarter of 2022 that could indicate that goodwill might be impaired and concluded that a subsequent interim test was not necessary. The following table presents the estimated amortization expense schedule related to acquisition-related amortizable intangible assets. These amounts will be recorded as "Intangibles amortization expense" within the noninterest expense section of the Consolidated Statements of Income. These estimates are subject to change in future periods to the extent management determines it is necessary to make adjustments to the carrying value or estimated useful lives of amortized intangible assets. ($ in thousands) Estimated Amortization Expense July 1, 2022 to December 31, 2022 $ 1,713 2023 2,545 2024 1,718 2025 1,358 2026 962 Thereafter 2,088 Total $ 10,384 Note 6 - Borrowings The following tables present information regarding the Company’s outstanding borrowings at June 30, 2022 and December 31, 2021 ($ in thousands). Description Due date Call Feature June 30, 2022 Interest Rate FHLB Principal Reducing Credit 7/24/2023 None $ 56 1.00 % fixed FHLB Principal Reducing Credit 12/22/2023 None 932 1.25 % fixed FHLB Principal Reducing Credit 6/26/2028 None 219 0.25 % fixed FHLB Principal Reducing Credit 7/17/2028 None 40 0.00 % fixed FHLB Principal Reducing Credit 8/18/2028 None 163 1.00 % fixed FHLB Principal Reducing Credit 8/22/2028 None 163 1.00 % fixed FHLB Principal Reducing Credit 12/20/2028 None 335 0.50 % fixed Trust Preferred Securities 1/23/2034 Quarterly by Company beginning 1/23/2009 10,310 3.94 % at 6/30/22 adjustable rate 3 month LIBOR + 2.65 % Trust Preferred Securities 1/23/2034 Quarterly by Company beginning 1/23/2009 10,310 4.04 % at 6/30/22 adjustable rate 3 month LIBOR + 2.75 % Trust Preferred Securities 9/20/2034 Quarterly by Company beginning 9/20/2009 12,372 4.25 % at 6/30/22 adjustable rate 3 month LIBOR + 2.15 % Trust Preferred Securities 1/7/2035 Quarterly by Company beginning 1/7/2010 10,310 3.04 % at 6/30/22 adjustable rate 3 month LIBOR + 2.00 % Trust Preferred Securities 6/15/2036 Quarterly by Company beginning 6/15/2011 25,774 3.22 % at 6/30/22 adjustable rate 3 month LIBOR + 1.39 % Total borrowings / weighted average rate as of June 30, 2022 70,984 3.53 % Unamortized discount on acquired borrowings ( 3,539 ) Total borrowings $ 67,445 Page 27 Index Description Due date Call Feature December 31, 2021 Interest Rate FHLB Principal Reducing Credit 7/24/2023 None $ 79 1.00 % fixed FHLB Principal Reducing Credit 12/22/2023 None 952 1.25 % fixed FHLB Principal Reducing Credit 6/26/2028 None 225 0.25 % fixed FHLB Principal Reducing Credit 7/17/2028 None 44 0.00 % fixed FHLB Principal Reducing Credit 8/18/2028 None 166 1.00 % fixed FHLB Principal Reducing Credit 8/22/2028 None 166 1.00 % fixed FHLB Principal Reducing Credit 12/20/2028 None 342 0.50 % fixed Trust Preferred Securities 1/23/2034 Quarterly by Company beginning 1/23/2009 10,310 2.78 % at 12/31/21 adjustable rate 3 month LIBOR + 2.65 % Trust Preferred Securities 1/23/2034 Quarterly by Company beginning 1/23/2009 10,310 2.88 % at 12/31/21 adjustable rate 3 month LIBOR + 2.75 % Trust Preferred Securities 9/20/2034 Quarterly by Company beginning 9/20/2009 12,372 2.72 % at 12/31/21 adjustable rate 3 month LIBOR + 2.15 % Trust Preferred Securities 1/7/2035 Quarterly by Company beginning 1/7/2010 10,310 2.12 % at 12/31/21 adjustable rate 3 month LIBOR + 2.00 % Trust Preferred Securities 6/15/2036 Quarterly by Company beginning 6/15/2011 25,774 1.59 % at 12/31/21 adjustable rate 3 month LIBOR + 1.39 % Total borrowings / weighted average rate as of December 31, 2021 71,050 2.24 % Unamortized discount on acquired borrowings ( 3,664 ) Total borrowings $ 67,386 Note 7 – Leases The Company enters into leases in the normal course of business. As of June 30, 2022, the Company leased 16 branch offices for which the land and buildings are leased and nine branch offices for which the land is leased but the building is owned. The Company also leases office space for several operational departments. All of the Company’s leases are operating leases under applicable accounting standards and the lease agreements have maturity dates ranging from July 2023 through May 2076, some of which include options for multiple five - and