What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-28 compared with 2022-03-01 · 516 added, 748 removed, 1531 unchanged (45% of the section changed)

15 unchanged sentences

Presold mortgages in process of settlement

19,257 42,271

SBA and other loans held for sale — 61,003

16 unchanged sentences

Total assets $ 10,625,049 10,508,901

Noninterest-bearing checking accounts

$ 3,348,622 2,210,012

Interest-bearing checking accounts

1,593,231 1,172,022

Money market accounts

2,562,283 1,581,364

Savings accounts

708,054 519,266

Time deposits of $100,000 or more

613,414 564,365

Other time deposits

299,025 226,567

Noninterest-bearing deposits $ 3,566,003 3,348,622

Interest-bearing deposits 5,661,526 5,776,007

Total deposits

24 unchanged sentences

Rabbi trust obligation

Accumulated other comprehensive (loss) income ( 24,970 ) 14,350

Accumulated other comprehensive loss ( 341,975 ) ( 24,970 )

Total shareholders’ equity

19 unchanged sentences

Interest Expense

Savings, checking and money market accounts

4,520 6,551 9,551

Time deposits of $100,000 or more

2,549 8,215 13,598

Other time deposits

812 1,535 1,901

1,642 3,261 8,853

Interest on deposits 11,349 7,881 16,301

Interest on borrowings 4,754 1,642 3,261

Total interest expense

3 unchanged sentences

Provision for loan losses 12,600 9,611 35,039

Provision for unfunded commitments 5,420 — —

(Reversal of) provision for unfunded commitments ( 200 ) 5,420 —

Total provision for credit losses 12,400 15,031 35,039

31 unchanged sentences

Merger and acquisition expenses

5,072 16,845 —

Intangibles amortization

3,684 3,531 3,956

Foreclosed property losses, net

Foreclosed property (gains) losses, net ( 372 ) 24 547

Other operating expenses

17 unchanged sentences

First Bancorp and Subsidiaries

Consolidated Statements of Comprehensive Income

Consolidated Statements of Comprehensive (Loss) Income

Years Ended December 31, 2022, 2021 and 2020

8 unchanged sentences

Postretirement plans:

Net gain (loss) arising during period 872 589 ( 686 )

Net gain arising during period 695 872 589

Tax expense ( 159 ) ( 201 ) ( 135 )

Amortization of unrecognized net actuarial (gain) loss ( 288 ) 592 686

Tax expense (benefit) 66 ( 136 ) ( 158 )

Amortization of unrecognized net actuarial loss

( 136 ) ( 158 ) ( 200 )

Other comprehensive (loss) income ( 317,005 ) ( 39,320 ) 9,227

Comprehensive income

$ 56,324 90,704 109,130

Comprehensive (loss) income $ ( 170,069 ) 56,324 90,704

See accompanying notes to consolidated financial statements.

3 unchanged sentences

($ in thousands, except per share data) Common Stock Retained

Earnings Stock in

acquisition Rabbi trust

obligation Accumulated

Comprehensive

Earnings Stock in rabbi trust assumed in acquisition Rabbi trust obligation Accumulated Other Comprehensive Income (Loss) Total

Shareholders’ Equity

7 unchanged sentences

Stock repurchases ( 1,117 ) ( 31,868 ) ( 31,868 )

Stock option exercises 9 129 129

Stock withheld for payment of taxes ( 11 ) ( 307 ) ( 307 )

Stock-based compensation 82 2,749 2,749

Other comprehensive loss 17,084 17,084

Other comprehensive income 9,227 9,227

Balances, December 31, 2020 28,579 400,582 478,489 ( 2,243 ) 2,243 14,350 893,421

Adoption of new accounting standard ( 17,051 ) ( 17,051 )

Net income 95,644 95,644

2 unchanged sentences

Change in Rabbi Trust Obligation 440 ( 440 ) —

Equity issued related to acquisition earn-out 24 494 494

Equity issued pursuant to acquisition 7,070 324,389 324,389

Stock repurchases ( 107 ) ( 4,036 ) ( 4,036 )

1 unchanged sentence

Stock-based compensation 105 2,522 2,522

Other comprehensive income 9,227 9,227

Other comprehensive loss ( 39,320 ) ( 39,320 )

Balances, December 31, 2021 35,629 722,671 532,874 ( 1,803 ) 1,803 ( 24,970 ) 1,230,575

Adoption of new accounting standard ( 17,051 ) ( 17,051 )

Net income 146,936 146,936

2 unchanged sentences

Change in Rabbi Trust Obligation 218 ( 218 ) —

Equity issued pursuant to acquisition 7,070 324,389 324,389

Stock repurchases ( 107 ) ( 4,036 ) ( 4,036 )

Stock withheld for payment of taxes ( 25 ) ( 840 ) ( 840 )

Stock-based compensation 100 3,322 3,322

Other comprehensive income ( 39,320 ) ( 39,320 )

Other comprehensive loss ( 317,005 ) ( 317,005 )

Balances, December 31, 2022 35,704 $ 725,153 648,418 ( 1,585 ) 1,585 ( 341,975 ) 1,031,596

8 unchanged sentences

Provision for credit losses 12,400 15,031 35,039

Deferred tax expense (benefit) ( 4,800 ) ( 10,007 ) 1,588

Net security premium amortization 12,005 14,058 5,019

Deferred tax benefit ( 1,810 ) ( 4,800 ) ( 10,007 )

Loan discount accretion ( 5,622 ) ( 8,814 ) ( 6,328 )

Other purchase accounting accretion and amortization, net ( 340 ) ( 47 ) 81

Foreclosed property losses and write-downs, net 24 547 939

Foreclosed property (gains) losses/write-downs, net ( 372 ) 24 547

Losses (gains) on securities available for sale — 1,237 ( 8,024 )

14 unchanged sentences

Increase in accrued interest receivable ( 3,814 ) ( 773 ) ( 3,624 )

Decrease (increase) in other assets 13,978 ( 991 ) ( 3,171 )

(Decrease) increase in accrued interest payable ( 683 ) ( 1,250 ) 178

Decrease in other assets 11,352 17,412 267

Increase (decrease) in accrued interest payable 2,131 ( 683 ) ( 1,250 )

(Decrease) increase in other liabilities ( 8,009 ) 394 9,805

6 unchanged sentences

Proceeds from sales of securities available for sale — 106,484 219,697

Redemptions of FRB and FHLB stock 2,043 9,851 4,088

(Purchases) redemptions of FRB and FHLB stock, net ( 17,244 ) 2,043 9,851

Purchases of bank owned life insurance — ( 25,000 ) —

Proceeds from bank owned life insurance death benefits 8,312 — —

Purchases of other investments ( 7,990 ) ( 3,434 ) ( 1,258 )

Net increase in loans ( 558,398 ) ( 97,559 ) ( 233,788 )

7 unchanged sentences

Net increase in deposits 103,494 1,258,193 1,342,340

Net decrease in short-term borrowings — ( 198,000 ) ( 55,000 )

Net increase (decrease) in short-term borrowings 220,000 — ( 198,000 )

Proceeds from long-term borrowings — — 150,000

2 unchanged sentences

Repurchases of common stock — ( 4,036 ) ( 31,868 )

Proceeds from stock option exercises — — 129

Payment of taxes related to stock withheld ( 840 ) ( 786 ) ( 307 )

Net cash provided by financing activities 291,861 1,225,414 1,039,194

Increase (decrease) in Cash and Cash Equivalents 93,872 135,988 ( 231,596 )

(Decrease) increase in Cash and Cash Equivalents ( 190,844 ) 93,872 135,988

Cash and Cash Equivalents, Beginning of Year 461,162 367,290 231,302

Cash and Cash Equivalents, End of Year $ 270,318 461,162 367,290

First Bancorp and Subsidiaries

Consolidated Statements of Cash Flows

Years Ended December 31, 2022, 2021 and 2020

($ in thousands) 2022 2021 2020

Supplemental Disclosures of Cash Flow Information:

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December 31, 2022

Summary Note 1.

Summary of Significant Accounting Policies

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("Magnolia Financial"), and First Troy SPE, LLC.

All significant intercompany accounts and transactions have been eliminated.

Subsequent events have been evaluated through the date of filing this Annual Report Form 10-K.

The Company is a bank holding company.

The principal activity of the Company is the ownership and operation of the Bank, a state chartered bank with its main office in Southern Pines, North Carolina.

The Company is also the parent company for a series of statutory trusts that were formed at various times since 2002 for the purpose of issuing trust preferred debt securities.

The trusts are not consolidated for financial reporting purposes;

however, notes issued by the Company to the trusts in return for the proceeds from the issuance of the trust preferred securities are included in the consolidated financial statements and have terms that are substantially the same as the corresponding trust preferred securities.

The trust preferred securities qualify as capital for regulatory capital adequacy requirements.

SBA Complete specializes in providing consulting services for financial institutions across the country related to Small Business Administration (“SBA”) loan origination and servicing.

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First Troy SPE, LLC was formed in order to hold and dispose of certain real estate foreclosed upon by the Bank.

The Company is also the parent company for a series of statutory trusts that were formed for the purpose of issuing trust preferred debt securities.

The trusts are not consolidated for financial reporting purposes as they are variable interest entities and the Company is not the primary beneficiary.

All significant intercompany accounts and transactions have been eliminated.

Certain reclassifications have been made to the 2021 and 2020 consolidated financial statements to be comparable to 2022.

These reclassifications had no effect on net income.

Subsequent events have been evaluated through the date of filing this Annual Report Form 10-K.

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

1 unchanged sentence

The most significant estimates made by the Company in the preparation of its consolidated financial statements are the determination of the allowance for credit losses on loans, the allowance for credit losses on unfunded commitments, the accounting and impairment testing related to intangible assets, and the fair value and discount accretion of acquired loans.

Operating, Accounting and Reporting Considerations related to COVID-19 - The coronavirus ("COVID-19") pandemic that emerged in March 2020 negatively impacted the local, national, and global economy, disrupted global supply chains, caused business closures, increased unemployment levels, and created significant volatility and disruption in financial markets.

In response to the hardships arising from the pandemic, on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was signed by the President of the United States.

Certain provisions within the CARES Act encouraged financial institutions to practice prudent efforts to work with borrowers impacted by COVID-19.

Under these provisions, which the Company applied, loan modifications deemed to be COVID-19-related are not considered a troubled debt restructuring (“TDR”) if the loan was not more than 30 days past due as of December 31, 2019 and the deferral was executed between March 1, 2020 and the earlier of 60 days after the date of termination of the COVID-19 national emergency or December 31, 2020.

This CARES Act provision was subsequently extended to January 1, 2022.

The banking regulators issued similar guidance, which also clarified that a COVID-19-related modification would not meet the requirements under GAAP to be a TDR if the borrower was current on payments at the time the underlying loan modification program was implemented and if the modification is considered to be short-term.

During 2020, the Company generally offered impacted borrowers loan payment deferrals of 90 days in duration, with a deferral renewal if requested.

As of December 31, 2020, the Company had payment deferrals of $ 16.6 million, and at December 31, 2021 the Company had no loans deferred under this CARES Act provision.

Additionally, the Company participated in the SBA's Paycheck Protection Program ("PPP") under the CARES Act.

The Company originated $ 247.5 million in PPP loans during the second quarter of 2020.

In December 2020, the Bipartisan-Bicameral Omnibus COVID Relief Deal, included, among other things, additional stimulus payments for individuals under certain income thresholds and small business relief, which included additional funds for PPP loans.

As a result, in early 2021, the Company originated an additional $ 113.1 million in PPP loans.

Beginning in the second quarter of 2020, the Company began accepting and transmitting PPP loan forgiveness documentation.

This forgiveness process continued during 2021, and as a result, the Company's remaining PPP loans amounted to only $ 39.0 million at December 31, 2021.

The economies of our market areas generally improved during 2021 as they recovered from the pandemic.

However, the ongoing impact on the Company of the continuing pandemic, including infection rate spikes and new strains of COVID-19 is uncertain.

The extent to which the COVID-19 pandemic and its variants have 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.

Business Combinations – The Company accounts for business combinations using the acquisition method of accounting.

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Interest income includes amortization of purchase premiums or discounts.

Premiums and discounts are generally amortized into income on a level yield basis, with premiums being amortized to the earliest call date and discounts being accreted to the stated maturity date.

Premiums and discounts are generally amortized and accreted into income on a level yield basis, with premiums being amortized to the earliest call date and discounts being accreted to the stated maturity date.

Gains and losses on sales of securities are recognized at the time of sale based upon the specific identification method.

1 unchanged sentence

Interest accrued but not received for a security placed on nonaccrual is reversed against interest income.

Allowance for Credit Losses ("ACL") - Securities Held to Maturity - Since its adoption of Accounting Standards Codification 326 ("CECL"), the Company measures expected credit losses on HTM debt securities on an individual security basis.

Accrued interest receivable on HTM debt securities totaled $ 3.7 million at December 31, 2021 and was excluded from the estimate of credit losses.

Allowance for Credit Losses ("ACL") - Securities Held to Maturity - Since its adoption of ASC 326 ("CECL"), the Company measures expected credit losses on HTM debt securities on a pooled basis.

The estimate of expected credit losses is primarily based on the ratings assigned to the securities by debt rating agencies and the average of the annual historical loss rates associated with those ratings.

The Company then multiplies those loss rates, as adjusted for any modifications to reflect current conditions and reasonable and supportable forecasts as considered necessary, by the remaining lives of each individual security to arrive at a lifetime expected loss amount.

The CECL assumptions, including reasonable and supportable forecast periods, reversion method, and prepayments as applicable, are consistent with those utilized for the ACL on loans as discussed further below.

Virtually all of the mortgage-backed securities held by the Company are issued by government-sponsored enterprises.

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Substantially all of the state and local government securities held by the Company are highly rated by major rating agencies.

As a result, there was no ACL on HTM securities at December 31, 2021.

Accrued interest receivable of $ 4.3 million and $ 3.7 million at December 31, 2022 and December 31, 2021, respectively, on HTM debt securities was excluded from the estimate of credit losses.

Allowance for Credit Losses - Securities Available for Sale - For AFS debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or if it is more likely than not that it will be required to sell the security before recovery of the amortized cost basis.

If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income with the establishment of an allowance under CECL compared to a direct write down of the security under previously applicable accounting

standard ASC 310-30 ("Incurred Loss").

For debt securities AFS that do not meet the aforementioned criteria, the Company evaluates whether any decline in fair value is due to credit loss factors.

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Losses are charged against the allowance when management believes the uncollectibility of an AFS security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

At December 31, 2021, there was no ACL related to the AFS portfolio.

Accrued interest receivable on available for sale debt securities totaled $ 5.0 million at December 31, 2021 and was excluded from the estimate of credit losses.

Accrued interest receivable of $ 5.7 million and $ 5.0 million at December 31, 2022 and December 31, 2021, respectively, on AFS debt securities was excluded from the estimate of credit losses.

