What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-08-08 compared with 2023-05-09 · 439 added, 291 removed, 928 unchanged (44% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

($ in thousands) March 31,

($ in thousands) June 30,

2023 (unaudited) December 31,

6 unchanged sentences

Presold mortgages in process of settlement at fair value 4,953 1,282

SBA loans held for sale 2,933 —

Loans 7,897,629 6,665,145

6 unchanged sentences

Other intangible assets 37,097 12,675

Foreclosed properties 789 658

Bank-owned life insurance 181,659 164,592

14 unchanged sentences

Issued & outstanding:

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

none as of June 30, 2023 and December 31, 2022

Common stock, no par value per share.

1 unchanged sentence

Issued & outstanding:

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

41,082,678 shares and 35,704,154 shares as of June 30, 2023 and December 31, 2022, respectively

960,851 725,153

8 unchanged sentences

Consolidated Statements of Income

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

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

12 unchanged sentences

Provision for credit losses 3,700 — 15,151 3,500

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

Reversal of provision for unfunded commitments ( 1,339 ) — ( 288 ) ( 1,500 )

Total provision for credit losses 2,361 — 14,863 2,000

10 unchanged sentences

Total noninterest income 14,235 17,264 27,771 36,515

NONINTEREST EXPENSES

NONINTEREST EXPENSE

Salaries expense 28,676 23,799 57,997 47,253

5 unchanged sentences

Intangibles amortization expense 2,049 953 4,194 1,970

Foreclosed property net gains ( 35 ) ( 80 )

Other operating expenses 18,397 12,963 37,464 26,207

14 unchanged sentences

Three Months Ended

June 30, Six Months Ended June 30,

($ in thousands - unaudited) 2023 2022 2023 2022

1 unchanged sentence

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

Unrealized (losses) gains on securities available for sale:

Unrealized (losses) gains arising during the period ( 31,415 ) ( 109,623 ) 3,918 ( 291,418 )

Tax benefit (expense) 7,273 25,192 ( 152 ) 66,968

Postretirement Plans:

1 unchanged sentence

Tax benefit ( 10 ) ( 10 ) ( 21 ) ( 20 )

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

Other comprehensive (loss) income ( 24,108 ) ( 84,397 ) 3,833 ( 224,382 )

Comprehensive income (loss) $ 5,295 ( 47,812 ) 48,397 ( 153,828 )

9 unchanged sentences

Shares Amount

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

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

Net income 36,585 36,585

Cash dividends declared ($ 0.22 per common share)

( 7,850 ) ( 7,850 )

Change in Rabbi Trust Obligation 241 ( 241 ) —

Stock withheld for payment of taxes ( 14 ) ( 486 ) ( 486 )

Stock-based compensation 58 1,001 1,001

Other comprehensive loss ( 84,397 ) ( 84,397 )

Balances, June 30, 2022 35,684 $ 723,956 587,739 ( 1,573 ) 1,573 ( 249,352 ) 1,062,343

Three Months Ended June 30, 2023

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

Net income 29,403 29,403

Cash dividends declared ($ 0.22 per common share)

( 9,043 ) ( 9,043 )

Change in Rabbi Trust Obligation 243 ( 243 ) —

Stock options exercised 23 488 488

Stock withheld for payment of taxes ( 6 ) ( 186 ) ( 186 )

Stock-based compensation 79 1,127 1,127

Other comprehensive income ( 24,108 ) ( 24,108 )

Balances, June 30, 2023 41,083 $ 960,851 674,933 ( 1,365 ) 1,365 ( 338,142 ) 1,297,642

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

Six Months Ended June 30, 2022

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

6 unchanged sentences

Other comprehensive loss ( 224,382 ) ( 224,382 )

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, June 30, 2022 35,684 $ 723,956 587,739 ( 1,573 ) 1,573 ( 249,352 ) 1,062,343

Six Months Ended June 30, 2023

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

5 unchanged sentences

Stock options exercised 193 3,703 3,703

Stock withheld for payment of taxes ( 6 ) ( 186 ) ( 186 )

Stock-based compensation 159 2,692 2,692

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

Other comprehensive income (loss) 3,833 3,833

Balances, June 30, 2023 41,083 $ 960,851 674,933 ( 1,365 ) 1,365 ( 338,142 ) 1,297,642

See accompanying notes to unaudited consolidated financial statements.

1 unchanged sentence

Consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

($ in thousands-unaudited) 2023 2022

22 unchanged sentences

Proceeds from sales of SBA and other loans 15,053 101,801

Decrease in accrued interest receivable 3,707 1,168

Decrease in other assets 8,719 3,509

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

Decrease in other liabilities ( 3,498 ) ( 2,816 )

Increase (decrease) in accrued interest receivable 2,001 ( 604 )

Decrease (increase) in other assets 4,048 ( 24,857 )

Increase in accrued interest payable 1,725 41

Increase (decrease) in other liabilities 1,553 ( 7,561 )

Net cash provided by operating activities 65,154 130,517

7 unchanged sentences

Proceeds from bank owned life insurance death benefits 137 5,827

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

Net increase in loans ( 226,193 ) ( 143,223 )

Proceeds from sales of foreclosed properties 192 2,904

2 unchanged sentences

Net cash received in acquisition activities 22,610 —

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

Net cash used by investing activities ( 10,213 ) ( 377,466 )

Cash Flows From Financing Activities

Net increase in deposits 98,742 260,752

Net (decrease) increase in deposits ( 106,165 ) 235,521

Net increase in short-term borrowings 154,973 —

9 unchanged sentences

Consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

($ in thousands-unaudited) 2023 2022

17 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 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.