ten-year extensions. The weighted average remaining life of the lease term for these leases was 19.5 years as of June 30, 2022. Certain of the Company's lease agreements include variable lease payments based on changes in inflation, with the impact of that factor being insignificant to the Company's total lease expense. As permitted by applicable accounting standards, the Company has elected not to recognize leases with original lease terms of 12 months or less (short-term leases) on the Company's Consolidated Balance Sheets. The short-term lease cost for each period presented was insignificant. Leases are classified as either operating or finance leases at the lease commencement date, and as previously noted, all of the Company's leases have been determined to be operating leases. Lease expense for operating leases and short-term leases is recognized on a straight-line basis over the lease term. Right-of-use assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The Company uses its incremental borrowing rate, on a collateralized basis, at lease commencement to calculate the present value of lease payments when the rate implicit in the lease is not known. The weighted average discount rate for leases was 2.92 % as of June 30, 2022. Page 28 Index Total operating lease expense was $ 0.7 million and $ 0.6 million for the three months ended June 30, 2022 and 2021, respectively, and $ 1.6 million and $ 1.3 million for the six months ended June 30, 2022 and 2021, respectively. The right-of-use assets and lease liabilities were $ 19.7 million and $ 20.3 million as of June 30, 2022, respectively, and were $ 20.7 million and $ 21.2 million as of December 31, 2021, respectively. Future undiscounted lease payments for operating leases with initial terms of one year or more as of June 30, 2022 are as follows. ($ in thousands) July 1, 2022 to December 31, 2022 $ 1,167 2023 2,360 2024 2,163 2025 1,706 2026 1,685 Thereafter 19,988 Total undiscounted lease payments 29,069 Less effect of discounting ( 8,789 ) Present value of estimated lease payments (lease liability) $ 20,280 Note 8 – Pension Plans The Company sponsored two defined benefit pension plans – a qualified retirement plan (the “Pension Plan”) which was generally available to all employees, and a Supplemental Executive Retirement Plan (the “SERP”) which was for the benefit of certain senior management executives of the Company. Effective December 31, 2012, the Company froze both plans for all participants. Although no previously accrued benefits were lost, employees no longer accrue benefits under these plans for service subsequent to 2012. The Company recorded periodic pension cost totaling $ 51,000 and $ 126,000 for the three months ended June 30, 2022 and 2021, respectively, and $ 102,000 and $ 317,000 for the six months ended June 30, 2022 and 2021, respectively. The following tables contain the components of the pension cost. For the Three Months Ended June 30, ($ in thousands) 2022 Pension Plan 2021 Pension Plan 2022 SERP 2021 SERP 2022 Total Both Plans 2021 Total Both Plans Service cost $ — — — — — — Interest cost 267 104 28 20 295 124 Expected return on plan assets ( 288 ) ( 203 ) — — ( 288 ) ( 203 ) Amortization of net (gain)/loss 180 158 ( 136 ) 47 44 205 Net periodic pension cost $ 159 59 ( 108 ) 67 51 126 For the Six Months Ended June 30, ($ in thousands) 2022 Pension Plan 2021 Pension Plan 2022 SERP 2021 SERP 2022 Total Both Plans 2021 Total Both Plans Service cost $ — — — — — — Interest cost 534 410 56 59 590 469 Expected return on plan assets ( 576 ) ( 528 ) — — ( 576 ) ( 528 ) Amortization of net (gain)/loss 360 368 ( 272 ) 8 88 376 Net periodic pension cost $ 318 250 ( 216 ) 67 102 317 The service cost component of net periodic pension cost is included in salaries and benefits expense and all other components of net periodic pension cost are included in other noninterest expense. Page 29 Index The Company’s contributions to the Pension Plan are based on computations by independent actuarial consultants and are intended to be deductible for income tax purposes. The Company did not contribute to the Pension Plan in the first six months of 2022 and does not expect to contribute to the Pension Plan in the remainder of 2022. The Company’s funding