Presold Mortgages in Process of Settlement - As a part of normal business operations, the Company originates residential mortgage loans that have been pre-approved by secondary investors to be sold on a best efforts basis.

6 unchanged sentences

These loans are carried at the lower of cost or market as determined on an individual loan basis.

There were $ 9.6 million and $ 6.1 million in SBA loans held for sale at December 31, 2021 and 2020, respectively.

At December 31, 2021, this line item also included two pools of loans assumed in the Company's acquisition of Select Bancorp, Inc.

that the Company determined did not align with its strategy or were not in our markets and were thus designated for sale.

These loans amounted to $ 51.4 million at December 31, 2021 and were carried at the lower of cost or market at the aggregate level for each pool.

See Note 2 for additional discussion of the valuation of these loan pools and Note 22 for disclosure of their disposition.

There were no SBA loans held for sale at December 31, 2022 and there were $ 9.6 million in SBA loans held for sale at December 31, 2021.

Also included in the balance at December 31, 2021 was $ 51.4 million of loans assumed in the Company's acquisition of Select Bancorp, Inc.

("Select") that were designated for sale as not aligning with the Company's strategy or markets.

The loans were carried at the the lower of cost or market and the disposition of these loans was completed in the first quarter of 2022 at a price that approximated the carrying value.

Loans - Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost.

Amortized cost is the principal balance outstanding, net of purchase premiums and discounts and deferred fees and costs.

Accrued interest receivable related to these loans totaled $ 17.2 million at December 31, 2021 and was reported in accrued interest receivable on the consolidated balance sheets.

Accrued interest receivable related to these loans totaled $ 19.7 million at December 31, 2022 and $ 17.2 million at December 31, 2021, and was reported in accrued interest receivable on the consolidated balance sheets.

Interest income is accrued on the unpaid principal balance.

Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using methods that approximate a level yield without anticipating prepayments.

origination fees, net of certain direct origination costs, are deferred and recognized in interest income using methods that approximate a level yield without anticipating prepayments.

The accrual of interest is generally discontinued when a loan becomes 90 days past due and is not well collateralized and in the process of collection, or when management believes, after considering economic and business conditions and collection efforts, that the principal or interest will not be collectible in the normal course of business.

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Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, there is a sustained period of repayment performance, and future payments are reasonably assured.

Purchased Credit Deteriorated ("PCD") Loans - Subsequent to the Company's adoption of CECL on January 1, 2021, loans acquired in a business combination that have experienced more-than-insignificant deterioration in credit

quality since origination are considered PCD loans.

Purchased Financial Assets with Credit Deterioration ("PCD") - Subsequent to the Company's adoption of CECL on January 1, 2021, loans acquired in a business combination that have experienced more-than-insignificant deterioration in credit quality since origination are considered PCD loans.

In determining whether an acquired loan is a PCD loan, the Company considers internal loan grades, delinquency status, and other relevant factors.

6 unchanged sentences

All loans and leases considered to be purchased credit impaired ("PCI") prior to January 1, 2021 under prior accounting guidance were converted to PCD on that date.

Allowance for Credit Losses - Loans - The ACL on loans is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans.

Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed.

Estimated recoveries are considered for post-CECL adoption date charge-offs to the extent that they do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

Accrued interest receivable totaling $ 17.2 million at December 31, 2021 was excluded from the estimate of credit losses.

The ACL is measured on a collective pool basis when similar risk characteristics exist.

Loans with similar risk characteristics are grouped into homogenous segments, or pools, for analysis.

Allowance for Credit Losses - Loans - The ACL is an estimate that is deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial assets.

The level of the allowance is determined under the CECL methodology and includes management's evaluation of historical default and loss experience, current and projected economic conditions, asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrowers' ability to repay a loan (including the timing of future payments), the estimated value of any underlying collateral, composition of the loan portfolio, and other pertinent factors.

Credit losses are estimated on the amortized cost basis of loans, which includes the principal balance outstanding, purchase discounts and premiums, and deferred loan fees and costs.

Accrued interest receivable is presented separately on the consolidated balance sheets and excluded from the estimate of credit losses.

Loans are charged off when the Company determines that such financial assets are deemed uncollectible.

The ACL is increased through provision for loan losses and decreased by charge-offs, net of recoveries of amounts previously charged-off.

The ACL is measured on a collective basis for pools of loans with similar risk characteristics.

The Discounted Cash Flow (“DCF”) method is utilized for substantially all pools, with discounted cash flows computed for each loan in a pool based on its individual characteristics (e.g.

maturity date, payment amount, interest rate, etc.), and the results are aggregated at the pool level.

A probability of default and loss given default, as adjusted for recoveries (as noted above), are applied to the discounted cash flows for each pool, while considering prepayment and principal curtailment effects.

The analysis produces a discounted expected cash flow total for each pool, which is then compared to the amortized cost of the pool to arrive at the expected credit loss.

A probability of default and loss given default, as adjusted for recoveries, are applied to the discounted cash flows for each pool, while considering prepayment and principal curtailment assumptions driven by each loan's collateral type.

When the DCF method is used to determine the ACL, management adjusts the effective interest rate used to discount expected cash flows to incorporate expected prepayments.

When management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

The Company has identified the following primary pools for measuring expected credit losses.

There are additional sub-segmentations within each pool, including risk categories.

• Owner occupied commercial real estate loans - Owner occupied commercial real estate mortgage loans are secured by commercial office buildings, industrial buildings, warehouses or retail buildings where the owner of the building occupies the property.

For such loans, repayment is largely dependent upon the operation of the borrower's business.

• Non-owner occupied commercial real estate loans - These loans represent investment real estate loans secured by office buildings, industrial buildings, warehouses, retail buildings, and multifamily residential housing.

Repayment is primarily dependent on lease income generated from the underlying collateral.

• Consumer real estate mortgage loans - Consumer real estate mortgage consists primarily of loans secured by 1-4 family residential properties, including home equity lines of credit.

Repayment is primarily dependent on the personal cash flow of the borrower and may be affected by changes in general economic conditions.

• Construction and land development loans - Construction and land development loans include loans where the repayment is dependent on the successful completion and eventual sale, refinance or operation of the related real estate project and are thus impacted by market demand and real estate valuations.

Construction and land development loans include 1-4 family construction projects and commercial construction projects.

• Commercial and industrial loans - Commercial and industrial loans include loans to business enterprises issued for commercial, industrial and/or other professional purposes.

These loans are generally secured by equipment, inventory, and accounts receivable of the borrower and repayment is primarily dependent on business cash flows.

• Consumer and other loans - Consumer and other loans include all loans issued to individuals not included in the consumer real estate mortgage classification, including automobile loans, consumer credit cards and loans to finance education, among others.

Many consumer loans are unsecured and repayment is primarily dependent on the personal cash flow of the borrower which may be impacted by changes in economic conditions and unemployment .

In determining the proper level of default rates and loss given default, management has determined that the loss experience of the Company provides the best basis for its assessment of expected credit losses.

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The Company subscribes to a third-party service which provides a quarterly macroeconomic baseline forecast and alternative scenarios for the United States economy.

The baseline forecast, along with the alternative scenarios, are evaluated by management to determine the best estimate within the range of expected credit losses.

The baseline forecast incorporates an equal probability of the United States economy performing better or worse than this projection.

With the ongoing pandemic, along with periodic starts and stops to reopening the economy and the impact of government stimulus, the baseline and alternative scenarios have reflected a high degree of volatility in economic forecasts from month-to-month.

The Company based its adoption date allowance for credit loss adjustment primarily on the baseline forecast, which reflected ongoing threats to the economy, primarily arising from the pandemic.

In reviewing forecasts during 2021, management noted high degrees of volatility in the monthly forecasts.

Given the uncertainty that the volatility is indicative of and the inherent imprecision of a forecast accurately projecting economic statistics during these unprecedented times, management elected to base each of the 2021 quarter-end computations of the ACL primarily on an alternative, more negative forecast, that management judged to more appropriately reflect the inherent risks to its loan portfolio.

The baseline forecast, which incorporates an equal probability of the United States economy performing better or worse than the projection, along with the alternative scenarios, are evaluated by management to determine the best estimate within the range of expected credit losses.

Management has also evaluated the appropriateness of the reasonable and supportable forecast scenarios utilized for each period and has made adjustments as needed.

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1) changes in lending policies, procedures, and strategies, 2) changes in the nature and volume of the portfolio, 3) staff experience, 4) changes in volume and trends in classified loans, delinquencies, and nonaccrual loans, 5) concentration risk, 6) trends in underlying collateral value, 7) external factors, including competition and legal and regulatory factors, 8) changes in the quality of the Company's loan review system, and 9) economic conditions not already captured.

The Company has identified the following portfolio segments and calculates the ACL for each using a DCF methodology at the loan level, with loss rates, prepayment assumptions, and curtailment assumptions driven by each loan’s collateral type:

Commercial, financial, and agricultural - Risks to this loan category include industry concentration and the inability to monitor the condition of the collateral which often consists of inventory, accounts receivable, and other non-real estate assets.

Equipment and inventory obsolescence can also pose a risk.

Declines in general economic conditions and other events can cause cash flows to fall to levels insufficient to service debt.

Also included in this category for periods subsequent to March 31, 2020 are PPP loans, which are fully guaranteed by the SBA and thus have minimal risk.

Real estate - construction, land development, & other land loans - Risks common to commercial construction loans are cost overruns, changes in market demand for property, inadequate long-term financing arrangements, and declines in real estate values.

Residential construction loans are susceptible to those same risks as well as those associated with residential mortgage loans (see below).

Changes in market demand for property could lead to longer marketing times resulting in higher carrying costs, declining values, and higher interest rates.

Real estate - mortgage - residential (1-4 family) first - Residential mortgage loans are susceptible to weakening general economic conditions and increases in unemployment rates and declining real estate values.

Real estate - mortgage - home equity loans / lines of credit - Risks common to home equity loans and lines of credit are general economic conditions, including an increase in unemployment rates and declining real estate values, which reduce or eliminate the borrower’s home equity.

Real estate - mortgage - commercial and other - Loans in this category are susceptible to declines in occupancy rates, business failure, and general economic conditions.

Also, declines in real estate values and lack of suitable alternative use for the properties are risks for loans in this category.

Consumer loans - Risks common to these loans include regulatory risks, unemployment, and changes in local economic conditions as well as the inability to monitor collateral consisting of personal property .

When the DCF method is used to determine the ACL, management adjusts the effective interest rate used to discount expected cash flows to incorporate expected prepayments.

Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate.

The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies:

management has a reasonable expectation at the reporting date that a TDR will be executed with an individual borrower or the extension, or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.

Troubled Debt Restructurings - A loan for which the terms have been modified resulting in a more than insignificant concession, and for which the borrower is experiencing financial difficulties, is generally considered to be a TDR.

Allowance for Credit Losses - Off-Balance Sheet Credit Exposure - The Company estimates expected credit losses on commitments to extend credit over the contractual period in which the Company is exposed to credit risk on the underlying commitments, unless the obligation is unconditionally cancellable by the Company.

The allowance for off-balance sheet credit exposures, which is reflected within "Other Liabilities," is adjusted for as an increase or decrease to the provision for credit losses for unfunded commitments.

The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded

over its estimated life.

The allowance is calculated using the same aggregate reserve rates calculated for the funded portion of loans at the portfolio level applied to the amount of commitments expected to fund.

Troubled Debt Restructurings ("TDR") - A loan for which the terms have been modified resulting in a more than insignificant concession, and for which the borrower is experiencing financial difficulties, is generally considered to be a TDR.

The allowance for credit loss on a TDR is measured using the same method as all other loans held for investment, except that the original interest rate is used to discount the expected cash flows, not the rate specified within the restructuring.

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The discount is amortized as a yield adjustment over the life of the loan, so long as the loan performs.

In the event the loan is moved to nonaccrual status, the Company ceases the amortization of the discount and upon any subsequent transfer to foreclosed properties or liquidation of the loan, the remaining discount is amortized, along with any remaining servicing asset and deferred loan costs.

Refer also to SBA Servicing Assets below.

In the event the loan is moved to nonaccrual status or transfer to foreclosed properties or liquidation of the loan, the remaining discount is amortized, along with any remaining servicing asset and deferred loan costs.

SBA Servicing Assets - When the Company sells the guaranteed portion of an SBA loan, the Company continues to perform the servicing on the loan and collects a fee related to the sold portion of the loan.

A SBA servicing asset is recorded for the fair value of that fee based on an analysis of discounted cash flows that incorporates estimates of (1) market servicing costs, (2) market-based prepayment rates, and (3) market profit margins.

SBA servicing assets are included in “Other intangible assets” on the consolidated balance sheets.

SBA servicing assets are initially recorded at fair value and amortized against income over the lives of the related loans as a reduction of servicing fee income, generally five years .

SBA servicing assets are tested for impairment on a quarterly basis by comparing their estimated fair values, aggregated by year of origination, to the related carrying values.

Changes in observable market data relating to market interest rates, loan prepayment speeds, and other factors, could result in impairment or reversal of impairment of these servicing assets and, as such, impact the Company's financial condition and results of operations.

Transfers of Financial Assets - Transfers of financial assets are accounted for as sales, when control over the assets has been relinquished.

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Premises and Equipment - Premises and equipment are stated at cost less accumulated depreciation.

Depreciation, computed by the straight-line method, is charged to operations over the estimated useful lives of the properties, which range from 2 to 40 years or, in the case of leasehold improvements, over the term of the lease, if shorter.

Depreciation, computed by the straight-line method, is charged to operations over the estimated useful lives of the properties or, in the case of leasehold improvements, over the term of the lease, if shorter.

Land is carried at cost.

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Goodwill is not amortized, but rather is subject to fair value impairment tests on at least an annual basis.

SBA servicing assets are included in “Other intangible assets” on the consolidated balance sheets.

SBA servicing assets are amortized against income over the lives of the related loans as a reduction of servicing fee income, generally five years .

SBA servicing assets are tested for impairment on a quarterly basis by comparing their estimated fair values, aggregated by year of origination, to the related carrying values.

Foreclosed Properties - Foreclosed properties consists primarily of real estate acquired by the Company through legal foreclosure or deed in lieu of foreclosure.

The property is initially carried at the lower of cost or the estimated fair value of the property less estimated selling costs (also see Note 13).

The property is initially carried at the lower of cost or the estimated fair value of the property less estimated selling costs.

If there are subsequent declines in fair value, which is reviewed routinely by management, the property is written down to its fair value through a charge to expense.

Capital expenditures made to improve the property are capitalized.

Costs of holding real estate, such as property taxes, insurance, and maintenance, less related revenues during the holding period, are recorded as expense as they are incurred.

Costs of holding real estate, such as property

taxes, insurance, and maintenance, less related revenues during the holding period, are recorded as expense as they are incurred.

