What changed in this filing

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Item 1. Financial Statements

2023-11-07 compared with 2023-08-08 · 221 added, 209 removed, 1158 unchanged (27% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

($ in thousands) June 30,

2023 (unaudited) December 31,

($ in thousands - unaudited) September 30,

2023 December 31,

Cash and due from banks, noninterest-bearing $ 95,257 101,133

4 unchanged sentences

535,460 541,700

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

Presold mortgages and SBA loans in process of settlement 8,060 1,282

Loans 8,027,037 6,665,145

22 unchanged sentences

Issued & outstanding:

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

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

Common stock, no par value per share.

1 unchanged sentence

Issued & outstanding:

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

41,085,498 shares and 35,704,154 shares as of September 30, 2023 and December 31, 2022, respectively

962,644 725,153

8 unchanged sentences

Consolidated Statements of Income

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

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

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

11 unchanged sentences

Net interest income 84,702 85,334 264,174 240,482

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

Provision for loan losses 1,200 5,100 16,351 8,600

(Reversal of) provision for unfunded commitments ( 1,200 ) 300 ( 1,487 ) ( 1,200 )

35 unchanged sentences

Three Months Ended

June 30, Six Months Ended June 30,

September 30, Nine Months Ended September 30,

($ in thousands - unaudited) 2023 2022 2023 2022

1 unchanged sentence

Other comprehensive income (loss):

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

Unrealized losses on securities available for sale:

Unrealized losses arising during the period ( 81,515 ) ( 141,155 ) ( 77,597 ) ( 432,573 )

Tax benefit 18,871 32,437 18,719 99,405

Postretirement Plans:

Amortization of unrecognized net actuarial loss 44 44 132 132

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

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

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

Tax expense ( 10 ) ( 10 ) ( 31 ) ( 30 )

Other comprehensive loss ( 62,610 ) ( 108,684 ) ( 58,777 ) ( 333,066 )

Comprehensive (loss) income $ ( 32,717 ) ( 70,735 ) 15,680 ( 224,563 )

See accompanying notes to unaudited consolidated financial statements.

8 unchanged sentences

Shares Amount

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

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

2 unchanged sentences

Change in Rabbi Trust Obligation ( 12 ) 12 —

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

Stock-based compensation 28 738 738

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

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

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

Three Months Ended September 30, 2023

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

Net income 29,893 29,893

3 unchanged sentences

Stock options exercised 2 66 66

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

Stock-based compensation — 1,727 1,727

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

Other comprehensive loss ( 62,610 ) ( 62,610 )

Balances, September 30, 2023 41,085 $ 962,644 695,791 ( 1,375 ) 1,375 ( 400,752 ) 1,257,683

See accompanying notes to unaudited consolidated financial statements.

8 unchanged sentences

Shares Amount

Six Months Ended June 30, 2022

Nine Months Ended September 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 ( 333,066 ) ( 333,066 )

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

Nine Months Ended September 30, 2023

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

7 unchanged sentences

Stock-based compensation 159 4,419 4,419

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

Other comprehensive loss ( 58,777 ) ( 58,777 )

Balances, September 30, 2023 41,085 $ 962,644 695,791 ( 1,375 ) 1,375 ( 400,752 ) 1,257,683

See accompanying notes to unaudited consolidated financial statements.

1 unchanged sentence

Consolidated Statements of Cash Flows

Six Months Ended June 30,

Nine Months Ended September 30,

($ in thousands-unaudited) 2023 2022

4 unchanged sentences

Net security premium amortization 7,082 9,431

(Decrease) increase in net deferred tax asset ( 2,324 ) 26,341

Decrease in net deferred tax asset ( 2,839 ) ( 465 )

Loan discount accretion ( 10,354 ) ( 4,736 )

15 unchanged sentences

Proceeds from sales of SBA and other loans 30,526 109,608

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

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

Decrease in accrued interest receivable 1,033 564

Decrease in other assets 3,253 5,925

Increase in accrued interest payable 2,391 274

4 unchanged sentences

Purchases of securities held to maturity — ( 39,004 )