policy with respect to the SERP is to fund the related benefits from the operating cash flow of the Company. Note 9 – Fair Value Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal and most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair value: Level 1: Quoted prices (unadjusted) of identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. The following table summarizes the Company’s financial instruments that were measured at fair value on a recurring and nonrecurring basis at June 30, 2022. ($ in thousands) Description of Financial Instruments Fair Value at June 30, 2022 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Recurring Securities available for sale: U.S. Treasury $ 172,195 — 172,195 — Government-sponsored enterprise securities 60,917 — 60,917 — Mortgage-backed securities 2,254,549 — 2,254,549 — Corporate bonds 44,963 — 44,963 — Total available for sale securities $ 2,532,624 — 2,532,624 — Presold mortgages in process of settlement $ 4,655 4,655 — — Nonrecurring Individually evaluated loans $ 10,333 — — 10,333 The following table summarizes the Company’s financial instruments that were measured at fair value on a recurring and nonrecurring basis at December 31, 2021. Page 30 Index ($ in thousands) Description of Financial Instruments Fair Value at December 31, 2021 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Recurring Securities available for sale: Government-sponsored enterprise securities $ 69,179 — 69,179 — Mortgage-backed securities 2,514,805 — 2,514,805 — Corporate bonds 46,430 — 46,430 — Total available for sale securities $ 2,630,414 — 2,630,414 — Presold mortgages in process of settlement $ 19,257 19,257 — — Nonrecurring Individually evaluated loans $ 11,583 — — 11,583 Foreclosed real estate 364 — — 364 The following is a description of the valuation methodologies used for instruments measured at fair value. Presold Mortgages in Process of Settlement — The fair value is based on the committed price that an investor has agreed to pay for the loan and is considered a Level 1 input. Securities Available for Sale — When quoted market prices are available in an active market, the securities are classified as Level 1 in the valuation hierarchy. If quoted market prices are not available, but fair values can be estimated by observing quoted prices of securities with similar characteristics, the securities are classified as Level 2 in the valuation hierarchy. Most of the fair values for the Company’s Level 2 securities are determined by our third-party bond accounting provider using matrix pricing. Matrix pricing is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities. For the Company, Level 2 securities include U.S. Treasury bonds, mortgage-backed securities, commercial mortgage-backed obligations, government-sponsored enterprise securities, and corporate bonds. In cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. Collateral-dependent loans — Fair values for collateral-dependent loans are measured on a non-recurring basis and are based on (1) the underlying collateral values securing the loans, adjusted for estimated selling costs, or (2) the net present value of the cash flows expected to be received for such loans. Collateral may be in the form of real estate or business assets including equipment, inventory and accounts receivable. The vast majority of the collateral is real estate. The value of real estate collateral is generally determined by third-party appraisers using an income or market valuation approach based on an appraisal conducted by an independent, licensed third party appraiser (Level 3). The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable borrower’s financial statements if not considered significant. Likewise, values for inventory and accounts receivable collateral are based on borrower financial statement balances or aging reports on a discounted basis as appropriate (Level 3). Appraisals used in this analysis are generally obtained at least annually based on when the loans first became impaired, and thus the appraisals are not necessarily as of the period ends presented. Any fair value adjustments are recorded in the period incurred as provision for credit losses on the Consolidated Statements of Income. Foreclosed real estate — Foreclosed real estate, consisting of properties obtained through foreclosure or in satisfaction of loans, is reported at the lower of cost or fair value. Fair value is measured on a non-recurring basis and is based upon independent market prices or current appraisals that are generally prepared using an income or market valuation approach and conducted by an independent, licensed third party appraiser, adjusted for estimated selling costs (Level 3). Appraisals used in this analysis are generally obtained at least annually based on when the assets were acquired, and thus the appraisals are not necessarily as of the period ends presented. At the time of foreclosure, any excess of the loan balance over the fair value of the real estate held as collateral is treated as a charge against the ACL. For any real estate valuations Page 31 Index subsequent to foreclosure, any excess of the real estate recorded value over the fair value of the real estate is treated as a foreclosed real estate write-down on the Consolidated Statements of Income. For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of June 30, 2022, the significant unobservable inputs used in the fair value measurements were as follows: ($ in thousands) Fair Value at June 30, 2022 Valuation Technique Significant Unobservable Inputs Range (Weighted Average) Individually evaluated loans - collateral-dependent $ 5,557 Appraised value Discounts applied for estimated costs to sell 10 % Individually evaluated loans - cash-flow dependent 4,776 PV of expected cash flows Discount rates used in the calculation of the present value ("PV") of expected cash flows 4 %- 11 % ( 6.59 %) For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of December 31, 2021, the significant unobservable inputs used in the fair value measurements were as follows: ($ in thousands) Fair Value at December 31, 2021 Valuation Technique Significant Unobservable Inputs Range (Weighted Average) Individually evaluated loans - collateral-dependent $ 7,326 Appraised value Discounts applied for estimated costs to sell 10 % Individually evaluated loans - cash-flow dependent 4,257 PV of expected cash flows Discount rates used in the calculation of PV of expected cash flows 4 %- 11 % ( 6.22 %) Foreclosed real estate 364 Appraised value Discounts applied for estimated costs to sell 10 % The carrying amounts and estimated fair values of financial instruments not carried at fair value at June 30, 2022 and December 31, 2021 were as follows: June 30, 2022 December 31, 2021 ($ in thousands) Level in Fair Value Hierarchy Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value Cash and due from banks, noninterest-bearing Level 1 $ 85,139 85,139 128,228 128,228 Due from banks, interest-bearing Level 1 348,964 348,964 332,934 332,934 Securities held to maturity Level 2 546,410 452,658 513,825 511,699 SBA and other loans held for sale Level 2 638 688 61,003 62,044 Total loans, net of allowance Level 3 6,160,989 6,086,338 6,002,926 5,990,235 Accrued interest receivable Level 1 26,500 26,500 25,896 25,896 Bank-owned life insurance Level 1 163,831 163,831 165,786 165,786 SBA Servicing Asset Level 3 4,967 5,302 5,472 5,546 Deposits Level 2 9,359,748 9,351,423 9,124,629 9,124,701 Borrowings Level 2 67,445 58,219 67,386 61,295 Accrued interest payable Level 2 648 648 607 607 Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no highly liquid market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Page 32 Index Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial assets or liabilities include net premises and equipment, intangible and other assets such as deferred income taxes, prepaid expense accounts, income taxes currently payable and other various accrued expenses. In addition, the income tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates. Note 10 – Stock-Based Compensation The Company recorded total stock-based compensation expense of $ 0.6 million and $ 0.8 million for the three months ended June 30, 2022 and 2021, respectively, and $ 1.2 million and $ 1.2 million for the six months ended June 30, 2022 and 2021, respectively. In addition, the Company recog nized $ 149,000 an d $ 191,000 of income tax benefits related to stock-based compensation expense for the three months ended