In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the consolidated financial position of the Company as of June 30, 2023, the consolidated results of operations for the three and six months ended June 30, 2023 and 2022, and the consolidated cash flows for the six months ended June 30, 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.

Certain reclassifications have been made to the June 30, 2022 and December 31, 2022 consolidated financial statements to be comparable to June 30, 2023.

These reclassifications had no effect on net income.

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

7 unchanged sentences

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.

Additionally, the current year vintage disclosure included in Note 4 has been updated to reflect gross charge-offs by year of origination for the six months ended June 30, 2023.

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

6 unchanged sentences

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.

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.

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.

23 unchanged sentences

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.

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.

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

30 unchanged sentences

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 Company calculated the "Day 1" allowance of $ 5.6 million on PCD loans in accordance with its 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:

12 unchanged sentences

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 discount rates used for CDI assets were 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.

8 unchanged sentences

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:

Merger-related costs related to this acquisition of $ 1.3 million and $ 13.5 million for the three and six months ended June 30, 2023 were recorded by the Company 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 $ 0.1 million and $ 0.4 million for the three and six months ended June 30, 2022.

Pro forma information for the three and six months ended June 30, 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.

The following table also discloses the impact of the acquisition of GrandSouth from the acquisition date of January 1, 2023 through June 30, 2023.

These amounts are included in the Company’s consolidated financial statements as of and for the three and six months ended June 30, 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

($ in thousands) For the three months ended For the six months ended

June 30, 2023 June 30, 2023

Revenue Net Income Revenue Net Income

Actual GrandSouth results included in statement of income since acquisition date $ 13,767 $ 5,132 $ 29,307 $ 10,951

Three Months Ended March 31, 2022

($ in thousands) For the three months ended For the six months ended

June 30, 2022 June 30, 2022

Revenue Net Income Revenue Net Income

Supplemental consolidated pro forma for the Company as if GrandSouth had been acquired on January 1, 2022 110,248 39,746 220,672 77,213

Note 3 – Securities

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

The book values and approximate fair values of investment securities at June 30, 2023 and December 31, 2022 are summarized as follows:

($ in thousands) June 30, 2023 December 31, 2022

Value Unrealized Amortized

11 unchanged sentences

Total held to maturity $ 537,821 441,881 6 ( 95,946 ) 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 $ 0.8 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:

The following table presents information regarding all securities with unrealized losses at June 30, 2023:

Securities in an Unrealized

27 unchanged sentences

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

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 June 30, 2023, the Company's securities portfolio held 657 securities of which 645 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 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 the above tables, all of the securities that were in an unrealized loss position at June 30, 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.

3 unchanged sentences

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 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.

At June 30, 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 June 30, 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 $ 2,659,931 2,219,786 537,821 441,881

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.

At June 30, 2023 and December 31, 2022, investment securities with carrying values of $ 1.6 billion and $ 758.0 million, respectively, were pledged as collateral for public deposits or at the Federal Reserve Bank of Richmond ("Federal Reserve") as security on lines of credit.

At June 30, 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.

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.

There were no sales of investment securities during the three or six months ended June 30, 2023.

Included in “Other assets” in the Consolidated Balance Sheets are investments in Federal Home Loan Bank (“FHLB”) and Federal Reserve stock totaling $ 54.9 million and $ 39.6 million at June 30, 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 $ 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.

The FHLB stock had a cost and fair value of $ 22.1 million and $ 14.7 million at June 30, 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 $ 32.7 million and $ 24.9 million at June 30, 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 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.

The conversion rate at June 30, 2023 was approximately 1.59 , which means the Company would have received approximately 19,649 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) March 31, 2023 December 31, 2022

($ in thousands) June 30, 2023 December 31, 2022

Amount Percentage Amount Percentage

Commercial, financial, and agricultural $ 885,032 11 % $ 641,941 9 %

Real estate – construction, land development & other land loans 1,092,026 14 % 934,176 14 %

Real estate mortgage – residential (1-4 family) first mortgages 1,386,580 18 % 1,195,785 18 %

Real estate mortgage – home equity loans / lines of credit 342,287 4 % 323,726 5 %

Real estate mortgage – commercial and other 4,026,258 52 % 3,510,261 53 %

Commercial and industrial $ 888,391 11 % $ 641,941 9 %

Construction, development & other land loans 1,109,769 14 % 934,176 14 %

Commercial real estate - owner occupied 1,222,189 16 % 1,036,270 16 %

Commercial real estate - non owner occupied 2,423,262 31 % 2,123,811 32 %

Multi-family real estate 392,120 5 % 350,180 5 %

Residential 1-4 family real estate 1,461,068 18 % 1,195,785 18 %

Home equity loans/lines of credit 334,566 4 % 323,726 5 %

Consumer loans 67,077 1 % 60,659 1 %

3 unchanged sentences

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

($ in thousands) June 30, 2023 December 31, 2022

Guaranteed portions of SBA loans included in table above $ 39,339 31,893

2 unchanged sentences

Sold portions of SBA loans with servicing retained - not included in tables above $ 371,943 392,370

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.

At June 30, 2023 and December 31, 2022, there were remaining unaccreted discounts on the retained portion of sold SBA loans amounting to $ 3.8 million and $ 4.3 milion, respectively.

At June 30, 2023 and December 31, 2022, l oans in the amount of $ 6.1 billion and $ 5.3 billion, respectively, were pledged as collateral for certain borrowings.

At June 30, 2023 and December 31, 2022, total loans included loans to executive officers and directors of the Company, and their associates, totaling approximately $ 5.8 million and $ 6.0 million, respectively.

There were two new loans and advances on existing loans totaling approximately $ 0.1 million for the six months ended June 30, 2023 and repayments amounted to $ 0.3 million for that period.

