What changed in this filing

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Item 1. Financial Statements

2023-05-09 compared with 2022-11-07 · 411 added, 332 removed, 808 unchanged (48% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

($ in thousands) September 30,

($ in thousands) March 31,

2023 (unaudited) December 31,

6 unchanged sentences

Presold mortgages in process of settlement at fair value 2,951 1,282

SBA and other loans held for sale 477 61,003

SBA loans held for sale 2,933 —

Loans 7,798,963 6,665,145

10 unchanged sentences

Total assets $ 12,363,149 10,625,049

Noninterest-bearing checking accounts $ 3,748,207 3,348,622

Interest-bearing checking accounts 5,481,064 5,776,007

Noninterest-bearing deposits $ 3,763,637 3,566,003

Interest-bearing deposits 6,608,961 5,661,526

Total deposits 10,372,598 9,227,529

9 unchanged sentences

Issued & outstanding:

none as of September 30, 2022 and December 31, 2021

none as of March 31, 2023 and December 31, 2022

Common stock, no par value per share.

1 unchanged sentence

Issued & outstanding:

35,711,754 shares and 35,629,177 shares as of September 30, 2022 and December 31, 2021, respectively

40,986,990 shares and 35,704,154 shares as of March 31, 2023 and December 31, 2022, respectively

959,422 725,153

8 unchanged sentences

Consolidated Statements of Income

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

($ in thousands, except share data - unaudited) 2023 2022

11 unchanged sentences

Net interest income 92,486 76,878

Provision for (reversal of) credit losses 5,100 ( 1,400 ) 8,600 ( 1,400 )

Provision for credit losses 11,451 3,500

Provision for (reversal of) unfunded commitments 1,051 ( 1,500 )

5 unchanged sentences

Fees from presold mortgage loans 406 1,121

Commissions from sales of insurance and financial products 1,391 1,198 3,487 5,854

Commissions from sales of financial products 1,306 945

SBA consulting fees 521 780

11 unchanged sentences

Intangibles amortization expense 2,145 1,017

Foreclosed property losses (gains), net — 23 ( 372 ) 7

Foreclosed property net gains ( 35 ) ( 80 )

Other operating expenses 19,102 13,324

14 unchanged sentences

Three Months Ended

September 30, Nine Months Ended September 30,

($ in thousands - unaudited) 2023 2022

Net income $ 15,161 33,969

Other comprehensive (loss) income:

Unrealized (losses) gains on securities available for sale:

Unrealized (losses) gains arising during the period ( 141,155 ) 3,673 ( 432,573 ) ( 16,236 )

Tax benefit (expense) 32,437 ( 844 ) 99,405 3,731

Other comprehensive income (loss):

Unrealized gains (losses) on securities available for sale:

Unrealized gains (losses) arising during the period 35,333 ( 181,795 )

Tax (expense) benefit ( 7,425 ) 41,776

Postretirement Plans:

Amortization of unrecognized net actuarial loss 44 44

Tax (expense) benefit ( 10 ) 5 ( 30 ) ( 112 )

Other comprehensive (loss) income ( 108,684 ) 2,943 ( 333,066 ) ( 12,132 )

Comprehensive (loss) income $ ( 70,735 ) 30,586 ( 224,563 ) 72,990

See accompanying notes to unaudited consolidated financial statements.

First Bancorp and Subsidiaries

Consolidated Statements of Shareholders’ Equity

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

Earnings Stock in

Acquisition Rabbi

Obligation Accumulated

Comprehensive

Shareholders’

Shares Amount

Three Months Ended September 30, 2021

Balances, July 1, 2021 28,492 $ 397,704 507,531 ( 1,928 ) 1,928 ( 725 ) 904,510

Net income 27,643 27,643

Cash dividends declared ($ 0.20 per common share)

( 5,700 ) ( 5,700 )

Change in Rabbi Trust obligation 137 ( 137 ) —

Stock withheld for payment of taxes ( 6 ) ( 182 ) ( 182 )

Stock-based compensation 38 536 536

Other comprehensive income 2,943 2,943

Balances, September 30, 2021 28,524 $ 398,058 529,474 ( 1,791 ) 1,791 2,218 929,750

Three Months Ended September 30, 2022

Balances, July 1, 2022 35,684 $ 723,956 587,739 ( 1,573 ) 1,573 ( 249,352 ) 1,062,343

Net income 37,949 37,949

Cash dividends declared ($ 0.22 per common share)

( 7,849 ) ( 7,849 )

Change in Rabbi Trust obligation ( 12 ) 12 —

Stock withheld for payment of taxes — — —

Stock-based compensation 28 738 738

Other comprehensive loss ( 108,684 ) ( 108,684 )

Balances, September 30, 2022 35,712 $ 724,694 617,839 ( 1,585 ) 1,585 ( 358,036 ) 984,497

Tax benefit ( 11 ) ( 10 )

Other comprehensive income (loss) 27,941 ( 139,985 )

Comprehensive income (loss) $ 43,102 ( 106,016 )

See accompanying notes to unaudited consolidated financial statements.

8 unchanged sentences

Shares Amount

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Balances, January 1, 2022 35,629 $ 722,671 532,874 ( 1,803 ) 1,803 ( 24,970 ) 1,230,575

Net income 33,969 33,969

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

Cash dividends declared ($ 0.22 per common share)

1 unchanged sentence

Change in Rabbi Trust Obligation ( 11 ) 11 —

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

Stock withheld for payment of taxes ( 3 ) ( 117 ) ( 117 )

1 unchanged sentence

Other comprehensive loss ( 139,985 ) ( 139,985 )

Balances, September 30, 2021 28,524 $ 398,058 529,474 ( 1,791 ) 1,791 2,218 929,750

Nine Months Ended September 30, 2022

Balances, March 31, 2022 35,640 $ 723,441 559,004 ( 1,814 ) 1,814 ( 164,955 ) 1,117,490

Three Months Ended March 31, 2023

Balances, January 1, 2023 35,704 $ 725,153 648,418 ( 1,585 ) 1,585 ( 341,975 ) 1,031,596

3 unchanged sentences

Change in Rabbi Trust Obligation ( 23 ) 23 —

Stock withheld for payment of taxes ( 17 ) ( 603 ) ( 603 )

Equity issued pursuant to acquisition 5,033 229,489 229,489

Stock options exercised 170 3,215 3,215

Stock-based compensation 80 1,565 1,565

Other comprehensive loss ( 333,066 ) ( 333,066 )

Balances, September 30, 2022 35,712 $ 724,694 617,839 ( 1,585 ) 1,585 ( 358,036 ) 984,497

Other comprehensive income 27,941 27,941

Balances, March 31, 2023 40,987 $ 959,422 654,573 ( 1,608 ) 1,608 ( 314,034 ) 1,299,961

See accompanying notes to unaudited consolidated financial statements.

1 unchanged sentence

Consolidated Statements of Cash Flows

Nine Months Ended September 30,

Three Months Ended March 31,

($ in thousands-unaudited) 2023 2022

4 unchanged sentences

Net security premium amortization 2,351 3,437

(Decrease) increase in net deferred tax asset ( 1,713 ) 1,160

Loan discount accretion ( 3,566 ) ( 1,671 )

Other purchase accounting accretion and amortization, net ( 335 ) 98

Foreclosed property gains and write-downs, net ( 372 ) 7

Other purchase accounting amortization and accretion, net 1,227 ( 172 )

Foreclosed property net gains ( 35 ) ( 80 )

Other gains, net ( 244 ) ( 1,622 )

Decrease in net deferred loan fees ( 570 ) ( 309 )

Bank-owned life insurance income ( 1,046 ) ( 976 )

Decrease in net deferred loan fees ( 127 ) ( 776 )

Depreciation of premises and equipment 1,923 1,726

11 unchanged sentences

Decrease in other assets 8,719 3,509

Increase in net deferred income tax asset ( 465 ) ( 42 )

Increase (decrease) in accrued interest payable 3,872 ( 31 )

6 unchanged sentences

Proceeds from maturities/issuer calls of securities held to maturity 759 2,684

(Purchases) redemptions of Federal Reserve and FHLB stock, net ( 13,826 ) 1,792

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

Net increase in loans ( 422,655 ) ( 125,083 )

Proceeds from sales of securities available for sale 111,863 —

Purchases of Federal Reserve and FHLB stock, net ( 27,859 ) ( 9,818 )

Proceeds from bank owned life insurance death benefits — 3,595

Net (increase) decrease in loans ( 133,712 ) 29,927

Proceeds from sales of foreclosed properties 192 520

1 unchanged sentence

Proceeds from sales of premises and equipment 15 99

Net cash received from sale of insurance operations — 11,314

Bank-owned life insurance death benefits 5,827 —

Net cash used by investing activities ( 611,514 ) ( 1,221,210 )