June 30, 2022 and 2021, respectively, and $ 275,000 and $ 282,000 for the six months ended June 30, 2022 and 2021, respectively. At June 30, 2022, the sole equity-based compensation plan for the Company was the First Bancorp 2014 Equity Plan (the "Equity Plan"), which was approved by shareholders on May 8, 2014. As of June 30, 2022, the Equity Plan had 374,192 shares remaining available for grant. The Equity Plan is intended to serve as a means to attract, retain and motivate key employees and directors and to associate the interests of the plans' participants with those of the Company and its shareholders. The Equity Plan allows for both grants of stock options and other types of equity-based compensation, including stock appreciation rights, restricted stock, restricted performance stock, unrestricted stock, and performance units. Recent equity awards to employees have been made in the form of shares of restricted stock awards with service vesting conditions only. Compensation expense for these awards is recorded over the requisite service periods. Upon forfeiture, any previously recognized compensation cost is reversed. Upon a change in control (as defined in the Equity Plan), unless the awards remain outstanding or substitute equivalent awards are provided, the awards become immediately vested. Certain of the Company’s equity grants contain terms that provide for a graded vesting schedule whereby portions of the award vest in increments over the requisite service period. The Company recognizes compensation expense for awards with graded vesting schedules on a straight-line basis over the requisite service period for each incremental award. Compensation expense is based on the estimated number of stock awards that will ultimately vest. Over the past five years, there have been insignificant amounts of forfeitures, and therefore the Company assumes that all awards granted with service conditions only will vest. In addition to employee equity awards, the Company's practice is to grant common shares, valued at approximately $ 32,000 , to each non-employee director (currently 14 in total) in June of each year. Compensation expense associated with these director awards is recognized on the date of award since there are no vesting conditions. The following table presents information regarding the activity for the first six months of 2022 related to the Company’s outstanding restricted stock awards: Long-Term Restricted Stock Awards Number of Units Weighted-Average Grant-Date Fair Value Nonvested at January 1, 2022 206,331 $ 35.25 Granted during the period 68,672 38.18 Vested during the period ( 52,423 ) 35.70 Forfeited or expired during the period ( 7,115 ) 31.50 Nonvested at June 30, 2022 215,465 $ 36.18 Total unrecognized compensation expense as of June 30, 2022 amounted to $ 5.2 million with a weighted-average remaining term of 2.4 years. For the nonvested awards that are outstanding at June 30, 2022, the Company Page 33 Index expects to record $ 2.5 million in compensation expense in the next twelve months, $ 1.3 million of which is expected to be recorded in the remaining quarters of 2022. Note 11 - Shareholders' Equity Stock Repurchases During the first six months of 2022, the Company did not repurchase any shares of the Company's common stock. The Company currently has a $ 40.0 million repurchase authorization that was announced on February 7, 2022, and expires December 31, 2022. During the first six months of 2021, the Company repurchased approximately 106,744 shares of the Company's common stock at an average stock price of $ 37.81 per share, which totaled $ 4.0 million, under a $ 20.0 million repurchase authorization announced publicly in January 2021. Note 12 – Earnings Per Share The following is a reconciliation of the numerators and denominators used in computing Basic and Diluted Earnings Per Common Share ("EPS"): For the Three Months Ended June 30, 2022 2021 ($ in thousands except per share amounts) Income (Numerator) Shares (Denominator) Per Share Amount Income (Numerator) Shares (Denominator) Per Share Amount Basic EPS: Net income $ 36,585 $ 29,285 Less: income allocated to participating securities ( 172 ) ( 163 ) Basic EPS per common share $ 36,413 35,474,664 $ 1.03 $ 29,122 28,331,456 $ 