Available credit on related party loans totaled $ 1.2 million at June 30, 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.

As of June 30, 2023 and December 31, 2022, unamortized discounts on all acquired loans totaled $ 29.2 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, 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) March 31,

Nonperforming assets ("NPA") 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.

The following table summarizes the NPAs for each period presented.

($ in thousands) June 30,

2023 December 31,

5 unchanged sentences

Total nonperforming assets $ 35,815 38,293

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:

At June 30, 2023 and December 31, 2022, the Company had $ 2.7 million and $ 0.8 million, respectively, in residential mortgage loans in the process of foreclosure.

At both June 30, 2023 and December 31, 2022, there was one loan, respectively, 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 June 30, 2023:

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

Commercial, financial, and agricultural $ 36 10,752 10,788

Real estate – construction, land development & other land loans — 123 123

Real estate mortgage – residential (1-4 family) first mortgages — 3,026 3,026

Real estate mortgage – home equity loans / lines of credit — 1,781 1,781

Real estate mortgage – commercial and other 4,059 8,096 12,155

Commercial and industrial $ — 11,299 11,299

Construction, development & other land loans — 265 265

Commercial real estate - owner occupied 3,277 7,988 11,265

Commercial real estate - non owner occupied 673 1,153 1,826

Multi-family real estate — — —

Residential 1-4 family real estate — 3,198 3,198

Home equity loans/lines of credit — 1,867 1,867

Consumer loans — 156 156

2 unchanged sentences

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

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

Real estate – construction, land development & other land loans — 1,009 1,009

Real estate mortgage – residential (1-4 family) first mortgages 157 3,132 3,289

Real estate mortgage – home equity loans / lines of credit — 1,397 1,397

Real estate mortgage – commercial and other 5,010 7,495 12,505

Commercial and industrial $ 3,855 6,374 10,229

Construction, development & other land loans — 1,009 1,009

Commercial real estate - owner occupied 3,903 5,770 9,673

Commercial real estate - non owner occupied 1,107 1,725 2,832

Multi-family real estate — — —

Residential 1-4 family real estate 157 3,132 3,289

Home equity loans/lines of credit — 1,397 1,397

Consumer loans — 85 85

3 unchanged sentences

The following table represents the accrued interest receivables written off by reversing interest income during each period indicated:

($ 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

Real estate – construction, land development & other land loans — 16 12

Real estate mortgage – residential (1-4 family) first mortgages 8 45 10

Real estate mortgage – home equity loans / lines of credit 9 20 2

Real estate mortgage – commercial and other 16 139 100

($ in thousands) Six Months Ended June 30, 2023 For the Year Ended December 31, 2022 Six Months Ended June 30, 2022

Commercial and industrial $ 162 102 33

Construction, development & other land loans 2 16 16

Commercial real estate - owner occupied 64 123 100

Commercial real estate - non owner occupied 7 15 2

Multi-family real estate — 1 —

Residential 1-4 family real estate 20 45 25

Home equity loans/lines of credit 16 20 6

Consumer loans 1 2 2

Total $ 272 324 184

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

The following table presents an analysis of the payment status of the Company’s loans as of June 30, 2023:

($ in thousands) Accruing

2 unchanged sentences

Current Total Loans

Commercial, financial, and agricultural $ 1,329 392 — 10,788 872,523 885,032

Real estate – construction, land development & other land loans 233 52 — 123 1,091,618 1,092,026

Real estate mortgage – residential (1-4 family) first mortgages 8,806 95 — 3,026 1,374,653 1,386,580

Real estate mortgage – home equity loans / lines of credit 807 139 — 1,781 339,560 342,287

Real estate mortgage – commercial and other 1,896 725 — 12,155 4,011,482 4,026,258

Commercial and industrial $ 702 1,127 — 11,299 875,263 888,391

Construction, development & other land loans 585 22 — 265 1,108,897 1,109,769

Commercial real estate - owner occupied 525 400 — 11,265 1,209,999 1,222,189

Commercial real estate - non owner occupied 61 634 — 1,826 2,420,741 2,423,262

Multi-family real estate — — — — 392,120 392,120

Residential 1-4 family real estate 1,027 1,814 — 3,198 1,455,029 1,461,068

Home equity loans/lines of credit 550 673 — 1,867 331,476 334,566

Consumer loans 229 56 — 156 66,636 67,077

7 unchanged sentences

Current Total Loans

Commercial, financial, and agricultural $ 438 565 — 10,229 630,709 641,941

Real estate – construction, land development & other land loans 238 1,687 — 1,009 931,242 934,176

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

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

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

Commercial and industrial $ 438 565 — 10,229 630,709 641,941

Construction, development & other land loans 238 1,687 — 1,009 931,242 934,176

Commercial real estate - owner occupied 124 48 — 9,673 1,026,425 1,036,270

Commercial real estate - non owner occupied 496 49 — 2,832 2,120,434 2,123,811

Multi-family real estate — — — — 350,180 350,180

Residential 1-4 family real estate 3,415 25 — 3,289 1,189,056 1,195,785

Home equity loans/lines of credit 457 371 — 1,397 321,501 323,726

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

5 unchanged sentences

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:

The following table presents an analysis of collateral dependent loans of the Company as of June 30, 2023:

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

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

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

Commercial and industrial $ — 1,626 — — 1,626

Commercial real estate - owner occupied — — — 5,830 5,830

Commercial real estate - non owner occupied — — — 673 673

Total $ — 1,626 — 6,503 8,129

1 unchanged sentence

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

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

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

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

Commercial and industrial $ — 6,394 — — 6,394

Commercial real estate - owner occupied — — — 4,578 4,578

Commercial real estate - non owner occupied — — — 2,145 2,145

Residential 1-4 family real estate 157 — — — 157

Total $ 157 6,394 — 6,723 13,274

11 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.