Proceeds from maturities/issuer calls of securities available for sale 96,686 156,874

Proceeds from maturities/issuer calls of securities held to maturity 1,587 4,102

Proceeds from maturities, calls and principal repayments of securities available for sale 133,341 208,438

Proceeds from maturities, calls and principal repayments of securities held to maturity 2,807 5,158

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

9 unchanged sentences

Net (decrease) increase in deposits ( 40,040 ) 105,166

Net increase in short-term borrowings 154,973 —

Payments on long-term borrowings ( 42 ) ( 67 )

Advances from other borrowings 1,665,000 328,000

Repayment of other borrowings ( 1,590,099 ) ( 169,099 )

Cash dividends paid – common stock ( 25,902 ) ( 22,806 )

2 unchanged sentences

Net cash provided by financing activities 12,542 240,658

Increase in cash and cash equivalents 90,357 ( 27,059 )

Increase (decrease) in cash and cash equivalents 3,271 ( 191,647 )

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

2 unchanged sentences

Consolidated Statements of Cash Flows

Six Months Ended June 30,

Nine Months Ended September 30,

($ in thousands-unaudited) 2023 2022

2 unchanged sentences

Cash paid during the period for income taxes 21,856 29,091

Unrealized gain (loss) on securities available for sale, net of taxes 3,765 ( 224,450 )

Unrealized loss on securities available for sale, net of taxes ( 58,878 ) ( 333,168 )

Foreclosed loans transferred to other real estate 1,000 119

Accrued dividends at end of period 9,039 7,857

Initial recognition of operating lease right-of-use assets and operating lease liabilities 260 —

Revision of operating lease right-of-use assets and operating lease liabilities ( 562 ) —

Acquisition of GrandSouth Bancorporation See Note 2 —

10 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 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.

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, 2023, the consolidated results of operations for the three and nine months ended September 30, 2023 and 2022, and the consolidated cash flows for the nine months ended September 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.

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

These reclassifications had no effect on net income.

8 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 six months ended June 30, 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 nine months ended September 30, 2023.

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

2 unchanged sentences

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

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

Deferral of the Sunset Date of Topic 848 ." In 2020, the Financial Accounting Standards Board ("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;

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

As such, ASU 2022-06 deferred 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.

18 unchanged sentences

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.

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

Significant synergies were 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.

64 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 $ 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:

Merger-related costs related to this acquisition of $ 13.5 million for the nine months ended September 30, 2023 were recorded by the Company and were excluded from the pro forma information below.

There were no merger costs for the three months ended September 30, 2023.

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 $ 1.1 million and $ 1.5 million for the three and nine months ended September 30, 2022.

Pro forma information for the three and nine months ended September 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 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) For the three months ended For the six months ended

June 30, 2023 June 30, 2023

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

These amounts are included in the Company’s consolidated financial

statements as of and for the three and nine months ended September 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) For the three months ended For the nine months ended

September 30, 2023 September 30, 2023

Revenue Net Income Revenue Net Income

Actual GrandSouth results included in statement of income since acquisition date $ 14,209 $ 4,940 $ 43,516 $ 15,891

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

June 30, 2022 June 30, 2022

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

September 30, 2022 September 30, 2022

Revenue Net Income Revenue Net Income

1 unchanged sentence

Note 3 – Securities

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

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

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

Value Unrealized Amortized

11 unchanged sentences

Total held to maturity $ 535,460 410,321 — ( 125,139 ) 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 June 30, 2023 and December 31, 2022, respectively.

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

The following table presents information regarding all securities with unrealized losses at September 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 June 30, 2023, the Company's securities portfolio held 657 securities of which 645 securities were in an unrealized loss position.

As of September 30, 2023, the Company's securities portfolio held 656 securities of which 652 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 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 the above tables, all of the securities that were in an unrealized loss position at September 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 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.

At September 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 September 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 $ 2,622,066 2,100,406 535,460 410,321

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.