1.03 Diluted EPS: Net income $ 36,585 35,474,664 $ 29,285 28,331,456 Effect of dilutive securities — 167,807 — 158,575 Diluted EPS per common share $ 36,585 35,642,471 $ 1.03 $ 29,285 28,490,031 $ 1.03 For the Six Months Ended June 30, 2022 2021 ($ in thousands except per share amounts) Income (Numerator) Shares (Denominator) Per Share Amount Income (Numerator) Shares (Denominator) Per Share Amount Basic EPS: Net income $ 70,554 $ 57,479 Less: income allocated to participating securities ( 326 ) ( 341 ) Basic EPS per common share $ 70,228 35,476,902 $ 1.98 $ 57,138 28,344,633 $ 2.02 Diluted EPS: Net income $ 70,554 35,476,902 $ 57,479 28,344,633 Effect of Dilutive Securities — 164,826 — 169,309 Diluted EPS per common share $ 70,554 35,641,728 $ 1.98 $ 57,479 28,513,942 $ 2.02 Page 34 Index Note 13 – Accumulated Other Comprehensive Income (Loss) The components of accumulated other comprehensive loss for the Company are as follows: ($ in thousands) June 30, 2022 December 31, 2021 Unrealized loss on securities available for sale $ ( 323,485 ) ( 32,067 ) Deferred tax asset 74,337 7,369 Net unrealized loss on securities available for sale ( 249,148 ) ( 24,698 ) Postretirement plans liability ( 265 ) ( 353 ) Deferred tax asset 61 81 Net postretirement plans liability ( 204 ) ( 272 ) Total accumulated other comprehensive loss $ ( 249,352 ) ( 24,970 ) The following tables disclose the changes in accumulated other comprehensive loss for the three and six months ended June 30, 2022 and 2021 (all amounts are net of tax). For the Three Months Ended June 30, 2022 ($ in thousands) Unrealized Loss on Securities Available for Sale Postretirement Plans Asset (Liability) Total Beginning balance $ ( 164,717 ) ( 238 ) ( 164,955 ) Other comprehensive loss before reclassifications ( 84,431 ) — ( 84,431 ) Amounts reclassified from accumulated other comprehensive income — 34 34 Net current-period other comprehensive (loss) income ( 84,431 ) 34 ( 84,397 ) Ending balance $ ( 249,148 ) ( 204 ) ( 249,352 ) For the Three Months Ended June 30, 2021 ($ in thousands) Unrealized (Loss) Gain on Securities Available for Sale Postretirement Plans Asset (Liability) Total Beginning balance $ ( 2,917 ) ( 1,268 ) ( 4,185 ) Other comprehensive income before reclassifications 3,332 — 3,332 Amounts reclassified from accumulated other comprehensive income — 128 128 Net current-period other comprehensive income 3,332 128 3,460 Ending balance $ 415 ( 1,140 ) ( 725 ) Page 35 Index For the Six Months Ended June 30, 2022 ($ in thousands) Unrealized Loss on Securities Available for Sale Postretirement Plans Asset (Liability) Total Beginning balance $ ( 24,698 ) ( 272 ) ( 24,970 ) Other comprehensive loss before reclassifications ( 224,450 ) — ( 224,450 ) Amounts reclassified from accumulated other comprehensive income — 68 68 Net current-period other comprehensive (loss) income ( 224,450 ) 68 ( 224,382 ) Ending balance $ ( 249,148 ) ( 204 ) ( 249,352 ) For the Six Months Ended June 30, 2021 ($ in thousands) Unrealized Gain (Loss) on Securities Available for Sale Postretirement Plans Asset (Liability) Total Beginning balance $ 15,749 ( 1,399 ) 14,350 Other comprehensive loss before reclassifications ( 15,334 ) — ( 15,334 ) Amounts reclassified from accumulated other comprehensive income — 259 259 Net current-period other comprehensive (loss) income ( 15,334 ) 259 ( 15,075 ) Ending balance $ 415 ( 1,140 ) ( 725 ) Amounts reclassified from accumulated other comprehensive income for rnrealized gain (loss) on securities available for sale represent realized securities gains or losses, net of tax effects. Amounts reclassified from accumulated other comprehensive income for postretirement plans asset (liability) represent amortization of amounts included in accumulated other comprehensive income, net of taxes, and are recorded in the "Other operating expenses" line item of the Consolidated Statements of Income. Note 14 – Revenue from Contracts with Customers All of the Company’s revenues that are in the scope of the “ Revenue from Contracts with Customers ” accounting standard (“ASC 606”) are recognized within noninterest income. The following table presents the Company’s sources of noninterest income for the three and six months ended June 30, 2022 and 2021. Items