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

Much of the change to the level of ACL during the six months ended June 30, 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 )

Recoveries 274 65 146 34 434 36 989

Provisions / (Reversals) 2,061 3,744 672 283 4,126 565 11,451

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

The balance of the change was a result of updated economic forecast inputs to our CECL model driving higher loss rate assumptions, primarily due to some deterioration in the commercial real estate index.

($ in thousands) Beginning balance "Day 1" ACL for acquired PCD loans Charge-offs Recoveries Provisions / (Reversals) Ending balance

As of and for the three months ended June 30, 2023

Commercial and industrial $ 23,073 — ( 1,534 ) 492 1,411 23,442

Construction, development & other land loans 18,986 — — 158 ( 667 ) 18,477

Commercial real estate - owner occupied 16,082 — — 34 265 16,381

Commercial real estate - non owner occupied 25,990 — — 38 246 26,274

Multi-family real estate 3,204 — — 3 739 3,946

Residential 1-4 family real estate 12,285 — — 79 1,941 14,305

Home equity loans/lines of credit 3,481 — — 40 196 3,717

Consumer loans 3,295 — ( 217 ) 41 ( 431 ) 2,688

Total $ 106,396 — ( 1,751 ) 885 3,700 109,230

As of and for the six months ended June 30, 2023

Commercial and industrial $ 17,718 5,197 ( 3,711 ) 766 3,472 23,442

Construction, development & other land loans 15,128 49 — 223 3,077 18,477

Commercial real estate - owner occupied 14,972 191 — 70 1,148 16,381

Commercial real estate - non owner occupied 22,780 51 ( 235 ) 432 3,246 26,274

Multi-family real estate 2,957 — — 7 982 3,946

Residential 1-4 family real estate 11,354 113 — 225 2,613 14,305

Home equity loans/lines of credit 3,158 8 ( 2 ) 74 479 3,717

Consumer loans 2,900 1 ( 424 ) 77 134 2,688

Total $ 90,967 5,610 ( 4,372 ) 1,874 15,151 109,230

($ in thousands) Beginning balance Charge-offs Recoveries Provisions / (Reversals) Ending balance

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

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

Recoveries 756 480 17 600 1,983 207 4,043

Provisions/(Reversals) 3,232 ( 1,871 ) 2,651 ( 1,736 ) 9,447 877 12,600

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

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

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

Recoveries 247 137 4 233 155 47 823

Provisions/(Reversals) 307 ( 599 ) ( 531 ) ( 2,455 ) 6,875 ( 97 ) 3,500

Ending balance $ 16,013 16,057 8,159 2,074 37,327 2,439 82,069

Commercial and industrial $ 16,249 ( 2,519 ) 756 3,232 17,718

Construction, development & other land loans 16,519 — 480 ( 1,871 ) 15,128

Commercial real estate - owner occupied 12,317 ( 214 ) 691 2,178 14,972

Commercial real estate - non owner occupied 16,789 ( 849 ) 1,281 5,559 22,780

Multi-family real estate 1,236 — 11 1,710 2,957

Residential 1-4 family real estate 8,686 — 17 2,651 11,354

Home equity loans/lines of credit 4,337 ( 43 ) 600 ( 1,736 ) 3,158

Consumer loans 2,656 ( 840 ) 207 877 2,900

Total $ 78,789 ( 4,465 ) 4,043 12,600 90,967

($ in thousands) Beginning balance Charge-offs Recoveries Provisions / (Reversals) Ending balance

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

Commercial and industrial $ 16,013 ( 728 ) 223 ( 58 ) 15,450

Construction, development & other land loans 16,057 — 130 ( 16 ) 16,171

Commercial real estate - owner occupied 15,274 ( 18 ) 529 ( 864 ) 14,921

Commercial real estate - non owner occupied 19,440 ( 800 ) 768 716 20,124

Multi-family real estate 2,613 — 3 ( 467 ) 2,149

Residential 1-4 family real estate 8,159 — 11 480 8,650

Home equity loans/lines of credit 2,074 — 128 ( 116 ) 2,086

Consumer loans 2,439 ( 214 ) 80 325 2,630

Total $ 82,069 ( 1,760 ) 1,872 — 82,181

As of and for the six months ended June 30, 2022

Commercial and industrial $ 16,249 ( 1,518 ) 470 249 15,450

Construction, development & other land loans 16,519 — 267 ( 615 ) 16,171

Commercial real estate - owner occupied 12,317 ( 18 ) 560 2,062 14,921

Commercial real estate - non owner occupied 16,789 ( 845 ) 889 3,291 20,124

Multi-family real estate 1,236 — 6 907 2,149

Residential 1-4 family real estate 8,686 — 15 ( 51 ) 8,650

Home equity loans/lines of credit 4,337 ( 41 ) 361 ( 2,571 ) 2,086

Consumer loans 2,656 ( 381 ) 127 228 2,630

Total $ 78,789 ( 2,803 ) 2,695 3,500 82,181

Credit Quality Indicators

33 unchanged sentences

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

As of March 31, 2023

Commercial, financial, and agricultural

As of June 30, 2023

Commercial and industrial

Pass $ 74,660 181,469 115,551 84,957 48,034 67,670 298,082 870,423

1 unchanged sentence

Classified 297 1,244 1,991 1,601 1,252 5,274 1,588 13,247

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

Total commercial and industrial 75,304 183,199 117,877 87,060 50,380 73,833 300,738 888,391