At September 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 September 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.

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.

There were no sales of investment securities during the three or nine months ended September 30, 2023 with the exception of securities acquired from GrandSouth as discussed in Note 2.

There was no gain or loss associated with the sale of acquired securities.

Included in “Other assets” in the Consolidated Balance Sheets are investments in Federal Home Loan Bank (“FHLB”) and Federal Reserve stock totaling $ 55.4 million and $ 39.6 million at September 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 $ 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.

The FHLB stock had a cost and fair value of $ 22.6 million and $ 14.7 million at September 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 $ 32.8 million and $ 24.9 million at September 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 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.

The conversion rate at September 30, 2023 was 1.5875 , which means the Company would have received approximately 19,615 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) June 30, 2023 December 31, 2022

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

Amount Percentage Amount Percentage

11 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) June 30, 2023 December 31, 2022

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

Guaranteed portions of SBA loans included in table above $ 40,849 31,893

2 unchanged sentences

Sold portions of SBA loans with servicing retained - not included in tables above $ 364,859 392,370

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.

At September 30, 2023 and December 31, 2022, there were remaining unaccreted discounts on the retained portion of sold SBA loans amounting to $ 3.6 million and $ 4.3 milion, respectively.

At September 30, 2023 and December 31, 2022, l oans in the amount of $ 6.4 billion and $ 5.3 billion, respectively, were pledged as collateral for certain borrowings.

At September 30, 2023 and December 31, 2022, total loans included loans to executive officers and directors of the Company, and their associates, totaling approximately $ 5.5 million and $ 6.0 million, respectively.

There were two new loans and advances on existing loans totaling approximately $ 45,000 for the nine months ended September 30, 2023 and repayments amounted to $ 0.5 million for that period.

Available credit on related party loans totaled $ 1.3 million and $ 1.2 million at September 30, 2023 and December 31, 2022, respectively.

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

As of June 30, 2023 and December 31, 2022, unamortized discounts on all acquired loans totaled $ 29.2 million and $ 11.6 million, respectively.

As of September 30, 2023 and December 31, 2022, unamortized discounts on all acquired loans totaled $ 26.5 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.

1 unchanged sentence

The following table summarizes the NPAs for each period presented.

($ in thousands) June 30,

($ in thousands) September 30,

2023 December 31,

5 unchanged sentences

Total nonperforming assets $ 38,842 38,293

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:

At September 30, 2023 and December 31, 2022, the Company had $ 3.2 million and $ 0.8 million, respectively, in residential mortgage loans in the process of foreclosure.

At September 30, 2023, there were two loans with a commitment to lend additional funds of $ 0.1 million to borrowers whose loans were nonperforming.

As of December 31, 2022, there was one such loan for an immaterial commitment to lend additional funds to the borrower whose loan was nonperforming.

The following table is a summary of the Company’s nonaccrual loans by major categories as of September 30, 2023:

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

22 unchanged sentences

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

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

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

Commercial and industrial $ 182 102 56

7 unchanged sentences

Total $ 367 324 231

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

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

($ in thousands) Accruing

32 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 June 30, 2023:

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

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

2 unchanged sentences

Commercial real estate - non owner occupied — — — 1,941 1,941

Home equity loans/lines of credit 538 — — — 538

Total $ 538 2,542 — 3,169 6,249

11 unchanged sentences

For loans secured by real estate, the Company's policy is to write nonaccrual loans down to 90 % of the appraised value, which considers estimated selling costs that are usually incurred when disposing of real estate collateral.

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.

discounts that are estimated to be incurred in a near-term sale.

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

For reviewed loans that are not on nonaccrual basis, the Company assigns a specific allowance based on the parameters noted above.

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.

Much of the change to the level of ACL during the six months ended June 30, 2023 is attributed to the acquisition of GrandSouth.

Much of the change to the level of ACL during the nine months ended September 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 higher loss rate assumptions, primarily due to some deterioration in the commercial real estate index.

The balance of the change was a result of loan growth during the period and updated prepayment speed estimates in the CECL model.