Net cash received in acquisition activities 22,610 —

Net cash provided (used) by investing activities 32,378 ( 249,025 )

Cash Flows From Financing Activities

3 unchanged sentences

Cash dividends paid – common stock ( 7,852 ) ( 7,123 )

Repurchases of common stock — ( 4,036 )

Proceeds from stock option exercises 3,215 —

Payment of taxes related to stock withheld — ( 117 )

Net cash provided by financing activities 374,071 253,479

(Decrease) increase in cash and cash equivalents ( 191,647 ) 26,903

Increase in cash and cash equivalents 443,064 104,597

Cash and cash equivalents, beginning of period 270,318 461,162

2 unchanged sentences

Consolidated Statements of Cash Flows

Nine Months Ended September 30,

Three Months Ended March 31,

($ in thousands-unaudited) 2023 2022

2 unchanged sentences

Cash paid during the period for income taxes 46 —

Unrealized loss on securities available for sale, net of taxes ( 333,168 ) ( 12,505 )

Unrealized gain (loss) on securities available for sale, net of taxes 27,908 ( 140,019 )

Foreclosed loans transferred to other real estate 288 119

Accrued dividends at end of period 9,010 7,839

Initial recognition of operating lease right-of-use assets and operating lease liabilities — 2,191

Derecognition of intangible assets related to sale of insurance operations — ( 10,229 )

Acquisition of GrandSouth Bancorporation See Note 2 —

See accompanying notes to consolidated financial statements.

9 unchanged sentences

Accordingly, they do not include all information and notes necessary for complete financial statements in accordance with GAAP.

In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the consolidated financial position of the Company as of September 30, 2022, the consolidated results of operations for the three and nine months ended September 30, 2022 and 2021, and the consolidated cash flows for the nine months ended September 30, 2022 and 2021.

In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the consolidated financial position of the Company as of March 31, 2023, the consolidated results of operations for the three months ended March 31, 2023 and 2022, and the consolidated cash flows for the three months ended March 31, 2023 and 2022.

Any such adjustments were of a normal, recurring nature.

2 unchanged sentences

Reference is made to Note 1 of the 2022 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) for a discussion of accounting policies and other relevant information with respect to the financial statements.

To maintain consistency and comparability, certain amounts from prior periods may have been reclassified to conform to current period presentation with no effect on net income or shareholders' equity as previously reported.

The Company has evaluated all subsequent events through the date the financial statements were issued.

Note 2 – Accounting Pronouncements

Accounting Standards Adopted in 2023

The Company did not adopt any accounting standards during the first nine months of 2022.

Accounting Standards Pending Adoption

ASU 2022-02, "Financial Instruments-Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures." The amendments contained in this Accounting Standards Update ("ASU") eliminate the accounting guidance for troubled debt restructurings by creditors, while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty.

This ASU also requires entities to disclose current period gross write-offs by year of origination for financing receivables and net investment in leases.

The amendments in this ASU will be effective for fiscal years beginning after December 15, 2022 including interim periods within those fiscal years and early adoption is permitted.

The entity must have adopted the amendments in ASU 2016-13 ("CECL") to adopt the amendments in this ASU.

The Company is currently evaluating the impact of adopting the new guidance on the consolidated financial statements but does not expect it to have a material effect on its financial statements.

Troubled Debt Restructurings and Vintage D isclosures ." The amendments contained in this Accounting Standards Update ("ASU") eliminate the accounting guidance for troubled debt restructurings ("TDR") 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.

The Company adopted ASU 2022-02 effective January 1, 2023 using a modified retrospective transition approach for the amendments related to the recognition and measurement of TDRs.

The impact of the adoption resulted in an immaterial change to the allowance for credit losses ("ACL"), thus no adjustment to retained earnings was recorded.

Disclosures have been updated to reflect information on loan modifications given to borrowers experiencing financial difficulty as presented in Note 4.

TDR disclosures are presented for comparative periods only and are not required to be updated in current periods.

Additionally, the current year vintage disclosure included in Note 4 has been updated to reflect gross charge-offs by year of origination for the three months ended March 31, 2023.

ASU 2022-03, "Fair Value Measurements (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions." This ASU clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security, and, therefore, is not considered in measuring fair value.

The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years.

Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance.

The Company is currently evaluating this ASU for impact on the consolidated financial statements but does not expect it to have a material effect on its financial statements.

The Company adopted ASU 2022-03 January 1, 2023 with no material impact 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.

ASU 2022-06 was adopted upon issuance.

The Company will continue to elect various optional expedients for contract modifications affected by rate reference reform through the effective date of this guidance with no material effect on its financial statements.

Accounting Standards Pending Adoption

ASU 2023-02, “ Investments—Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method ” permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met.

This update is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

The adoption of ASU 2023-02 is not expected to have a significant impact on the Company's consolidated 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.

Note 2 – Acquisitions

On January 1, 2023, the Company completed its acquisition of GrandSouth Bancorporation ("GrandSouth"), in an all-stock transaction pursuant to the 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.

The results of GrandSouth are included beginning on the January 1, 2023 acquisition date.

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, GrandSouth common stock options outstanding at the merger effective time were converted to options to acquire 0.91 shares of the Company's common stock resulting in 542,345 options with an average exercise price of approximately $ 20.14 .

The total consideration transferred at the close of the transaction was $ 229.5 million which was determined based on the number of shares issued and the closing market price of the Company's stock immediately prior to the merger effective time of $ 42.84 .

In addition to the stock issued, the fair value of the converted stock options calculated in accordance with FASB Accounting Standards Codification ("ASC") 805-30-55 was included in the total consideration of the transaction.

As a result of the merger, eight branches in South Carolina were added to the Company's branch network.

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 recognized goodwill in the transaction related primarily to the reasons noted, as well as the positive earnings of GrandSouth.

This transaction was accounted for using the acquisition method of accounting for business combinations, and accordingly, the assets acquired, intangible assets identified, and liabilities assumed of GrandSouth were recorded based on estimates of fair values as of January 1, 2023.

The determination of fair value requires management to make estimates about discount rates, future expected cash flows, market conditions, and other future events that are highly subjective in nature and subject to change.

Estimated fair values were based on management’s best estimates, using the information available at the date of acquisition, including the use of third-party valuation specialists.

As of March 31, 2023, management has finalized the valuations of all acquired assets and liabilities assumed in the GrandSouth acquisition.

The following table summarizes the estimated fair value of acquired assets, identified intangible assets, and liabilities assumed as of January 1, 2023.

Following the table is a discussion of valuation approaches utilized in estimating the fair values in accordance with ASC 805-10, " Business Combinations ." The $ 114.5 million in goodwill that resulted from this transaction is non-deductible for tax purposes.

($ in thousands) Fair Value Estimate

Assets acquired:

Cash and cash equivalents $ 22,610

Securities available for sale 112,363

Loans, gross 996,833

Allowance for loan losses ( 5,610 )

Premises and equipment 20,268

Core deposit intangible 28,840

Operating right-of-use lease assets 732

Other assets 27,163

Total 1,203,199

Liabilities assumed:

Deposits 1,045,308

Borrowings 38,800

Other liabilities 4,089

Total 1,088,197

Net identifiable assets acquired 115,002

Total consideration 229,489

Goodwill recorded related to acquisition of GrandSouth $ 114,487

The following is a description of the methods used to determine the fair values of significant assets acquired and liabilities assumed included in the table above.

Cash and cash equivalents:

This consists primarily of cash and due from banks, and interest-bearing deposits with banks.

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:

Fair value of securities was measured based on quoted market prices, where available.

If a quoted market price was not available, fair value was estimated using quoted market prices for similar securities and adjusted for differences between the quoted instrument and the instrument being valued.

Substantially all of the securities acquired from GrandSouth were liquidated at their recorded fair value upon close of the transaction or shortly thereafter.

There was no gain or loss recorded on the sale of acquired securities.

Fair value of loans acquired was based on a discounted cash flow methodology that considered factors including loan type and related collateral, classification status, remaining term of the loan, fixed or variable interest rate, amortization status, and current discount rates.

Expected cash flows were derived using inputs consistent with management's assessment of credit risk for allowance measurement, including estimated future credit losses and estimated prepayments.

A total fair value mark of $ 29.5 million was recorded.

Purchased loans with financial deterioration ("PCD loans") were determined based primarily on internal grades, delinquency status, and other evidence of credit deterioration.

The Company calculated the "Day 1" allowance of $ 5.6 million on PCD loans in accordance with the current expected credit loss model ("CECL") and reclassified that amount from the fair value mark to establish the initial ACL on PCD loans.

The following table presents additional information related to the acquired loan portfolio at the acquisition date:

($ in thousands) January 1, 2023

Par value $ 152,487

Allowance for credit losses ( 5,610 )

Non-credit discount ( 1,370 )

Purchase price 145,507

Non-PCD Loans:

Fair Value 845,716

Gross contractual amounts receivable 865,132

Estimate of contractual cash flows not expected to be collected 22,542

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

Intangible assets:

Core deposit intangible ("CDI") asset represents the value of the relationships with deposit customers.