Gross charge-offs, YTD — 146 696 32 556 764 1,517 3,711

Real estate – construction, land development & other land loans

Construction, development & other land loans

Pass 310,613 466,562 214,178 22,440 15,743 9,253 67,372 1,106,161

1 unchanged sentence

Classified 404 104 81 8 16 228 24 865

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

Total construction, development & other land loans 311,404 468,878 214,259 22,470 15,759 9,580 67,419 1,109,769

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

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

Commercial real estate - owner occupied

Pass 93,809 316,395 325,281 210,414 101,728 123,372 17,491 1,188,490

1 unchanged sentence

Classified 425 3,128 1,749 267 2,443 7,636 90 15,738

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

Total commercial real estate - owner occupied 94,964 319,802 327,750 214,479 110,120 136,858 18,216 1,222,189

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

Real estate mortgage – home equity loans / lines of credit

Commercial real estate - non owner occupied

Pass 263,968 750,657 781,011 326,322 144,933 115,805 23,895 2,406,591

1 unchanged sentence

Classified 96 1,090 16 — 1,425 1,374 — 4,001

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

Total commercial real estate - non owner occupied 264,437 751,965 781,067 330,926 147,706 123,266 23,895 2,423,262

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

Real estate mortgage – commercial and other

Multi-family real estate

Pass 35,169 146,618 135,882 45,914 12,650 11,561 4,326 392,120

1 unchanged sentence

Classified — — — — — — — —

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

Total multi-family real estate 35,169 146,618 135,882 45,914 12,650 11,561 4,326 392,120

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

Residential 1-4 family real estate

Pass 153,127 393,590 318,229 198,500 98,969 281,467 1,715 1,445,597

Special Mention 697 44 196 151 607 2,036 19 3,750

Classified 312 245 374 811 436 8,928 615 11,721

Total residential 1-4 family real estate 154,136 393,879 318,799 199,462 100,012 292,431 2,349 1,461,068

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

Home equity loans/lines of credit

Pass 1,770 3,404 1,275 298 606 1,752 315,797 324,902

Special Mention 223 — 120 — — 17 77 437

Classified 107 66 151 93 98 125 8,587 9,227

Total home equity loans/lines of credit 2,100 3,470 1,546 391 704 1,894 324,461 334,566

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

Consumer loans

11 unchanged sentences

As of December 31, 2022

Commercial, financial, and agricultural

Commercial and industrial

Pass $ 185,167 107,747 85,110 51,274 590 76,588 120,590 627,066

1 unchanged sentence

Classified 734 1,909 808 1,384 — 5,762 488 11,085

Total commercial, financial, and agricultural 186,243 109,822 86,566 53,970 590 83,340 121,410 641,941

Real estate – construction, land development & other land loans

Total commercial and industrial 186,243 109,822 86,566 53,970 590 83,340 121,410 641,941

Construction, development & other land loans

Pass 550,752 267,096 42,421 30,973 — 12,722 19,519 923,483

1 unchanged sentence

Classified 656 107 38 899 — 44 24 1,768

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

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

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

Commercial real estate - owner occupied

Pass 258,025 305,324 190,464 96,495 179 141,053 15,499 1,007,039

1 unchanged sentence

Classified 3,060 208 84 1,572 — 6,790 367 12,081

Total real estate – mortgage – residential (1-4 family) first mortgages 319,234 275,134 186,433 99,388 185 313,373 2,038 1,195,785

Real estate mortgage – home equity loans / lines of credit

Total commercial real estate - owner occupied 262,255 306,602 194,590 104,993 179 151,120 16,531 1,036,270

Commercial real estate - non owner occupied

Pass 718,696 747,653 319,708 141,284 — 168,096 21,159 2,116,596

1 unchanged sentence

Classified 420 1,057 — 884 — 1,328 — 3,689

Total real estate – mortgage – home equity loans / lines of credit 1,150 1,247 443 324 — 2,251 318,311 323,726

Real estate mortgage – commercial and other

Total commercial real estate - non owner occupied 719,661 748,754 320,102 143,531 — 170,604 21,159 2,123,811

Multi-family real estate

Pass 119,922 133,701 59,452 9,669 — 15,212 12,224 350,180

1 unchanged sentence

Classified — — — — — — — —

Total real estate mortgage – commercial and other 1,101,838 1,189,057 574,144 258,193 179 336,936 49,914 3,510,261

Total multi-family real estate 119,922 133,701 59,452 9,669 — 15,212 12,224 350,180

Residential 1-4 family real estate

Pass 317,282 274,756 186,102 98,559 185 301,885 1,379 1,180,148

Special Mention 1,189 127 110 470 — 2,416 — 4,312

Classified 763 251 221 359 — 9,072 659 11,325

Total residential 1-4 family real estate 319,234 275,134 186,433 99,388 185 313,373 2,038 1,195,785

Home equity loans/lines of credit

Pass 869 1,091 349 237 — 2,020 309,786 314,352

Special Mention 175 — — — — 18 1,072 1,265

Classified 106 156 94 87 — 213 7,453 8,109

Total home equity loans/lines of credit 1,150 1,247 443 324 — 2,251 318,311 323,726

Consumer loans

14 unchanged sentences

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.