The higher rate environment has resulted in slower prepayments, thus increasing the projected ACL required.

($ 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

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

Commercial and industrial $ 23,442 — ( 2,650 ) 450 1,202 22,444

7 unchanged sentences

Total $ 109,230 — ( 3,203 ) 971 1,200 108,198

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

As of and for the nine months ended September 30, 2023

Commercial and industrial $ 17,718 5,197 ( 6,361 ) 1,216 4,674 22,444

19 unchanged sentences

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

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

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

Commercial and industrial $ 15,450 ( 512 ) 166 2,482 17,586

7 unchanged sentences

Total $ 82,181 ( 1,205 ) 511 5,100 86,587

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

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

Commercial and industrial $ 16,249 ( 2,030 ) 636 2,731 17,586

42 unchanged sentences

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

As of June 30, 2023

As of September 30, 2023

Commercial and industrial

104 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 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.

The followings tables present the amortized cost basis at September 30, 2023 of the loans modified during the three and nine months then ended for borrowers experiencing financial difficulty, by loan category and type of concession granted.

($ 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

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

Commercial and industrial $ 1,142 117 — 1,259 0.14 %

Construction, development & other land loans — 594 — 594 0.06 %

Commercial real estate - owner occupied — 4,023 — 4,023 0.32 %

Commercial real estate - non owner occupied — 131 — 131 0.01 %

Residential 1-4 family real estate — 245 — 245 0.02 %

Home equity loans/lines of credit 24 401 99 524 0.16 %

Consumer loans — 9 — 9 0.01 %

Total $ 1,166 5,520 99 6,785 0.08 %

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

As of and for the nine months ended September 30, 2023

Commercial and industrial $ 2,589 216 — 2,805 0.31 %

1 unchanged sentence

Commercial real estate - owner occupied 185 4,302 — 4,487 0.36 %

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

Commercial real estate - non owner occupied — 219 — 219 0.01 %

Residential 1-4 family real estate — 750 — 750 0.05 %

2 unchanged sentences

Total $ 2,798 7,816 109 10,723 0.13 %

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:

For the three and nine months ended September 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 nine months ended September 30, 2023 of the modifications made for borrowers experiencing financial difficulty:

Financial Effect of Modification to Borrowers Experiencing Financial Difficulty

1 unchanged sentence

(in months) Weighted Average Term Extension

For the three months ended June 30, 2023

For the three months ended September 30, 2023

Commercial and industrial — % 6 26

Construction, development & other land loans — % 0 8

Commercial real estate - owner occupied — % 0 32

Commercial real estate - non owner occupied — % 0 11

Residential 1-4 family real estate — % 0 23

Home equity loans/lines of credit 2.61 % 24 84

For the six months ended June 30, 2023

Consumer loans — % 0 24

For the nine months ended September 30, 2023

Commercial and industrial — % 4 20

6 unchanged sentences

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 as of June 30, 2023:

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

Payment Status (Amortized Cost Basis)

4 unchanged sentences

Commercial real estate - non owner occupied 219 — — —

Multi-family real estate — — — —

Residential 1-4 family real estate 670 80 — —

2 unchanged sentences

$ 10,643 80 — —

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.

None of the modifications made for borrowers experiencing financial difficulty during the three and nine months ended September 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 periods ended June 30, 2022 related to interest rate reductions combined with extension of terms.

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

The Company does not generally grant principal forgiveness.

1 unchanged sentence

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 and six months ended June 30, 2022.

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

For the three months ended

June 30, 2022 For the six months ended

June 30, 2022

September 30, 2022 For the nine months ended

September 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

10 unchanged sentences

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 and six months ended June 30, 2022.

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

Concentration of Credit Risk

2 unchanged sentences

Approximately 88 % of the Company's loan portfolio is secured by real estate and is therefore susceptible to changes in real estate valuations.

Allowance for Credit Losses - Unfunded Loan Commitments

In addition to the ACL on loans, the Company maintains an ACL for lending-related commitments such as unfunded loan commitments and letters of credit.

Allowance for Unfunded Loan Commitments

In addition to the ACL on loans, the Company maintains an allowance for lending-related commitments such as unfunded loan commitments and letters of credit.

The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company.

1 unchanged sentence

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 $ 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

The allowance for unfunded loan commitments of $ 11.8 million and $ 13.3 million at September 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 unfunded loan commitments for the nine months ended September 30, 2023 and 2022 and for the twelve months ended December 31, 2022:

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

The ACL for securities held to maturity was insignificant at September 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 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

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

September 30, 2023 December 31, 2022

($ in thousands) Gross Carrying

Amount Accumulated

Amortization Gross Carrying

Amortization Net Amount Gross Carrying

Amount Accumulated

Amortization Net Amount

Amortizable intangible assets:

8 unchanged sentences

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 $ 2.0 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.

Amortization expense of all other intangible assets, excluding the SBA servicing assets, totaled $ 2.0 million and $ 0.9 million for the three months ended September 30, 2023 and 2022, respectively, and $ 6.1 million and $ 2.9 million for the nine months ended September 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.

1 unchanged sentence

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,

The following table presents the changes in the SBA servicing assets and SBA servicing income for the three and nine months ended September 30, 2023 and 2022:

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

($ in thousands) 2023 2022 2023 2022

4 unchanged sentences

SBA guaranteed servicing income $ 846 1,120 2,693 2,901

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.

A t September 30, 2023 and December 31, 2022, the Company serviced SBA loans totali ng $ 364.9 million a nd $ 392.4 million, respectively, for others.

There were no other loans serviced in any period presented.

2 unchanged sentences

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.

The Company's most recent evaluation of goodwill, which occurred in the fourth quarter of 2022, indicated that there was no goodwill impairment.

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

4 unchanged sentences

Additions from acquisition of GrandSouth 114,487

Balance at June 30, 2023 $ 478,750

Balance at September 30, 2023 $ 478,750

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

3 unchanged sentences

($ in thousands) Estimated Amortization

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

October 1, 2023 to December 31, 2023 $ 1,856

Thereafter 8,576

1 unchanged sentence

Note 6 - Borrowings

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

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

Description Due date Call Feature Balance at September 30, 2023 Interest Rate

FHLB Principal Reducing Credit 12/22/2023 None $ 880 1.25 % fixed

4 unchanged sentences

FHLB Principal Reducing Credit 12/20/2028 None 319 0.50 % fixed

FHLB Daily Rate Credit 7/13/2023 None 75,000 5.24 % fixed

FHLB Fixed Rate Credit 10/13/2023 None 100,000 5.46 % fixed

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

FHLB Fixed Rate Credit 10/20/2023 None 25,000 5.46 % fixed

FHLB Fixed Rate Credit 10/30/2023 None 50,000 5.48 % fixed

FHLB Fixed Rate Credit 11/13/2023 None 100,000 5.50 % fixed

FHLB Daily Rate Credit 9/16/2024 None 25,000 5.57 % fixed

Trust Preferred Securities 1/23/2034 Quarterly by Company

1 unchanged sentence

adjustable rate

3 month LIBOR + 2.65 %

3 month CME Term SOFR+ 2.91 %

Trust Preferred Securities 1/23/2034 Quarterly by Company

beginning 1/23/2009 10,310 8.38 % at 9/30/23 adjustable rate

3 month LIBOR + 2.75 %

3 month CME Term SOFR + 3.01 %

Trust Preferred Securities 9/20/2034 Quarterly by Company

1 unchanged sentence

adjustable rate

3 month LIBOR + 2.15 %

3 month CME Term SOFR + 2.41 %

Trust Preferred Securities 1/7/2035 Quarterly by Company

1 unchanged sentence

adjustable rate

3 month LIBOR + 2.00 %

3 month CME Term SOFR + 2.00 %

Trust Preferred Securities 6/15/2036 Quarterly by Company

1 unchanged sentence

adjustable rate

3 month LIBOR + 1.39 %

3 month CME Term SOFR + 1.65 %

Trust Preferred Securities 6/23/2036 Quarterly by the Company beginning 6/23/2011 8,248 7.51 % at 9/30/23

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 June 30, 2023

3 month CME Term SOFR + 2.11 %

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

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

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

407,068 5.85 %

1 unchanged sentence

Total borrowings $ 401,843

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

Description Due date Call Feature Balance at December 31, 2022 Interest Rate

FHLB Principal Reducing Credit 7/24/2023 None $ 32 1.00 % fixed

35 unchanged sentences

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

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.

As of September 30, 2023, the Company leased 17 bank branch offices for which the land and buildings are leased and ten 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 19.3 years as of June 30, 2023.

All of the Company’s leases are operating leases under applicable accounting standards and the lease agreements have maturity dates ranging from January 2024 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, 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.

As permitted by applicable accounting standards, the Company has elected not to recognize leases with original lease terms of 12 months or less (short-term leases) on the Company's Consolidated Balance Sheets.

As permitted by applicable accounting standards, the Company has elected not to recognize leases with original lease terms of twelve months or less (short-term leases) on the Company's Consolidated Balance Sheets.

The short-term lease cost for each period presented was insignificant.

2 unchanged sentences

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

Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

Right-of-use assets and lease liabilities

are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

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

The weighted average discount rate for leases was 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.

The weighted average discount rate for leases was 3.16 % as of September 30, 2023.

Total operating lease expenses were $ 0.8 million and $ 0.7 million for the three months ended September 30, 2023 and 2022, respectively, and $ 2.3 million for the nine months ended September 30, 2023 and 2022.

The right-of-use assets and lease liabilities were $ 17.6 million and $ 18.3 million as of September 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 great than one year as of September 30, 2023 are as follows.

($ in thousands)

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

October 1, 2023 to December 31, 2023 $ 661

Thereafter 18,476

6 unchanged sentences

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 $ 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 Company recorded periodic pension cost totaling $ 51,000 for the three months ended September 30, 2023 and 2022, and $ 152,000 and $ 153,000 for the nine months ended September 30, 2023 and 2022, respectively.

The following table contains the components of the pension cost:

For the Three Months Ended June 30,

For the Three Months Ended September 30,

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

4 unchanged sentences

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

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

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

5 unchanged sentences

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 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.

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

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

On March 27, 2023, the Company’s Board of Directors approved termination of the Pension Plan to be effective during the calendar year 2023 and a termination cost estimate of $ 2.4 million was recorded in the first quarter of 2023 in the accompanying Consolidated Statements of Income.

On July 31, 2023, the Pension Plan was amended to terminate the Plan as of that date.

The Company is in the process of taking appropriate actions necessary to liquidate the Pension Plan which is anticipated to be completed during the fourth quarter of 2023.

Note 9 – Fair Value

5 unchanged sentences

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

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

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

($ in thousands)

Description of Financial Instruments

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

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

(Level 1) Significant Other

35 unchanged sentences

In cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

Individually evaluated loans — Fair values for individually evaluated loans are measured on a non-recurring basis and are based on (1) the underlying collateral values securing the loans, adjusted for estimated selling costs, or (2) the net present value of the cash flows expected to be received for such loans.

Individually evaluated loans — Fair values for individually evaluated loans are measured on a non-recurring basis and are based on (1) the underlying collateral values securing the loans, adjusted for estimated selling costs, or (2) the net present value ("PV") of the cash flows expected to be received for such loans.

Collateral may be in the form of real estate or business assets including equipment, inventory and accounts receivable.

11 unchanged sentences

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

For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of September 30, 2023, the significant unobservable inputs used in the fair value measurements were as follows:

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

Technique Significant Unobservable

8 unchanged sentences

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 June 30, 2023 and December 31, 2022 were as follows:

June 30, 2023 December 31, 2022

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

September 30, 2023 December 31, 2022

($ in thousands) Level in Fair

6 unchanged sentences

Securities held to maturity Level 2 535,460 410,321 541,700 432,528

SBA loans held for sale Level 2 2,633 2,633 — —

Total loans, net of allowance Level 3 7,918,839 7,377,021 6,574,178 6,240,870

11 unchanged sentences

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.