The fair value for the core deposit intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of deposit base, net maintenance cost attributable to customer deposits and an estimate of the cost associated with alternative funding sources.

The discount rates used for CDI assets are based on market rates.

The CDI is being amortized over 10 years utilizing the sum of the months digits accelerated method, which results in a weighted-average amortization period of approximately 41 months.

Lease Assets and Lease Liabilities:

Lease assets and lease liabilities were measured using a methodology that involved estimating the future lease payments over the remaining lease term with discounting using a discount rate.

The lease term was determined for individual leases based on management's assessment of the probability of exercising existing renewal options.

The fair values used for the demand and savings deposits by definition equal the amount payable on demand at the acquisition date.

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 were estimated based on quoted market prices for instrument if available, or for similar instruments if not available.

Supplemental Pro Forma Financial Information

The following table presents certain pro forma information as if GrandSouth had been acquired on January 1, 2022.

These results combine the historical results of GrandSouth with the Company’s results and, while certain adjustments were made for the estimated impact of certain fair value adjustments and other acquisition-related activity, they are not indicative of what would have occurred had the acquisition taken place on January 1, 2022.

Merger-related costs related to this acquisition of $ 12.2 million were recorded by the Company during 2023 and were excluded from the pro forma information below.

In addition, no adjustments have been made to such pro forma information to eliminate the provision for loan losses recorded by GrandSouth in the amount of $ 0.3 million for the three months ended March 31, 2022.

Pro forma information for the three months ended March 31, 2023 was adjusted to eliminate the following:

1) the non-PCD provision for loan losses recorded on the acquisition date of $ 12.2 million and 2) the initial recording of a provision for credit losses associated with GrandSouth’s unfunded commitments of $ 1.9 million.

If the GrandSouth acquisition had occurred at the beginning of 2022, the acquisition date credit loss reserve amounts would have been included in the fair value measurements of GrandSouth and also included in the goodwill calculation.

The following table also discloses the impact of the acquisition of GrandSouth from the acquisition date of January 1, 2023 through March 31, 2023.

These amounts are included in the Company’s consolidated financial statements as of and for the three months ended March 31, 2023.

Merger-related costs have been excluded from these

amounts and the provisions for credit loss amounts associated with non-PCD loans and unfunded commitments that were discussed above have also been excluded.

($ in thousands) Revenue Net Income

Three Months Ended March 31, 2023

Actual GrandSouth results included in statement of income since acquisition date $ 15,540 $ 5,819

Three Months Ended March 31, 2022

Supplemental consolidated pro forma for the Company as if GrandSouth had been acquired on January 1, 2022 110,424 37,467

Note 3 – Securities

The book values and approximate fair values of investment securities at September 30, 2022 and December 31, 2021 are summarized as follows:

($ in thousands) September 30, 2022 December 31, 2021

The book values and approximate fair values of investment securities at March 31, 2023 and December 31, 2022 are summarized as follows:

($ in thousands) March 31, 2023 December 31, 2022

Value Unrealized Amortized

11 unchanged sentences

Total held to maturity $ 539,795 448,904 53 ( 90,944 ) 541,700 432,528 7 ( 109,179 )

All of the Company’s mortgage-backed securities were issued by government-sponsored enterprises ("GSE"), except for private mortgage-backed securities with a fair value of $ 0.8 million and $ 0.9 million as of September 30, 2022 and December 31, 2021, respectively.

The following table presents information regarding all securities with unrealized losses at September 30, 2022:

All of the Company’s mortgage-backed securities were issued by government-sponsored enterprises ("GSE"), except for private mortgage-backed securities with a fair value of $ 0.8 million and $ 0.8 million as of March 31, 2023 and December 31, 2022, respectively.

The following table presents information regarding all securities with unrealized losses at March 31, 2023:

Securities in an Unrealized

21 unchanged sentences

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

3 unchanged sentences

Total unrealized loss position $ 478,793 33,147 2,263,197 520,099 2,741,990 553,246

As of September 30, 2022, the Company's securities portfolio held 669 securities of which 641 securities were in an unrealized loss position.

As of March 31, 2023, the Company's securities portfolio held 657 securities of which 635 securities were in an unrealized loss position.

As of December 31, 2022, the Company's securities portfolio held 666 securities of which 644 securities were in an unrealized loss position.

In the above tables, all of the securities that were in an unrealized loss position at September 30, 2022 and December 31, 2021 are bonds that the Company has determined are in a loss position due primarily to interest rate factors and not credit quality concerns.

In the above tables, all of the securities that were in an unrealized loss position at March 31, 2023 and December 31, 2022 are bonds that the Company has determined are in a loss position due primarily to interest rate factors and not credit quality concerns.

In arriving at this conclusion, the Company reviewed third-party credit ratings and considered the severity of the impairment.

1 unchanged sentence

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 the securities.

Nearly all of our mortgage-backed securities were issued by Federal Home Loan Mortgage Corporation ("FHLMC"), Federal National Mortgage Association ("FNMA"), Government National Mortgage Association ("GNMA"), or the Small Business Administration ("SBA"), each of which is a government agency or GSE and guarantees the repayment of the 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.

At September 30, 2022 and December 31, 2021, the Company determined that expected credit losses associated with held to maturity debt securities were insignificant.

The book values and approximate fair values of investment securities at September 30, 2022, by contractual maturity, are summarized in the table below.

At March 31, 2023 and December 31, 2022, the Company determined that expected credit losses associated with held to maturity debt securities were insignificant.

The book values and approximate fair values of investment securities at March 31, 2023, by contractual maturity, are summarized in the table below.

Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

8 unchanged sentences

Total securities $ 2,698,996 2,290,265 539,795 448,904

At September 30, 2022 and December 31, 2021, investment securities with carrying values of $ 731.7 million and $ 951.4 million, respectively, were pledged as collateral for public deposits.

At September 30, 2022 and December 31, 2021, there were no holdings of securities of any one issuer, other than U.S.

At March 31, 2023 and December 31, 2022, investment securities with carrying values of $ 826.9 million and $ 758.0 million, respectively, were pledged as collateral for public deposits.

At March 31, 2023 and December 31, 2022, there were no holdings of securities of any one issuer, other than U.S.

Government and its agencies or GSEs, in an amount greater than 10% of shareholders' equity.

Included in “Other assets” in the Consolidated Balance Sheets are investments in Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank of Richmond (“Federal Reserve”) stock totaling $ 36.2 million and $ 22.3 million at September 30, 2022 and December 31, 2021, respectively.

During the three months ended March 31, 2023, the Company sold substantially all of the securities acquired from GrandSouth at their initially recorded fair value.

Accordingly, there was no gain or loss recorded on the sale of acquired securities.

There were no sales of investment securities during the three months ended March 31, 2022.

Included in “Other assets” in the Consolidated Balance Sheets are investments in Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank of Richmond (“Federal Reserve”) stock totaling $ 67.4 million and $ 39.6 million at March 31, 2023 and December 31, 2022, respectively.

These investments do not have readily determinable fair values.

The FHLB stock had a cost and fair value of $ 11.3 million and $ 4.6 million at September 30, 2022 and December 31, 2021, respectively, and serves as part of the collateral for the Company’s line of credit with the FHLB and is also a requirement for membership in the FHLB system.

The Federal Reserve stock had a cost and fair value of $ 24.9 million and $ 17.8 million at September 30, 2022 and December 31, 2021, respectively, and is a

requirement for Federal Reserve member bank qualification.

The FHLB stock had a cost and fair value of $ 27.4 million and $ 14.7 million at March 31, 2023 and December 31, 2022, respectively, and serves as part of the collateral for the Company’s line of credit with the FHLB and is also a requirement for membership in the FHLB system.

The Federal Reserve stock had a cost and fair value of $ 40.0 million and $ 24.9 million at March 31, 2023 and December 31, 2022, respectively, and is a requirement for Federal Reserve member bank qualification.

Periodically, both the FHLB and Federal Reserve recalculate the Company’s required level of holdings, and the Company either buys more stock or redeems a portion of the stock at cost.

4 unchanged sentences

The Class B shares have transfer restrictions, and the conversion rate into Class A shares is periodically adjusted as Visa settles litigation.

The conversion rate at September 30, 2022 was approximately 1.61 , which means the Company would have received approximately 19,843 Class A shares if the stock had converted on that date.

The conversion rate at March 31, 2023 was approximately 1.60 , which means the Company would have received 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 .

2 unchanged sentences

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

($ in thousands) September 30, 2022 December 31, 2021

($ in thousands) March 31, 2023 December 31, 2022

Amount Percentage Amount Percentage

8 unchanged sentences

Total loans $ 7,798,963 $ 6,665,145

Included in the line item "Commercial, financial, and agricultural" in the table above are Paycheck Protection Program ("PPP") loans totaling $ 39.0 million at December 31, 2021.