The followings tables present the amortized cost basis at June 30, 2023 of the loans modified during the three and six months then ended 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 %

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

($ in thousands) Payment Delay Term Extension Combination - Interest Rate Reduction and Term Extension Total Percent of Total Class of Loans

As of and for the three months ended June 30, 2023

Commercial and industrial $ 1,363 30 — 1,393 0.16 %

Commercial real estate - owner occupied 188 287 — 475 0.04 %

Residential 1-4 family real estate — 469 — 469 0.03 %

Home equity loans/lines of credit — 1,317 — 1,317 0.39 %

Total $ 1,551 2,103 — 3,654 0.05 %

As of and for the six months ended June 30, 2023

Commercial and industrial $ 1,513 105 — 1,618 0.18 %

Construction, development & other land loans — 502 12 514 0.05 %

Commercial real estate - owner occupied 188 287 — 475 0.04 %

Commercial real estate - non owner occupied — 96 — 96 NM

Residential 1-4 family real estate — 515 — 515 0.04 %

Home equity loans/lines of credit — 1,416 — 1,416 0.42 %

Consumer loans — 228 — 228 0.34 %

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 %

Total $ 1,701 3,149 12 4,862 0.06 %

For the three and six months ended June 30, 2023, there were no modifications for borrowers experiencing financial difficulty with principal forgiveness concessions.

The following tables describes the financial effect for the three and six months ended June 30, 2023 of the modifications made for borrowers experiencing financial difficulty:

Financial Effect of Modification to Borrowers Experiencing Financial Difficulty

Weighted Average Interest Rate Reduction Weighted Average Payment Delay

(in months) Weighted Average Term Extension

For the three months ended June 30, 2023

Commercial and industrial — % 2 25

Commercial real estate - owner occupied — % 12 49

Residential 1-4 family real estate — % 0 25

Home equity loans/lines of credit — % 0 42

For the six months ended June 30, 2023

Commercial and industrial — % 2 13

Construction, development & other land loans 1.50 % 0 7

Commercial real estate - owner occupied — % 12 49

Commercial real estate - non owner occupied — % 0 15

Residential 1-4 family real estate — % 0 24

Home equity loans/lines of credit — % 0 40

Consumer loans — % 0 6

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):

The following table depicts the performance of loans that have been modified in the last 12 months as of June 30, 2023:

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 —

Real estate – construction, land development & other land loans 144 — — —

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

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

Real estate mortgage – commercial and other 104 — — —

Commercial and industrial $ 1,618 — — —

Construction, development & other land loans 514 — — —

Commercial real estate - owner occupied 475 — — —

Commercial real estate - non owner occupied 96 — — —

Multi-family real estate — — — —

Residential 1-4 family real estate 345 — 170 —

Home equity loans/lines of credit 1,416 — — —

Consumer loans 228 — — —

$ 4,692 — 170 —

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.

None of the modifications made for borrowers experiencing financial difficulty during the three and six months ended June 30, 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.

3 unchanged sentences

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 vast majority of the Company’s TDRs modified during the periods ended June 30, 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 Company’s TDRs are 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

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

For the three months ended

June 30, 2022 For the six months ended

June 30, 2022

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

Commercial and industrial 1 $ 161 161 1 $ 161 161

Construction, development & other land loans 1 131 131 1 131 131

Residential 1-4 family real estate — — — 1 36 36

Home equity loans/lines of credit 2 203 203 2 203 203

TDRs - Nonaccrual

Commercial, financial, and agricultural 1 41 41

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

Real estate mortgage – commercial and other 1 540 540

Commercial and industrial 2 259 259 3 300 300

Commercial real estate - owner occupied 1 244 244 2 784 784

Residential 1-4 family real estate — — — 1 36 36

Total TDRs arising during period 7 $ 998 998 11 $ 1,651 1,651

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.

There were no accruing TDRs that were modified in the previous twelve months and that defaulted during the three and six months ended June 30, 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 $ 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

The ACL for unfunded loan commitments of $ 13.0 million and $ 13.3 million at June 30, 2023 and December 31, 2022, respectively, were separately classified on the Consolidated Balance Sheets within "Other liabilities."

The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the six months ended June 30, 2023 and 2022 and for the twelve months ended December 31, 2022:

($ in thousands) June 30, 2023 December 31, 2022 June 30, 2022

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

5 unchanged sentences

Allowance for Credit Losses - Securities Held to Maturity

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

The ACL for securities held to maturity was insignificant at June 30, 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 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

The following is a summary of the gross carrying amount and accumulated amortization of amortizable intangible assets as of June 30, 2023 and December 31, 2022, and the carrying amount of unamortized intangible assets as of those same dates.

June 30, 2023 December 31, 2022

($ in thousands) Gross Carrying

5 unchanged sentences

Core deposit intangibles 57,890 25,296 29,050 21,274

Other intangibles 100 71 100 58

Intangibles before servicing assets 60,690 27,374 31,850 23,179

SBA servicing assets 13,536 9,755 13,264 9,260

Other 100 64 100 58

Total $ 74,032 34,770 45,114 32,439

Total amortizable intangible assets $ 74,226 37,129 45,114 32,439

Unamortizable intangible assets:

1 unchanged sentence

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.

Amortization expense of all other intangible assets, excluding the SBA servicing assets, totaled $ 2.0 million and $ 1.0 million for the three months ended June 30, 2023 and 2022, respectively, and $ 4.2 million and $ 2.0 million for the six months ended June 30, 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 months ended March 31, 2023 and 2022:

Three months ended March 31,

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 and SBA servicing income for the three and six months ended June 30, 2023 and 2022:

Three months ended June 30, Six months ended June 30,

($ in thousands) 2023 2022 2023 2022

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Ending balance, net $ 3,781 4,967 3,781 4,967

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.

SBA guaranteed servicing income $ 863 992 1,847 1,781

A t June 30, 2023 and December 31, 2022, the Company serviced SBA loans totali ng $ 371.9 million a nd $ 392.4 million, respectively, for others.

There were no other loans serviced in any period presented.

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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.

No triggering events were identified during 2023 to date or in 2022, and therefore, the Company did not perform interim impairment evaluations in either of those periods.

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.