Bank-Owned Life Insurance – The Company has purchased life insurance policies on certain current and past key employees and directors where the insurance policy benefits and ownership are retained by the employer.

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Deferred tax assets are reduced, if necessary, by the amount of such benefits that are not expected to be realized based upon available evidence.

Other Investments – The Company accounts for substantially all of its investments in limited partnerships and limited liability companies (“LLCs”) using the equity method of accounting.

The accounting treatment depends upon the Company’s percentage ownership and degree of management influence.

Other Investments – The Company accounts for its investments in limited partnerships and limited liability companies (“LLCs”) using the equity method of accounting if the percentage ownership and degree of management influence in the investments warrants such accounting treatment.

Under the equity method of accounting, the Company records its initial investment at cost.

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At December 31, 2022 and 2021, the Company’s investments in limited partnerships and LLCs totaled $ 18.5 million and $ 11.3 million, respectively, and are included in "Other assets".

Also see Note 3 for discussion of an investment without a readily determinable fair value.

Federal Home Loan Bank ("FHLB") Stock - The Company is a member of the FHLB system.

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Such financial instruments are recorded when they are funded.

Allowance for Credit Losses - Unfunded Loan Commitments - Effective with the adoption of CECL, the Company estimates expected credit losses on commitments to extend credit over the contractual period in which the Company is exposed to credit risk on the underlying commitments, unless the obligation is unconditionally cancellable by the Company.

The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.

The allowance is calculated using the same aggregate reserve rates calculated for the funded portion of loans at the portfolio level applied to the amount of commitments expected to fund.

Stock-Based Compensation - Restricted stock awards are the primary form of equity grant utilized by the Company.

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Earnings Per Share Amounts - Basic Earnings Per Common Share is calculated by dividing net income, less income allocated to participating securities, by the weighted average number of common shares outstanding during the period, excluding unvested shares of restricted stock.

For the Company, participating securities are comprised of unvested shares of restricted stock.

For the Company, participating securities are comprised

of unvested shares of restricted stock.

Diluted Earnings Per Common Share is computed by assuming the issuance of common shares for all potentially dilutive common shares outstanding during the reporting period.

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Impairment - Goodwill is evaluated for impairment on at least an annual basis, and more often if a triggering event is identified, by comparing the estimated fair value of the reporting units to their related carrying value.

At December 31, 2021, the Company had two reporting units – 1) the Bank with $ 360.0 million in goodwill and 2) SBA activities, including SBA Complete and our SBA Lending Division, with $ 4.3 million in goodwill.

If the carrying value of a reporting unit exceeds its fair value, the Company determines whether the implied fair value of the goodwill, using various valuation techniques, exceeds the carrying value of the goodwill.

At December 31, 2022, the Company had two reporting units which are evaluated for impairment.

If the carrying value of a reporting unit exceeds its fair value, the Company utilizes various valuation techniques to determine whether the implied fair value of the goodwill exceeds its carrying value.

If the carrying value of the goodwill exceeds the implied fair value of the goodwill, an impairment loss is recorded in an amount equal to that excess.

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Other comprehensive income (loss) includes revenues, expenses, gains, and losses that are excluded from earnings under current accounting standards.

Variable Interest Entities - The Company's statutory trust subsidiaries (First Bancorp Capital Trust II, Trust III and Trust IV, Carolina Capital Trust, and New Century Statutory Trust I), ("the Trusts") qualify as variable interest entities under ASC 810, “Consolidation.” Notes issued by the Company to the Trusts in return for the proceeds from the issuance of the trust preferred securities have terms that are substantially the same as the corresponding trust preferred securities.

As qualified variable interest entities, the Trusts' balance sheet and statement of operations have never been consolidated with those of the Company because the Company is not the primary beneficiary.

Further, the Company has no exposure to loss of the operations of the Trusts as the Company is limited to the repayment of the underlying obligations and would not absorb the losses of the Trusts if losses were to occur.

The trust preferred securities qualify as capital for regulatory capital adequacy requirements.

Segment Reporting - Accounting standards require management to report selected financial and descriptive information about reportable operating segments that exceed certain thresholds.

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Accounting Standards Adopted in 2022

In August 2018, the Financial Accounting Standards Board amended the Compensation - Retirement Benefits – Defined Benefit Plans Topic of the Accounting Standards Codification to improve disclosure requirements for employers that sponsor defined benefit pension and other postretirement plans.

The guidance removed disclosures that were no longer considered cost-beneficial, clarified the specific requirements of disclosures, and added disclosure requirements identified as relevant.

The amendments were effective for the Company on January 1, 2021 and the adoption of this amendment did not have a material effect on its financial statements.

On January 1, 2021, the Company adopted CECL which replaced the prior Incurred Loss methodology for recognizing credit losses with a methodology that is based on estimating future expected lifetime credit losses.

The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held to maturity debt securities.

It also applies to off-balance sheet credit exposures, such as unfunded commitments to extend credit.

In addition, CECL made changes to the accounting for AFS debt securities.

One such change is to require credit losses to be presented as an allowance rather than as a write-down on available for sale debt securities if management does not intend to sell and does not believe that it is more likely than not they will be required to sell.

In adopting CECL, the Company utilized the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures.

Results for reporting periods beginning after January 1, 2021 are presented under CECL while prior period amounts continue to be reported under the Incurred Loss methodology.

The transition adjustment of the adoption of CECL included an increase in the ACL on loans of $ 14.6 million, which is presented as a reduction to loans outstanding, and an increase in the allowance on unfunded loan commitments of $ 7.5 million, which is recorded within "Other liabilities".

The adoption of CECL had an insignificant impact on the Company's HTM and AFS securities portfolios.

The Company recorded a net decrease to retained earnings of $ 17.1 million as of January 1, 2021 for the cumulative effect of adopting CECL, which reflects the transition adjustments noted above, net of the applicable deferred tax assets recorded.

Federal banking regulatory agencies provided optional relief to delay the adverse regulatory capital impact of CECL at adoption.

The Company did not elect the option.

The Company adopted CECL using the prospective transition approach for PCD assets that were previously classified as PCI under ASC 310-30.

In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption.

The amortized cost basis of the PCD assets was adjusted to reflect the addition of $ 0.1 million to the ACL.

The remaining noncredit discount (based on the adjusted amortized cost basis) will be accreted into interest income at a rate that approximates the effective interest rate as of January 1, 2021.

With regard to PCD assets, because the Company elected to disaggregate the former PCI pools and no longer considers these pools to be the unit of account, contractually delinquent PCD loans are now reported as nonaccrual loans using the same criteria as other loans.

Similarly, although management did not reassess whether modifications to individual acquired financial assets accounted for in pools were TDRs as of the date of adoption, PCD loans that were restructured and met the definition of TDRs after the adoption of CECL are reported as such.

Accrued interest for all financial instruments is included in a separate line on the face of the Consolidated Balance Sheets.

The Company elected not to measure an ACL for accrued interest receivable and instead elected to reverse interest income on loans or securities that are placed on nonaccrual status, which is generally when the instrument is 90 days past due, or earlier if the Company believes the collection of interest is doubtful.

The Company has concluded that this policy results in the timely reversal of uncollectible interest.

The ACL for the majority of loans was calculated using a DCF methodology applied at a loan level with a one-year reasonable and supportable forecast period and a three-year straight-line reversion period.

The Company elected to use, as a practical expedient, the fair value of collateral when determining the ACL on loans for which repayment is expected to be provided substantially through the operation or sale of the collateral when the borrower is experiencing financial difficulty (collateral-dependent loans).

The Company's CECL allowances will fluctuate over time due to macroeconomic conditions and forecasts as well as the size and composition of the loan portfolios.

In March 2020, Accounting Standards Update ("ASU") 2020-04, “Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting” was issued.

ASU 2020-04 provides optional expedients and exceptions for accounting related to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

ASU 2020-04 applies only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform and do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship.

ASU 2020-04 was effective upon issuance and generally can be applied through December 31, 2022.

The adoption of ASU 2020-04 did not significantly impact the Company’s consolidated financial statements.

The Company did not adopt any accounting standards during 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 has evaluated the adoption of the new guidance on the consolidated financial statements and 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 does not expect the ASU to have a material effect on its financial statements.

ASU 2022-06, "Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848." In 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provided optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform.

The objective of the guidance in Topic 848 was to provide relief during the temporary transition period and the FASB included a sunset provision based on expectations of when the London Interbank Offered Rate (LIBOR) would cease being published.

The United Kingdom Financial Conduct Authority has announced that the intended LIBOR cessation date has been extended from December 31, 2021 to June 30, 2023.

As such, ASU 2022-06 defers the sunset date previously set to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848;

moreover, it applies to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

The Company does not expect this ASU to have a material effect on its financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

Acquisitions and Dispositions

GrandSouth Acquisition

On January 1, 2023, the Company completed its acquisition of GrandSouth Bancorporation ("GrandSouth"), in an all-stock transaction pursuant to the previously announced Agreement and Plan of Merger and Reorganization ("the Merger Agreement"), dated June 21, 2022, between the Company and GrandSouth.

At the closing of the transaction, GrandSouth merged into the Company.

Following the merger of the Company and GrandSouth, GrandSouth Bank, a wholly-owned subsidiary of GrandSouth, merged into the Bank with the Bank being the surviving entity.

Pursuant to the Merger Agreement, each share of common and preferred stock of GrandSouth issued and outstanding immediately prior to the effective time of the acquisition was converted into 0.91 shares of the Company's common stock.

As a result, the Company issued 5,032,834 shares of the Company common stock effective January 1, 2023.

In addition, approximately 596,000 GrandSouth common stock options were converted to options to acquire 0.91 shares of the Company's common stock with an average exercise price of approximately $ 18.22 .

The consideration transferred at the close of the transaction was approximately $ 226.9 million.

Effective with the transaction close, eight branches in South Carolina were added to the Company's branch network.

Immediately prior to the completion of the acquisition, at December 31, 2021, GrandSouth Bank reported total assets of $ 1.2 billion, total loans of $ 1.0 billion, and total deposits of $ 1.1 billion on a Call Report filed with federal banking regulators.

The acquisition accomplished the Company's strategic initiative to expand its presence in South Carolina, specifically in the the high-growth markets of the state including Greenville, Charleston and Columbia.

Significant synergies are anticipated to be gained from the acquisition, with asset growth and revenue enhancement opportunities from the new markets and expanded customer base.

Accordingly, the Company anticipates recognizing goodwill in the transaction related primarily to the reasons noted, as well as the positive earnings of GrandSouth.

It is anticipated that the goodwill which will result from this transaction will be non-deductible for tax purposes.

Given that the initial purchase accounting for the acquisition in accordance with GAAP for this business combination is not yet completed, the Company is not yet able to disclose the preliminary fair value of the GrandSouth assets acquired and liabilities assumed.

Select Acquisition

On October 15, 2021, the Company completed the acquisition of Select Bancorp, Inc.

(“Select”), headquartered in Dunn, North Carolina, pursuant to an Agreement and Plan of Merger and Reorganization dated June 1, 2021.

On October 15, 2021, the Company completed the acquisition of Select, headquartered in Dunn, North Carolina, pursuant to an Agreement and Plan of Merger and Reorganization dated June 1, 2021.

Select's subsidiary, Select Bank & Trust, was merged into the Bank.

The results of Select are included in the Company’s results beginning on the October 15, 2021 acquisition date.

The results of the Select acquisition are included in the Company’s results beginning on the October 15, 2021 acquisition date.

The Company exchanged 0.408 shares of its common stock for each share of Select common stock.

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Cash and due from banks, and interest-bearing deposits with banks :

The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets.

The carrying amount of these assets was a reasonable estimate of fair value based on the short-term nature of these assets.

Securities available for sale :

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Estimate of contractual cash flows not expected to be collected 13,257

Land and buildings held for use are valued at appraised values, which reflect considerations of recent disposition values for similar property types with adjustments for characteristics of individual properties.

Land and buildings held for use were valued at appraised values, which reflect considerations of recent disposition values for similar property types with adjustments for characteristics of individual properties.

Locations held for sale are valued at appraised values which also reference recent disposition values for similar property types but also considers marketability discounts for vacant properties.

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Fair values for time deposits were estimated using a discounted cash flow analysis applying interest rates currently offered to the contractual interest rates on such time deposits.

The fair values of long-term debt instruments are estimated based on quoted market prices for instrument if available, or for similar instruments if not available.

The fair values of long-term debt instruments were estimated based on quoted market prices for instrument if available, or for similar instruments if not available.

Supplemental Pro Forma Financial Information

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In addition, no adjustments have been made to such pro forma information to eliminate the provision for loan losses recorded by Select in the amount of $ 6.2 million for 2020 and a negative provision for loan losses recorded by Select of $ 1.3 million recorded in 2021 prior the acquisition.

Pro forma information for the year 2021 has been adjusted to eliminate the following:

Pro forma information for the year 2021 was adjusted to eliminate the following:

1) the non-PCD provision for loan losses recorded on the acquisition date of $ 14.1 million and 2) the initial recording of a provision for credit losses associated with Select’s unfunded commitments of $ 3.9 million.

If the Select acquisition had occurred at the beginning of 2020, the acquisition date credit loss reserve amounts would have been included in the fair value measurements of Select and been included in the goodwill calculation.

Expenses related to systems conversions and other costs of integration are expected to be recorded during 2022.

Expenses related to systems conversions and other costs of integration were recorded during 2022.

The Company expects to achieve further operating cost savings and other business synergies as a result of the acquisition.

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First Bank Insurance Services, Inc.

On June 30, 2021, the Company completed the sale of the operations and substantially all of the operating assets of its property and casualty insurance agency subsidiary, First Bank Insurance Services Inc., to Bankers Insurance, LLC for an initial purchase price valued at $ 13.0 million and a future earn-out payment of up to $ 1.0 million.

("First Bank Insurance"), to Bankers Insurance, LLC for an initial purchase price valued at $ 13.0 million and a future earn-out payment of up to $ 1.0 million.

Cash received at the time of the sale was $ 11.3 million.

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Approximately $ 10.2 million of intangible assets were derecognized from the Company's balance sheet as a result of this transaction, including $ 7.4 million in goodwill and $ 2.8 million in other intangibles.

Magnolia Acquisition

On September 1, 2020, the Company completed the acquisition of Magnolia Financial, a business financing company headquartered in Spartanburg, South Carolina, that makes loans throughout the southeastern United States.

In the transaction, the Company acquired $ 14.6 million in loans and $ 0.5 million of other assets, and assumed $ 11.7 million in borrowings, substantially all of which was paid off subsequent to the closing.

The transaction value was approximately $ 10.0 million with the Company paying $ 9.5 million in cash and issuing 24,096 shares of its common stock, which had a value of approximately $ 0.5 million.

This acquisition was accounted for using the acquisition method of accounting for business combinations, and accordingly, the assets and liabilities of Magnolia Financial were recorded based on fair values, which according to applicable accounting guidance, are subject to change for 12 months following the acquisition.

In connection with this transaction, the Company recorded goodwill of $ 4.9 million and $ 1.6 million in other amortizable intangible assets, all of which are deductible for tax purposes over 15 years.

The book values and approximate fair values of investment securities at December 31, 2022 and 2021 are summarized as follows:

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Securities available for sale:

US Treasury securities $ 174,420 168,758 — ( 5,662 ) — — — —

Government-sponsored enterprise securities 71,957 57,456 — ( 14,501 ) 71,951 69,179 — ( 2,772 )

$ 71,951 69,179 — ( 2,772 ) 70,016 70,206 371 ( 181 )

Mortgage-backed securities

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Total available for sale $ 2,758,556 2,314,493 4 ( 444,067 ) 2,662,481 2,630,414 10,595 ( 42,662 )

2,662,481 2,630,414 10,595 ( 42,662 ) 1,432,684 1,453,132 22,963 ( 2,515 )

Securities held to maturity:

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Total held to maturity $ 541,700 432,528 7 ( 109,179 ) 513,825 511,699 3,540 ( 5,666 )

$ 513,825 511,699 3,540 ( 5,666 ) 167,551 170,734 3,348 ( 165 )

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 $ 0.9 million and $ 1.0 million as of December 31, 2021 and 2020, respectively.

All of the Company’s mortgage-backed securities were issued by government-sponsored enterprises ("GSEs"), except for private mortgage-backed securities with a fair value of $ 0.8 million and $ 0.9 million as of December 31, 2022 and 2021, respectively.

The following table presents information regarding securities with unrealized losses at December 31, 2022:

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Losses Fair Value Unrealized

US Treasury securities $ 168,758 5,662 — — 168,758 5,662

Government-sponsored enterprise securities — — 57,456 14,501 57,456 14,501

$ 21,436 522 47,743 2,250 69,179 2,772

Mortgage-backed securities 221,006 18,215 1,835,958 405,557 2,056,964 423,772

1,773,022 25,977 404,484 13,857 2,177,506 39,834

Corporate bonds 40,644 947 886 114 41,530 1,061

999 1 945 55 1,944 56

State and local governments 48,385 8,323 368,897 99,927 417,282 108,250

228,279 3,797 34,398 1,869 262,677 5,666

Total temporarily impaired securities $ 478,793 33,147 2,263,197 520,099 2,741,990 553,246

$ 2,023,736 30,297 487,570 18,031 2,511,306 48,328

The following table presents information regarding securities with unrealized losses at December 31, 2021:

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Government-sponsored enterprise securities $ 21,436 522 47,743 2,250 69,179 2,772

$ 29,812 181 — — 29,812 181

Mortgage-backed securities 1,773,022 25,977 404,484 13,857 2,177,506 39,834

497,992 1,957 6,168 167 504,160 2,124

Corporate bonds 999 1 945 55 1,944 56

3,956 45 835 165 4,791 210

State and local governments 228,279 3,797 34,398 1,869 262,677 5,666

23,310 165 — — 23,310 165

Total temporarily impaired securities $ 2,023,736 30,297 487,570 18,031 2,511,306 48,328

$ 555,070 2,348 7,003 332 562,073 2,680

As of December 31, 2021 and December 31, 2020, the Company's security portfolio held 371 and 69 securities that were in an unrealized loss position, respectively.

As of December 31, 2022, the Company's securities portfolio held 666 securities of which 644 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 December 31, 2022 and 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 amount of the impairment.

In the tables above, substantially all of the mortgage-backed securities in unrealized loss positions at each period end were issued by government-sponsored agencies, including Freddie Mac, Fannie Mae, and Ginnie Mae, which the Company considered in concluding that the unrealized loss position of each security was due 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 state and local government investments are comprised almost entirely of highly-rated municipal bonds issued by state and local governments throughout the nation.

The Company has no significant concentrations of bond holdings from one state or local government entity.

Nearly all of our mortgage-backed securities were issued by FHLMC, FNMA, GNMA, or the SBA, each of which is a government agency or GSE and guarantees the repayment of its securities.

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.

No impairment charges were recognized for any securities during the year ended December 31, 2020.

At adoption of CECL on January 1, 2021 and at December 31, 2021, the Company determined that expected credit losses associated with HTM debt securities were insignificant.

See Note 1 for additional details on the adoption of CECL as it relates to the securities portfolio.

At December 31, 2022 and 2021, the Company determined that expected credit losses associated with HTM securities and AFS debt securities were insignificant.

The book values and approximate fair values of investment securities at December 31, 2022, by contractual maturity, are summarized in the table below.

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At December 31, 2022 and 2021, investment securities with carrying values of $ 758.0 million and $ 951.4 million, respectively, were pledged as collateral for public deposits.

At December 31, 2021 and 2020, there were no holdings of securities of any one issuer, other than the US Government and its agencies or government sponsored agencies, in an amount greater than 10% of shareholders' equity.

In 2021, the Company received proceeds from sales of securities of $ 106.5 million and recorded $ 1.2 million in gross losses from the sales.

In 2020, the Company received proceeds from sales of securities of $ 219.7 million and recorded $ 8.0 million in gross gains from the sales.

In 2019, the Company received proceeds from sales of securities of $ 39.8 million and recorded $ 0.1 million in gross gains from the sales.

At December 31, 2022 and 2021, there were no holdings of securities of any one issuer, other than the US Government and its agencies or GSEs, in an amount greater than 10% of shareholders' equity.

In 2022, there were no sales of investment securities.

In 2021, the Company received proceeds from sales of securities of $ 106.5 million and recorded in $ 1.2 million net losses from the sales.

In 2020, the Company received proceeds from sales of securities of $ 219.7 million and recorded $ 8.0 million in net gains from the sales.

Included in “Other Assets” in the consolidated balance sheets are investments in FHLB and Federal Reserve stock totaling $ 39.6 million and $ 22.3 million at December 31, 2022 and 2021, respectively.

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The conversion rate at December 31, 2022 was approximately 1.60 , which means the Company would receive approximately 19,758 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 .

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 the conversion to Class A shares, the Company will adjust the carrying value of the stock to its market value with a credit to earnings.

Loans and Asset Quality Information

Loans, Allowance for Credit Losses, and Asset Quality Information

The following is a summary of the major categories of total loans outstanding:

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Real estate mortgage – residential (1-4 family) first mortgages 1,195,785 18 % 1,021,966 17 %

1,021,966 17 % 972,378 21 %

Real estate mortgage – home equity loans/lines of credit 323,726 5 % 331,932 5 %

331,932 5 % 306,256 6 %

Real estate mortgage – commercial and other 3,510,261 53 % 3,194,737 53 %

3,194,737 53 % 2,049,203 43 %

Consumer loans 60,659 1 % 57,238 1 %

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$ 6,665,145 6,081,715

Included in the line item "Commercial, financial, and agricultural" in the table above are PPP loans totaling $ 39.0 million and $ 240.5 million at December 31, 2021 and December 31, 2020, respectively.

PPP loans are fully guaranteed by the SBA.

Included in unamortized net deferred loan fees are approximately $ 2.6 million and $ 6.0 million at December 31, 2021 and December 31, 2020, respectively, in unamortized net deferred loan fees associated with 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.

Because of their fully guaranteed nature, the Company has no allocation of allowance for loan losses established for these loans.

Included in the table above are credit card balances outstanding totaling $ 37.9 million and $ 33.2 million at December 31, 2021 and 2020, respectively.

Approximately 49 % of this total are business credit cards included in "commercial, financial and agricultural" above and the remaining 51 % are personal credit cards included in consumer loans in the table above.

Also included in the table above are non-PPP SBA loans, generally originated under the SBA 7A loan program, with additional information on these loans presented in the table below.

Also included in the table above are SBA loans, generally originated under the SBA 7A loan program, with additional information on these loans presented in the table below.

($ in thousands) December 31,

2022 December 31,

Guaranteed portions of non-PPP SBA Loans included in table above $ 48,377 33,959

Unguaranteed portions of non-PPP SBA Loans included in table above 122,772 135,703

Total non-PPP SBA loans included in the table above $ 171,149 169,662

Guaranteed portions of SBA Loans included in table above $ 31,893 48,377

Unguaranteed portions of SBA Loans included in table above 116,910 122,772

Total SBA loans included in the table above $ 148,803 171,149

Sold portions of SBA loans with servicing retained - not included in table above $ 392,370 414,240

At December 31, 2021 and December 31, 2020, there were remaining unaccreted discounts on the retained portion of sold non-PPP SBA loans amounting to $ 6.0 million and $ 7.3 million respectively.

Loans in the amount of $ 4.3 billion and $ 4.0 billion were pledged as collateral for certain borrowings at December 31, 2021 and December 31, 2020, respectively (see Note 9).

The loans above also include loans to executive officers and directors serving the Company at December 31, 2021 and to their associates, totaling approximately $ 0.6 million and $ 3.4 million at December 31, 2021 and 2020, respectively.

There were no new loans and advances on those loans in 2021 and repayments amounted to $ 2.8 million.

As of December 31, 2022, there were essentially no remaining loans originated under the SBA's Paycheck Protection Program ("PPP") as provided for under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") of 2020.

As of December 31, 2021, the Company had $ 39.0 million in remaining PPP loans which have been excluded from the above SBA 7A Loan program table.

At December 31, 2022 and December 31, 2021, there were remaining unaccreted discounts on the retained portion of sold SBA loans amounting to $ 4.3 million and $ 6.0 million respectively.

At December 31, 2022 and December 31, 2021, loans in the amount of $ 5.3 billion and $ 4.3 billion, respectively, were pledged as collateral for certain borrowings.

Refer to Note 9 for further discussion.

Total loans at December 31, 2022 and 2021 included loans to executive officers and directors of the Company, and their associates, totaling approximately $ 6.0 million and $ 0.6 million, respectively.

There were six new loans and advances totaling approximately $ 5.5 million on those loans in 2022 and repayments amounted to $ 0.1 million.

Management does not believe these loans involve more than the normal risk of collectability or present other unfavorable features.

The Company has several acquired loan portfolios as a result of merger and acquisition transactions.

In these transactions, the Company recorded loans at their fair value as required by applicable accounting guidance.

acquisitions completed prior to the Company's adoption of CECL, these loan portfolios included loans designated as PCI loans, which were loans for which it was probable at acquisition that all contractually required payments would not be collected.

Upon the adoption of CECL, all PCI loans were reclassified as PCD loans, as permitted by the CECL standard.

As of December 31, 2021, unamortized discounts on all acquired loans totaled $ 17.2 million.

At December 31, 2020, there were remaining accretable discounts of $ 7.9 million, related to purchased non-impaired loans.

Loan discounts are generally amortized as yield adjustments over the respective lives of the loans, so long as the loans perform.

At December 31, 2020, the carrying value of PCI loans was $ 8.6 million.

The following table presents changes in the accretable yield for PCI loans under the Incurred Loss methodology used by the Company prior to adopting CECL.

($ in thousands) For the Year Ended December 31,

2020 For the Year Ended December 31,

Balance at beginning of period $ 4,149 4,750

( 1,119 ) ( 1,486 )

Reclassification from (to) nonaccretable difference

Balance at end of period

$ 2,898 4,149

During 2020, the Company received $ 0.5 million in payments that exceeded the carrying amount of the related PCI loans, of which $ 0.4 million was recognized as loan discount accretion income, $ 0.1 million was recorded as additional loan interest income, and $ 14,000 was recorded as a recovery.

During 2019, the Company received $ 0.4 million in payments that exceeded the carrying amount of the related PCI loans, of which $ 0.3 million was recognized as loan discount accretion income and $ 0.1 million was recorded as additional loan interest income.

For acquisitions completed prior to the Company's adoption of CECL, loans designated as PCI loans were reclassified as PCD loans, upon the adoption of CECL.

Activity in the accretable yield for PCI loans under the Incurred Loss methodology used by the Company prior to adopting CECL was not material for the year ended December 31, 2020.

As of December 31, 2022 and 2021, unamortized discounts on all acquired loans totaled $ 11.6 million and $ 17.2 million, respectively.

Loan discounts are generally amortized as yield adjustments over the respective lives of the loans, while the loans perform.

Nonperforming assets, defined as nonaccrual loans, troubled debt restructurings, loans past due 90 or more days and still accruing interest, and foreclosed real estate, are summarized as follows:

9 unchanged sentences

At December 31, 2022 and 2021, the Company had $ 0.8 million and $ 1.5 million in residential mortgage loans in process of foreclosure, respectively.

At December 31, 2021 and 2020, there were no commitments to lend additional funds to debtors whose loans were nonperforming.

The following table is a summary of the Company’s nonaccrual loans by major categories for the periods indicated.

CECL Incurred Loss

2021 December 31,

($ in thousands) Nonaccrual Loans with No Allowance Nonaccrual Loans with an Allowance Total Nonaccrual Loans Nonaccrual Loans

At December 31, 2022, there was one loan with an immaterial commitment to lend additional funds to borrowers whose loans were nonperforming.

At December 31, 2021, there were no commitments to lend additional funds to debtors whose loans were nonperforming.

The following table is a summary of the Company’s nonaccrual loans by major categories for the year ended December 31, 2022.

($ in thousands) Nonaccrual Loans with No Allowance Nonaccrual Loans with an Allowance Total Nonaccrual Loans

Commercial, financial, and agricultural $ 3,855 6,374 10,229

5 unchanged sentences

Total $ 9,022 19,492 28,514

There is no interest income recognized during the period on nonaccrual loans.

The following table is a summary of the Company’s nonaccrual loans by major categories for the year ended 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

There is no interest income recognized during the periods presented 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 the year ended December 31, 2021.

($ in thousands) For the Year Ended December 31, 2021

The following table represents the accrued interest receivables written off by reversing interest income for the periods indicate.

($ in thousands) Year Ended December 31, 2022 Year Ended December 31, 2021

Commercial, financial, and agricultural $ 102 195

4 unchanged sentences

Consumer loans 2 —

Total $ 324 699

The following table presents an analysis of the payment status of the Company’s loans as of December 31, 2022.

10 unchanged sentences

Real estate mortgage – residential (1-4 family) first mortgages 3,415 25 — 3,289 1,189,056 1,195,785

6,571 1,488 — 4,898 1,009,009 1,021,966

Real estate mortgage – home equity loans/lines of credit 457 371 — 1,397 321,501 323,726

489 124 718 694 329,907 331,932

Real estate mortgage – commercial and other 620 97 — 12,505 3,497,039 3,510,261

164 1,496 — 16,231 3,176,846 3,194,737

Consumer loans 249 66 — 85 60,259 60,659

14 unchanged sentences

Real estate mortgage – residential (1-4 family) first mortgages 6,571 1,488 — 4,898 1,009,009 1,021,966

10,146 869 — 6,048 951,088 968,151

Real estate mortgage – home equity loans/lines of credit 489 124 718 694 329,907 331,932

1,088 42 — 1,333 303,693 306,156

Real estate mortgage – commercial and other 164 1,496 — 16,231 3,176,846 3,194,737

2,540 3,111 — 17,191 2,022,422 2,045,264

Consumer loans 116 62 — 89 56,971 57,238

Purchased credit impaired

328 112 719 — 7,432 8,591

Total $ 11,763 3,263 1,004 34,696 6,032,693 6,083,419

7 unchanged sentences

Commercial, financial, and agricultural $ — 6,394 — — 6,394

Real estate mortgage – residential (1-4 family) first mortgages 157 — — — 157

Real estate mortgage – commercial and other — — — 6,723 6,723

Total $ 157 6,394 — 6,723 13,274

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 – home equity loans / lines of credit — — — — —

Real estate mortgage – commercial and other — — — 10,743 10,743

Consumer loans — — — — —

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 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.

Under CECL, for collateral dependent loans, the Company has adopted the practical expedient to measure the ACL based on the fair value of collateral.

The ACL is calculated on an 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.

1 unchanged sentence

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 that are undergoing heightened stress, the Company often discounts the collateral values by an additional 10 % - 25 % due to 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 real estate collateral that is in industries that are undergoing heightened stress, the Company often discounts the collateral values by an additional 10 % to 25 % due to 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 over-coverage of collateral for any of the loan types noted above.

The following table presents the activity in the ACL on loans for the year ended December 31, 2021 under the CECL methodology.

The following tables presents the activity in the ACL on loans for the periods indicated.

The increase in ACL at December 31, 2022 as compared to the prior year was related to a combination of the allowance required for loan growth during the year, and updated economic forecasts and loss driver inputs to the CECL model.

Throughout 2022, the economic forecasts have projected general weakening of the economy demonstrated by higher projected unemployment rates, lower GDP, and declining price indices for both commercial real estate and residential mortgages.

These worsening economic projections translated to higher forecasted life of loan losses in our portfolio and a higher estimated ACL.

($ in thousands) Commercial,

Financial, and

Agricultural Real Estate -

Construction,

Loans Real Estate

Mortgages Real Estate

Credit Real Estate

and Other Consumer Loans Unallocated Total

Development & Other Land Loans Real Estate Mortgage -

First Mortgages Real Estate Mortgage -

Home Equity Loans/Lines of Credit Real Estate

and Other Consumer Loans Total

As of and for the year ended December 31, 2022

Beginning balance $ 16,249 16,519 8,686 4,337 30,342 2,656 78,789

Adjustment for implementation of CECL 3,067 6,140 2,584 2,580 ( 257 ) 674 ( 213 ) 14,575

Allowance for Select PCD loans 2,917 165 222 92 1,489 10 — 4,895

Charge-offs ( 2,519 ) — — ( 43 ) ( 1,063 ) ( 840 ) ( 4,465 )

2 unchanged sentences

Ending balance $ 17,718 15,128 11,354 3,158 40,709 2,900 90,967

The following table presents the activity in the allowance for loan losses for the year ended December 31, 2020 under the Incurred Loss methodology.

($ in thousands) Commercial,

2 unchanged sentences

Construction,

Loans Real Estate –

Mortgages Real Estate

of Credit Real Estate

Development & Other Land Loans Real Estate Mortgage -

First Mortgages Real Estate Mortgage -

Home Equity Loans/Lines of Credit Real Estate

and Other Consumer loans Unallocated Total

2 unchanged sentences

$ 11,316 5,355 8,048 2,375 23,603 1,478 213 52,388

( 5,608 ) ( 51 ) ( 478 ) ( 524 ) ( 968 ) ( 873 ) — ( 8,502 )

Adjustment for implementation of CECL 3,067 6,140 2,584 2,580 ( 257 ) 674 ( 213 ) 14,575

Allowance for Select PCD loans 2,917 165 222 92 1,489 10 — 4,895

( 3,722 ) ( 245 ) ( 273 ) ( 400 ) ( 2,295 ) ( 667 ) — ( 7,602 )

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

Ending balances as of December 31, 2020:

Allowance for loan losses

Individually evaluated for impairment

$ 3,546 30 800 — 2,175 — — 6,551

Collectively evaluated for impairment

$ 7,742 5,325 7,141 2,375 21,428 1,475 213 45,699

Purchased credit impaired

$ 28 — 107 — — 3 — 138

Loans receivable as of December 31, 2020:

Ending balance – total

$ 782,549 570,672 972,378 306,256 2,049,203 53,955 — 4,735,013

Unamortized net deferred loan (fees) costs ( 3,698 )

Ending balances as of December 31, 2020:

Individually evaluated for impairment

$ 7,700 677 9,303 15 18,582 4 — 36,281

Collectively evaluated for impairment

$ 774,712 569,845 958,848 306,141 2,026,682 53,913 — 4,690,141

Purchased credit impaired

$ 137 150 4,227 100 3,939 38 — 8,591

The following table presents the activity in the allowance for loan losses for the year ended December 31, 2020 under the Incurred Loss methodology.

3 unchanged sentences

Construction,

Loans Real Estate

Mortgages Real Estate

of Credit Real Estate

Development & Other Land Loans Real Estate Mortgage -

First Mortgages Real Estate Mortgage -

Home Equity Loans/Lines of Credit Real Estate

and Other Consumer loans Unallo-

1 unchanged sentence

Beginning balance $ 4,553 1,976 3,832 1,127 8,938 972 — 21,398

$ 2,889 2,243 5,197 1,665 7,983 952 110 21,039

( 2,473 ) ( 553 ) ( 657 ) ( 307 ) ( 1,556 ) ( 757 ) — ( 6,303 )

980 1,275 705 629 575 235 — 4,399

3,157 ( 989 ) ( 1,413 ) ( 860 ) 1,936 542 ( 110 ) 2,263

Charge-offs ( 5,608 ) ( 51 ) ( 478 ) ( 524 ) ( 968 ) ( 873 ) — ( 8,502 )

Recoveries 745 1,552 754 487 621 294 — 4,453

Provisions 11,626 1,878 3,940 1,285 15,012 1,085 213 35,039

Ending balance $ 11,316 5,355 8,048 2,375 23,603 1,478 213 52,388

$ 4,553 1,976 3,832 1,127 8,938 972 — 21,398

Ending balances as of December 31, 2020:

1 unchanged sentence

Individually evaluated for impairment $ 3,546 30 800 — 2,175 — — 6,551

$ 1,791 50 750 — 983 — — 3,574

Collectively evaluated for impairment 7,742 5,325 7,141 2,375 21,428 1,475 213 45,699

$ 2,720 1,926 2,976 1,127 7,931 961 — 17,641

Purchased credit impaired 28 — 107 — — 3 — 138

$ 42 — 106 — 24 11 — 183

Loans receivable as of December 31, 2020:

Ending balance – total $ 782,549 570,672 972,378 306,256 2,049,203 53,955 — 4,735,013

$ 504,271 530,866 1,105,014 337,922 1,917,280 56,172 — 4,451,525

Unamortized net deferred loan (fees) costs 1,941

Unamortized net deferred loan fees ( 3,698 )

Total loans 4,731,315

Ending balances as of December 31, 2020:

Individually evaluated for impairment $ 7,700 677 9,303 15 18,582 4 — 36,281

$ 4,957 796 9,546 333 9,570 — — 25,202

Collectively evaluated for impairment 774,712 569,845 958,848 306,141 2,026,682 53,913 — 4,690,141

$ 499,101 529,904 1,090,125 337,366 1,901,080 56,083 — 4,413,659

Purchased credit impaired 137 150 4,227 100 3,939 38 — 8,591

$ 213 166 5,343 223 6,630 89 — 12,664

The following table presents loans individually evaluated for impairment by class of loans, excluding PCI loans, as of December 31, 2020 under the Incurred Loss methodology.

($ in thousands) Recorded

Investment Unpaid

Balance Related

Allowance Average

Impaired loans with no related allowance recorded:

Commercial, financial, and agricultural

$ 3,688 4,325 — 750

Real estate – mortgage – construction, land development & other land loans

554 694 — 308

Real estate – mortgage – residential (1-4 family) first mortgages

4,115 4,456 — 4,447

Real estate – mortgage –home equity loans / lines of credit

Real estate – mortgage –commercial and other

11,763 13,107 — 9,026

Consumer loans 4 4 — 1

Total impaired loans with no allowance

$ 20,139 22,613 — 14,796

Impaired loans with an allowance recorded:

Commercial, financial, and agricultural

$ 4,012 4,398 3,546 5,139

Real estate – mortgage – construction, land development & other land loans

123 131 30 502

Real estate – mortgage – residential (1-4 family) first mortgages

5,188 5,361 800 5,186

Real estate – mortgage –home equity loans / lines of credit

Real estate – mortgage –commercial and other

6,819 7,552 2,175 5,786

Consumer loans — — — —

Total impaired loans with allowance

$ 16,142 17,442 6,551 16,634

Interest income recorded on impaired loans during the year ended December 31, 2020 was $ 1.1 million, and reflects interest income recorded on nonaccrual loans prior to them being placed on nonaccrual status and interest income recorded on accruing TDRs.

The following table presents loans individually evaluated for impairment by class of loans, excluding PCI loans, as of December 31, 2019 under the Incurred Loss methodology.

($ in thousands) Recorded

Investment Unpaid

Balance Related

Allowance Average

Impaired loans with no related allowance recorded:

Commercial, financial, and agricultural

Real estate – mortgage – construction, land development & other land loans

221 263 — 366

Real estate – mortgage – residential (1-4 family) first mortgages

4,300 4,539 — 4,415

Real estate – mortgage –home equity loans / lines of credit

333 357 — 147

Real estate – mortgage –commercial and other

2,643 3,328 — 3,240

Consumer loans — — — —

Total impaired loans with no allowance

$ 7,513 8,506 — 8,242

Impaired loans with an allowance recorded:

Commercial, financial, and agricultural

$ 4,941 4,995 1,791 1,681

Real estate – mortgage – construction, land development & other land loans

575 575 50 586

Real estate – mortgage – residential (1-4 family) first mortgages

5,246 5,469 750 6,206

Real estate – mortgage –home equity loans / lines of credit

Real estate – mortgage –commercial and other

6,927 7,914 983 5,136

Consumer loans — — — —

Total impaired loans with allowance

$ 17,689 18,953 3,574 13,664

Interest income recorded on impaired loans during the year ended December 31, 2019 was $ 1.3 million, and reflects interest income recorded on nonaccrual loans prior to them being placed on nonaccrual status and interest income recorded on accruing TDRs.

Credit Quality Indicators

28 unchanged sentences

(Fail) Consumer loans 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.

The following table presents the Company’s recorded investment in loans by credit quality indicators by year of origination or renewal as of December 31, 2021 under the CECL methodology.

The following table presents the Company’s recorded investment in loans by credit quality indicators by year of origination or renewal as of December 31, 2022.

Acquired loans are presented in the year originated, not in the year of acquisition.

10 unchanged sentences

Classified 656 107 38 899 — 44 24 1,768

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

Total real estate – construction, development & other land loans 556,536 267,208 46,138 31,872 — 12,866 19,556 934,176

Real estate mortgage – residential (1-4 family) first mortgages

23 unchanged sentences

In the table above, 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 following table presents the Company’s recorded investment in loans by credit quality indicators as of December 31, 2020 under the Incurred Loss methodology.

($ in thousands) Pass Special Mention

Loans Classified

Accruing Loans Classified

Revolving lines of credit that converted to term loans during the year ended December 31, 2022 amounted to $ 3.3 million.

The following table presents the Company’s recorded investment in loans by credit quality indicators by year of origination or renewal as of December 31, 2021.

Acquired loans are presented in the year originated, not in the year of acquisition.

Term Loans by Year of Origination

($ in thousands) 2021 2020 2019 2018 2017 Prior Revolving Total

Commercial, financial, and agricultural

$ 762,091 9,553 1,087 9,681 782,412

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

560,845 7,877 1,157 643 570,522

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, 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

943,455 7,609 11,039 6,048 968,151

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

297,795 1,468 5,560 1,333 306,156

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

1,988,684 34,588 4,801 17,191 2,045,264

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

Purchased credit impaired

6,901 85 1,605 — 8,591

$ 4,613,259 61,260 25,418 35,076 4,735,013

Unamortized net deferred loan (fees) costs ( 3,698 )

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

At December 31, 2021, as derived from the table above, the Company had $ 43.1 million in loans graded as Special Mention and $ 56.0 million in loans graded as Classified, which includes all nonaccrual loans.

In the table above, substantially all of the "Classified Loans" have grades of 7 or Fail, with those categories having similar levels of risk.

Revolving lines of credit that converted to term loans during the year ended December 31, 2021 amounted to $ 1.0 million.

Troubled Debt Restructurings

14 unchanged sentences

Real estate mortgage – residential (1-4 family) first mortgages 2 75 78

Real estate – mortgage – home equity loans / lines of credit

Real estate – mortgage – commercial and other

Consumer loans — — —

TDRs – Nonaccrual

Commercial, financial, and agricultural

5 1,438 1,435

Real estate – construction, land development & other land loans

Real estate mortgage – residential (1-4 family) first mortgages 1 36 36

Real estate – mortgage – home equity loans / lines of credit

Real estate mortgage – commercial and other 1 72 72

4 1,729 1,729

Consumer loans — — —

Total TDRs arising during period

6 unchanged sentences

TDRs – Accruing

Commercial, financial, and agricultural

Real estate – construction, land development & other land loans

Real estate mortgage – residential (1-4 family) first mortgages 1 $ 33 33

Real estate – mortgage – home equity loans / lines of credit

Real estate – mortgage – commercial and other

Consumer loans 1 4 4

TDRs – Nonaccrual

Commercial, financial, and agricultural

5 1,438 1,435

Real estate – construction, land development & other land loans

Real estate mortgage – residential (1-4 family) first mortgages 1 263 263

Real estate – mortgage – home equity loans / lines of credit

Real estate mortgage – commercial and other 4 1,729 1,729

5 5,977 5,977

Consumer loans — — —

Total TDRs arising during period

9 unchanged sentences

Real estate mortgage – residential (1-4 family) first mortgages 2 75 78

Real estate – mortgage – home equity loans / lines of credit

Real estate – mortgage – commercial and other

Consumer loans 1 4 4

1 unchanged sentence

Commercial, financial, and agricultural

Real estate – construction, land development & other land loans

Real estate – mortgage – residential (1-4 family) first mortgages

Real estate – mortgage – home equity loans / lines of credit

Real estate mortgage – commercial and other 5 5,977 5,977

Consumer loans — — —

Total TDRs arising during period

10 unchanged sentences

Accruing TDRs that subsequently defaulted

Real estate – mortgage – residential (1-4 family first mortgages)

— $ — — — 1 93

Real estate mortgage – commercial and other — $ — — $ — 1 $ 274

— — 1 274 — —

Total accruing TDRs that subsequently defaulted

9 unchanged sentences

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 allowance for credit losses on loans, and are discussed in Note 1.

The allowance for credit losses for unfunded loan commitments of $ 13.5 million and $ 0.6 million at December 31, 2021 and December 31, 2020, respectively, is separately classified on the balance sheet within the line items "Other Liabilities." The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the year ended December 31, 2021.

($ in thousands) Total Allowance for Credit Losses - Unfunded Loan Commitments

Beginning balance at December 31, 2020 $ 582

Adjustment for implementation of CECL on January 1, 2021 7,504

Charge-offs —

The allowance for credit losses for unfunded loan commitments of $ 13.3 million and $ 13.5 million at December 31, 2022 and December 31, 2021, respectively, is separately classified on the consolidated balance sheets within the line items "Other Liabilities."

The following table prese nts the balance and activity in the allowance for credit losses for unfunded loan commitments for each period indicated.

($ in thousands) December 31, 2022 December 31, 2021

Beginning balance $ 13,506 $ 582

Adjustments for implementation of CECL on January 1, 2021 — 7,504

Day 2 provision for credit losses on unfunded commitments acquired from Select — 3,982

Provision for credit losses on changes in unfunded commitments 1,438

Ending balance at December 31, 2021 $ 13,506

Allowance for Credit Losses - Securities Held to Maturity

As previously discussed, there was no ACL for securities HTM at December 31, 2021.

(Reversal of) provision for credit losses on changes in unfunded commitments ( 200 ) 1,438

Ending balance $ 13,306 $ 13,506

Allowance for Credit Losses - Securities HTM and AFS

The ACL for securities HTM and AFS was immaterial at December 31, 2022 and December 31, 2021.

Premises and Equipment

Premises and equipment at December 31, 2022 and 2021 consisted of the following:

($ in thousands) 2021 2020

($ in thousands) Estimated Useful Lives 2022 2021

Land $ 45,363 45,398

Buildings 112,622 103,232

Furniture and equipment 31,099 30,097

Leasehold improvements 2,028 3,054

Buildings 15 to 40 years

114,884 112,622

Furniture and equipment 5 to 10 years

33,147 31,099

Leasehold improvements 5 to 39 years

Total cost 195,038 191,147

17 unchanged sentences

Goodwill $ 364,263 364,263

Customer lists are generally amortized over 5 years and core deposit intangibles are generally amortized over 10 years, both at an accelerated rate.

As discussed in Note 1, 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, amortized over the expected lives of the related loans, and are periodically tested for impairment.

SBA guarantee servicing fees and SBA servicing asset amortization expense are both recorded within noninterest income within the line item "Other service charges, commissions, and fees." As derived from the table above, the Company had a SBA servicing asset at December 31, 2021 with a remaining book value of $ 5.5 million.

The Company recorded $ 2.0 million and $ 2.2 million in servicing assets associated with the guaranteed portion of SBA loans sold during 2021 and 2020, respectively.

During 2021, 2020, and 2019, the Company recorded $ 3.9 million, $ 3.3 million, and $ 2.6 million, respectively, in SBA guarantee servicing fee income, and $ 2.3 million, $ 1.8 million, and $ 1.3 million, respectively, in related amortization expense.

Customer lists are generally amortized over five years and core deposit intangibles are generally amortized over 10 years, both at an accelerated rate.

Amortization expense of all other intangible assets, excluding the SBA servicing asset, totaled $ 3.7 million, $ 3.5 million, and $ 4.0 million for the years ended December 31, 2022, 2021 and 2020, respectively.

SBA guarantee servicing fees and SBA servicing asset amortization expense are both recorded within noninterest income within the line item "Other service charges, commissions, and fees." The following table presents the changes in the SBA servicing assets for each period indicated.

Impairment charges included with amortization expense in the table below were immaterial for each period presented.

($ in thousands) December 31, 2022 December 31, 2021

Beginning balance, net $ 5,472 5,788

New servicing assets 1,332 1,956

Amortization expense and impairment charges ( 2,800 ) ( 2,272 )

Ending balance, net $ 4,004 5,472

During 2022, 2021, and 2020, the Company recorded $ 3.4 million, $ 3.9 million, and $ 3.3 million, respectively, in SBA guarantee servicing fee income .

At December 31, 2022 and 2021, the Company serviced SBA for others totaling $ 392.4 million and $ 414.2 million, respectively.

There were no other loans serviced for others in any year presented.

Goodwill is evaluated for impairment on at least an annual basis, with the annual evaluation occurring on October 31st of each year.

Goodwill is evaluated for impairment on at least an annual basis, with the annual evaluation occurring as of October 31st of each year.

Goodwill is also evaluated for impairment any time there is a triggering event indicating that impairment may have occurred.

During 2020, in addition to the annual impairment evaluation, due to the COVID-19 pandemic, the Company evaluated its goodwill for impairment at each of the first three quarter ends of 2020, with each evaluation indicating that there was no impairment.

Due to improving economic conditions and increases in the Company's stock price and market capitalization at year end 2020 and throughout 2021, no triggering events were identified, and therefore, the Company did not perform interim impairment evaluations subsequent to the third quarter of 2020.

No triggering events were identified during 2022 or 2021, and therefore, the Company did not perform interim impairment evaluations in either of those years.

Each of the Company's goodwill impairment evaluations for the periods presented, including the most recent October 2022 evaluation, indicated that there was no goodwill impairment.

2 unchanged sentences

Balance at December 31, 2020 $ 239,272

Additions from acquisition of Magnolia Financial 4,904

Balance at December 31, 2020 239,272

Additions from acquisition of Select 132,356

Reduction from disposal of First Bank Insurance Services, Inc.

Reduction from disposal of First Bank Insurance ( 7,365 )

Balance at December 31, 2021 364,263

Net activity during 2022 —

Balance at December 31, 2022 $ 364,263

In addition to the changes in goodwill presented above, activity for other intangibles related to transactions since January 1, 2021 are presented as follows.

1 unchanged sentence

• In connection with the Select acquisition on October 15, 2021, the Company recorded $ 9.2 million in core deposit intangibles.

• Related to the sale of First Bank Insurance Services, Inc., customer lists with a carrying value of $ 2.8 million were derecognized.

• In connection with the acquisition of Magnolia Financial on September 1, 2020, the Company recorded $ 1.6 million in other amortizable intangible assets.

Amortization expense of all other intangible assets, excluding the SBA servicing asset, totaled $ 3.5 million, $ 4.0 million, and $ 4.9 million for the years ended December 31, 2021, 2020 and 2019, respectively.

• Related to the sale of First Bank Insurance, customer lists with a carrying value of $ 2.8 million were derecognized.

The following table presents the estimated amortization expense schedule related to acquisition-related amortizable intangible assets for each of the five calendar years ending December 31, 2027 and the estimated amount amortizable thereafter.

12 unchanged sentences

$ 38,283 24,675 21,654

The sources and tax effects of temporary differences that give rise to significant portions of the deferred tax assets (liabilities) at December 31, 2021 and 2020 are presented below:

The following is a reconciliation of federal income tax expense at the statutory rate of 21% at December 31, 2022, December 31, 2021, and December 31, 2020, to the income tax provision reported in the financial statements.

($ in thousands) 2022 2021 2020

Tax provision at statutory rate $ 38,896 25,266 21,657

Increase (decrease) in income taxes resulting from:

Tax-exempt interest income ( 1,976 ) ( 1,589 ) ( 1,050 )

Low income housing and other tax credits ( 669 ) ( 1,229 ) ( 772 )

Bank-owned life insurance income ( 1,511 ) ( 589 ) ( 532 )

Non-deductible interest expense 26 14 23

State income taxes, net of federal benefit 3,369 2,472 2,117

Nondeductible merger expenses 107 242 —

Change in valuation allowance ( 20 ) ( 10 ) ( 20 )

Other, net 61 98 231

Total $ 38,283 24,675 21,654

The sources and tax effects of temporary differences that give rise to significant portions of the deferred tax assets, which are included in Other Assets on the consolidated balance sheets, are as follows at December 31, 2022 and 2021:

($ in thousands) 2022 2021

Deferred tax assets:

5 unchanged sentences

Accruals, book versus tax

Pension 81 418

Unrealized losses on securities available for sale 102,046 7,369

18 unchanged sentences

( 10,047 ) ( 10,328 )

FHLB stock dividends

Basis differences in assets acquired in FDIC transactions

Trust preferred securities

( 416 ) ( 453 )

Unrealized gain on securities available for sale

Pension ( 12 ) —

Gross deferred tax liabilities

( 19,178 ) ( 19,411 )

Net deferred tax asset (liability) - included in other assets (liabilities) $ 20,634 ( 450 )

Net deferred tax asset $ 117,032 20,634

The valuation allowances for 2022, 2021 and 2020 related primarily to state net operating loss carryforwards.

8 unchanged sentences

Circumstances that would require an accrual of a portion or all of this unrecorded tax liability are a reduction in qualifying loan levels relative to the end of 1987, failure to meet the definition of a bank, dividend payments in excess of accumulated tax earnings and profits, or other distributions in dissolution, liquidation or redemption of the Bank’s stock.

The following is a reconcilement of federal income tax expense at the statutory rate of 21% at December 31, 2021 and December 31, 2020 and December 31, 2019, to the income tax provision reported in the financial statements.

($ in thousands) 2021 2020 2019

Tax provision at statutory rate $ 25,266 21,657 24,418

Increase (decrease) in income taxes resulting from:

Tax-exempt interest income ( 1,589 ) ( 1,050 ) ( 1,186 )

Low income housing tax credits ( 1,229 ) ( 772 ) ( 756 )

Bank-owned life insurance income ( 589 ) ( 532 ) ( 538 )

Non-deductible interest expense 14 23 43

State income taxes, net of federal benefit 2,472 2,117 2,178

Nondeductible merger expenses 242 — —

Change in valuation allowance ( 10 ) ( 20 ) 4

Impact of tax reform — — ( 73 )

Other, net 98 231 140

Total $ 24,675 21,654 24,230

The following table lists the composition of the deposit portfolio as of the end of the respective years.

($ in thousands) December 31, 2022 December 31, 2021

Noninterest-bearing checking accounts $ 3,566,003 3,348,622

Interest-bearing checking accounts 1,514,166 1,593,231

Money market accounts 2,416,146 2,562,283

Savings accounts 728,641 708,054

Other time deposits 726,254 555,084

Time deposits of $250,000 or more 276,319 357,355

Total deposits $ 9,227,529 $ 9,124,629

At December 31, 2022, the scheduled maturities of time deposits were as follows:

4 unchanged sentences

Deposit overdrafts of approximately $ 0.8 million and $ 0.9 million at December 31, 2022 and 2021 are included within "Loans" on the consolidated balance sheets.

As of December 31, 2021 and 2020, the Company held $ 363.8 million and $ 375.7 million, respectively, in time deposits of more than $ 250,000 (which is the current FDIC insurance limit for insured deposits as of December 31, 2021).

As of December 31, 2022 and 2021, the Company held $ 276.3 million and $ 357.4 million, respectively, in time deposits of more than $ 250,000 (which was the FDIC insurance limit for insured deposits as of December 31, 2022).

Brokered deposits were $ 261.9 million and $ 7.4 million at December 31, 2022 and 2021, respectively.

Total reciprocal deposits through CDARS and ICS were $ 12.6 million and $ 6.8 million at December 31, 2021 and 2020, respectively.

Total reciprocal deposits through the Certificate of Deposit Account Registry Services ("CDARS") and Insured Cash Sweep ("ICS") were $ 10.3 million and $ 12.6 million at December 31, 2022 and 2021, respectively.

Borrowings and Borrowings Availability

15 unchanged sentences

12/20/2028 None 329 0.50 % fixed

FHLB Daily Rate Credit 8/23/2023 None 40,000 4.57 % fixed

FHLB Fixed Rate Credit 1/9/2023 None 50,000 4.15 % fixed

FHLB Fixed Rate Credit 2/9/2023 None 50,000 4.35 % fixed

FHLB Fixed Rate Credit 2/1/2023 None 80,000 4.25 % fixed

Trust Preferred Securities

21 unchanged sentences

Total borrowings $ 287,507

The following table presents information regarding the Company’s outstanding borrowings at December 31, 2021 (dollars are in thousands) :

Description – 2021 Due date Call Feature 2021 Amount Interest Rate

11 unchanged sentences

8/22/2028 None 166 1.00 % fixed

FHLB Principal Reducing Credit

8/22/2028 None 174 1.00 % fixed

FHLB Principal Reducing Credit 12/20/2028 None 342 0.50 % fixed

Other Borrowing 4/7/2022 None 103 1.00 % fixed

Trust Preferred Securities

12 unchanged sentences

3 month LIBOR + 2.00 %

Trust Preferred Securities

9/20/2034 Quarterly by Company

beginning 9/20/2009 12,372 2.27 % at 12/31/21

adjustable rate

3 month LIBOR + 2.15 %

Total borrowings / weighted average rate as of December 31, 2021 71,050 2.24 %

2 unchanged sentences

All outstanding FHLB borrowings may be accelerated immediately by the FHLB in certain circumstances, including material adverse changes in the condition of the Company or if the Company’s qualifying collateral amounts to less than that required under the terms of the FHLB borrowing agreement.

In the above table there were no short-term borrowings (original maturity terms of less than 3 months) at December 31, 2021 or December 31, 2020.

In the above tables, at December 31, 2022 short-term borrowings (original maturity terms of less than 3 months) totaled $ 220.0 million.

There were no short-term borrowings at December 31, 2021.

In the above tables, the $ 20.6 million in borrowings due on January 23, 2034 relate to borrowings structured as trust preferred capital securities that were issued by First Bancorp Capital Trusts II and III ($ 10.3 million by each trust), which are unconsolidated subsidiaries of the Company, on December 19, 2003 and qualify as capital for regulatory capital adequacy requirements.

11 unchanged sentences

The Company acquired Select Bancorp, Inc.

and its subsidiary, New Century Statutory Trust I, on

October 15, 2021.

and its subsidiary, New Century Statutory Trust I, on October 15, 2021.

These unsecured debt securities qualify as capital for regulatory capital adequacy requirements and became callable by the Company at par on any quarterly interest payment date beginning on September 20, 2009.

The interest rate on these debt securities adjusts on a quarterly basis at a rate of three-month LIBOR plus 2.15 %.

At December 31, 2021, the Company had three sources of readily available borrowing capacity – 1) an approximately $ 866 million line of credit with the FHLB, of which $ 2 million was outstanding at December 31, 2021 and $ 8 million was outstanding at December 31, 2020, 2) a $ 100 million federal funds line of credit with a correspondent bank, of which none was outstanding at December 31, 2021 or 2020, and 3) an approximately $ 138 million line of credit through the Federal Reserve discount window, of which none was outstanding at December 31, 2021 or 2020.

The Company’s line of credit with the FHLB totaling approximately $ 866 million can be structured as either short-term or long-term borrowings, depending on the particular funding or liquidity needs and is secured by the Company’s FHLB stock and a blanket lien on most of its real estate loan portfolio.

The Company’s correspondent bank relationship allows the Company to purchase up to $ 100 million in federal funds on an overnight, unsecured basis (federal funds purchased).

The Company had no borrowings outstanding under this line at December 31, 2021 or 2020.

The Company has a line of credit with the Federal Reserve discount window.

This line is secured by a blanket lien on a portion of the Company’s commercial and consumer loan portfolio (excluding real estate).

Based on the collateral owned by the Company as of December 31, 2021, the available line of credit was approximately $ 138 million.

The Company had no borrowings outstanding under this line of credit at December 31, 2021 or 2020.

At December 31, 2022, the Company had three sources of readily available borrowing capacity:

• An $ 847.1 million line of credit with the FHLB that can be structured as either short-term or long-term borrowings, depending on the particular funding or liquidity needs and is secured by the Company’s FHLB stock and a blanket lien on most of its real estate loan portfolio.

$ 221.8 million was outstanding at December 31, 2022 and $ 2.0 million was outstanding at December 31, 2021;

• A total of $ 265.0 million federal funds lines of credit with correspondent banks which allow the Company to purchase federal funds on an overnight, unsecured basis.

None was outstanding at December 31, 2022 or 2021;

• An approximately $ 165.4 million line of credit through the Federal Reserve discount window, and is secured by a blanket lien on a portion of the Company’s commercial and consumer loan portfolio (excluding real estate collateral).

None was outstanding at December 31, 2022 or 2021.

The Company enters into leases in the normal course of business.

As of December 31, 2021, the Company leased 17 branch offices for which the land and buildings are leased and 10 branch offices for which the land is leased but the building is owned.

As of December 31, 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 March 2022 through May 2076, some of which include options for multiple five - and ten-year extensions.

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 Company includes lease extension options in the lease term if, after considering relevant economic, market, and strategic factors, it is reasonably certain the Company will exercise the option.

11 unchanged sentences

Total operating lease expense charged to operations under all operating lease agreements was $ 2.9 million in 2022, $ 2.6 million in 2021, and $ 2.9 million in 2020.

Future undiscounted lease payments for operating leases with initial terms of one year or more as of December 31, 2021 are as follows:

Future undiscounted lease payments for operating leases with initial terms of one year or more as of December 31, 2022 for each of the five calendar years ending December 31, 2027 are as follows:

($ in thousands)

Year ending December 31:

Thereafter 18,441

19 unchanged sentences

As discussed below, the contributions are invested to provide for benefits under the Pension Plan.

The Company did not make any contributions to the Pension Plan for the years presented.

The Company did not make any contributions to the Pension Plan for any of the years presented.

The Company also does not expect to contribute to the Pension Plan in 2023.

7 unchanged sentences

Benefits paid ( 1,803 ) ( 2,033 ) ( 1,853 )

Benefit obligation at end of year 41,657 44,750 41,592

Accumulated benefit obligation at end of year 30,611 41,657 44,750

Change in plan assets

5 unchanged sentences

Funded status at end of year $ 3,044 3,247 3,417

The accumulated benefit obligation related to the Pension Plan was $ 41.7 million, $ 44.8 million, and $ 41.6 million at December 31, 2021, 2020, and 2019, respectively.

The following table presents information regarding the amounts recognized in the Consolidated Balance Sheets at December 31, 2021 and 2020 as it relates to the Pension Plan, excluding the related deferred tax assets.

($ in thousands) 2021 2020

Other assets $ 3,247 3,417

The amount recognized in the Other Assets in the consolidated balance sheets at December 31, 2022 and 2021 as it relates to the Pension Plan, excluding the related deferred tax assets, was $ 3.0 million and $ 3.2 million.

The following table presents information regarding the amounts recognized in accumulated other comprehensive income (loss) (“AOCI”) at December 31, 2022 and 2021, as it relates to the Pension Plan.

9 unchanged sentences

$ ( 1,110 ) ( 1,364 )

Net (loss) gain arising during period ( 247 ) 1,107

Net loss arising during period ( 312 ) ( 247 )

Amortization of unrecognized actuarial loss

Tax benefit of changes during the year, net

( 76 ) ( 448 )

Tax expense (benefit) of changes during the year, net 13 ( 76 )

Accumulated other comprehensive loss at end of fiscal year

16 unchanged sentences

Net periodic pension cost $ 147 499 766

The following table is an estimate of the benefits that will be paid in accordance with the Pension Plan during the indicated time periods, assuming the Pension Plan is operated on an ongoing basis.

The following table is an estimate of the benefits that will be paid in accordance with the Pension Plan for each of the five calendar years ending December 31, 2027 and thereafter, assuming the Pension Plan is operated on an ongoing basis.

($ in thousands) Estimated

Year ending December 31, 2022 $ 1,919

Year ending December 31, 2023 1,976

Year ending December 31, 2024 2,029

Year ending December 31, 2025 2,112

Year ending December 31, 2026 2,149

Years ending December 31, 2027-2031 11,086

benefit payments

2028-2032 10,728

The investment objective of the Company’s Pension Plan is to ensure that there are sufficient assets to fund regular pension benefits payable to employees over the long-term life of the plan.

2 unchanged sentences

In 2018, the Pension Plan adopted a liability-driven investment strategy to help meet these objectives.

This strategy employs a structured fixed-income portfolio designed to reduce volatility in the Plan’s future funding requirements and funding status.

This strategy employs a structured fixed-income portfolio designed to reduce volatility in the Pension Plan’s future funding requirements and funding status.

This is accomplished by using a blend of high quality corporate and government fixed-income securities, with both intermediate and long-term durations.

9 unchanged sentences

Cash and cash equivalents $ 194 — 194 —

Investment funds

Fixed income funds 44,637 — 44,637 —

Fixed income investment funds 33,461 — 33,461 —

Total $ 33,655 — 33,655 —

8 unchanged sentences

Cash and cash equivalents $ 267 — 267 —

Investment funds

Fixed income funds 47,830 — 47,830 —

Fixed income investment funds 44,637 — 44,637 —

Total $ 44,904 — 44,904 —

21 unchanged sentences

Change in benefit obligation

Projected benefit obligation at beginning of year $ 5,982 5,638 5,794

Benefit obligation at beginning of year $ 4,660 5,982 5,638

Service cost — — —

2 unchanged sentences

Benefits paid ( 245 ) ( 322 ) ( 331 )

Projected benefit obligation at end of year 4,660 5,982 5,638

Accumulated benefit obligation at end of year 3,521 4,660 5,982

Plan assets — — —

Funded status at end of year $ ( 3,521 ) ( 4,660 ) ( 5,982 )

The accumulated benefit obligation related to the SERP was $ 4.7 million, $ 6.0 million, and $ 5.6 million at December 31, 2021, 2020, and 2019, respectively.

The following table presents information regarding the amounts recognized in the Consolidated Balance Sheets at December 31, 2021 and 2020 as it relates to the SERP, excluding the related deferred tax assets.

($ in thousands) 2021 2020

Other liabilities $ ( 4,660 ) ( 5,982 )

The amount recognized in the Other Liabilities in the consolidated balance sheets at December 31, 2022 and 2021 as it relates to the SERP, excluding the related deferred tax assets, was $ 3.5 million and $ 4.7 million.

The following table presents information regarding the amounts recognized in AOCI at December 31, 2022 and 2021, as it relates to the SERP:

($ in thousands) 2022 2021

Net gain (loss) $ 1,088 ( 46 )

Net gain $ 1,551 1,088

Prior service cost — —

Amount recognized in AOCI before tax effect 1,551 1,088

Tax (expense) benefit ( 250 ) 11

Net amount recognized as (decrease) increase to AOCI $ 838 ( 35 )

Tax expense ( 356 ) ( 250 )

Net amount recognized as increase to AOCI $ 1,195 838

The following table reconciles the beginning and ending balances of AOCI at December 31, 2022 and 2021, as it relates to the SERP:

1 unchanged sentence

Accumulated other comprehensive income (loss) at beginning of fiscal year $ 838 ( 35 )

Net gain (loss) arising during period 1,119 ( 517 )

Net gain arising during period 1,007 1,119

Prior service cost — —

1 unchanged sentence

Amortization of prior service cost and transition obligation — —

Tax (expense) benefit related to changes during the year, net ( 261 ) 155

Accumulated other comprehensive income (loss) at end of fiscal year $ 838 ( 35 )

Tax expense related to changes during the year, net ( 106 ) ( 261 )

Accumulated other comprehensive income at end of fiscal year $ 1,195 838

The following table reconciles the beginning and ending balances of the prepaid pension cost related to the SERP:

10 unchanged sentences

Net periodic pension cost $ ( 432 ) 134 1

The following table is an estimate of the benefits that will be paid in accordance with the SERP during the indicated time periods:

($ in thousands)

Year ending December 31, 2022 $ 252

Year ending December 31, 2023 249

Year ending December 31, 2024 246

Year ending December 31, 2025 269

Year ending December 31, 2026 273

Years ending December 31, 2027-2031 1,395

The following table is an estimate of the benefits that will be paid in accordance with the SERP for each of the five calendar years ending December 31, 2027 and thereafter:

($ in thousands) Estimated

2028-2032 1,345

Applicable to both Plans

10 unchanged sentences

2.62 % n/a 2.24 % n/a 3.03 % n/a

Rate of compensation increase

n/a n/a n/a n/a n/a n/a

The Company’s discount rate policy for the Pension Plan is based on a calculation of the Company’s expected pension payments, with those payments discounted using the FTSE yield curve (formerly called the Citigroup Pension Index yield curve) that matches the specific expected cash flows of the Pension Plan.

1 unchanged sentence

Commitments and Contingencies

See Note 10 with respect to future obligations under operating leases.

In the normal course of business, there are various outstanding commitments to extend credit that are not reflected in the financial statements.

15 unchanged sentences

The ACL for unfunded loan commitments is determined as part of the quarterly ACL analysis.

See Note 1 for further detail.

The Company also periodically invests in limited partnerships and LLCs primarily for the purposes of fulfilling CRA requirements and obtaining tax credits.

As of December 31, 2022, the Company had a remaining funding commitments of $ 28.6 million related to these investments.

See Note 10 with respect to future obligations under operating leases and Note 11 with respect to future benefits that will be paid under the Company's Pension Plan and SERP.

The Company, in the normal course of business, may be subject to various pending and threatened lawsuits in which claims for monetary damages are asserted.

14 unchanged sentences

for Identical

Assets (Level 1) Significant

(Level 2) Significant

Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant

Securities available for sale:

US Treasury securities $ 168,758 — 168,758 —

Government-sponsored enterprise securities 57,456 — 57,456 —

$ 69,179 — 69,179 —

Mortgage-backed securities 2,045,000 — 2,045,000 —

2,514,805 — 2,514,805 —

Corporate bonds 43,279 — 43,279 —

46,430 — 46,430 —

Total available for sale securities

10 unchanged sentences

Assets (Level 1) Significant

(Level 2) Significant

Inputs (Level 2) Significant

Securities available for sale:

Government-sponsored enterprise securities $ 69,179 — 69,179 —

$ 70,206 — 70,206 —

Mortgage-backed securities 2,514,805 — 2,514,805 —

1,337,706 — 1,337,706 —

Corporate bonds 46,430 — 46,430 —

45,220 — 45,220 —

Total available for sale securities $ 2,630,414 — 2,630,414 —

$ 1,453,132 — 1,453,132 —

Presold Mortgages in process of settlement $ 19,257 19,257 — —

2 unchanged sentences

Foreclosed real estate

1,484 — — 1,484

The following is a description of the valuation methodologies used for instruments measured at fair value.

27 unchanged sentences

Individually evaluated loans - cash-flow dependent 3,909 PV of expected cash flows Discount rates used in the calculation of PV of expected cash flows 5.5 % - 11.1 % ( 6.76 %)

Foreclosed real estate 364 Appraised value Discounts for estimated costs to sell 10 %

Foreclosed real estate 38 Appraised value Discounts applied for estimated costs to sell 10 %

For Level 3 assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2021, the significant unobservable inputs used in the fair value measurements were as follows:

5 unchanged sentences

Impaired loans - valued at PV of expected cash flows 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 1,484 Appraised value Discounts for estimated costs to sell 10 %

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 as of December 31, 2022 and 2021 are as follows:

11 unchanged sentences

Level 2 541,700 432,528 513,825 511,699

Loans held for sale Level 2 61,003 62,044 6,077 7,465

SBA and other loans held for sale Level 2 — — 61,003 62,004

Total loans, net of allowance

34 unchanged sentences

The Company issues new shares of common stock when options are exercised.

In addition to employee equity awards, the Company's practice is to grant unrestricted common shares, valued at approximately $ 32,000 , to each non-employee director (currently 13 in total) in June of each year.

In addition to employee equity awards, the Company's practice is to grant unrestricted common shares to each non-employee director (currently 12 in total) in June of each year.

These grants were each valued at approximately $ 32,000 in 2022.

Compensation expense associated with these director awards is recognized on the date of the award since there are no vesting conditions.

On June 1, 2021, the Company granted 7,050 shares of common stock to non-employee directors ( 705 shares per director), at a fair market value of $ 45.41 per share, which was the closing price of the Company’s common stock on that date, which resulted in $ 0.3 million in expense.

On June 1, 2020, the Company granted 14,146 shares of common stock to non-employee directors ( 1,286 shares per director), at a fair market value of $ 24.87 per share, which was the closing price of the Company’s common stock on that date, which resulted in $ 0.4 million in expense.

On June 1, 2022, the Company granted 10,344 shares of common stock to non-employee directors ( 862 shares per director), at a fair market value of $ 37.12 per share, which was the closing price of the Company’s common stock on that date, which resulted in $ 384,000 in expense.

The expense associated with director grants is classified as "other operating expense" in the consolidated statements of income.

5 unchanged sentences

Vested during the period ( 55,965 ) 33.91

Forfeited or expired during the period ( 954 ) 41.93

Nonvested at December 31, 2020 172,105 33.80

9 unchanged sentences

The Company expects to record $ 2.5 million of compensation expense in the next twelve months related to these nonvested awards that are outstanding at December 31, 2022.

Prior to 2010, stock options were the primary form of stock-based compensation utilized by the Company.

At December 31, 2019, 2020, and 2021, there were no stock options outstanding.

In 2019, the Company received $ 0.1 million as a result of stock option exercises, as 9,000 shares of stock options were exercised with a weighted average exercise price of $ 14.35 .

Shareholders’ Equity

Rabbi Trust Obligations

With the acquisition of Carolina Bank in March 2017, the Company assumed a deferred compensation plan structured as a Rabbi Trust for certain members of Carolina Bank’s board of directors that is fully funded by Company common stock, which was valued at $ 7.7 million on the date of acquisition.

Subsequent to this acquisition, approximately $ 6.1 million of the deferred compensation has been paid to the plan participants.

The balances of the related asset and liability were $ 1.6 million and $ 1.8 million at December 31, 2022 and December 31, 2021, respectively, both of which are presented as components of shareholders’ equity.

In the acquisition of Select on October 15, 2021, the Company assumed a deferred compensation plan structured as a Rabbi Trust for certain members of Select’s board of directors that is fully funded by Company common stock, which was valued at $ 5.1 million on the date of acquisition.

This plan was fully liquidated during the fourth quarter of 2021 by distributing the shares to the participants.

Stock Repurchases

During 2022, the Company did not repurchase any shares of the Company's common stock.

The $ 40.0 million repurchase authorization in effect during 2022 expired December 31, 2022 and the Company's Board has not approved any additional repurchase authorizations.

During 2021, the Company repurchased approximately 106,744 shares of the Company’s common stock at an average price of $ 37.81 , which totaled $ 4.0 million, under a $ 20 million repurchase authorization publicly announced in November 2020, which expired on December 31, 2021.

Earnings Per Share

The following is a reconciliation of the income (numerator) and shares (denominator) used in computing Basic and Diluted Earnings Per Common Share ("EPS"):

For Years Ended December 31,

2022 2021 2020

($ in thousands except per

share amounts) Income Shares Per Share

Amount Income Shares Per Share

Net income $ 146,936 $ 95,644 $ 81,477

income allocated to participating securities ( 779 ) ( 483 ) ( 398 )

Basic EPS per common share $ 146,157 35,485,620 $ 4.12 $ 95,161 29,876,151 $ 3.19 $ 81,079 28,839,866 $ 2.81

Net income $ 146,936 35,485,620 $ 95,644 29,876,151 $ 81,477 28,839,866

Effect of Dilutive Securities — 189,110 — 151,634 — 141,701

Diluted EPS per common share $ 146,936 35,674,730 $ 4.12 $ 95,644 30,027,785 $ 3.19 $ 81,477 28,981,567 $ 2.81

For the years ended December 31, 2022 , 2021, and 2019, there were no options that were anti-dilutive.

Accumulated Other Comprehensive (Loss) Income

The components of AOCI for the Company are as follows:

($ in thousands) December 31,

2022 December 31,

2021 December 31,

Unrealized (loss) gain on securities available for sale $ ( 444,063 ) ( 32,067 ) 20,448

Deferred tax asset (liability) 102,046 7,369 ( 4,699 )

Net unrealized (loss) gain on securities available for sale ( 342,017 ) ( 24,698 ) 15,749

Postretirement plans asset (liability)

54 ( 353 ) ( 1,817 )

Deferred tax (liability) asset ( 12 ) 81 418

Net postretirement plans asset (liability)

42 ( 272 ) ( 1,399 )

Total accumulated other comprehensive (loss) income $ ( 341,975 ) ( 24,970 ) 14,350

The following table discloses the changes in AOCI for the years ended December 31, 2022, 2021, and 2020 (all amounts are net of tax).

($ in thousands) Unrealized Gain (Loss) on Securities Available for Sale Postretirement Plans (Liability) Asset Total

Beginning balance at January 1, 2020 $ 7,504 ( 2,381 ) 5,123

Other comprehensive income before reclassifications 14,425 454 14,879

Amounts reclassified from accumulated other comprehensive income

( 6,180 ) 528 ( 5,652 )

Net current-period other comprehensive income 8,245 982 9,227

Ending balance at December 31, 2020 15,749 ( 1,399 ) 14,350

Other comprehensive (loss) income before reclassifications ( 41,400 ) 671 ( 40,729 )

Amounts reclassified from accumulated other comprehensive income

953 456 1,409

Net current-period other comprehensive (loss) income ( 40,447 ) 1,127 ( 39,320 )

Ending balance at at December 31, 2021 ( 24,698 ) ( 272 ) ( 24,970 )

Other comprehensive (loss) income before reclassifications ( 317,319 ) 536 ( 316,783 )

Amounts reclassified from accumulated other comprehensive income

— ( 222 ) ( 222 )

Net current-period other comprehensive (loss) income ( 317,319 ) 314 ( 317,005 )

Ending balance at December 31, 2022 $ ( 342,017 ) 42 ( 341,975 )

Amounts reclassified from AOCI for Unrealized Gain (Loss) on Securities AFS represent realized securities gains or losses, net of tax effects.

Amounts reclassified from AOCI for Postretirement Plans Asset (Liability) represent amortization of amounts included in , net of taxes, and are recorded in the "Other operating expenses" line item of the consolidated statements of income.

Regulatory Restrictions

3 unchanged sentences

The Bank, as a North Carolina banking corporation, may declare dividends so long as such dividends do not reduce its capital below its applicable required capital (typically, the level of capital required to be deemed “adequately capitalized”).

As of December 31, 2021, approximately $ 894.4 million of the Company’s investment in the Bank is restricted as to transfer to the Company without obtaining prior regulatory approval.

There was no average reserve balance requirement under the requirements of the Federal Reserve for the year ended December 31, 2021.

The Company and the Bank must comply with regulatory capital requirements established by the FRB.

As of December 31, 2022, approximately $ 830.8 million of the Company’s investment in the Bank was restricted as to transfer to the Company without obtaining prior regulatory approval.

There was no average reserve balance requirement under the requirements of the Federal Reserve at December 31, 2022.

The Company and the Bank must comply with regulatory capital requirements established by the Federal Reserve.

Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements.

1 unchanged sentence

The Company’s and Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

The Company’s and the Bank’s respective regulatory capital ratios as of December 31, 2021 and 2020, along with the minimum amounts required for capital adequacy purposes and to be well capitalized under prompt corrective action in effect at such times are presented below.

The Company’s and the Bank’s respective regulatory capital ratios as of December 31, 2022 and 2021, along with the minimum amounts required for capital adequacy purposes and to be well capitalized under prompt corrective

action in effect at such times are presented below.

There are no conditions or events since year-end that management believes have changed the Company’s or the Bank's classification.

31 unchanged sentences

934,687 9.22 % 405,652 4.00 % 507,065 5.00 %

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 years ended December 31, 2022, 2021, and 2020.

Items outside the scope of ASC 606 are noted as such.

For the Years Ended December 31,

($ in thousands) 2022 2021 2020

Noninterest income in-scope of ASC 606:

Service charges on deposit accounts $ 15,523 12,317 11,098

Other service charges, commissions, and fees:

Bankcard Interchange income, net 14,996 17,323 13,101

Other service charges and fees 5,683 4,352 3,905

Commissions from sales of insurance and financial products:

Insurance income — 2,725 5,353

Wealth management income 5,195 4,160 3,495

SBA consulting fees 2,608 7,231 8,644

Noninterest income (in-scope of ASC 606) 44,005 48,108 45,596

Noninterest income (out-of-scope of ASC 606) 23,980 25,503 35,750

Total noninterest income $ 67,985 73,611 81,346

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 usage 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, commissions, 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 sale 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.

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.

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 was generally satisfied upon the issuance of the insurance policy.

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.

Supplementary Income Statement Information

Components of other noninterest income/expense exceeding 1% of total revenue for any of the years ended December 31, 2021, 2020, and 2019 are as follows:

Components of other noninterest income or noninterest expense exceeding 1% of total revenue ($ 4.1 million) for any of the years ended December 31, 2022, 2021, and 2020 are as follows:

($ in thousands) 2022 2021 2020

Noninterest income:

Other service charges, commissions, and fees – interchange fees, net $ 14,996 17,323 13,101

Noninterest expense:

Other operating expenses – software costs 6,064 5,315 5,149

Other operating expenses – data processing expense 7,535 5,959 4,743

3,619 2,904 2,787

Other operating expenses – credit card rewards expense 547 3,431 2,391

Other operating expenses – telephone and data line expense

3,026 2,893 3,057

Condensed Parent Company Information

8 unchanged sentences

$ 1,106,469 1,302,973

1,302,973 953,421

Liabilities and shareholders’ equity

15 unchanged sentences

( 2,672 ) ( 1,455 ) ( 1,743 )

All other income and (expenses), net ( 3,898 ) ( 779 ) ( 661 )

All other expense, net ( 939 ) ( 3,898 ) ( 779 )

$ 146,936 95,644 81,477

4 unchanged sentences

Equity in undistributed earnings of subsidiaries ( 133,147 ) ( 75,697 ) ( 20,899 )

Decrease (increase) in other assets 3,924 5,806 ( 5,850 )

(Decrease) increase in other liabilities ( 859 ) ( 3 ) 64

Decrease in other assets 4,055 3,924 5,806

Increase (decrease) in other liabilities 642 ( 859 ) ( 3 )

Total – operating activities 18,486 23,012 66,381

23,012 66,381 20,705

Investing Activities:

5 unchanged sentences

Repurchases of common stock — ( 4,036 ) ( 31,868 )

Proceeds from issuance of common stock

Stock withheld for payment of taxes

1 unchanged sentence

Total - financing activities ( 31,500 ) ( 27,050 ) ( 53,111 )

( 27,050 ) ( 53,111 ) ( 24,235 )

Net increase (decrease) in cash 3,341 13,270 ( 3,530 )

Net (decrease) increase in cash ( 13,014 ) 3,341 13,270

Cash, beginning of year

2 unchanged sentences

$ 5,611 18,625 15,284

Shareholders’ Equity

Rabbi Trust Obligations

Subsequent to this acquisition, approximately $ 5.9 million of the deferred compensation has been paid to the plan participants.

The balances of the related asset and liability were each $ 1.8 million and $ 2.2 million at December 31, 2021 and December 31, 2020, respectively, both of which are presented as components of shareholders’ equity.

This plan was fully liquidated during the fourth quarter of 2021 by distributing the shares to the participants.

Stock Repurchases

During 2020, the Company repurchased approximately 1,117,208 shares of the Company’s common stock at an average price of $ 28.53 , which totaled $ 31.9 million, under a $ 40 million repurchase authorization publicly announced in November 2019.

During 2019, the Company repurchased approximately 282,000 shares of the Company’s common stock at an average price of $ 35.51 , which totaled $ 10 million, under a $ 25 million repurchase authorization publicly announced in February 2019.

See Note 22 for disclosure of a share repurchase program authorized in 2022.

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 Years Ended December 31,

2021 2020 2019

($ in thousands except per

share amounts) Income

(Numer-ator) Shares

(Denom-inator) Per Share

Amount Income

(Numer-ator) Shares

(Denom-inator) Per Share

Amount Income

(Numer-ator) Shares

(Denom-inator) Per Share

Net income $ 95,644 $ 81,477 $ 92,046

income allocated to participating securities ( 483 ) ( 398 ) ( 450 )

Basic EPS per common share $ 95,161 29,876,151 $ 3.19 $ 81,079 28,839,866 $ 2.81 $ 91,596 29,547,851 $ 3.10

Net income $ 95,644 29,876,151 $ 81,477 28,839,866 $ 92,046 29,547,851

Effect of Dilutive Securities — 151,634 — 141,701 — 172,648

Diluted EPS per common share $ 95,644 30,027,785 $ 3.19 $ 81,477 28,981,567 $ 2.81 $ 92,046 29,720,499 $ 3.10

For the years ended December 31, 2021 , 2020, and 2019, there were no options that were anti-dilutive.

Accumulated Other Comprehensive Income (Loss)

The components of AOCI for the Company are as follows:

($ in thousands) December 31,

2021 December 31,

2020 December 31,

Unrealized gain (loss) on securities available for sale

$ ( 32,067 ) 20,448 9,743

Deferred tax (liability) asset

7,369 ( 4,699 ) ( 2,239 )

Net unrealized gain (loss) on securities available for sale

( 24,698 ) 15,749 7,504

Postretirement plans asset (liability)

( 353 ) ( 1,817 ) ( 3,092 )

Deferred tax asset (liability)

Net postretirement plans asset (liability)

( 272 ) ( 1,399 ) ( 2,381 )

Total accumulated other comprehensive income (loss)

$ ( 24,970 ) 14,350 5,123

The following table discloses the changes in AOCI for the years ended December 31, 2021, 2020, and 2019 (all amounts are net of tax).

($ in thousands) Unrealized Gain

(Loss) on Securities

Available for Sale Postretirement Plans Asset

(Liability) Total

Beginning balance at January 1, 2019 $ ( 9,494 ) ( 2,467 ) ( 11,961 )

Other comprehensive income (loss) before reclassifications 17,073 ( 528 ) 16,545

Amounts reclassified from accumulated other comprehensive income

( 75 ) 614 539

Net current-period other comprehensive income (loss) 16,998 86 17,084

Ending balance at December 31, 2019 7,504 ( 2,381 ) 5,123

Other comprehensive income (loss) before reclassifications 14,425 454 14,879

Amounts reclassified from accumulated other comprehensive income

( 6,180 ) 528 ( 5,652 )

Net current-period other comprehensive income (loss) 8,245 982 9,227

Ending balance at at December 31, 2020 15,749 ( 1,399 ) 14,350

Other comprehensive income (loss) before reclassifications

( 41,400 ) 671 ( 40,729 )

Amounts reclassified from accumulated other comprehensive income

953 456 1,409

Net current-period other comprehensive income (loss) ( 40,447 ) 1,127 ( 39,320 )

Ending balance at December 31, 2021 $ ( 24,698 ) ( 272 ) ( 24,970 )

Amounts reclassified from AOCI for Unrealized Gain (Loss) on Securities AFS represent realized securities gains or losses, net of tax effects.

Amounts reclassified from AOCI for Postretirement Plans Asset (Liability) represent amortization of amounts included in AOCI, net of taxes, and are recorded in the "Other operating expenses" line item of the Consolidated Statements of Income.

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 years ended December 31, 2021, 2020, and 2019.

Items outside the scope of ASC 606 are noted as such.

For the Years Ended December 31,

($ in thousands) 2021 2020 2019

Noninterest Income

In-scope of Topic 606:

Service charges on deposit accounts $ 12,317 11,098 12,970

Other service charges, commissions, and fees:

Interchange income 18,480 14,142 13,814

Other fees 7,036 5,955 5,667

Commissions from sales of insurance and financial products:

Insurance income 2,787 5,353 5,289

Wealth management income 4,160 3,495 3,206

SBA consulting fees 7,231 8,644 3,872

Noninterest income (in-scope of Topic 606) 52,011 48,687 44,818

Noninterest income (out-of-scope of Topic 606) 21,600 32,659 14,711

Total noninterest income $ 73,611 81,346 59,529

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 automated teller machine usage 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.