There were essentially no remaining PPP loans at September 30, 2022.

PPP loans are fully guaranteed by the United State Small Business Administration ("SBA").

Included in the table above are credit card balances outstanding totaling $ 42.0 million and $ 37.9 million at September 30, 2022 and December 31, 2021, respectively.

At September 30, 2022, approximately 57 % of total credit card balances were business credit cards included in "commercial, financial and agricultural" above and the remaining 43 % were personal credit cards included in consumer loans in the table above.

Also included in the table above are various non-PPP SBA loans, with additional information on these loans presented in the table below.

($ in thousands) September 30, 2022 December 31, 2021

Guaranteed portions of non-PPP SBA loans included in table above $ 36,625 48,377

Unguaranteed portions of non-PPP SBA loans included in table above 119,590 122,772

Total non-PPP SBA loans included in the table above $ 156,215 171,149

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

($ in thousands) March 31, 2023 December 31, 2022

Guaranteed portions of SBA loans included in table above $ 36,035 31,893

Unguaranteed portions of SBA loans included in table above 115,413 116,910

Total SBA loans included in the table above $ 151,448 148,803

Sold portions of SBA loans with servicing retained - not included in tables above $ 380,634 392,370

At September 30, 2022 and December 31, 2021, there was a remaining unaccreted discount on the retained portion of sold non-PPP SBA loans amounting to $ 4.6 million and $ 6.0 milion, respectively.

Loans in the amount of $ 5.2 billion and $ 4.3 billion were pledged as collateral for certain borrowings at September 30, 2022 and December 31, 2021, respectively.

The loans above also include loans to executive officers and directors serving the Company at September 30, 2022 and to their related persons, totaling approximately $ 6.1 million and $ 0.6 million at September 30, 2022 and December 31, 2021, respectively.

For the nine months ended September 30, 2022 t here were $ 5.8 million in new loans due to the addition of new directors, $ 38,000 in advances on loans, and repayments of $ 0.4 million.

The loans were made on terms and conditions applicable to similarly situated borrowers and management does not believe these loans involve more than the normal risk of collectability or present other unfavorable features.

As of September 30, 2022 and December 31, 2021, unamortized discounts on all acquired loans totaled $ 12.5 million and $ 17.2 million, respectively.

At March 31, 2023 and December 31, 2022, there was a remaining unaccreted discount on the retained portion of sold SBA loans amounting to $ 4.0 million and $ 4.3 milion, respectively.

At March 31, 2023 and December 31, 2022, l oans in the amount of $ 6.0 billion and $ 5.3 billion, respectively, were pledged as collateral for certain borrowings.

At both March 31, 2023 and December 31, 2022, total loans included loans to executive officers and directors of the Company, and their associates, totaling approximately $ 6.0 million.

There were four new loans and advances on existing loans totaling approximately $ 0.1 million for the three months ended March 31, 2023 and repayments amounted to $ 0.2 million for that period.

Available credit on related party loans totaled $ 1.1 million and $ 1.2 million, respectively, at March 31, 2023 and December 31, 2022.

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

As of March 31, 2023 and December 31, 2022, unamortized discounts on all acquired loans totaled $ 32.4 million and $ 11.6 million, respectively.

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

Nonperforming assets are defined as nonaccrual loans, troubled debt restructured loans ("TDRs"), loans past due 90 or more days and still accruing interest, and foreclosed real estate.

Nonperforming assets are defined as nonaccrual loans, modifications to borrowers in financial distress, loans past due 90 or more days and still accruing interest, foreclosed real estate, and prior to the adoption of ASU 2022-02 on January 1, 2023, TDRs.

Nonperforming assets are summarized as follows.

($ in thousands) September 30,

($ in thousands) March 31,

2023 December 31,

Nonaccrual loans $ 28,059 28,514

Modifications to borrowers in financial distress 2,224 —

TDRs - accruing — 9,121

Accruing loans > 90 days past due — 1,004

Total nonperforming loans 30,283 37,635

1 unchanged sentence

Total nonperforming assets $ 31,072 38,293

At September 30, 2022 and December 31, 2021, the Company had $ 1.7 million and $ 1.5 million, respectively, in residential mortgage loans in the process of foreclosure.

The following table is a summary of the Company’s nonaccrual loans by major categories as of September 30, 2022.

At March 31, 2023 and December 31, 2022, the Company had $ 1.5 million and $ 0.8 million, respectively, in residential mortgage loans in the process of foreclosure.

At both March 31, 2023 and December 31, 2022, there was one loan with an immaterial commitment to lend additional funds to borrowers whose loans were nonperforming.

The following table is a summary of the Company’s nonaccrual loans by major categories as of March 31, 2023:

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

15 unchanged sentences

Total $ 9,022 19,492 28,514

There was no interest income recognized during the nine month period ended September 30, 2022 or the year ended December 31, 2021 on nonaccrual loans.

There was 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 each period indicated:

($ in thousands) Nine Months Ended September 30, 2022 For the Year Ended December 31, 2021 Nine Months Ended September 30, 2021

($ in thousands) Three Months Ended March 31, 2023 For the Year Ended December 31, 2022 Three Months Ended March 31, 2022

Commercial, financial, and agricultural $ 123 102 8

5 unchanged sentences

Total $ 156 324 132

The following table presents an analysis of the payment status of the Company’s loans as of September 30, 2022.

The following table presents an analysis of the payment status of the Company’s loans as of March 31, 2023:

($ in thousands) Accruing

27 unchanged sentences

The Company reviews individually evaluated loans on nonaccrual with a net book balance of $500,000 or greater for designation as collateral dependent loans, as well as certain other loans that may still be accruing interest and/or are less than $500,000 in size that management of the Company designates as having higher risk.

These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the allowance for credit losses ("ACL").

The following table presents an analysis of collateral dependent loans of the Company as of September 30, 2022.

These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the ACL.

The following table presents an analysis of collateral dependent loans of the Company as of March 31, 2023:

($ in thousands) Residential Property Business Assets Land Commercial Property Total Collateral-Dependent Loans

Commercial, financial, and agricultural $ — 3,085 — — 3,085

Real estate – construction, land development & other land loans — — 877 — 877

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

Real estate mortgage – commercial and other — — — 4,718 4,718

3 unchanged sentences

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

Real estate – construction, land development & other land loans — — 533 — 533

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

7 unchanged sentences

For real estate collateral that is in industries which may be undergoing heightened stress due to economic or other external factors, the Company may reduce the collateral values by an additional 10 - 25 % of appraised value to recognize additional discounts that are estimated to be incurred in a near-term sale.

For non real estate collateral secured loans, the Company generally writes nonaccrual loans down to 75 % of the appraised value, which provides for selling costs and liquidity discounts that are usually incurred when disposing of non real estate collateral.

For 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.

2 unchanged sentences

Fluctuations in the ACL each period are based on loan mix and growth, changes in the levels of nonperforming loans, economic forecasts impacting loss drivers, other assumptions and inputs to the CECL model, and as occurred in 2023, adjustments for acquired loan portfolios.

With regard to the increase in ACL for three and nine months ended September 30, 2022, approximately half of the increase was due to organic growth in the loan portfolio.

The balance of the increase was a result of updated economic forecast inputs to our CECL model driving higher loss rate assumptions, primarily due to higher unemployment forecasts and deteriorating Commercial Real Estate Index forecasts given the developing uncertain economic environment.

($ in thousands) Commercial,

Agricultural Real Estate

Construction,

Loans Real Estate

Mortgages Real Estate

Credit Real Estate

and Other Consumer Loans Unallocated Total

As of and for the three months ended September 30, 2022

Beginning balance $ 15,450 16,171 8,650 2,086 37,194 2,630 — 82,181

Charge-offs ( 512 ) — — ( 2 ) ( 470 ) ( 221 ) — ( 1,205 )

Recoveries 166 109 1 85 112 38 — 511

Provisions / (Reversals) 2,482 ( 1,352 ) 2,064 597 938 371 — 5,100

Ending balance $ 17,586 14,928 10,715 2,766 37,774 2,818 — 86,587

As of and for the nine months ended September 30, 2022

Much of the change to the level of ACL during the three months ended March 31, 2023 is attributed to the acquisition of GrandSouth.

In addition to the "Day 1" allowance recorded for PCD loans of $ 5.6 million, the Company recorded a "Day 2" initial provision of $ 12.2 million related to the non-PCD loans in the GrandSouth portfolio.

The balance of the change was a result of updated economic forecast inputs to our CECL model driving lower loss rate assumptions, primarily due to slightly improved unemployment and GDP forecasts.