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 $ 0.6 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 Company recorded total stock-based compensation expense of $ 1.2 million and $ 0.7 million for the three months ended September 30, 2023 and 2022, respectively, and $ 3.4 million and $ 1.9 million for the nine months ended September 30, 2023 and 2022, respectively.

In addition, the Company recog nized $ 278,000 an d $ 170,000 of income tax benefits related to stock-based compensation expense for the three months ended September 30, 2023 and 2022, respectively, and $ 798,000 and $ 445,000 for the nine months ended September 30, 2023 and 2022, respectively.

At September 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 September 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.

10 unchanged sentences

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

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

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

Long-Term Restricted Stock Awards

5 unchanged sentences

Forfeited or expired during the period ( 791 ) 37.88

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.

Nonvested at September 30, 2023 339,790 $ 37.15

Total unrecognized compensation expense as of September 30, 2023 amounted to $ 6.1 million with a weighted-average remaining term of 2.0 years.

For the nonvested awards that were outstanding at September 30, 2023, the Company expects to record $ 3.6 million in compensation expense in the next twelve months, $ 1.2 million of which is expected to be recorded in the remaining quarter 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.

7 unchanged sentences

Forfeited or expired during the period — —

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:

Outstanding at September 30, 2023 347,347 20.59 6.01 $ 2,768

Exercisable at September 30, 2023 347,347 $ 20.59 6.01 $ 2,768

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

Shares Range Weighted Average Price Weighted Average Remaining Life in Years

3 unchanged sentences

347,347 20.59 6.01

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 Six Months Ended

June 30, 2023

For the Nine Months Ended

September 30, 2023

Fair value per option, weighted average $ 24.85

8 unchanged sentences

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

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.

At September 30, 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 June 30,

For the Three Months Ended September 30,

($ in thousands except per

11 unchanged sentences

Diluted EPS per common share $ 29,893 41,199,058 $ 0.73 $ 37,949 35,703,446 $ 1.06

Six Months Ended June 30,

Nine Months Ended September 30,

($ in thousands except per

13 unchanged sentences

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

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

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

Unrealized loss on securities available for sale $ ( 521,660 ) ( 444,063 )

5 unchanged sentences

Total accumulated other comprehensive loss $ ( 400,752 ) ( 341,975 )

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

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

For the Three Months Ended September 30, 2023

($ in thousands) Unrealized Loss on

6 unchanged sentences

Ending balance $ ( 400,895 ) 143 ( 400,752 )

For the Three Months Ended June 30, 2022

For the Three Months Ended September 30, 2022

($ in thousands) Unrealized Loss on

6 unchanged sentences

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

For the Six Months Ended June 30, 2023

For the Nine Months Ended September 30, 2023

($ in thousands) Unrealized Loss on

2 unchanged sentences

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

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

Other comprehensive loss before reclassifications ( 58,878 ) — ( 58,878 )

Amounts reclassified from accumulated other comprehensive income

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

Net current-period other comprehensive (loss) income ( 58,878 ) 101 ( 58,777 )

Ending balance $ ( 400,895 ) 143 ( 400,752 )

For the Six Months Ended June 30, 2022

For the Nine Months Ended September 30, 2022

($ in thousands) Unrealized Loss on

7 unchanged sentences

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.

There were no security sales resulting in gains or losses in any period presented.

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.

1 unchanged sentence

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

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

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

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

For the Three Months Ended For the Six Months Ended

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

For the Three Months Ended For the Nine Months Ended

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

Noninterest Income:

14 unchanged sentences

Maintenance and activity fees include account maintenance fees and transaction-based fees.

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

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

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

Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of the month,

representing the period over which the Company satisfies the performance obligation.

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

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

17 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