outside the scope of ASC 606 are noted as such. Page 36 Index For the Three Months Ended For the Six Months Ended ($ in thousands) June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021 Noninterest Income: In-scope of ASC 606: Service charges on deposit accounts $ 3,700 2,824 7,241 5,557 Other service charges and fees: Bankcard interchange income, net 4,812 4,409 9,523 7,933 Other service charges and fees 1,490 1,160 2,753 2,151 Commissions from sales of insurance and financial products: Insurance income — 1,393 — 2,719 Wealth management income 1,151 1,073 2,096 1,937 SBA consulting fees 704 2,187 1,484 4,951 Noninterest income (in-scope of ASC 606) 11,857 13,046 23,097 25,248 Noninterest income (out-of-scope of ASC 606) 5,407 8,328 13,418 16,795 Total noninterest income $ 17,264 21,374 36,515 42,043 A description of the Company’s revenue streams accounted for under ASC 606 is detailed below. Service charges on deposit accounts: The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Overdraft fees are recognized at the point in time that the overdraft occurs. Maintenance and activity fees include account maintenance fees and transaction-based fees. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of the month, representing the period over which the Company satisfies the performance obligation. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Service charges on deposits are withdrawn from the customer’s account balance. Other service charges and fees: The Company earns interchange income on its customers’ debit and credit card usage and earns fees from other services utilized by its customers. Interchange income is primarily comprised of interchange fees earned whenever the Company’s debit and credit cards are processed through card payment networks such as MasterCard. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. Interchange fees are offset with interchange expenses and are presented on a net basis. Other service charges include revenue from processing wire transfers, bill pay service, cashier’s checks, ATM surcharge fees, and other services. The Company’s performance obligation for fees, exchange, and other service charges are largely satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month. Commissions from the sales of insurance and financial products: The Company earns commissions from the sale of wealth management products and also earned commissions from the sale of insurance policies until the sale of First Bank Insurance Services on June 30, 2021. Insurance income, which was earned by the Company until June 30, 2021, generally consisted of commissions from the sale of insurance policies and performance-based commissions from insurance companies. The Company recognized commission income from the sale of insurance policies when it acted as an agent between the insurance company and the policyholder. The Company’s performance obligation is generally satisfied upon the issuance of the insurance policy. Shortly after the policy is issued, the carrier remits the commission payment to the Company, and the Company recognized the revenue. Performance-based commissions from insurance companies were recognized at a point in time as policies are sold. Wealth management income primarily consists of commissions received on financial product sales, such as annuities. The Company’s performance obligation is generally satisfied upon the issuance of the financial product. Shortly after the policy is issued, the carrier remits the commission payment to the Company, and the Company recognizes the revenue. The Company also earns some fees from asset management, which is billed quarterly for services rendered in the most recent period, for which the performance obligation has been satisfied. Page 37 Index SBA consulting fees: The Company earns fees for its consulting services related to the origination of SBA loans. Fees are based on a percentage of the dollar amount of the originated loans and are recorded when the performance obligation has been satisfied. The Company has made no significant judgments in applying the revenue guidance prescribed in ASC 606 that affect the determination of the amount and timing of revenue from the above-described contracts with customers. Page 38 Index