($ in thousands) 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 Consumer loans Total

As of and for the three months ended March 31, 2023

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

"Day 1" ACL for acquired PCD loans 5,197 49 113 8 242 1 5,610

Charge-offs ( 2,177 ) — — ( 2 ) ( 235 ) ( 207 ) ( 2,621 )

2 unchanged sentences

Ending balance $ 23,073 18,986 12,285 3,481 45,276 3,295 106,396

($ in thousands) Commercial,

Agricultural Real Estate

Construction,

Loans Real Estate

Mortgages Real Estate

Credit Real Estate

and Other Consumer Loans Unallocated 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 acquired 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

($ in thousands) Commercial,

Agricultural Real Estate

Construction,

Loans Real Estate

Mortgages Real Estate

Credit Real Estate

and Other Consumer Loans Unallocated Total

As of and for the three months ended September 30, 2021

Beginning balance $ 14,809 10,104 8,651 3,737 25,358 2,363 — 65,022

Charge-offs ( 899 ) — ( 24 ) — ( 4 ) ( 178 ) — ( 1,105 )

Recoveries 398 98 176 311 79 49 — 1,111

Provisions/(Reversals) ( 808 ) 2,187 ( 1,032 ) ( 546 ) ( 1,336 ) 135 — ( 1,400 )

Ending balance $ 13,500 12,389 7,771 3,502 24,097 2,369 — 63,628

As of and for the nine months ended September 30, 2021

As of and for the three months ended March 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

Charge-offs ( 790 ) — — ( 41 ) ( 45 ) ( 167 ) ( 1,043 )

35 unchanged sentences

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

For three month and nine month periods ended September 30, 2022, the amount of revolving lines of credit that converted to term loans totaled $ 2.4 million and $ 4.6 million, respectively.

Converted lines of credit were immaterial in the comparable prior year periods.

Term Loans by Year of Origination

($ in thousands) 2023 2022 2021 2020 2019 Prior Revolving Total

As of September 30, 2022

As of March 31, 2023

Commercial, financial, and agricultural

3 unchanged sentences

Total commercial, financial, and agricultural 31,335 192,922 136,271 92,274 57,154 78,850 296,226 885,032

Gross charge-offs, YTD — 129 691 21 299 651 386 2,177

Real estate – construction, land development & other land loans

3 unchanged sentences

Total real estate – construction, land development & other land loans 171,256 575,881 221,411 46,268 15,127 10,982 51,101 1,092,026

Gross charge-offs, YTD — — — — — — — —

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

3 unchanged sentences

Total real estate mortgage – residential (1-4 family) first mortgages 70,953 378,020 317,981 205,576 103,560 308,012 2,478 1,386,580

Gross charge-offs, YTD — — — — — — — —

Real estate mortgage – home equity loans / lines of credit

3 unchanged sentences

Total real estate mortgage – home equity loans / lines of credit 637 5,703 2,004 1,431 311 2,176 330,025 342,287

Gross charge-offs, YTD — — — — — — 2 2

Real estate mortgage – commercial and other

3 unchanged sentences

Total real estate mortgage – commercial and other 157,294 1,250,923 1,313,449 625,860 291,308 327,151 60,273 4,026,258

Gross charge-offs, YTD — — 235 — — — — 235

Consumer loans

3 unchanged sentences

Total consumer loans 4,985 18,604 8,128 3,646 1,042 1,041 30,610 68,056

Total $ 1,721,694 2,045,609 944,016 487,309 304,017 505,778 517,997 6,526,420

Unamortized net deferred loan fees ( 1,134 )

Gross charge-offs, YTD — — 11 3 — — 193 207

Total loans $ 436,460 2,422,053 1,999,244 975,055 468,502 728,212 770,713 7,800,239

Unamortized net deferred loan fees ( 1,276 )

Total loans, net of deferred loan fees 7,798,963

Total gross charge-offs, year to date $ — 129 937 24 299 651 581 2,621

Term Loans by Year of Origination

31 unchanged sentences

Total consumer loans 35,726 7,977 3,613 1,057 3 1,275 11,008 60,659

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 $ 2,200,727 1,850,445 897,337 444,804 957 750,041 522,237 6,666,548

Troubled Debt Restructurings

The restructuring of a loan is considered a TDR if both (i) the borrower is experiencing financial difficulties and (ii) the creditor has granted a concession.

Concessions may include interest rate reductions or below market interest rates, principal forgiveness, extension of terms and other actions intended to minimize potential losses.

The vast majority of the Company’s TDRs modified during the periods ended September 30, 2022 and September 30, 2021 related to interest rate reductions combined with extension of terms.

The Company does not generally grant principal forgiveness.

The Company’s TDRs can be classified as either nonaccrual or accruing based on the loan’s payment status.

The TDRs that are nonaccrual are reported within the nonaccrual loan totals presented previously.

At September 30, 2022, there was one loan with immaterial commitments to lend additional funds to debtors whose loans were modified as a TDR.

At December 31, 2021, there were no commitments to lend additional funds to debtors whose loans were modified as a TDR.

The following table presents information related to loans modified in a TDR during the three months ended September 30, 2022 and 2021.

($ in thousands) For the three months ended September 30, 2022 For the three months ended September 30, 2021

Contracts Pre-

Balances Post-

Balances Number of

Contracts Pre-

Balances Post-

TDRs – Accruing

Real estate – mortgage – home equity loans / lines of credit 1 176 176 — — —

TDRs – Nonaccrual

Unamortized net deferred loan fees ( 1,403 )

Total loans, net of deferred loan fees 6,665,145

Loan Modifications to Borrowers Experiencing Financial Difficulty

Effective January 1, 2023, we adopted ASU 2022-02 which eliminated the accounting guidance for TDRs and requires disclosures for certain loan modifications when a borrower is experiencing financial difficulty.

Occasionally, the Company modifies loans to borrowers in financial distress as a part of our loss mitigation activities.

Various types of modification may be offered including principal forgiveness, term extension, payment delays, or interest rate reductions.

In some cases, the Company will modify a certain loan by providing multiple types of concessions.

Typically, one type of concession, such as a term extension, is granted initially.

If the borrower continues to experience financial difficulty, another concession may be granted.

For loans included in the “combination” columns below, multiple types of modifications have been made on the same loan within the current reporting period.

The followings tables present the amortized cost basis at March 31, 2023 of the loans modified for borrowers experiencing financial difficulty, by loan category and type of concession granted.

Percentages labeled as "NM" are not measurable to the class of financing receivable, as they are less than 0.1% of the total class.

Payment Delay

($ in thousands) Amortized Cost Basis at 3/31/2023 Percent of Total Class of Financing Receivable

Commercial, financial, and agricultural $ 156 NM

Term Extension

($ in thousands) Amortized Cost Basis at 3/31/2023 Percent of Total Class of Financing Receivable

Commercial, financial, and agricultural $ 1,442 0.2 %

Total TDRs arising during period 2 $ 503 $ 503 — $ — $ —

The following table presents information related to loans modified in a TDR during the nine months ended September 30, 2022 and 2021.

($ in thousands) For the nine months ended September 30, 2022

For the nine months ended September 30, 2021

Contracts Pre-

Balances Post-

Balances Number of

Contracts Pre-

Balances Post-

TDRs – Accruing

Real estate – construction, land development & other land loans 130 NM

Real estate mortgage – residential (1-4 family) first mortgages 48 NM

Real estate mortgage – home equity loans / lines of credit 103 NM

Real estate mortgage – commercial and other 104 NM

Consumer loans 228 0.3 %

Combination - Interest Rate Reduction and Term Extension

($ in thousands) Amortized Cost Basis at 3/31/2023 Percent of Total Class of Financing Receivable

Real estate – construction, land development & other land loans $ 14 NM

For the three months ended March 31, 2023, there were no modifications for borrowers experiencing financial difficulty with principal forgiveness concessions.

The following tables describes the financial effect for the three months ended March 31, 2023 of the modifications made for borrowers experiencing financial difficulty:

Payment Delay

Loan Type Financial Effect

Commercial, financial, and agricultural Delayed payment for 4 months.

Term Extension

Loan Type Financial Effect

Commercial, financial, and agricultural Added a weighted average 6 months to the life of loans, which reduced monthly payment amounts to borrowers.

Real estate – construction, land development & other land loans Added a weighted average 11 months to the life of loans, which reduced monthly payment amounts to borrowers.

Real estate mortgage – residential (1-4 family) first mortgages Added a weighted average 14 months to the life of loans, which reduced monthly payment amounts to borrowers.

Real estate mortgage – home equity loans / lines of credit Added a weighted average 46 months to the life of loans, which reduced monthly payment amounts to borrowers.

Real estate mortgage – commercial and other Added a weighted average 12 months to the life of loans, which reduced monthly payment amounts to borrowers.

Consumer loans Added a weighted average 3 months to the life of loans, which reduced monthly payment amounts to borrowers.