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Additions from acquisition of GrandSouth 114,487

Balance at March 31, 2023 $ 478,750

Balance at June 30, 2023 $ 478,750

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

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($ in thousands) Estimated Amortization

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

July 1, 2023 to December 31, 2023 $ 3,808

Thereafter 8,576

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Note 6 - Borrowings

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

The following tables present information regarding the Company’s outstanding borrowings at June 30, 2023 and December 31, 2022 (dollars in thousands):

Description Due date Call Feature June 30, 2023 Interest Rate

FHLB Principal Reducing Credit 7/24/2023 None $ 8 1.00 % fixed

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

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

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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

Total borrowings / weighted average rate as of June 30, 2023

487,097 5.44 %

1 unchanged sentence

Total borrowings $ 481,658

As discussed in Note 1, with the June 30, 2023 cessation of LIBOR, the index for the interest rates on the Company's trust preferred securities will automatically convert to the 3-month CME Term SOFR plus a spread intended to approximate the current interest rate.

No material impact on the Company's financial statements is anticipated upon the next interest rate reset based on the SOFR index.

Description Due date Call Feature December 31, 2022 Interest Rate

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

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.

As of June 30, 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 19.2 years as of March 31, 2023.

The weighted average remaining life of the lease term for these leases was 19.3 years as of June 30, 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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Leases are classified as either operating or finance leases at the lease commencement date, and as previously noted, all of the Company's leases have been determined to be operating leases.

Lease expense for operating leases and short-term leases is recognized on a straight-line basis over the lease term.

Lease expense for operating leases and short-term leases is recognized on a straight-line basis over the applicable lease term.

Right-of-use assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease.

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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 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.

The weighted average discount rate for leases was 3.07 % as of June 30, 2023.

Total operating lease expenses were $ 0.8 million and $ 0.7 million for the three months ended June 30, 2023 and 2022, respectively, and $ 1.5 million and $ 1.6 million for the six months ended June 30, 2023 and 2022, respectively.

The right-of-use assets and lease liabilities were $ 18.4 million and $ 19.1 million as of June 30, 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 June 30, 2023 are as follows.

($ in thousands)

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

July 1, 2023 to December 31, 2023 $ 1,180

Thereafter 18,441

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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 Company recorded periodic pension cost totaling $ 50,000 and $ 51,000 for the three months ended June 30, 2023 and 2022, respectively, and $ 101,000 and $ 102,000 for the six months ended June 30, 2023 and 2022, respectively.

The following table contains the components of the pension cost:

For the Three Months Ended March 31,

For the Three Months Ended June 30,

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

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Net periodic pension cost $ 158 ( 108 ) 50 159 ( 108 ) 51

For the Six Months Ended June 30,

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

Service cost $ — — — — — —

Interest cost 533 56 589 534 56 590

Expected return on plan assets ( 576 ) — ( 576 ) ( 576 ) — ( 576 )

Amortization of net (gain)/loss 360 ( 272 ) 88 360 ( 272 ) 88

Net periodic pension cost $ 317 ( 216 ) 101 318 ( 216 ) 102

The service cost component of net periodic pension cost is included in salaries and benefits expense and all other components of net periodic pension cost are included in other noninterest expense.

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

The Company did not contribute to the Pension Plan in the first six 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.

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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 March 31, 2023:

The following table summarizes the Company’s financial instruments that were measured at fair value on a recurring and nonrecurring basis at June 30, 2023:

($ in thousands)

Description of Financial Instruments

Fair Value at March 31, 2023 Quoted Prices in

Active Markets for

Identical Assets

Fair Value at June 30, 2023 Quoted Prices in Active Markets for Identical Assets

(Level 1) Significant Other

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Description of Financial Instruments

Fair Value at December 31, 2022 Quoted Prices in

Active Markets

for Identical

Assets (Level 1) Significant Other

Fair Value at December 31, 2022 Quoted Prices in Active Markets for Identical Assets

(Level 1) Significant Other

Observable Inputs

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Foreclosed real estate 38 — — 38

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

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

Presold Mortgages in Process of Settlement — The fair value is based on the committed price that an investor has agreed to pay for the loan and is considered a Level 1 input.

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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 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

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 June 30, 2023, the significant unobservable inputs used in the fair value measurements were as follows:

($ in thousands) Fair Value at June 30, 2023 Valuation

Technique Significant Unobservable

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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 March 31, 2023 and December 31, 2022 were as follows:

March 31, 2023 December 31, 2022

The carrying amounts and estimated fair values of financial instruments not carried at fair value at June 30, 2023 and December 31, 2022 were as follows:

June 30, 2023 December 31, 2022

($ in thousands) Level in Fair

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Securities held to maturity Level 2 537,821 441,881 541,700 432,528

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

Total loans, net of allowance Level 3 7,788,399 7,339,310 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.

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.

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 $ 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 Company recorded total stock-based compensation expense of $ 1.1 million and $ 0.6 million for the three months ended June 30, 2023 and 2022, respectively, and $ 2.2 million and $ 1.5 million for the six months ended June 30, 2023 and 2022, respectively.

In addition, the Company recog nized $ 261,000 an d $ 149,000 of income tax benefits related to stock-based compensation expense for the three months ended June 30, 2023 and 2022, respectively, and $ 520,000 and $ 275,000 for the six months ended June 30, 2023 and 2022, respectively.

At June 30, 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 June 30, 2023, the Equity Plan had 205,498 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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Upon a change in control (as defined in the Equity Plan), unless the awards remain outstanding or substitute equivalent awards are provided, the awards become immediately vested.

Certain of the Company’s equity grants contain terms that provide for a graded vesting schedule whereby portions of the award vest in increments over the requisite service period.

The Company recognizes compensation expense for awards with graded vesting schedules on a straight-line basis over the requisite service period for each incremental award.

Certain of the Company’s equity grants contain terms that provide for an annual or cliff vesting schedule whereby portions of the award vest in increments over the requisite service period.

The Company recognizes compensation expense for awards with vesting schedules on a straight-line basis over the requisite service period for each incremental award.

Compensation expense is based on the estimated number of stock awards that will ultimately vest.

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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 three months of 2023 related to the Company’s outstanding restricted stock awards:

The following table presents information regarding the activity for the first six 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 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.

Nonvested at June 30, 2023 339,790 $ 37.15

Total unrecognized compensation expense as of June 30, 2023 amounted to $ 7.3 million with a weighted-average remaining term of 2.2 years.

For the nonvested awards that are outstanding at June 30, 2023, the Company expects to record $ 4.0 million in compensation expense in the next 12 months, $ 2.4 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.

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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:

Outstanding at June 30, 2023 350,167 20.62 6.27 $ 3,270

Exercisable at June 30, 2023 350,167 $ 20.62 6.27 $ 3,270

Stock options outstanding are summarized as follows as of June 30, 2023:

Shares Range Weighted Average Price Weighted Average Remaining Life in Years

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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

For the Six Months Ended

June 30, 2023

Fair value per option, weighted average $ 24.85

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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.

At June 30, 2023, the Company had no unrecognized compensation expense related to stock options.

All unexercised options expire 10 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 March 31,

For the Three Months Ended June 30,

($ in thousands except per

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Net income $ 29,403 $ 36,585

income allocated to participating securities ( 109 ) ( 198 )

income allocated to restricted stock ( 201 ) ( 172 )

Basic EPS per common share $ 29,202 40,721,840 $ 0.72 $ 36,413 35,474,664 $ 1.03

2 unchanged sentences

Diluted EPS per common share $ 29,403 41,129,100 $ 0.71 $ 36,585 35,642,471 $ 1.03

Six Months Ended June 30,

($ in thousands except per

share amounts) Income

(Numerator) Shares

(Denominator) Per Share

Amount Income

(Numerator) Shares

(Denominator) Per Share

Net income $ 44,564 $ 70,554

income allocated to restricted stock ( 299 ) ( 326 )

Basic EPS per common share $ 44,265 40,665,172 $ 1.09 $ 70,228 35,476,902 $ 1.98

Net income $ 44,564 40,665,172 $ 70,554 35,476,902

Effect of dilutive securities — 458,697 — 164,826

Diluted EPS per common share $ 44,564 41,123,869 $ 1.08 $ 70,554 35,641,728 $ 1.98

Note 12 – Accumulated Other Comprehensive Income (Loss)

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

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

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

($ in thousands) June 30, 2023 December 31, 2022

Unrealized loss on securities available for sale $ ( 440,145 ) ( 444,063 )

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Total accumulated other comprehensive loss $ ( 338,142 ) ( 341,975 )

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

The following tables disclose the changes in AOCI for the three and six months ended June 30, 2023 and 2022 (all amounts are net of tax):

For the Three Months Ended June 30, 2023

($ in thousands) Unrealized Loss on

Available for Sale Postretirement Plans Asset

1 unchanged sentence

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

Other comprehensive loss before reclassifications ( 24,142 ) — ( 24,142 )

Amounts reclassified from accumulated other comprehensive income

Net current period other comprehensive (loss) income ( 24,142 ) 34 ( 24,108 )

Ending balance $ ( 338,251 ) 109 ( 338,142 )

For the Three Months Ended June 30, 2022

($ in thousands) Unrealized Loss on

Available for Sale Postretirement Plans Asset

(Liability) Total

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

Other comprehensive loss before reclassifications ( 84,431 ) — ( 84,431 )

Amounts reclassified from accumulated other comprehensive income

Net current period other comprehensive (loss) income ( 84,431 ) 34 ( 84,397 )

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

For the Six Months Ended June 30, 2023

($ in thousands) Unrealized Loss on

Available for Sale Postretirement Plans Asset

(Liability) Total

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

Other comprehensive gain before reclassifications 3,766 — 3,766

Amounts reclassified from accumulated other comprehensive income

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

Net current-period other comprehensive income 3,766 67 3,833

Ending balance $ ( 338,251 ) 109 ( 338,142 )

For the Three Months Ended March 31, 2022

For the Six Months Ended June 30, 2022

($ in thousands) Unrealized Loss on

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

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.

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

There were no security sales in any period presented.

Amounts reclassified from accumulated other comprehensive income for postretirement plans asset (liability) represent amortization of amounts included in accumulated other comprehensive income (loss), net of taxes, and are recorded in the "Other operating expenses" line item of the Consolidated Statements of Income.

Amounts reclassified from AOCI for postretirement plans asset (liability) represent amortization of amounts included in AOCI, net of taxes, and are recorded in the "Other operating expenses" line item of the Consolidated Statements of Income.

Note 13 – Revenue from Contracts with Customers

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

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

The following table presents the Company’s sources of noninterest income for the three and six months ended June 30, 2023 and 2022.

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

For the Three Months Ended

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

For the Three Months Ended For the Six Months Ended

($ in thousands) June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Noninterest Income:

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Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of the month, representing the period over which the Company satisfies the performance obligation.

Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer’s request.

Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, are recognized at the

time the transaction is executed as that is the point in time the Company fulfills the customer’s request.

Service charges on deposits are withdrawn from the customer’s account balance.

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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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Payment is typically received immediately or in the following month.

Commissions from the sales of insurance and financial products:

Commissions from the sales of financial products:

The Company earns commissions from the sale of wealth management products which primarily consist of commissions received on financial product sales, such as annuities.

7 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