Interest Rate Reduction

Loan Type Financial Effect

Real estate – construction, land development & other land loans Reduced weighted average contractual interest rate from 7.0 % to 5.5 %

The Company closely monitors the performance of the loans that are modified for borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.

The following table depicts the performance of loans that have been modified in the last 12 months (numbers in thousands):

Payment Status (Amortized Cost Basis)

($ in thousands) Current 30-59 Days Past Due 60-89 Days Past Due 90+ Days Past Due

Commercial, financial, and agricultural $ 1,363 156 79 —

4 unchanged sentences

Consumer loans 228 — — —

$ 1,990 156 79 —

None of the modifications made for borrowers experiencing financial difficulty during the three months ended March 31, 2023 are considered to have had a payment default.

Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off.

Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the ACL is adjusted by the same amount.

TDR Disclosures Prior to the Adoption of ASU 2022-02

The restructuring of a loan was considered a TDR if both (i) the borrower was experiencing financial difficulties and (ii) the creditor had granted a concession.

Concessions may have included interest rate reductions or below market interest rates, principal forgiveness, extension of terms and other actions intended to minimize potential losses.

The vast majority of the Company’s TDRs modified during the period ended March 31, 2022 related to interest rate reductions combined with extension of terms.

The Company does not generally grant principal forgiveness.

The Company’s TDRs could be classified as either nonaccrual or accruing based on the loan’s payment status.

The TDRs that were nonaccrual were reported within the nonaccrual loan totals presented previously.

The following table presents information related to loans modified in a TDR during the three months ended March 31, 2022.

For the three months ended March 31, 2022

($ in thousands) Number of Contracts Pre-Modification Restructured Balances Post-Modification Restructured Balances

TDRs - Accruing

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

TDRs - Nonaccrual

Commercial, financial, and agricultural 1 41 41

Real estate – construction, land development & other land loans — — — 1 75 75

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 1 540 540

Consumer loans — — — — — —

Total TDRs arising during period 4 $ 653 653

The Company considers a TDR loan to have defaulted when it becomes 90 or more days delinquent under the modified terms, has been transferred to nonaccrual status, or has been transferred to foreclosed real estate.

There were no accruing TDRs that were modified in the previous twelve months and that defaulted during the three or nine months ended September 30, 2022 or 2021.

The Company considered a TDR loan to have defaulted when it became 90 or more days delinquent under the modified terms, had been transferred to nonaccrual status, or had been transferred to foreclosed real estate.

There were no accruing TDRs that were modified in the previous twelve months and that defaulted during the three months ended March 31, 2022.

Concentration of Credit Risk

7 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 ACL on loans.

The ACL for unfunded loan commitments of $ 12.3 million and $ 13.5 million at September 30, 2022 and December 31, 2021, respectively, is separately classified on the Consolidated Balance Sheets within "Other liabilities".

The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the nine months ended September 30, 2022.

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

Beginning balance at December 31, 2021 $ 13,506

The ACL for unfunded loan commitments of $ 14.4 million and $ 13.3 million at March 31, 2023 and December 31, 2022, respectively, is separately classified on the Consolidated Balance Sheets within "Other liabilities."

The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the three months ended March 31, 2023 and 2022 and for the twelve months ended December 31, 2022:

($ in thousands) March 31, 2023 December 31, 2022 March 31, 2022

Beginning balance $ 13,306 13,506 13,506

"Day 2" provision for credit losses on unfunded commitments acquired from GrandSouth 1,921 — —

Charge-offs — — —

Recoveries — — —

Reversal of provision for unfunded commitments ( 870 ) ( 200 ) ( 1,500 )

Ending balance at September 30, 2022

Ending balance $ 14,357 13,306 12,006

Allowance for Credit Losses - Securities Held to Maturity

The ACL for securities held to maturity was immaterial at September 30, 2022 and December 31, 2021.

The ACL for securities held to maturity was insignificant at March 31, 2023 and December 31, 2022.

Note 5 – Goodwill and Other Intangible Assets

The following is a summary of the gross carrying amount and accumulated amortization of amortizable intangible assets as of September 30, 2022 and December 31, 2021, and the carrying amount of unamortized intangible assets as of those same dates.

September 30, 2022 December 31, 2021

The following is a summary of the gross carrying amount and accumulated amortization of amortizable intangible assets as of March 31, 2023 and December 31, 2022, and the carrying amount of unamortized intangible assets as of those same dates.

March 31, 2023 December 31, 2022

($ in thousands) Gross Carrying

10 unchanged sentences

Goodwill $ 478,750 364,263

Amortization expense of all other intangible assets, excluding the SBA servicing assets, totaled $ 0.9 million and $ 0.7 million for the three months ended September 30, 2022 and 2021, respectively, and $ 2.9 million and $ 2.4 million for the nine months ended September 30, 2022 and 2021, respectively.

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 assets, totaled $ 2.1 million and $ 1.0 million for the three months ended March 31, 2023 and 2022, respectively.

SBA servicing assets are recorded for the portions of SBA loans that the Company has sold but continues to service for a fee.

Servicing assets are initially recorded at fair value and amortized over the expected lives of the related loans and are tested for impairment on a quarterly basis.

SBA servicing asset amortization expense is recorded within noninterest income as an offset to SBA servicing fees within the line item "Other service charges, commissions, and fees." The following table presents the changes in the SBA servicing assets for the three and nine months ended September 30, 2022 and 2021.

Three months ended September 30, Nine months ended September 30,

Three months ended March 31,

($ in thousands) 2023 2022

3 unchanged sentences

Ending balance, net $ 3,897 5,591

A t September 30, 2022 and December 31, 2021, the Company serviced SBA loans totali ng $ 396.1 million a nd $ 414.2 million, respectively, for others.

During the three months ended March 31, 2023 and 2022, the Company recorded $ 1.0 million and $ 0.8 million, respectively, in SBA guarantee servicing income.

A t March 31, 2023 and December 31, 2022, the Company serviced SBA loans totali ng $ 380.6 million a nd $ 392.4 million, respectively, for others.

There were no other loans serviced in any period presented.

There were no changes to the carrying amounts of goodwill for the three or nine months ended September 30, 2022 .

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

The Company performed the required annual impairment testing in the fourth quarter of 2021.

Management evaluated the events and circumstances in the third quarter of 2022 that could indicate that goodwill might be impaired and concluded that a subsequent interim test was not necessary.

The following table presents the estimated amortization expense schedule related to acquisition-related amortizable intangible assets.

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

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.

The following table presents the changes in carrying amounts of goodwill:

($ in thousands) Total Goodwill

Balance at December 31, 2021 $ 364,263

Net activity during 2022 —

Balance at December 31, 2022 364,263

Additions from acquisition of GrandSouth 114,487

Balance at March 31, 2023 $ 478,750

In connection with the GrandSouth acquisition on January 1, 2023, the Company recorded $ 28.8 million in core deposit intangibles.

The following table presents the estimated amortization expense schedule related to acquisition-related amortizable intangible assets, excluding the SBA servicing assets.

These amounts will be recorded as "Intangibles amortization expense" within the noninterest expense section of the Consolidated Statements of Income.

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($ in thousands) Estimated Amortization

October 1, 2022 to December 31, 2022 $ 825

April 1, 2023 to December 31, 2023 $ 5,857

Thereafter 8,576

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Note 6 - Borrowings

The following tables present information regarding the Company’s outstanding borrowings at September 30, 2022 and December 31, 2021 (dollars in thousands).

Description Due date Call Feature September 30, 2022 Interest Rate

The following tables present information regarding the Company’s outstanding borrowings at March 31, 2023 and December 31, 2022 (dollars in thousands):

Description Due date Call Feature March 31, 2023 Interest Rate

FHLB Principal Reducing Credit 7/24/2023 None $ 20 1.00 % fixed

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FHLB Fixed Rate Credit 4/13/2023 None 50,000 4.88 % fixed

FHLB Fixed Rate Credit 9/13/2023 None 300,000 5.17 % fixed

FHLB Fixed Rate Hybrid 9/29/2023 None 5,000 0.40 % fixed

Trust Preferred Securities 1/23/2034 Quarterly by Company

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3 month LIBOR + 1.39 %

Total borrowings / weighted average rate as of September 30, 2022

Trust Preferred Securities 6/23/2036 Quarterly by the Company beginning 6/23/11 8,248 6.87 % at 3/31/23

adjustable rate

3 month LIBOR + 1.85 %

Subordinated Debentures 11/30/2028 Semi-annually by Company beginning 11/30/2023 10,000 6.50 % fixed

Subordinated Debentures 11/15/2030 Semi-annually by Company beginning 11/15/2025 18,000 4.38 % fixed

Total borrowings / weighted average rate as of March 31, 2023

612,131 5.20 %

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FHLB Principal Reducing Credit 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 2/1/2023 None 80,000 4.25 % fixed

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

Trust Preferred Securities 1/23/2034 Quarterly by Company

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

As of September 30, 2022, the Company leased 16 branch offices for which the land and buildings are leased and nine branch offices for which the land is leased but the buildings are owned.

As of March 31, 2023, 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 buildings are owned.

The Company also leases office space for several operational departments.

All of the Company’s leases are operating leases under applicable accounting standards and the lease agreements have maturity dates ranging from July 2023 through May 2076, some of which include options for multiple five - and ten-year extensions.

The weighted average remaining life of the lease term for these leases was 19.6 years as of September 30, 2022.

The weighted average remaining life of the lease term for these leases was 19.2 years as of March 31, 2023.

Certain of the Company's lease agreements include variable lease payments based on changes in inflation, with the impact of that factor being insignificant to the Company's total lease expense.

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The Company uses its incremental borrowing rate, on a collateralized basis, at lease commencement to calculate the present value of lease payments when the rate implicit in the lease is not known.

The weighted average discount rate for leases was 2.94 % as of September 30, 2022.

Total operating lease expense was $ 0.7 million and $ 0.5 million for the three months ended September 30, 2022 and 2021, respectively, and $ 2.3 million and $ 1.8 million for the nine months ended September 30, 2022 and 2021, respectively.

The right-of-use assets and lease liabilities were $ 19.2 million and $ 19.8 million as of September 30, 2022, respectively, and were $ 20.7 million and $ 21.2 million as of December 31, 2021, respectively.

Future undiscounted lease payments for operating leases with initial terms of one year or more as of September 30, 2022 are as follows.

The weighted average discount rate for leases was 3.04 % as of March 31, 2023.

Total operating lease expense was $ 0.8 million and $ 0.9 million for the three months ended March 31, 2023 and 2022, respectively.

The right-of-use assets and lease liabilities were $ 18.9 million and $ 19.6 million as of March 31, 2023, respectively, and were $ 18.7 million and $ 19.4 million as of December 31, 2022, respectively.

Future undiscounted lease payments for operating leases with initial terms of one year or more as of March 31, 2023 are as follows.

($ in thousands)

October 1, 2022 to December 31, 2022 $ 584

April 1, 2023 to December 31, 2023 $ 1,771

Thereafter 18,441

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Effective December 31, 2012, the Company froze both plans for all participants.

Although no previously accrued benefits were lost, employees no longer accrue benefits under these plans for service subsequent to 2012.

The Company recorded periodic pension cost totaling $ 51,000 and $ 158,000 for the three months ended September 30, 2022 and 2021, respectively, and $ 153,000 and $ 475,000 for the nine months ended September 30, 2022 and 2021, respectively.

The following tables contain the components of the pension cost.

For the Three Months Ended September 30,

($ in thousands) 2022 Pension Plan 2022 SERP 2022 Total Both Plans 2021 Pension Plan 2021 SERP 2021 Total Both Plans

Service cost $ — — — — — —

Interest cost 267 28 295 283 30 313

Expected return on plan assets ( 288 ) — ( 288 ) ( 264 ) — ( 264 )

Amortization of net (gain)/loss 180 ( 136 ) 44 106 3 109

Net periodic pension cost $ 159 ( 108 ) 51 125 33 158

For the Nine Months Ended September 30,

Although no previously accrued benefits were lost, no additional accruals of benefits under these plans for service subsequent to 2012 have been made.

The Company recorded periodic pension cost totaling $ 51,000 for both the three months ended March 31, 2023 and 2022.

The following table contains the components of the pension cost:

For the Three Months Ended March 31,

($ in thousands) 2023 Pension Plan 2023 SERP 2023 Total Both Plans 2022 Pension Plan 2022 SERP 2022 Total Both Plans

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Expected return on plan assets ( 288 ) — ( 288 ) ( 288 ) — ( 288 )

Amortization of net (gain)/loss 540 ( 408 ) 132 474 11 485

Amortization of net loss (gain) 180 ( 136 ) 44 180 ( 136 ) 44

Net periodic pension cost $ 159 ( 108 ) 51 159 ( 108 ) 51

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The Company’s contributions to the Pension Plan are based on computations by independent actuarial consultants and are intended to be deductible for income tax purposes.

The Company did not contribute to the Pension Plan in the first nine months of 2022 and does not expect to contribute to the Pension Plan in the remainder of 2022.

The Company did not contribute to the Pension Plan in the first three months of 2023 and does not expect to contribute to the Pension Plan in the remainder of 2023.

Effective March 31, 2023, the Company determined that the Pension Plan will be terminated during 2023 and a termination cost estimate of $ 2.4 million is included in the accompanying consolidated income statement.

The Company’s funding policy with respect to the SERP is to fund the related benefits from the operating cash flow of the Company.

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Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The following table summarizes the Company’s financial instruments that were measured at fair value on a recurring and nonrecurring basis at September 30, 2022.

The following table summarizes the Company’s financial instruments that were measured at fair value on a recurring and nonrecurring basis at March 31, 2023:

($ in thousands)

Description of Financial Instruments

Fair Value at September 30, 2022 Quoted Prices in

Fair Value at March 31, 2023 Quoted Prices in

Active Markets for

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Securities available for sale:

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

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

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Appraisals used in this analysis are generally obtained at least annually based on when the assets were acquired, and thus the appraisals are not necessarily as of the period ends presented.

At the time of foreclosure, any excess of the loan balance over the fair value of the real estate held as collateral is treated as a charge against the ACL.

For any real estate valuations

subsequent to foreclosure, any excess of the real estate recorded value over the fair value of the real estate is treated as a foreclosed real estate write-down on the Consolidated Statements of Income.

For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of September 30, 2022, the significant unobservable inputs used in the fair value measurements were as follows:

($ in thousands) Fair Value at September 30, 2022 Valuation

At the time of foreclosure, any excess of the loan balance over the fair value of

the real estate held as collateral is treated as a charge against the ACL.

For any real estate valuations subsequent to foreclosure, any excess of the real estate recorded value over the fair value of the real estate is treated as a foreclosed real estate write-down on the Consolidated Statements of Income.

For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of March 31, 2023, the significant unobservable inputs used in the fair value measurements were as follows:

($ in thousands) Fair Value at March 31, 2023 Valuation

Technique Significant Unobservable

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Individually evaluated loans - collateral-dependent $ 1,799 Appraised value Discounts applied for estimated costs to sell 10 %

Individually evaluated loans - cash-flow dependent 4,513 PV of expected cash flows Discount rates used in the calculation of the present value ("PV") of expected cash flows 4 %- 11 % ( 6.60 %)

For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of December 31, 2022, the significant unobservable inputs used in the fair value measurements were as follows:

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

The carrying amounts and estimated fair values of financial instruments not carried at fair value at September 30, 2022 and December 31, 2021 were as follows:

September 30, 2022 December 31, 2021

The carrying amounts and estimated fair values of financial instruments not carried at fair value at March 31, 2023 and December 31, 2022 were as follows:

March 31, 2023 December 31, 2022

($ in thousands) Level in Fair

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Securities held to maturity Level 2 539,795 448,904 541,700 432,528

SBA and other loans held for sale Level 2 477 477 61,003 62,044

SBA loans held for sale Level 2 2,933 2,924 — —

Total loans, net of allowance Level 3 7,692,567 7,269,005 6,574,178 6,240,870

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Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.

Significant assets and liabilities that are not considered financial assets or liabilities include net premises and equipment, intangible and other assets such as deferred income taxes, prepaid expense accounts, income taxes currently payable and other various accrued expenses.

Significant assets and liabilities that are not considered financial assets or liabilities include

net premises and equipment, intangible and other assets such as deferred income taxes, prepaid expense accounts, income taxes currently payable and other various accrued expenses.

In addition, the income tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates.

Note 10 – Stock-Based Compensation

The Company recorded total stock-based compensation expense of $ 0.7 million and $ 0.5 million for the three months ended September 30, 2022 and 2021, respectively, and $ 1.9 million and $ 1.8 million for the nine months ended September 30, 2022 and 2021, respectively.

In addition, the Company recog nized $ 170,000 an d $ 123,000 of income tax benefits related to stock-based compensation expense for the three months ended September 30, 2022 and 2021, respectively, and $ 445,000 and $ 405,000 for the nine months ended September 30, 2022 and 2021, respectively.

At September 30, 2022, the sole equity-based compensation plan of the Company was the First Bancorp 2014 Equity Plan (the "Equity Plan"), which was approved by shareholders on May 8, 2014.

As of September 30, 2022, the Equity Plan had 346,033 shares remaining available for grant.

The Company recorded total stock-based compensation expense of $ 1.1 million and $ 0.5 million for the three months ended March 31, 2023 and 2022, respectively.

In addition, the Company recog nized $ 259 thousand an d $ 126 thousand of income tax benefits related to stock-based compensation expense for the three months ended March 31, 2023 and 2022, respectively.

At March 31, 2023, the sole equity-based compensation plan of the Company was the First Bancorp 2014 Equity Plan (the "Equity Plan"), which was approved by shareholders on May 8, 2014.

As of March 31, 2023, the Equity Plan had 267,803 shares remaining available for grant.

The Equity Plan is intended to serve as a means to attract, retain and motivate key employees and directors and to associate the interests of the plans' participants with those of the Company and its shareholders.

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

The following table presents information regarding the activity for the first nine months of 2022 related to the Company’s outstanding restricted stock awards:

The following table presents information regarding the activity for the first three months of 2023 related to the Company’s outstanding restricted stock awards:

Long-Term Restricted Stock Awards

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Forfeited or expired during the period ( 791 ) 37.88

Nonvested at September 30, 2022 242,753 $ 36.37

Total unrecognized compensation expense as of September 30, 2022 amounted to $ 5.5 million with a weighted-average remaining term of 2.3 years.

For the nonvested awards that are outstanding at September 30, 2022, the Company expects to record $ 2.7 million in compensation expense in the next twelve months, $ 0.7 million of which is expected to be recorded in the remaining quarter of 2022.

Note 11 - Shareholders' Equity

Stock Repurchases

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

The Company currently has a $ 40.0 million repurchase authorization that was announced on February 7, 2022, and expires December 31, 2022.

During the first nine months of 2021, the Company repurchased 106,744 shares of the Company's common stock at an average stock price of $ 37.81 per share, which totaled approximately $ 4.0 million, under a $ 20.0 million repurchase authorization announced publicly in January 2021.

Nonvested at March 31, 2023 301,942 $ 37.33

Total unrecognized compensation expense as of March 31, 2023 amounted to $ 6.5 million with a weighted-average remaining term of 2.2 years.

For the nonvested awards that are outstanding at March 31, 2023, the Company expects to record $ 3.8 million in compensation expense in the next twelve months, $ 3.1 million of which is expected to be recorded in the remaining quarters of 2023.

As discussed in Note 2, in conjunction with the GrandSouth acquisition, GrandSouth common stock options outstanding at January 1, 2023 became fully vested under the change in control provisions in the GrandSouth option plans and were converted into replacement options to acquire 0.91 shares of the Company's common stock.

Stock option activity and related information is presented below as of and for the periods indicated:

Options Outstanding

Number of Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life (years) Aggregate Intrinsic Value

($ in thousands)

Balance at January 1, 2023 — $ —

Replacement options issued in conjunction with acquisition of GrandSouth 542,345 20.14

Exercised during the period ( 169,718 ) 18.94

Forfeited or expired during the period — —

Outstanding at March 31, 2023 372,627 20.68 6.55 $ 5,530

Exercisable at March 31, 2023 372,627 $ 20.68 6.55 $ 5,530

Stock options outstanding are summarized as follows as of March 31, 2023:

Shares Range Weighted Average Price Weighted Average Remaining Life in Years

113,732 $ 13.79 - 18.18

133,770 $ 18.19 18.19 6.23

125,125 $ 18.20 - 31.32

372,627 20.68 6.55

In accordance with ASC 805-30, the fair value of the replacement options issued in conjunction with the GrandSouth acquisition as of January 1, 2023 was measured using the Black-Scholes option pricing model and the weighted average fair value of replacement options was $ 24.85 .

The following table illustrates the assumptions for the Black-Scholes model used in determining the fair value of options granted:

For the Three Months Ended

March 31, 2023

Fair value per option, weighted average $ 24.85

Expected life (years) 1.4 - 4.7

Expected stock price volatility, weighted average 46.39 %

Expected dividend yield 2.05 %

Risk-free interest rate, weighted average 4.18 %

Expected forfeiture rate — %

The expected life is based on historical exercises and forfeitures experience of the grantees.

The volatility is based on historical price volatility.

The risk-free interest rate is based on a U.S.

Treasury instrument with a life that is similar to the expected life of the option grant.

At March 31, 2023, the Company had no unrecognized compensation expense related to stock options.

All unexercised options expire ten years after the applicable original grant dates under the GrandSouth stock option plan.

Note 11 – Earnings Per Share

The following is a reconciliation of the numerators and denominators used in computing Basic and Diluted Earnings Per Common Share ("EPS"):

For the Three Months Ended September 30,

($ in thousands except per

share amounts) Income

(Numerator) Shares

(Denominator) Per Share

Amount Income

(Numerator) Shares

(Denominator) Per Share

Net income $ 37,949 $ 27,643

income allocated to participating securities ( 249 ) ( 125 )

Basic EPS per common share $ 37,700 35,469,001 $ 1.06 $ 27,518 28,385,912 $ 0.97

Net income $ 37,949 35,469,001 $ 27,643 28,385,912

Effect of dilutive securities — 234,445 — 129,416

Diluted EPS per common share $ 37,949 35,703,446 $ 1.06 $ 27,643 28,515,328 $ 0.97

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

($ in thousands except per

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Diluted EPS per common share $ 15,161 41,112,692 $ 0.37 $ 33,969 35,640,978 $ 0.95

Note 13 – Accumulated Other Comprehensive Loss

Note 12 – Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss) for the Company are as follows:

($ in thousands) September 30, 2022 December 31, 2021

($ in thousands) March 31, 2023 December 31, 2022

Unrealized loss on securities available for sale $ ( 408,731 ) ( 444,063 )

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Total accumulated other comprehensive loss $ ( 314,034 ) ( 341,975 )

The following tables disclose the changes in accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2022 and 2021 (all amounts are net of tax).

For the Three Months Ended September 30, 2022

($ in thousands) Unrealized Loss on

Available for Sale Postretirement Plans Asset

(Liability) Total

Beginning balance $ ( 249,148 ) ( 204 ) ( 249,352 )

Other comprehensive loss before reclassifications ( 108,718 ) — ( 108,718 )

Amounts reclassified from accumulated other comprehensive income

Net current-period other comprehensive (loss) income ( 108,718 ) 34 ( 108,684 )

Ending balance $ ( 357,866 ) ( 170 ) ( 358,036 )

For the Three Months Ended September 30, 2021

The following tables disclose the changes in accumulated other comprehensive income (loss) for the three months ended March 31, 2023 and 2022 (all amounts are net of tax):

For the Three Months Ended March 31, 2023

($ in thousands) Unrealized (Loss) Gain on

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Beginning balance $ ( 342,017 ) 42 ( 341,975 )

Other comprehensive income before reclassifications 2,829 — 2,829

Other comprehensive gain before reclassifications 27,908 — 27,908

Amounts reclassified from accumulated other comprehensive income

Net current-period other comprehensive income 2,829 114 2,943

Net current period other comprehensive gain income 27,908 33 27,941

Ending balance $ ( 314,109 ) 75 ( 314,034 )

For the Nine Months Ended September 30, 2022

For the Three Months Ended March 31, 2022

($ in thousands) Unrealized (Loss) on

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Ending balance $ ( 164,717 ) ( 238 ) ( 164,955 )

For the Nine Months Ended September 30, 2021

($ in thousands) Unrealized Gain

Available for Sale Postretirement Plans Asset

(Liability) Total

Beginning balance $ 15,749 ( 1,399 ) 14,350

Other comprehensive loss before reclassifications ( 12,505 ) — ( 12,505 )

Amounts reclassified from accumulated other comprehensive income

Net current-period other comprehensive (loss) income ( 12,505 ) 373 ( 12,132 )

Ending balance $ 3,244 ( 1,026 ) 2,218

Amounts reclassified from accumulated other comprehensive income for unrealized gain (loss) on securities available for sale represent realized securities gains or losses, net of tax effects.

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All of the Company’s revenues that are in the scope of the “ Revenue from Contracts with Customers ” accounting standard (“ASC 606”) are recognized within noninterest income.

The following table presents the Company’s sources of noninterest income for the three and nine months ended September 30, 2022 and 2021.

The following table presents the Company’s sources of noninterest income for the three months ended March 31, 2023 and 2022.

Items outside the scope of ASC 606 are noted as such.

For the Three Months Ended For the Nine Months Ended

($ in thousands) September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

For the Three Months Ended

($ in thousands) March 31, 2023 March 31, 2022

Noninterest Income:

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Other service charges and fees 3,318 2,263

Commissions from sales of insurance and financial products:

Insurance income — 6 — 2,725

Wealth management income 1,391 1,128 3,487 3,065

Commissions from sales of financial products 1,306 945

SBA consulting fees 521 780

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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 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.

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Commissions from the sales of insurance and financial products:

The Company earns commissions from the sale of wealth management products.

In addition, this line included earned commissions from the sale of insurance policies until the sale of substantially all of the assets of First Bank Insurance Services on June 30, 2021, at which time this revenue source ceased.

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.

Wealth management income primarily consists of commissions received on financial product sales, such as annuities.

The Company earns commissions from the sale of wealth management products which primarily consist 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.

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements