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Item 7. Management’s Discussion and Analysis

Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition 
 This MD&A is intended to assist readers in understanding our results of operations and changes in financial position for the past three years. It should be read in conjunction with the consolidated financial statements and accompanying notes included in Item 8 of this Report. This discussion may contain forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly from those anticipated in forward-looking statements as a result of various factors. 
 
 Overview and 2023 Highlights 
 The Company is a bank holding company headquartered in Southern Pines, North Carolina. We provide diversified financial services primarily though the Bank, our principal subsidiary, including commercial and consumer banking services, mortgage lending, SBA lending, accounts receivable financing, and investment advisory services. As of December 31, 2023, the Bank had a 118 branch network in North Carolina and South Carolina and 1,421 full-time equivalent employees. We have grown organically as well as through strategic acquisitions as discussed previously in "Recent Developments and Acquisitions". 
 2023 Financial Highlights: 
 • Return on average assets was 0.87% for the year ended December 31, 2023, as compared to 1.39% for the prior year. Return on average common equity of 8.05% was reported for the year ended December 31, 2023 as compared to 13.40% for the prior year. 
 • Our total assets at December 31, 2023 were $12.1 billion, a 14.0% increase from a year earlier, with growth driven by the GrandSouth acquisition, combined with organic loan growth during the year. 
 • Total loans outstanding increased $1.5 billion, or 22.3%, during the year, which included $1.02 billion of loans acquired from GrandSouth. Loans totaled $8.2 billion at December 31, 2023. 
 • Credit quality continues to be strong with the NPA to total assets ratio at 0.37% as of December 31, 2023, as compared to 0.36% at December 31, 2022. Net charge offs as a percentage of average loans were 0.08% for 2023, as compared to 0.01% for the prior year. 
 • Capital remains strong with a total CET1 ratio of 13.20%, up from 13.02% for the prior year, and total risk-based capital ratio of 15.54% as of December 31, 2023, as compared to 15.09% for the prior year. 
 • We earned net income of $104.1 million, or $2.53 diluted EPS, during 2023 compared to net income of $146.9 million, or $4.12 diluted EPS, in 2022. The main drivers to the decrease in net income were as follows: 
 • Net interest income increased $21.8 million, or 6.7%, driven by higher interest income offset by increased interest expense. The NIM on a tax-equivalent basis was 3.06% for 2023, a decrease of 22 basis points from the prior year. Despite the growth in average earning assets, the market-driven increase in rates on liabilities occurred at a more rapid pace that the increase in yields on assets which resulted in the reduction in NIM for 2023. 
 • Total interest income increased $147.8 million in 2023 as compared to 2022, driven by higher interest income on loans of $140.6 million related to a combination of higher volumes of average balances and increased yields. 
 • The increase in interest expense of $126.0 million was driven by higher market rates which resulted in repricing of our deposits. Also contributing to higher interest expense was the utilization of short-term borrowings to fund loan demand and deposit fluctuations and rate increases on our variable rate trust preferred debt. 
 • Provision for credit losses for 2023 of $17.8 million was up from $12.4 million in 2022 due primarily to the initial provision established for acquired non-PCD loans of $12.2 million, combined with organic loan growth experienced during the year. Offsetting these increases were updated loss rates and improved economic forecasts used in our CECL model as discussed further in the "Provision for Loan Losses" section below. 
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 • Noninterest income declined $10.5 million, which resulted primarily from lower other gains as 2022 contained several death benefit gains on our BOLI policies, lower SBA-related revenues, including consulting fees and gains on sale, which was down $3.4 million year-over-year, and lower bankcard revenues related to the Durbin limitations effective for us in July 2022. Refer to "Noninterest Income" section below for further discussion. 
 • Noninterest expense increased $59.2 million, primarily related to the GrandSouth acquisition completed January 1, 2023, driving higher operating expenses, including merger expenses of $13.7 million, additional branch locations and personnel, and an increased number of customer accounts and transaction volume creating additional expense. Refer to "Noninterest Expense" section below for further discussion. 
 • Income tax expense was down $10.5 million from the prior year relative to the lower pre-tax income. The effective tax rate of 21.1% was up slightly from the prior year related to nondeductible merger expenses. 
 
 Current Economic Conditions 
 Since 2022, economic activity has shown continued growth with improving gross domestic product results, low unemployment and increased demand for goods and services. Inflationary pressures continue to a certain degree, however, monetary policy actions taken by the Federal Reserve over the last eighteen months have resulted in a significantly lower inflation rate in 2023 as compared to the prior year. While positive indicators are present, there continues to be some uncertainty in economic conditions, and as such, we could be subject to ongoing risks which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations. 
 Our financial position and results of operations are susceptible, among other factors, to the ability of our loan customers to meet loan obligations, the availability of our workforce, the availability of our vendors, and the decline in the value of assets held by us or securing our loans. We have not realized significant negative impact on our loan portfolio or asset quality to date as a result of the current economic conditions. However, the economic pressures and uncertainties arising from the recent expansion in economic activity, increased consumer demand and rising interest rates to combat inflation have resulted in, and may continue to result in, specific changes in consumer and business spending and borrowing habits, given the higher interest rate environment, which could make it difficult to grow assets and income. 
 The extent to which the current economic conditions have a further impact on our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted, including actions taken by governmental authorities response to inflationary trends and recessionary risks. 
 
 Critical Accounting Estimates 
 The accounting principles we follow and our methods of applying these principles conform with GAAP and with general practices followed by the banking industry. Certain policies inherently have a greater reliance on the use of estimates, assumptions, or judgments and as such, have a greater possibility of producing results that could be materially different than originally reported. We have identified the determination of our ACL and related Allowance for Unfunded Commitments, as well as business combinations, related fair value measurements and goodwill determination to be the accounting areas that require the most subjective or complex judgments, estimates, and assumptions, and where changes in those judgments, estimates, and assumptions (based on new or additional information, changes in the economic climate and/or market interest rates, etc.) could have a significant effect on our financial statements. 
 Our most significant accounting policies are presented in Note 1 to the accompanying consolidated financial statements. These policies, along with the disclosures presented in the other notes to the consolidated financial statements and in this MD&A, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. 
 Allowance for Credit Losses on Loans and Allowance for Unfunded Commitments 
 While management uses the best information available to establish the ACL, future adjustments to the ACL and methodology may be necessary if economic or other conditions differ substantially from the assumptions used in 
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 making the estimates. We perform periodic and systematic detailed reviews of the loan portfolio to identify trends and to assess the overall collectability of the portfolio. We believe the accounting estimate related to the ACL is a “critical accounting estimate” as: (1) changes in it can materially affect the provision for loan losses and net income; (2) it requires management to predict borrowers’ likelihood or capacity to repay, including evaluation of inherently uncertain future economic conditions; (3) the value of underlying collateral must be estimated on collateral-dependent loans; (4) prepayment activity must be projected to estimate the life of loans that often are shorter than contractual terms; and (5) it requires estimation of a reasonable and supportable forecast period for credit losses. Accordingly, this is a highly subjective process and requires significant judgment since it is difficult to evaluate current and future economic conditions in relation to an overall credit cycle and estimate the timing and extent of loss events that are expected to occur prior to end of a loan’s estimated life. 
 Our ACL is assessed at each balance sheet date and adjustments are recorded in the provision for loan losses on the consolidated statements of income. There are many factors affecting the ACL, some of which are quantitative, while others require qualitative judgment. There are both internal factors (i.e., loan balances, historical loss rates, credit quality, the contractual lives of loans), external factors (i.e., economic conditions such as trends in housing prices, interest rates, GDP, inflation, and unemployment), and assumptions of probability of default and loss given default by loan category, that can impact the ACL estimate. One of the most significant assumptions is the macroeconomic scenario forecasts that determine the economic variables utilized in the ACL model. Due to the inherent uncertainty in the macroeconomic forecasts, we evaluate a baseline scenario quarterly, as well as upside or downside macroeconomic scenarios to assess the most reasonable scenario based on review of the variable forecasts for each scenario, comparison to expectations, and sensitivity of variations in each scenario. 
 The most significant variable in the economic forecasts is the national unemployment rate and changes in unemployment forecasts can have significant impact to the estimated ACL. Other economic variables include national GDP, the national commercial real estate pricing index and the national home price index. We use the national unemployment rate in all of our models regardless of the loan portfolio type, and we use a second economic variable in each cohort model depending on the loan portfolio type. The ACL quantitative estimate is sensitive to changes in the economic variable forecasts during the twelve-month reasonable and supportable forecast period with a straight-line reversion over the next three years to long-term average loss factors. There have been no changes to the reasonable and supportable period or reversion period in any year presented. 
 Although management believes its process for determining the ACL adequately considers all the factors that could potentially result in credit losses, the process includes subjective elements and is susceptible to significant change. To the extent actual outcomes differ from management estimates, additional provision for loan losses could be required that could adversely affect our earnings or financial position in future periods. 
 PCD loans represent assets that are acquired with evidence of more than insignificant credit quality deterioration since origination at the acquisition date. At acquisition, the allowance on PCD assets is booked directly to the ACL. Any subsequent changes in the ACL on PCD assets is recorded through the provision for loan losses on the consolidated statements of income. 
 We believe that the ACL is adequate to absorb the expected life of loan credit losses on the portfolio of loans as of the balance sheet date. Actual losses incurred may differ materially from our estimates. For example, inflationary pressures and recessionary concerns leading to macroeconomic economic deterioration, higher unemployment and declines in real estate and other asset valuations could affect our loss experience and assumptions utilized in our model. 
 We estimate expected credit losses on unfunded commitments to extend credit over the contractual period in which we are exposed to credit risk on the underlying commitments, unless the obligation is unconditionally cancellable. The allowance for off-balance sheet credit exposures, which is included in "Other liabilities" on the consolidated balance sheets, is adjusted for as an increase or decrease to the provision for unfunded commitments. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The methodology is based on a loss rate approach that starts with the probability of funding based on historical experience. Similar to the methodology discussed above related to the loans receivable portfolio, adjustments are made to the historical losses for current conditions and reasonable and supportable forecasts. 
 Additional information on the loan portfolio and ACL can be found in the sections of this Item 7 titled “Nonperforming Assets” and “Allowance for Credit Losses and Loan Loss Experience” below. 
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 Business Combinations and Goodwill 
 We believe that the accounting for business combinations, goodwill, and other intangible assets also involves a higher degree of judgment than most other significant accounting policies. Pursuant to applicable accounting guidance, we recognize assets acquired, including identified intangible assets, and the liabilities assumed in acquisitions at their fair values as of the acquisition date, with the related transaction costs expensed in the period incurred. Specified items such as acquired operating lease assets and liabilities as lessee, employee benefit plans, and income-tax related balances are recognized in accordance with accounting guidance that results in measurements that may differ from fair value. Determining the fair value of assets acquired and liabilities assumed often involves estimates based on internal or third-party valuations which include appraisals, discounted cash flow analysis, or other valuation techniques that may include estimates of attrition, inflation, asset growth rates, discount rates, credit risk, multiples of earnings, or other relevant factors. The determination of fair value may require us to make point-in-time estimates about discount rates, future expected cash flows, market conditions, and other future events that can be volatile in nature and challenging to assess. While we use the best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, the estimates are inherently uncertain and subject to refinement. 
 The primary identifiable intangible asset we typically record in connection with a whole bank or bank branch acquisition is the value of the core deposit intangibles which represents the estimated value of the long-term deposit relationships acquired in the transaction. Determining the amount of identifiable intangible assets and their average lives involves multiple assumptions and estimates and is typically determined by performing a discounted cash flow analysis, which involves a combination of any or all of the following assumptions: customer attrition/runoff, alternative funding costs, deposit servicing costs, and discount rates. The core deposit intangibles are amortized over the estimated useful lives of the deposit accounts based on a method that we believe reasonably approximates the anticipated benefit stream from this intangible. The estimated useful lives are periodically reviewed for reasonableness and have generally been estimated to have a life ranging from seven to ten years, with an accelerated rate of amortization. We review identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Our policy is that an impairment loss is recognized, equal to the difference between the asset’s carrying amount and its fair value, if the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Estimating future cash flows involves the use of multiple estimates and assumptions, such as those listed above. 
 The ACL for PCD assets is recognized within business combination accounting with no initial impact to net income. Changes in estimates of expected credit losses on PCD loans after acquisition are recognized as provision expense (or reversal of provision expense) in subsequent periods as they arise. The ACL for non-PCD assets is recognized as provision expense in the same reporting period as the business combination. Estimated loan losses for acquired loans are determined using methodologies and applying estimates and assumptions that were described previously in the Allowance for Credit Losses on Loans and Allowance for Unfunded Commitments section above. 
 Non-PCD loans acquired are generally estimated at fair value using a discounted cash flow approach with assumptions of discount rate, remaining life, prepayments, probability of default, and loss given default. The actual cash flows on these loans could differ materially from the fair value estimates. The amount we record as the fair values for the loans is generally less than the contractual unpaid principal balance due from the borrowers, with the difference being referred to as the “discount” on the acquired loans. Discounts on acquired non-PCD loans are accreted to interest income over their estimated remaining lives, which may include prepayment estimates in certain circumstances. 
 Similarly, premiums or discounts on acquired debt are accreted or amortized to interest expense over their remaining lives. Actual accretion or amortization of premiums and discounts from a business acquisition may differ materially from our estimates impacting our operating results. 
 We believe that the accounting for goodwill also involves a higher degree of judgment than most other significant accounting policies. Goodwill arising from business combinations represents the excess of the purchase price over the sum of the estimated fair values of the tangible and identifiable intangible assets acquired less the estimated fair value of the liabilities assumed. Goodwill has an indefinite useful life and is evaluated for impairment annually or more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value. 
 ASC 350-10 establishes standards for an impairment assessment of goodwill. At each reporting date between annual goodwill impairment tests, we consider potential indicators of impairment. Generally, absent potential 
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 impairment indicators, we perform an annual assessment of whether the events and circumstances resulted in it being more likely than not that the fair value of any reporting unit was less than its carrying value. Impairment indicators considered include the condition of the economy and banking industry; government intervention and regulatory updates; the impact of recent events to financial performance and cost factors of the reporting unit; performance of the Company's stock, and other relevant events. During 2023 there were no triggers warranting interim impairment assessments and for the 2023 annual assessment, we concluded that it was more likely than not that the fair value exceeded its carrying value. At December 31, 2023, we had $478.8 million of goodwill. 
 Recent Accounting Standards and Pronouncements 
 
 
 For information relating to recent accounting standards and pronouncements, see Note 1 to our consolidated financial statements entitled “Summary of Significant Accounting Policies.” 
 
 
RESULTS OF OPERATIONS 
 The following discussion reviews the results of operations and key drivers to change in the results of 2023 as compared to 2022. For a description of our results of operations for 2022 as compared to 2021, refer to the "Overview and 2022 Highlights," Results of Operations," and "Analysis of Financial Condition and Changes in Financial Condition" sections of Item 7 in our 2022 Form 10-K. 
 
 Net Interest Income 
 Net interest income is our largest source of revenue and is the difference between the interest earned on interest-earning assets (generally loans and investment securities) and the interest expense incurred in connection with interest-bearing liabilities (generally deposits and borrowed funds). Changes in the net interest income are the result of changes in volume and the net interest spread which affects NIM. Volume refers to the average dollar levels of interest-earning assets and interest-bearing liabilities. Net interest spread refers to the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities. NIM refers to net interest income divided by average interest-earning assets and is influenced by the level and relative mix of interest-earning assets and interest-bearing liabilities. Net interest income is also influenced by external factors such as local economic conditions, competition for loans and deposits, and market interest rates. 
 Net interest income amounted to $346.7 million in 2023, an increase of $21.8 million, or 6.7%, from the $324.9 million in 2022. The increase was due primarily to the increase in average earnings assets from both organic growth and the GrandSouth acquisition completed in January 2023 which contributed $1.02 billion in total loans. For 2023, average interest-earning assets increased $1.4 billion, or 14.5%, including growth of $1.6 billion in average loans, partially offset by lower average securities. 
 Offsetting the higher net interest income related to the increase in average earning assets was the compression of our NIM which, on a tax-equivalent basis, declined to 3.06% in 2023 from 3.28% in 2022. For internal purposes, we evaluate our NIM on a tax-equivalent basis by adding the tax benefit realized from tax-exempt loans and securities to reported interest income, then dividing by total average earning assets. We believe that analysis of NIM on a tax-equivalent basis is useful and appropriate because it allows a comparison of net interest in different periods without taking into account the different mix of taxable versus non-taxable loans and investments that may have existed during those periods. The following is a reconciliation of reported net interest income to tax-equivalent net interest income and the resulting NIM as reported and on a tax-equivalent basis. 
 ($ in thousands) Year ended December 31, 
 2023 2022 2021 
 Net interest income, as reported $ 346,658 324,854 246,395 
 Tax-equivalent adjustment 2,879 2,780 2,243 
 Net interest income, tax-equivalent $ 349,537 327,634 248,638 
 Net interest margin, as reported 3.03 % 3.25 % 3.13 % 
 Net interest margin, tax-equivalent 3.06 % 3.28 % 3.16 % 

 The decrease in our NIM was driven by the rising market interest rates as the Federal Reserve's monetary policies resulted in a 100 basis point rise in short-term rates between January and July 2023, after rates had risen 425 basis points in 2022. The market-driven increase in rates on our liabilities occurred at a more rapid pace that the increase in yields on our assets, thus our total yield on average earning assets increased 86 basis points while our cost of 
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 funds increased 116 basis points, driving the compression in the NIM in 2023 as compared to the prior year. Our mix of earning assets remained fairly stable between 2022 and 2023. Refer to the Average Balances and Net Interest Income Analysis table below for additional discussion. 
 Our NIM for all periods benefited from the net accretion income, primarily associated with purchase accounting premiums/discounts associated with acquisitions. Presented in the table below is the amount of accretion which increased net interest income in each year. 
 
 Year ended December 31, 
 ($ in thousands) 2023 2022 2021 
 Interest income – increased by accretion of loan discount on acquired loans 
 $ 11,507 5,621 6,107 
 Interest income - increased by accretion of loan discount on retained SBA loans 
 1,770 2,856 2,707 
 Total interest income impact 13,277 8,477 8,814 
 Interest expense – (increased) reduced by (discount accretion) premium amortization of deposits (3,101) 593 295 
 Interest expense – increased by discount accretion of borrowings 
 (842) (254) (249) 
 Total net interest expense impact (3,943) 339 46 
 Impact on net interest income $ 9,334 8,816 8,860 

 The most significant component of the purchase accounting adjustments in each year was loan discount accretion on purchased loans. Generally, the level of loan discount accretion will decline each year due to the natural paydowns in acquired loan portfolios. Alternately, levels of accretion will increase as a result of acquisitions and related additions to loan discounts on acquired portfolios which are accreted to income as experienced in 2023 with the GrandSouth acquisition. 
 At December 31, 2023 and 2022, unaccreted loan discount on purchased loans amounted to $24.0 million and $11.6 million, respectively. The GrandSouth acquired portfolio comprises the majority of the remaining unaccreted loan discount at December 31, 2023. 
 In addition to the loan discount accretion recorded on acquired loans, we record accretion on the discounts associated with the retained unguaranteed portions of SBA loans sold in the secondary market. The level of SBA loan discount accretion will fluctuate relative to the SBA loan portfolio balances. At December 31, 2023 and 2022, unaccreted loan discount on SBA loans amounted to $3.5 million and $4.3 million, respectively. 
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 The following table presents the major components of the net interest income and NIM. 
 
 Average Balances and Net Interest Income Analysis 
 Year Ended December 31, 
 2023 2022 2021 
 ($ in thousands) Average
Volume Avg.
Rate Interest
Earned
or Paid Average
Volume Avg.
Rate Interest
Earned
or Paid Average
Volume Avg.
Rate Interest
Earned
or Paid 
 Assets 
 Loans (1) (2) 
 $ 7,902,628 5.30 % $ 418,668 6,293,280 4.42 % 278,027 5,018,391 4.36 % 219,013 
 Taxable securities 
 2,920,040 1.79 % 52,276 3,059,683 1.75 % 53,536 2,204,713 1.45 % 32,076 
 Non-taxable securities 
 296,287 1.51 % 4,485 296,803 1.48 % 4,387 162,878 1.49 % 2,402 
 Short-term investments, primarily interest-bearing cash 314,537 4.24 % 13,330 339,419 1.48 % 5,007 485,337 0.50 % 2,427 
 Total interest-earning assets 
 11,433,492 4.27 % 488,759 9,989,185 3.41 % 340,957 7,871,319 3.25 % 255,918 
 Cash and due from banks 
 93,182 104,374 90,275 
 Premises and equipment 
 151,980 135,160 125,738 
 Other assets 
 354,379 327,511 408,313 
 Total assets 
 $ 12,033,033 10,556,230 8,495,645 
 
 Liabilities and Equity 
 
 Interest-bearing checking $ 1,457,272 0.42 % $ 6,192 1,545,573 0.08 % 1,219 1,353,172 0.07 % 919 
 Money market deposits 3,355,992 2.34 % 78,643 2,515,897 0.22 % 5,610 1,923,614 0.16 % 3,158 
 Savings deposits 668,730 0.15 % 1,024 739,681 0.06 % 459 607,452 0.07 % 443 
 Other time deposits 737,330 2.58 % 19,023 551,852 0.46 % 2,541 432,506 0.39 % 1,722 
 Time deposits >$250,000 343,669 2.90 % 9,984 287,194 0.53 % 1,520 356,398 0.46 % 1,639 
 Total interest-bearing deposits 6,562,993 1.75 % 114,866 5,640,197 0.20 % 11,349 4,673,142 0.17 % 7,881 
 Short-term borrowings 374,254 5.15 % 19,289 52,446 3.45 % 1,808 — — % — 
 Long-term borrowings 99,858 7.96 % 7,946 65,358 4.51 % 2,946 63,201 2.60 % 1,642 
 Total interest-bearing liabilities 
 7,037,105 2.02 % 142,101 5,758,001 0.28 % 16,103 4,736,343 0.13 % 9,523 
 Noninterest-bearing checking 3,613,973 3,643,308 2,728,768 
 Total sources of funds 10,651,078 1.33 % 9,401,309 0.17 % 7,465,111 0.13 % 
 Other liabilities 
 88,870 58,008 60,759 
 Shareholders’ equity 
 1,293,085 1,096,913 969,775 
 Total liabilities and shareholders’ equity 
 $ 12,033,033 10,556,230 8,495,645 
 Net yield on interest-earning assets and net interest income 
 3.03 % $ 346,658 3.25 % 324,854 3.13 % 246,395 
 Net yield on interest-earning assets and net interest income – tax-equivalent (3) 
 3.06 % $ 349,537 3.28 % 327,634 3.16 % 248,638 
 Interest rate spread 
 3.15 % 3.29 % 3.14 % 
 Average prime rate 8.20 % 4.86 % 3.25 % 

 (1) Average loans include nonaccruing loans, the effect of which is to lower the average rate shown. Interest earned includes recognized net loan fees, including late fees, prepayment fees, and deferred loan fee amortization, in the amounts of $0.5 million , $3.1 million, and $9.7 million for 2023, 2022, and 2021, respectively. 
 (2) Includes accretion of discount on acquired and SBA loans of $13.3 million, $8.5 million, and $8.8 million in 2023, 2022, and 2021, respectively. 
 (3) Includes tax-equivalent adjustments of $2.9 million, $2.8 million and $2.2 million in 2023, 2022, and 2021, respectively, to reflect the federal and state tax benefit that we receive related to tax-exempt securities and tax-exempt loans, which carry interest rates lower than similar taxable investments/loans due to their tax exempt status. This amount has been computed assuming a 23% tax rate and is reduced by the related nondeductible portion of interest expense. 
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 The following table presents additional detail regarding the estimated impact that changes in loan and deposit volumes and changes in the interest rates we earned/paid had on our net interest income in 2023 and 2022. 
 
 Volume and Rate Variance Analysis 
 Year Ended December 31, 2023 Year Ended December 31, 2022 
 Change Attributable to Change Attributable to 
 ($ in thousands) Changes
in Volumes Changes
in Rates Total
Increase
(Decrease) Changes
in Volumes Changes
in Rates Total
Increase
(Decrease) 
 Interest income: 
 Loans $ 78,177 62,464 140,641 55,980 3,034 59,014 
 Taxable securities (2,472) 1,212 (1,260) 13,681 7,779 21,460 
 Non-taxable securities (8) 106 98 2,002 (17) 1,985 
 Other interest-earning assets, primarily overnight funds (711) 9,034 8,323 (1,442) 4,022 2,580 
 Total interest income 74,986 72,816 147,802 70,221 14,818 85,039 
 
 Interest expense: 
 Interest bearing checking accounts (223) 5,196 4,973 142 158 300 
 Money market accounts 10,780 62,253 73,033 1,147 1,305 2,452 
 Savings accounts (77) 642 565 89 (73) 16 
 Other time 4,244 12,238 16,482 360 459 819 
 Time deposits >$250,000 970 7,494 8,464 (340) 221 (119) 
 Total interest-bearing deposits 15,694 87,823 103,517 1,398 2,070 3,468 
 Short-term borrowings 13,950 3,531 17,481 904 904 1,808 
 Long-term borrowings 2,112 2,888 5,000 76 1,228 1,304 
 Total interest expense 31,756 94,242 125,998 2,378 4,202 6,580 
 
 Net interest income $ 43,230 (21,426) 21,804 67,843 10,616 78,459 

 Note - Changes attributable to both volume and rate are allocated equally between rate and volume variances. 
 
 
 Overall, as demonstrated in the above table, net interest income grew $21.8 million in 2023. Higher earning asset volumes were the primary driver of the increase in net interest income which was offset by increases in rates on interest-bearing liabilities. 
 • For 2023, higher loan volume was the primary contributor to increased interest income, driving $78.2 million of the increase. Higher market rates contributed to an additional $62.5 million of loan interest income. Variable rate loans comprise approximately 19% of the loan portfolio and, accordingly, the magnitude of the impact we experience from each rate increase is limited. 
 • Decreases in the overall volume of average investment securities, somewhat offset by higher yields on the portfolio, resulted in decreased interest income of $1.2 million in 2023. 
 • Although partially offset by lower average balances, higher yields on other interest-earning assets (primarily interest-bearing cash balance) in 2023 resulted in a $8.3 million higher interest income for the year. 
 • The increase of $103.5 million in interest expense on deposits was driven by higher rates on accounts as we repriced deposits during the year in response to the market increases and to retain deposits to meet our funding needs, combined with higher volumes, primarily in money market deposit accounts and other time deposits. 
 • Higher levels of borrowings, primarily in short-term FHLB advances to fund loan demand and deposit fluctuations, resulted in an increase in borrowings interest expense of $16.1 million in 2023. This was coupled with the higher cost of short-term advances and increases on our variable rate trust preferred securities, which added $6.4 million to interest expense for the year. 
 
 
 
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 Provision for Loan Losses and Provision for Unfunded Commitments 
 The provision for loan losses has been determined under ASC 326 since our implementation of CECL. The provision for loan losses represents our current estimate of life of loan credit losses in the loan portfolio and the provision for unfunded commitments represents expected losses on unfunded loan commitments that are expected to result in outstanding loan balances. Our estimate of credit losses under CECL is determined using a complex model that relies on reasonable and supportable forecasts and historical loss information to determine the balance of the ACL and allowance for unfunded commitments, as well as the resulting provision for loan losses and provision for unfunded commitments. The allowance for unfunded commitments is included in "Other liabilities" in the consolidated balance sheets. 
 The provision for loan losses was $19.8 million in 2023 and $12.6 million in 2022. The amount of provision recorded in each period was the amount required such that the total ACL reflected the appropriate balance as determined under the CECL model. The primary contributor to the higher provision for 2023 was the one-time loan loss provision of $12.2 million recorded to establish an initial ACL for non-PCD loans acquired from GrandSouth in accordance with our CECL model. The increase related to acquired and organic growth during the year was partially offset by updated economic forecasts and loss driver inputs to the CECL model. We subscribe to a third-party service which provides quarterly macroeconomic scenarios for the United States economy. For 2023, we utilized the baseline forecast, which incorporates an equal probability of the United States economy performing better or worse than the projection. The economic forecasts throughout the year have projected general improvement of the economy demonstrated in lower projected unemployment rates, improved GDP, and increasing price indices for both commercial real estate and residential mortgages. These improving economic projections translated to lower forecasted losses in our loan portfolio and, thus a lower estimated ACL, exclusive of portfolio growth. 
 Also under the CECL method, in 2023 we recorded a reduction in the provision for unfunded commitments of $1.9 million compared to $0.2 million for 2022. Changes in the level of provision each year are generally related to fluctuations in the level of available credit lines and updated loss drivers. 
 Additional discussion of the CECL method and our asset quality and credit metrics, which impact our provision for credit losses, is provided in the "Nonperforming Assets" and "Allowance for Credit Losses and Loan Loss Experience" sections following. 
 
 Noninterest Income 
 Our noninterest income amounted to $57.5 million in 2023, $68.0 million in 2022, and $73.6 million in 2021. Management evaluates noninterest income on a non-GAAP basis that excludes items such as securities gains and losses and other gains and losses because we believe excluding those items results in a more meaningful reflection of noninterest income from regular operations. We refer to this as "adjusted noninterest income." Adjusted noninterest income amounted to $54.8 million in 2023, $60.6 million in 2022, and $73.2 million in 2021. A reconciliation of reported noninterest income to adjusted noninterest income is presented in the table below. Drivers of the more significant fluctuations follow the table. 
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 Noninterest Income 
 Year Ended December 31, 
 ($ in thousands) 2023 2022 2021 
 Service charges on deposit accounts 
 $ 16,800 15,523 12,317 
 Other service charges and fees -bankcard and interchange income, net 9,319 14,996 18,480 
 Other service charges - other 12,951 11,298 7,036 
 Fees from presold mortgage loans 
 1,613 2,102 10,975 
 Commissions from sales of financial products 5,503 5,195 6,947 
 SBA consulting fees 
 1,803 2,608 7,231 
 SBA loan sale gains 
 2,489 5,076 7,329 
 Bank-owned life insurance ("BOLI") income 4,350 3,847 2,885 
 Securities losses, net — — (1,237) 
 Other gains, net 2,662 7,340 1,648 
 Total noninterest income 57,490 67,985 73,611 
 Non-GAAP adjustments - exclude: 
 Securities losses, net — — 1,237 
 Other gains, net (2,662) (7,340) (1,648) 
 Adjusted noninterest income $ 54,828 60,645 73,200 

 Service charges on deposit accounts increased $1.3 million, or 8.2%, in 2023 as compared to 2022. The increase in 2023 was driven by the higher number of new customers and transaction accounts generating fees from both the GrandSouth acquisition and organic growth. 
 Other service charges and fees - bankcard interchange income,net represents interchange income from debit and credit card transactions, net of associated interchange expense and amounted to $9.3 million in 2023, a 37.9% decrease from the $15.0 million in 2022. The decrease of $5.7 million was a direct result of the Durbin Amendment limitation on debit card interchange fees becoming applicable to the Company beginning in July 2022. The reduction in interchange rates was partially offset by higher volumes of accounts and transactions. 
 Other service charges and fees - other includes items such as ATM charges, wire transfer fees, safety deposit box rentals, fees from sales of personalized checks, and check cashing fees. Also included in this category are SBA guarantee servicing fees and related servicing rights amortization which fluctuate based on the volume of and prepayment speeds on SBA loans serviced which have slowed down in the current year. The increase in this item in 2023 of $1.7 million, or 14.6%, was due in part to the higher number of accounts and volume of transactions, combined with lower servicing right amortization expense given the current high interest rate environment. 
 SBA consulting fees and SBA loan sale gains both declined in 2023 primarily due to fewer third-party bank SBA clients, slower loan originations and lower premiums available on SBA loan sales given the market conditions during the year. 
 BOLI income increased 13.1% in 2023, primarily related to the acquisition of GrandSouth in the first quarter of 2023 which had $15.1 million in BOLI assets as of the date of acquisition. 
 Other gains, net amounted to a net gain of $2.7 million for 2023. For 2022, the balance consisted primarily of death benefits realized on BOLI policies which were nominal in 2023. 
 
 Noninterest Expenses 
 Total noninterest expenses totaled $254.4 million, $195.2 million, and $184.7 million, for 2023, 2022, and 2021, respectively. Management evaluates noninterest expense on a non-GAAP basis that excludes items such as merger and acquisition expense, amortization of intangible assets, and foreclosed property (gain) losses, because we believe excluding those items results in a more meaningful reflection of noninterest expense from regular operations. We refer to this as "adjusted noninterest expense." The following table presents the primary components of noninterest expense and a reconciliation of reported noninterest expense to adjusted noninterest expense. 
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 Noninterest Expenses 
 Year Ended December 31, 
 ($ in thousands) 2023 2022 2021 
 Salaries $ 114,377 96,321 86,815 
 Employee benefits 25,474 21,397 16,434 
 Total personnel expense 139,851 117,718 103,249 
 Occupancy expense 14,963 12,796 11,528 
 Equipment related expenses 6,027 5,808 4,492 
 Credit card rewards and other bankcard expenses 5,288 1,653 4,609 
 Telephone and data lines 3,960 3,631 3,087 
 Software licenses and other software costs 8,717 6,064 5,316 
 Data processing expense 8,733 7,535 5,959 
 Professional fees 5,409 4,350 2,992 
 Advertising and marketing 4,055 3,032 2,580 
 Non-credit losses 4,766 2,730 1,136 
 FDIC and corporate insurance costs 9,257 4,858 3,986 
 Other operating expenses 21,805 16,661 15,322 
 Merger and acquisition expenses 13,695 5,072 16,845 
 Amortization of intangible assets 8,003 3,684 3,531 
 Foreclosed property (gains) losses, net (150) (372) 24 
 Total noninterest expense 254,379 195,220 184,656 
 Non-GAAP adjustments - exclude: 
 Merger and acquisition expenses (13,695) (5,072) (16,845) 
 Amortization of intangible assets (8,003) (3,684) (3,531) 
 Foreclosed property (gains) losses, net 150 372 (24) 
 Adjusted noninterest expense $ 232,831 186,836 164,256 

 In general, the 30.3% increase in total noninterest expenses in 2023 as compared to 2022, was driven by the acquisition of eight GrandSouth branch locations and related branch and support personnel which resulted in higher salary and benefit expense (up $22.1 million, as compared to 2022) as well as other facilities (up $2.2 million from the prior year) and support-related costs. 
 The current year included merger and acquisition expenses of $13.7 million, an increase of $8.6 million from 2022, and higher intangible amortization which increased $4.3 million from the prior year, both of which were related to the GrandSouth acquisition. While intangible amortization will continue, it is anticipated to be at a declining rate and we do not anticipate any additional merger and acquisition costs related to GrandSouth. 
 FDIC and corporate insurance costs increased $4.4 million in 2023 driven by the general FDIC rate increase effective January 1, 2023, combined with the acquired deposits from GrandSouth. Non-credit losses increased $2.0 million as compared to the prior year driven by an increase in check fraud experienced in 2023. The increase in bankcard expenses was related to higher volumes of customer accounts and transactions, combined with a 2022 rewards accrual reduction for expired benefits which resulted in lower expense in 2022 and a return to a more normal level of expense for 2023. 
 Also contributing to higher noninterest expense in 2023 were increases for software costs, data processing, professional fees, and advertising, as well as travel and training and franchise tax (both included in "other operating expenses") related to the GrandSouth acquisition, including the transition of new customers and higher account and transactions volumes. 
 
 Income Taxes 
 We recorded income tax expense of $27.8 million in 2023, $38.3 million in 2022, and $24.7 million in 2021. Our effective tax rates were at 21.1% for 2023, 20.7% for 2022, and 20.5% for 2021. The slight increase in effective tax rate for 2023 was attributable primarily to merger and acquisition expenses recorded resulting in non-deductible adjustments for tax purposes. 
 
 
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 ANALYSIS OF FINANCIAL CONDITION AND CHANGES IN FINANCIAL CONDITION 
 
 Loans 
 The loan portfolio is the largest category of our earning assets and is comprised of commercial loans, real estate mortgage loans, real estate construction loans, and consumer loans. The majority of our loan portfolio is within our North Carolina and South Carolina market areas. We also have a portfolio of SBA loans that have been made on a nationwide basis. The diversity of the economic bases of our market areas has historically provided a stable lending environment. 
 Total loans amounted to $8.2 billion at December 31, 2023, an increase of $1.5 billion, or 22.3%, from December 31, 2022. The GrandSouth acquisition was completed on January 1, 2023 and contributed $1.02 billion in loans. The acquired loan portfolio mix was similar in nature to our portfolio mix. Loan growth for the year was as follows: 
 
 ($ in thousands) 
 Loans at December 31, 2022 $ 6,665,145 
 Organic loan growth 464,883 
 Growth from acquisition 1,020,074 
 Loans at December 31, 2023 $ 8,150,102 
 
 Organic loan growth percentage 7.0 % 
 Total loan growth percentage 22.3 % 

 The following table provides a summary of the loan portfolio composition at each of the past five year ends. 
 
 Loan Portfolio Composition 
 As of December 31, 
 2023 2022 2021 2020 2019 
 ($ in thousands) Amount % of
Total
Loans Amount % of
Total
Loans Amount % of
Total
Loans Amount % of
Total
Loans Amount % of
Total
Loans 
 Commercial and industrial $ 905,862 11 % 641,941 9 % 648,997 11 % 782,549 17 % 504,271 11 % 
 Construction, development & other land loans 992,980 12 % 934,176 14 % 828,549 13 % 570,672 12 % 530,866 12 % 
 Commercial real estate - owner occupied 1,259,022 16 % 1,036,270 16 % 991,775 16 % 754,570 16 % 816,325 18 % 
 Commercial real estate - non owner occupied 2,528,060 31 % 2,123,811 32 % 1,813,849 31 % 1,096,781 23 % 893,776 20 % 
 Multi-family real estate 421,376 5 % 350,180 5 % 389,113 6 % 197,852 4 % 207,179 5 % 
 Residential 1-4 family real estate 1,639,469 20 % 1,195,785 18 % 1,021,966 17 % 972,378 21 % 1,105,014 25 % 
 Home equity loans/lines of credit 335,068 4 % 323,726 5 % 331,932 5 % 306,256 6 % 337,922 8 % 
 Consumer loans 68,443 1 % 60,659 1 % 57,238 1 % 53,955 1 % 56,172 1 % 
 Loans, gross 8,150,280 100 % 6,666,548 100 % 6,083,419 100 % 4,735,013 100 % 4,451,525 100 % 
 Unamortized net deferred loan (fees) costs (178) (1,403) (1,704) (3,698) 1,941 
 Total loans $ 8,150,102 6,665,145 6,081,715 4,731,315 4,453,466 

 The majority of our loan portfolio over the years has been real estate mortgage loans, including commercial and residential mortgages. All loan categories secured by real estate, including construction and land loans, have historically ranged from approximately 82% to 90% of the loan portfolio. Except for construction, land development, and other land loans, the majority of our real estate loans are personal and commercial loans where cash flow from the borrower’s occupation or business is the primary repayment source, with the real estate pledged providing a secondary repayment source. 
 The largest component of our portfolio is non-owner occupied commercial real estate loans, followed by residential 1-4 family real estate and owner occupied commercial real estate loans. As demonstrated in the table above, while there has been some variations in the relative percentage of each loan category to the total portfolio over the years, the nature of our portfolio has not changed drastically from the prior year or the historical averages. The higher 
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 percentage for commercial and industrial loan category in 2020 was an anomaly related to Paycheck Protection Program ("PPP") loans made under the provisions of the CARES Act, which were forgiven in accordance with the PPP loan provisions starting in late 2020 and through early 2022. The percentage of residential real estate loans has declined somewhat over the last several years as consumers refinanced their home loans during the lower interest rate environment from 2020 through early 2022 and the Bank was able to sell more of these loans in the secondary market. With the increase in interest rates starting in 2022, the refinance activity slowed and the Bank retained more loans in this category on the balance sheet. 
 A summary of scheduled loan maturities, based on contractual maturity dates, over certain time periods is presented below, with fixed rate loans and adjustable rate loans shown separately. 
 
 Loan Maturities 
 As of December 31, 2023 
 Due within
one year Due after one year but
within five years Due after five years but
within fifteen years Due after fifteen
years Total 
 ($ in thousands) Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield 
 Variable Rate Loans: 
 Commercial and industrial $ 118,797 8.41 % 42,027 8.64 % 41,858 10.47 % 311 10.52 % 202,993 8.90 % 
 Construction, development & other land loans 177,259 9.06 % 167,350 8.33 % 2,672 7.85 % 2,649 9.10 % 349,930 8.70 % 
 Commercial real estate - owner occupied 18,922 8.96 % 34,543 8.08 % 26,069 7.50 % 65,715 9.34 % 145,249 8.67 % 
 Commercial real estate - non owner occupied 27,759 8.50 % 113,385 7.90 % 26,042 6.90 % 20,480 8.63 % 187,666 7.93 % 
 Multi-family real estate 1,658 7.82 % 3,399 8.32 % 15,217 7.60 % — — % 20,274 7.73 % 
 Residential 1-4 family real estate 4,306 9.39 % 27,749 8.08 % 27,255 6.50 % 272,189 4.38 % 331,499 4.80 % 
 Home equity loans/lines of credit 10,365 8.87 % 24,434 8.78 % 279,818 8.64 % 16 8.50 % 314,633 8.65 % 
 Consumer loans 5,672 9.34 % 2,491 10.79 % 19 8.13 % 814 10.84 % 8,996 10.13 % 
 Total at variable rates 364,738 8.80 % 415,378 8.25 % 418,950 8.46 % 362,174 5.59 % 1,561,240 7.80 % 
 Fixed Rate Loans: 
 Commercial and industrial 146,477 17.22 % 264,361 4.89 % 181,722 3.62 % 101,485 2.95 % 694,045 6.97 % 
 Construction, development & other land loans 156,464 5.26 % 250,483 4.90 % 235,703 4.75 % — — % 642,650 4.93 % 
 Commercial real estate - owner occupied 53,858 4.94 % 540,464 4.64 % 512,324 4.11 % 86 8.50 % 1,106,732 4.41 % 
 Commercial real estate - non owner occupied 124,230 4.76 % 1,318,860 4.26 % 889,854 3.94 % 177 6.50 % 2,333,121 4.16 % 
 Multi-family real estate 10,062 4.56 % 232,889 4.02 % 158,150 3.76 % — — % 401,101 3.93 % 
 Residential 1-4 family real estate 38,134 5.21 % 328,154 4.71 % 161,044 4.35 % 775,094 3.74 % 1,302,426 4.08 % 
 Home equity loans/lines of credit 6,269 3.50 % 7,252 5.99 % 3,912 5.39 % 300 6.14 % 17,733 4.98 % 
 Consumer loans 19,720 6.07 % 29,546 7.47 % 7,188 7.29 % 2,392 16.78 % 58,846 7.95 % 
 Total at fixed rates 555,214 8.26 % 2,972,009 4.51 % 2,149,897 4.07 % 879,534 3.68 % 6,556,654 4.58 % 
 
 Subtotal 919,952 8.48 % 3,387,387 4.97 % 2,568,847 4.79 % 1,241,708 4.24 % 8,117,894 5.20 % 
 Nonaccrual loans 32,208 — — — 32,208 
 Total loans $ 952,160 3,387,387 2,568,847 1,241,708 8,150,102 

 Note: The above table is based on contractual scheduled maturities. Early repayment of loans or renewals at maturity are not considered in this table. 
 Approximately 11% of our accruing loans outstanding at December 31, 2023 mature within one year and 53% of total loans mature within five years. As of December 31, 2023, the percentages of variable rate loans and fixed rate loans as compared to total performing loans were 19% and 81%, respectively. In recent years, the mix of variable rate loans to fixed rate loans has been shifting to more fixed rate loans given the low interest rate environment prior to mid-2022 and borrowers' preference to lock in low rates. While fixed rate loans present risk to our Company, in particular in rising interest rate environment as we have experienced starting in 2022 and into 2023, we measure our interest rate risk closely. Refer to additional discussion in the section “Interest Rate Risk” below. 
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 The Company’s loan portfolio is not concentrated in loans to any single borrower or to a relatively small number of borrowers. Additionally, management is not aware of any concentrations of loans to classes of borrowers or industries that would be similarly affected by economic conditions. 
 In addition to monitoring potential concentrations of loans to particular borrowers or groups of borrowers, industries, and geographic regions, the Company monitors exposure to credit risk that could arise from potential concentrations of lending products and practices such as loans that subject borrowers to substantial payment increases (e.g. principal deferral periods, loans with initial interest-only periods, etc.), and loans with high loan-to-value ratios. Additionally, there are industry practices that could subject the Company to increased credit risk should economic conditions change over the course of a loan’s life. For example, the Bank makes variable rate loans and fixed rate principal-amortizing loans with maturities prior to the loan being fully paid (i.e. balloon payment loans). These loans are underwritten and monitored to manage the associated risks. The Company has determined that there is no concentration of credit risk associated with its lending policies or practices. 
 Most of our business activity is with customers located within the markets where we have banking operations. Therefore, our exposure to credit risk is significantly affected by changes in the economy within our markets. Approximately 88% of our loan portfolio is secured by real estate and is therefore susceptible to changes in real estate valuations. 
 
 Nonperforming Assets 
 NPAs include 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, accruing TDRs. 
 Nonaccrual loans are loans on which interest income is no longer being recognized or accrued because management has determined that the collection of interest is doubtful. Placing loans on nonaccrual status negatively impacts earnings because (1) interest accrued but unpaid as of the date a loan is placed on nonaccrual status is reversed and deducted from interest income; (2) future accruals of interest income are not recognized until it becomes probable that both principal and interest will be paid; and (3) principal charged-off, if appropriate, may necessitate additional provisions for loan losses that are charged against earnings. As a matter of policy, we generally place all loans that are past due 90 or more days on nonaccrual basis. There were no accruing loans that are past due 90 or more days at December 31, 2023 and December 31, 2022. 
 In some cases, where borrowers are experiencing financial difficulties, loans may be restructured to provide terms significantly different from the originally contracted terms. 
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 The following table summarizes our NPAs at the dates indicated. 
 
 Nonperforming Assets 
 As of December 31, 
 ($ in thousands) 2023 2022 2021 2020 2019 
 Nonperforming assets 
 Nonaccrual loans $ 32,208 28,514 34,696 35,076 24,866 
 Modifications to borrowers in financial distress 11,719 — — — — 
 TDRs - accruing — 9,121 13,866 9,497 9,053 
 Accruing loans >90 days past due — — 1,004 — — 
 Total nonperforming loans 43,927 37,635 49,566 44,573 33,919 
 Foreclosed real estate 862 658 3,071 2,424 3,873 
 Total nonperforming assets $ 44,789 38,293 52,637 46,997 37,792 
 
 Allowance for credit losses $ 109,853 90,967 78,789 52,388 21,398 
 Total Loans 8,150,102 6,665,145 6,081,715 4,731,315 4,453,466 
 
 Asset Quality Ratios 
 Nonaccrual loans to total loans 0.40 % 0.43 % 0.57 % 0.74 % 0.56 % 
 Nonperforming loans to total loans 0.54 % 0.56 % 0.82 % 0.94 % 0.76 % 
 Nonperforming assets to total loans and foreclosed real estate 0.55 % 0.57 % 0.87 % 0.99 % 0.85 % 
 Nonperforming assets to total assets 0.37 % 0.36 % 0.50 % 0.64 % 0.62 % 
 Allowance for credit losses to total loans 1.35 % 1.36 % 1.30 % 1.11 % 0.48 % 
 Allowance for credit losses to nonaccrual loans 341.07 % 319.03 % 227.08 % 149.36 % 86.05 % 
 Allowance for credit losses to nonperforming loans 250.08 % 241.71 % 158.96 % 117.53 % 63.09 % 

 Our asset quality continues to be strong as demonstrated by stable or improving trends in all ratios as presented in the table above. Our total nonperforming loans to total loans was 0.54% at December 31, 2023, while our total NPA ratio was 0.37% at that date. Additional discussion of the credit quality classification status of our loans is contained in Note 4 to our consolidated financial statements. 
 "Commercial and industrial" is the largest category of nonaccrual loans, at $9.9 million, or 30.7% of total nonaccrual loans, followed by "Commercial real estate - non owner occupied" at $7.2 million, or 22.4% of total nonaccrual loans and "Commercial real estate - owner occupied" at $7.0 million, or 21.9% of total nonaccrual loans. 
 As of December 31, 2023, SBA loans accounted for approximately $18.2 million of our nonaccrual loans, or 56.6%, of the total SBA portfolio, and carried guarantees from the SBA totaling $9.3 million. This is compared to $14.6 million, or 9.5%, of the SBA portfolio at December 31, 2022. We continue to closely monitor the SBA loan portfolio and give it appropriate consideration when evaluating the adequacy of the ACL as those loans are generally considered inherently more risky than other loans in our portfolio. Refer to additional discussion of the ACL below. 
 As shown in Note 4 to the consolidated financial statements, our accruing past due loans (30 or more days) totaled $29.8 million at December 31, 2023, with the majority (74.8%) being in the residential 1-4 family real estate category with the increase related primarily to the timing of year end over a weekend. 
 We classify loans as “special mention” when there is a defined weakness or weaknesses that jeopardize the repayment by the borrower and there is a distinct possibility that we could sustain some loss if the deficiency is not corrected. Performing special mention loans, which are still accruing interest, totaled $44.1 million and $39.0 million as of December 31, 2023 and 2022, respectively. In addition, loans that are in the risk category of "classified" which are still accruing interest totaled $22.0 million at December 31, 2023 and $20.0 million at December 31, 2022. These loans have a great risk of further deterioration and potential loss to the Bank. 
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 Total foreclosed real estate amounted to $0.9 million at December 31, 2023, compared to $0.7 million in 2022. Six property were added to foreclosed real estate during 2023 and we completed the sale of six properties during the year. Four of the 2023 additions were within the population that sold in 2023. 
 
 Allowance for Credit Losses and Loan Loss Experience 
 The total allowance for credit losses amounted to $109.9 million at December 31, 2023 compared to $91.0 million at December 31, 2022. Fluctuations in the ACL 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. As discussed previously in the Provision for Loan Losses section, much of the change to the level of ACL during the year ended December 31, 2023 is attributed to the acquisition of GrandSouth. In addition to the initial allowance recorded for PCD loans of $5.6 million, the Company recorded an 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 loan growth during the year and updated prepayment speed estimates in the CECL model, which have slowed with market rate increases, thus requiring additional allowance for the estimated longer life of loans. Somewhat offsetting the prepayment speed assumptions in the CECL model were updated economic forecasts which have generally projected improvement of the economy demonstrated in lower projected unemployment rates, improved GDP, and increasing price indices for both commercial real estate and residential mortgages. 
 The ACL reflects our estimate of life of loan expected credit losses that will result from the inability of our borrowers to make required loan payments. We use systematic methodologies to determine the ACL for loans and the allowance for certain off-balance-sheet credit exposures. The ACL is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loan portfolio. 
 We consider the effects of past events, current conditions, and reasonable and supportable forecasts on the collectability of the loan portfolio. Our estimate of the ACL involves a high degree of judgment. Therefore, the process for determining expected credit losses may result in a range of expected credit losses. The ACL is calculated using collectively evaluated pools for loans with similar risk characteristics applying the DCF method. When a loan no longer shares similar risk characteristics with its segment, the loan is evaluated on an individual basis applying a DCF or asset approach for collateral-dependent loans. Refer also to the discussion of the critical estimates utilized in the ACL in the prior section, Critical Accounting Estimates, and refer to Note 1 of the consolidated financial statements for a discussion of our CECL methodology used to determine the ACL. 
 Our assessment of the ACL involves uncertainty and judgment and is subject to change in future periods. The amount of any changes could be significant if the assessment of loan quality or collateral values changes substantially with respect to one or more loan relationships or portfolios or if there is a significant change in the reasonable and supportable forecast used to model our expected credit losses. The allocation of the ACL as presented in the following table is based on reasonable and supportable forecasts, historical data, subjective judgment, and estimates and therefore, may not be predictive of the specific amounts or loan categories in which charge-offs may ultimately occur. In addition, bank regulatory authorities, as part of their periodic examination of the Bank, may require adjustments to the provision for loan losses in future periods if, in their opinion, the results of their review warrant such additions. 
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 The following table sets forth the allocation of the ACL by loan category at the dates indicated. However, the ACL is available to absorb losses in any and all categories. 
 
 Allocation of the Allowance for Credit Losses 
 As of December 31, 
 ($ in thousands) 2023 % of
Loan Category 2022 % of
Loan Category 2021 % of
Loan Category 2020 % of
Loan Category 2019 % of
Loan Category 
 Commercial and industrial $ 21,227 2.34 % 17,718 2.76 % 16,249 2.50 % 11,316 1.45 % 4,553 0.90 % 
 Construction, development & other land loans 13,940 1.40 % 15,128 1.62 % 16,519 1.99 % 5,355 0.94 % 1,976 0.37 % 
 Commercial real estate - owner occupied 18,218 1.45 % 14,972 1.44 % 12,317 1.24 % 10,608 1.41 % 5,186 0.64 % 
 Commercial real estate - non owner occupied 24,916 0.99 % 22,780 1.07 % 16,789 0.93 % 11,465 1.05 % 2,990 0.33 % 
 Multi-family real estate 3,825 0.91 % 2,957 0.84 % 1,236 0.32 % 1,530 0.77 % 762 0.37 % 
 Residential 1-4 family real estate 21,396 1.31 % 11,354 0.95 % 8,686 0.85 % 8,048 0.83 % 3,832 0.35 % 
 Home equity loans/lines of credit 3,339 1.00 % 3,158 0.98 % 4,337 1.31 % 2,375 0.78 % 1,127 0.33 % 
 Consumer loans 2,992 4.37 % 2,900 4.78 % 2,656 4.64 % 1,478 2.74 % 972 1.73 % 
 Total allocated 109,853 90,967 78,789 52,175 21,398 
 Unallocated — n/a — n/a — n/a 213 n/a — n/a 
 Total $ 109,853 1.35 % 90,967 1.36 % 78,789 1.30 % 52,388 1.11 % 21,398 0.48 % 
 
 Note: "% of Loan Category" represents the ACL as a percent of the respective total loan categories presented previously in the Loan Portfolio Composition table. 
 n/a - not applicable 

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 For the years indicated, the following table summarized our net loss experience by loan category and key ratios demonstrating the asset quality trends over the most recent five years. 
 
 Loan Ratios, Loss and Recovery Experience 
 As of December 31, 
 ($ in thousands) 2023 2022 2021 2020 2019 
 Loans outstanding at end of year $ 8,150,102 6,665,145 6,081,715 4,731,315 4,453,466 
 Average amount of loans outstanding 7,902,628 6,293,280 5,018,391 4,702,743 4,346,331 
 Allowance for credit losses, at end of year 109,853 90,967 78,789 52,388 21,398 
 
 Net loan (charge-offs) recoveries 
 Commercial and industrial $ (6,965) (1,763) (1,978) (4,863) (1,493) 
 Construction, development & other land loans 250 480 703 1,501 722 
 Commercial real estate - owner occupied 321 477 (212) (335) (220) 
 Commercial real estate - non owner occupied 502 432 (1,562) (24) (947) 
 Multi-family real estate 13 11 12 12 186 
 Residential 1-4 family real estate 373 17 488 276 48 
 Home equity loans/lines of credit (211) 557 178 (37) 322 
 Consumer loans (757) (633) (309) (579) (522) 
 Total net charge-offs $ (6,474) (422) (2,680) (4,049) (1,904) 
 Average loans: 
 Commercial and industrial $ 865,043 619,480 700,557 707,976 482,654 
 Construction, development & other land loans 1,053,422 857,880 619,928 615,717 503,183 
 Commercial real estate - owner occupied 1,224,284 1,012,275 812,764 776,166 814,783 
 Commercial real estate - non owner occupied 2,464,389 1,968,944 1,322,685 1,012,182 860,783 
 Multi-family real estate 402,814 357,491 256,396 193,415 197,100 
 Residential 1-4 family real estate 1,482,941 1,091,788 951,573 1,028,334 1,074,938 
 Home equity loans/lines of credit 341,778 326,592 300,291 316,593 346,331 
 Consumer loans 67,957 58,830 54,197 52,360 66,559 
 Total average loans $ 7,902,628 6,293,280 5,018,391 4,702,743 4,346,331 
 
 Ratios: 
 Allowance for credit losses as a percent of loans at end of year 1.35 % 1.36 % 1.30 % 1.11 % 0.48 % 
 Allowance for credit losses as a multiple of net charge-offs 16.97 215.56 29.40 12.94 11.24 
 Provision for loan losses as a percent of net charge-offs 305.07 % 2,985.78 % 358.62% 865.37% 118.86% 
 Recoveries of loans previously charged-off as a percent of loans charged-off 36.37 % 90.55 % 64.75 % 52.38 % 69.79 % 
 Total net charge-offs as a percent of average loans (0.08 %) (0.01 %) (0.05 %) (0.09 %) (0.04 %) 
 Net (charge-offs) recoveries by loan category as a percent of average loans: 
 Commercial and industrial (0.81 %) (0.28 %) (0.28 %) (0.69 %) (0.31 %) 
 Construction, development & other land loans 0.02 % 0.06 % 0.11 % 0.24 % 0.14 % 
 Commercial real estate - owner occupied 0.03 % 0.05 % (0.03 %) (0.04 %) (0.03 %) 
 Commercial real estate - non owner occupied 0.02 % 0.02 % (0.12 %) — % (0.11 %) 
 Multi-family real estate — % — % — % 0.01 % 0.09 % 
 Residential 1-4 family real estate 0.03 % — % 0.05 % 0.03 % — % 
 Home equity loans/lines of credit (0.06 %) 0.17 % 0.06 % (0.01 %) 0.09 % 
 Consumer loans (1.11 %) (1.08 %) (0.57 %) (1.11 %) (0.78 %) 

 
 
 
 
 
 
 
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 Securities 
 Our securities portfolio and the breakout of AFS and HTM securities is presented in the following table. 
 
 Securities Portfolio Composition 
 As of December 31, 
 ($ in thousands) 2023 2022 2021 
 Securities available for sale: 
 US Treasury securities $ 172,570 168,758 — 
 Government-sponsored enterprise securities 
 60,266 57,456 69,179 
 Mortgage-backed securities 
 1,937,784 2,045,000 2,514,805 
 Corporate bonds 
 18,759 43,279 46,430 
 
 Total securities available for sale 
 2,189,379 2,314,493 2,630,414 
 
 Securities held to maturity: 
 Mortgage-backed securities 
 12,085 15,150 20,260 
 State and local governments 
 521,593 526,550 493,565 
 Total securities held to maturity 
 533,678 541,700 513,825 
 
 Total securities $ 2,723,057 2,856,193 3,144,239 
 
 Average total securities during year, at amortized cost $ 3,216,327 3,356,486 2,367,591 

 
 
 The decrease in securities for the year ended December 31, 2023 was primarily due to regular principal repayments received on mortgage-backed securities. We made no notable purchases of investment securities during 2023 and we continue to utilize cash flows from amortizing investments to fund loan growth and fluctuations in deposits. Also impacting the change in balances of AFS securities was the improvement in unrealized loss on AFS securities which was $400.7 million at December 31, 2023 as compared to $444.1 million at December 31, 2022. 
 The composition of the investment securities portfolio reflects our investment strategy of maintaining an appropriate level of liquidity while providing a relatively stable source of income. The investment portfolio also provides a balance to interest rate risk and credit risk in other categories of the balance sheet while providing a vehicle for the investment of available funds, furnishing liquidity, and supplying securities to pledge as required collateral for certain deposits. Essentially all of our mortgage-backed securities, which include both AFS and HTM securities, are issued by GSEs or GNMA, and are traded in liquid secondary markets. These securities are recorded on the balance sheet at fair value for the AFS portfolio and at cost for the HTM portfolio. 
 The table below presents the composition, tax equivalent yields, and remaining maturities of our securities as of December 31, 2023. For more information about these securities, including gross unrealized gains and losses by type of security and securities pledged, see Note 3 to the consolidated financial statements. 
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 Securities Portfolio Maturity Schedule 
 ($ in thousands) US Treasury securities Government & govt.-sponsored enterprise securities Mortgage-backed securities (1) 
 Corporate debt securities Total Weighted Average Yield (2) 
 
 Securities available for sale 
 Remaining maturity: 
 One year or less $ 172,570 — 1,525 2,406 176,501 2.38 % 
 After one through five years — 8,602 408,067 — 416,669 2.52 % 
 After five through ten years — 51,664 1,419,410 15,354 1,486,428 1.76 % 
 After ten years — — 108,782 999 109,781 1.68 % 
 Fair Value $ 172,570 60,266 1,937,784 18,759 2,189,379 
 Amortized cost $ 174,785 71,964 2,323,673 19,676 2,590,098 1.78 % 
 Weighted-average yield (2) 
 2.33 % 1.17 % 1.73 % 4.58 % 1.78 % 
 Weighted average maturity years 0.48 6.07 6.86 5.54 6.37 
 
 Mortgage-backed securities (1) 
 State and local governments Total Weighted Average Yield (2) 
 
 Securities held to maturity 
 Remaining maturity: 
 One year or less $ — — — — % 
 After one through five years 12,085 1,998 14,083 2.29 % 
 After five through ten years — 129,097 129,097 2.11 % 
 After ten years — 390,498 390,498 2.05 % 
 Amortized cost $ 12,085 521,593 533,678 
 Fair value $ 11,447 438,176 449,623 2.09 % 
 Weighted-average yield (2) 
 2.53 % 2.07 % 2.09 % 
 Weighted average maturity years 2.99 10.51 10.37 

 (1) Mortgage-backed securities are shown maturing in the periods consistent with their estimated lives based on expected prepayment speeds. 
 (2) Yields have been computed using coupon interest, adding discount accretion or subtracting premium amortization, as appropriate, on a ratable basis over the life of each security. Weighted average yield for each maturity range has been computed on a fully taxable-equivalent basis using the amortized cost of each security in that range. Yields on tax-exempt investments have been adjusted to a taxable equivalent basis using a 23.15% tax rate. 
 
 
 The majority of our GSE securities carry one maturity date, often with an issuer call feature. At December 31, 2023, of the $60.3 million in AFS GSE securities, $33.8 million were issued by the FFCB, $24.9 million were issued by the FHLMC, and the remaining $1.6 million were issued by the FHLB. 
 Nearly all of our $1.9 billion in AFS mortgage-backed securities at December 31, 2023 were issued by the FHLMC, FNMA, GNMA, or the SBA, each of which is a government agency or a GSE and guarantees the repayment of the securities. Included in this total are private-label commerical mortgage-backed securities of $0.7 million. Mortgage-backed securities vary in their repayment in correlation with the underlying pools of mortgage loans. 
 At December 31, 2023, we held $533.7 million in securities classified as HTM, which are carried at amortized cost. These securities had fair values that were lower than their carrying values by $84.1 million at December 31, 2023. Approximately $12.1 million of the HTM securities were mortgage-backed securities that have been issued by either the FHLMC or FNMA. The remaining $521.6 million in HTM securities were comprised almost entirely of highly-rated municipal bonds issued by state and local governments throughout the nation. We have no significant concentration of bond holdings from one state or local government entity, with the single largest exposure to any one entity being $7.1 million. We have evaluated any unrealized losses on individual securities at each year end and determined them to be of a temporary nature and caused by fluctuations in market interest rates, not by concerns about the ability of the issuers to meet their obligations. 
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 Deposits 
 Deposits represent the primary funding source for our loans and investments. Total deposits amounted to $10.0 billion at December 31, 2023, an increase of $804.1 million, or 8.7%, from December 31, 2022. The GrandSouth acquisition was completed on January 1, 2023 and contributed $1.05 billion in deposits. The acquired deposit portfolio mix was similar in nature to our deposits, with the exception of a slightly higher percentage of money market accounts. Deposit growth for the year is as follows: 
 
 ($ in thousands) 
 Deposits at December 31, 2022 $ 9,227,529 
 Organic deposit contraction (245,808) 
 Growth from acquisition 1,049,878 
 Deposits at December 31, 2023 $ 10,031,599 
 
 Organic deposit contraction percentage (2.7) % 
 Total deposit growth percentage 8.7 % 

 The contraction in deposits, exclusive of acquired deposits during 2023 is directly related to a strategic decision to reduce brokered deposits during the year, which accounted for $249.3 million of the reduction in organic deposits as presented in the table above. The balance of the difference, an increase of $3.5 million, indicates the stability of our retail and commercial core deposits during a year with uncertainty and volatility experienced in the banking industry. We continue to have a diversified and granular deposit base which has remained a stable source of funding. At December 31, 2023, noninterest-bearing deposits accounted for 34% of total deposits. This is down slightly from the prior year, in part due to the GrandSouth acquired deposits mix combined with changes in consumer behavior, but continues to be in line with our historical trends and contributes to our low cost of funds. 
 The table below presents our historical deposit mix which has remained fairly consistent and continues to be predominately transaction and non-time deposit accounts. As demonstrated in the below table, total time deposits have declined to 10% of total deposits at December 31, 2023 from 18% at December 31, 2019. Such a shift in mix is beneficial for us, as non-time deposit accounts generally carry lower interest rates compared to time deposits and allows us to reprice these deposit categories at any time. Approximately 92% of our time deposits mature within one year. 
 
 Deposit Composition 
 As of December 31, 
 2023 2022 2021 2020 2019 
 ($ in thousands) Amount % of
Total Amount % of
Total Amount % of
Total Amount % of
Total Amount % of
Total 
 Noninterest-bearing checking accounts $ 3,379,876 34 % 3,566,003 39 % 3,348,622 37 % 2,210,012 35 % 1,515,977 31 % 
 Interest-bearing checking accounts 1,411,142 14 % 1,514,166 16 % 1,593,231 17 % 1,172,022 19 % 912,784 18 % 
 Money market accounts 3,653,506 36 % 2,416,146 26 % 2,562,283 28 % 1,581,364 25 % 1,173,107 24 % 
 Savings accounts 608,380 6 % 728,641 8 % 708,054 8 % 519,266 8 % 424,415 9 % 
 Other time deposits 610,887 6 % 464,343 5 % 547,669 6 % 415,269 7 % 462,898 9 % 
 Time deposits >$250,000 355,209 4 % 276,319 3 % 357,355 4 % 355,441 6 % 356,033 7 % 
 Total customer deposits 10,019,000 100 % 8,965,618 97 % 9,117,214 100 % 6,253,374 100 % 4,845,214 98 % 
 Brokered Deposits 12,599 — % 261,911 3 % 7,415 — % 20,222 — % 86,141 2 % 
 Total deposits $ 10,031,599 100 % 9,227,529 100 % 9,124,629 100 % 6,273,596 100 % 4,931,355 100 % 

 While our customer deposits have remained fairly stable, there continues to be competition for deposits and the market rate increases experienced starting in 2022 have resulted in changes in customer behavior driving the shift to money market accounts during 2023. The number of net new deposit accounts continues to increase, however, we have seen the average balance per account decline as compared to the prior year. We routinely engage in activities designed to grow and retain deposits, including emphasizing relationship banking to new and existing customers where borrowers are encouraged and normally expected to maintain deposit accounts with us; pricing 
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 deposits at rate levels that will attract and/or retain deposits; and continually working to identify and introduce new products that will attract customers or enhance our appeal as a primary provider of financial services. 
 As of December 31, 2023, the estimated uninsured deposits we held totaled approximately $3.7 billion. In addition, we held $355.2 million in time deposits which, by account, were in excess of the the FDIC insurance limit of $250,000. Of these accounts, there was a total of $187.6 million which was in excess of $250,000. This assessment of time deposit accounts does not evaluate total deposit relationships, account ownership types or other factors for determining the actual uninsured balances by customer. 
 The table below presents maturities of time deposits which by account are great than the FDIC insurance limit of $250,000 as of December 31, 2023. 
 
 As of December 31, 2023 
 ($ in thousands) 3 Months
or Less Over 3 to 6
Months Over 6 to 12
Months Over 12
Months Total 
 Time deposits greater than the FDIC insurance limit of $250,000 $ 151,321 98,241 91,210 14,437 355,209 

 In addition to insured deposits of $6.3 billion or 63.3% of total deposits, we had deposits collateralized by investment securities with balances totaling $820.9 million at December 31, 2023 such that approximately 71.5% of our total deposits were insured or collateralized at that date. 
 At each of the past three year ends, we had no deposits issued through foreign offices. Deposits at December 31, 2023 from foreign depositors were nominal. 
 
 Borrowings 
 We typically utilize short-term borrowings to provide balance sheet liquidity and to fund imbalances in our loan growth compared to our deposit growth. In addition, we have long-term debt in the form of trust preferred securities and subordinated debentures. 
 Total borrowings at December 31, 2023 increased $342.7 million from the prior year end. FHLB advances comprised $59.0 million of the increase and FRB borrowings under the Bank Term Funding Program comprised $249.0 million of the increase. The short-term advances were required to fund loan growth and fluctuations in deposit balances during 2023. As a part of the GrandSouth acquisition, we acquired $8.2 million in trust preferred securities and subordinated debentures totaling $28.0 million. 
 Our borrowings outstanding as of the dates presented were as follows: 
 
 ($ in thousands) December 31, 2023 December 31, 2022 
 FHLB advances $ 280,851 221,842 
 FRB borrowings 249,000 — 
 Trust preferred capital issuances 77,324 69,076 
 Subordinated debentures 28,000 — 
 635,175 290,918 
 Unamortized discounts on acquired borrowings (5,017) (3,411) 
 $ 630,158 287,507 

 As noted in the table above, at December 31, 2023, we had $77.3 million of borrowings structured as trust preferred capital securities which qualify as Tier I capital for regulatory capital adequacy requirements. The Company issued $46.4 million of these securities with the balance assumed from several recent acquisitions, including GrandSouth as noted above. The $28.0 million of unsecured subordinated debentures are borrowings issued by GrandSouth which we acquired and which qualify as Tier II capital for regulatory capital adequacy requirements. 
 At December 31, 2023, the Company had several sources of readily available borrowing capacity: 
 • A line of credit with the FHLB of approximately $1.3 billion which can be structured as either short-term or long-term borrowings, depending on the particular funding or liquidity need, and is secured by a blanket lien 
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 on most of our real estate loan portfolio, select securities from our investment portfolio, and our FHLB stock. There was approximately $1.1 billion available under the FHLB line at year end based on pledged collateral. 
 • Federal funds lines of credit from several correspondent banks totaling $265.0 million which provide for overnight unsecured federal funds purchased, all of which was available at year end. 
 • A $294.1 million line of credit through the Federal Reserve's Bank Term Funding Program ("BTFP"), secured by specific investment securities, of which $45.1 million was available at year end. Effective March 11, 2024, the Federal Reserve will terminate the BTFP and no additional advances will be available. 
 • A line of credit with the Federal Reserve through their discount window borrowing program of approximately $561.6 million which is secured by a blanket lien on a portion of our commercial and consumer loan portfolio (excluding real estate loans) and specific investment securities. All of this line was available at year end. 
 Refer to Note 9 to the consolidated financial statements for additional discussion of our borrowings. 
 
 Liquidity, Commitments, and Contingencies 
 Our liquidity is determined by our ability to convert assets to cash or to acquire alternative sources of funds to meet the needs of our customers who are withdrawing or borrowing funds, and our ability to maintain required reserve levels, pay expenses, and operate the Company on an ongoing basis. Our primary liquidity sources are net income from operations, cash and due from banks, federal funds sold, and other short-term investments. Our securities portfolio has a high percentage of amortizing mortgage-backed securities generating monthly cash flows. In addition, the portfolio is comprised almost entirely of readily marketable securities, which could also be sold to provide cash. We also maintain available lines of credit from the FHLB and the Federal Reserve, as well as federal funds lines from several correspondent banks which are summarized below. 
 At December 31, 2023, the Company had several sources of readily available borrowing capacity as described above in the Borrowings section. 
 Liquidity is evaluated as both on-balance sheet (primarily cash and cash-equivalents, unpledged securities, and other marketable assets) and off-balance sheet (readily available lines of credit or other funding sources). Our overall on-balance sheet liquidity ratio was 14.6% at December 31, 2023. Our total liquidity ratio, including the $1.9 billion in available lines of credit, was 28.8% as of that date. The increase in available lines of credit during 2023 was a result of additional loan and security collateral being transferred to the FHLB and the Federal Reserve to enhance the levels of off-balance sheet liquidity availability to meet demands, as necessary. 
 We continue to manage liquidity sources and believe our liquidity sources, including unused lines of credit, are at an acceptable level and remain adequate to meet our operating needs in the foreseeable future. We will continue to monitor our liquidity position carefully and will explore and implement strategies to increase liquidity if deemed appropriate. 
 In the normal course of business we have various outstanding contractual obligations that will require future cash outflows. In addition, there are commitments and contingent liabilities, such as commitments to extend credit, that may or may not require future cash outflows. Certain of the outstanding commitments and contingent liabilities, such as commitments to extend credit, are not reflected in the financial statements. 
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 Presented below is a summary of our contractual obligations and other commercial commitments outstanding as of December 31, 2023. 
 
 Contractual Obligations and Other Commercial Commitments 
 Payments Due Per Period ($ in thousands) 
 Contractual Obligation as of December 31, 2023 Less
than 1 Year 1-3 Years 4-5 Years After 5 Years Total 
 Borrowings $ 529,048 101 10,702 95,324 635,175 
 Operating leases 2,446 3,547 2,626 17,222 25,841 
 Time deposits, including brokered deposits 901,211 62,739 13,902 843 978,695 
 Non-qualified postretirement plan liabilities 524 1,125 1,153 4,442 7,244 
 Committed investment obligations 9,953 9,953 — — 19,906 
 Estimated interest expense on borrowings and time deposits (1) 
 48,491 15,966 14,998 38,587 118,042 
 Total contractual cash obligations $ 1,491,673 93,431 43,381 156,418 1,784,903 
 (1) Represents forecasted interest expense on borrowings and time deposits based on interest rates and balances at December 31, 2023. Forecasts are based on the contractual maturity of each liability. 
 

 
 Amount of Commitment Expiration Per Period ($ in thousands) 
 Other Commercial Commitments as of December 31, 2023 Less
than 1 Year 1-3 Years 4-5 Years After 5 Years Total
Amounts
Committed 
 Credit cards 
 $ — — — 264,107 264,107 
 Lines of credit and loan commitments 
 380,237 645,461 180,036 977,779 2,183,513 
 Standby letters of credit 
 19,508 1,012 40 — 20,560 
 Total commercial commitments 
 $ 399,745 646,473 180,076 1,241,886 2,468,180 

 As presented in the table above, at December 31, 2023, we had $20.6 million in standby letters of credit outstanding. We had no carrying amount for these standby letters of credit. The nature of standby letters of credit is that of a stand-alone obligation made on behalf of our customers to suppliers of the customers to guarantee payments owed to the supplier by the customer. The standby letters of credit are generally for terms of one year, at which time they may be renewed for another year if both parties agree. The payment of the guarantees would generally be triggered by a continued nonpayment of an obligation owed by the customer to the supplier. In the event that we are required to honor a standby letter of credit, a note, already executed by the customer, becomes effective providing repayment terms and any collateral. 
 It has been our experience that deposit withdrawals are generally able to be replaced with new deposits when needed, or through short-term advances from the FHLB. We believe that he Bank can meet its contractual cash obligations and existing commitments from normal operations. 
 
 Capital Resources and Shareholders’ Equity 
 Shareholders’ equity at December 31, 2023 amounted to $1.4 billion compared to $1.0 billion at December 31, 2022. The two basic components that typically have the largest impact on our shareholders’ equity are net income, which increases shareholders’ equity, and dividends declared, which decrease shareholders’ equity. Additionally, any stock issuances can significantly increase shareholders’ equity, including those associated with acquisitions such as in 2023, and any stock repurchases reduce shareholders’ equity. Finally, fluctuations in the amount of AOCI, generally driven by market interest rate changes resulting in increases or decreases in unrealized gains/losses on AFS securities, can have a significant impact on total equity. In 2023, the most significant factors that impacted our shareholders' equity were (1) $229.5 million of common stock issued for the acquisition of GrandSouth which increased equity; (2) $104.1 million net income reported for 2023, which increased equity, (3) common stock dividends declared of $36.1 million, which reduced equity; and (4) $33.9 million reduction in equity related to changes in AOCI driven by higher unrealized losses on AFS securities. 
 As discussed in “Borrowings” above, we also currently have $77.3 million in trust preferred securities outstanding, all of which qualify as Tier I capital under regulatory standards and $28.0 million of unsecured subordinated debentures which qualify as Tier II capital for regulatory capital adequacy requirements. We are not aware of any recommendations of regulatory authorities or otherwise which, if they were to be implemented, would have a material effect on our liquidity, capital resources, or operations. 
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 The Company and the Bank must comply with regulatory capital requirements established by the Federal Reserve and the Commissioner. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on our financial statements. The primary source of funds for the payment of dividends by the Company is dividends received from its subsidiary, the Bank. The Bank, as a North Carolina banking corporation, may declare dividends so long as such dividends do not reduce its capital below its applicable required capital (typically, the level of capital required to be deemed “adequately capitalized”). As of December 31, 2023, approximately $1.1 billion of the Company’s investment in the Bank is restricted as to transfer to the Company without obtaining prior regulatory approval. 
 Our regulatory capital ratios as of December 31, 2023, 2022 and 2021 are presented in the table below. All of our capital ratios significantly exceeded the minimum regulatory thresholds for all periods presented. 
 
 Risk-Based and Leverage Capital Ratios 
 As of December 31, 
 ($ in thousands) 2023 2022 2021 
 Risk-Based and Leverage Capital 
 Common Equity Tier I capital: 
 Shareholders’ equity $ 1,372,380 1,031,596 1,230,575 
 Intangible assets, net of deferred tax liability (493,383) (363,202) (366,609) 
 Accumulated other comprehensive income adjustments 308,030 341,975 24,970 
 Total Common Equity Tier I capital 1,187,027 1,010,369 888,936 
 Add: Trust preferred securities eligible for Tier I capital treatment 70,807 63,589 63,336 
 Total Tier I leverage capital 1,257,834 1,073,958 952,272 
 Tier II capital: 
 Add: Allowable allowance for credit losses and unfunded commitments 112,491 97,126 88,692 
 Add: Subordinated debentures eligible for Tier II capital treatment 27,177 — — 
 Tier II capital additions 139,668 97,126 88,692 
 Total capital $ 1,397,502 1,171,084 1,040,964 
 Total risk weighted assets $ 8,991,087 7,762,894 7,094,787 
 Adjusted fourth quarter average tangible assets $ 11,532,812 10,215,571 10,144,760 
 
 Risk-based and Leverage capital ratios: 
 Common equity Tier I capital to Tier I risk adjusted assets 13.20 % 13.02 % 12.53 % 
 Tier I capital to Tier I risk adjusted assets 13.99 % 13.83 % 13.42 % 
 Total risk-based capital to Tier II risk-adjusted assets 15.54 % 15.09 % 14.67 % 
 Tier I leverage capital to adjusted fourth quarter average assets 10.91 % 10.51 % 9.39 % 

 Our goal is to maintain our capital ratios at levels at least 200 basis points higher than the regulatory “well capitalized” thresholds set for banks. At December 31, 2023, our leverage ratio was 10.91% compared to the regulatory well capitalized bank-level threshold of 4.00% and our total risk-based capital ratio was 15.54% compared to the 10.50% regulatory well capitalized threshold. The increase in capital levels in 2023 was related to the growth in net income. 
 In addition to regulatory capital ratios, we also closely monitor our ratio of TCE to tangible assets, which is a non-GAAP financial measure. The TCE ratio was 7.42% at December 31, 2023 compared to 6.39% at December 31, 2022, with the increase of 103 basis points related primarily to the improvement in our AOCI unrealized loss on AFS securities included in equity. 
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 The following table reconciles common equity to tangible common equity and provides the calculation of the TCE ratio: 
 
 ($ in thousands) December 31, 2023 December 31, 2022 
 
 Reconciliation of Common Equity to TCE 
 Total shareholders' common equity $ 1,372,380 1,031,596 
 Less: Goodwill and other intangibles (511,608) (376,938) 
 Tangible common equity $ 860,772 654,658 
 Reconciliation of Total Assets to Tangible Assets 
 Total assets $ 12,114,942 10,625,049 
 Less: Goodwill and other intangibles (511,608) (376,938) 
 Tangible assets $ 11,603,334 10,248,111 
 TCE divided by Tangible Assets 7.42 % 6.39 % 

 See “Supervision and Regulation” under “Business” in Item 1. and Note 19 to the consolidated financial statements for discussion of other matters that may affect our capital resources. 
 
 Off-Balance Sheet Arrangements and Derivative Financial Instruments 
 Off-balance sheet arrangements include transactions, agreements, or other contractual arrangements pursuant to which we have obligations or provide guarantees on behalf of an unconsolidated entity. We have no off-balance sheet arrangements of this kind other than letters of credit and repayment guarantees associated with our trust preferred securities and subordinated debentures. 
 In the normal course of business, we are exposed to certain risk arising from both its business operations and economic conditions. As an element of our risk management strategies, we may enter into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Derivative financial instruments include futures, forwards, interest rate swaps, options contracts, and other financial instruments with similar characteristics. 
 We do not engage in significant derivatives activities, however, in 2023 to accommodate customers, we implemented a program whereby we enter into interest rate swaps with certain commercial loan customers, with offsetting positions to dealers under a back-to-back swap program. At December 31, 2023, the Company's derivative financial instruments consist entirely of customer back-to-back interest rate swaps which are not designated as hedges. Under this program, the Company executes interest rate swaps with commercial banking customers to facilitate their risk management strategies. Those interest rate swaps are simultaneously economically hedged by offsetting derivatives that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate derivatives associated with this program are not designated as hedging instruments, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings. Refer to Note 13 of the consolidated financial statements for additional discussion of our derivative positions. 
 
 Current Accounting Matters 
 We prepare our consolidated financial statements and related disclosures in conformity with standards established by, among others, the FASB. Because the information needed by users of financial reports is dynamic, the FASB frequently issues new rules and proposes new rules for companies to apply in reporting their activities. See Note 1 to our consolidated financial statements for a discussion of recent rule proposals and changes. 
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 Selected Financial Information 
 
 Year Ended December 31, 
 ($ in thousands, except per share data) 2023 2022 2021 2020 2019 
 Income Statement Data 
 Interest income $ 488,759 340,957 255,918 237,684 250,107 
 Interest expense 142,101 16,103 9,523 19,562 33,903 
 Net interest income 346,658 324,854 246,395 218,122 216,204 
 Provision for (reversal of) loan losses 19,750 12,600 9,611 35,039 2,263 
 (Reversal of) provision for unfunded commitments (1,937) (200) 5,420 — — 
 Net interest income after provision 328,845 312,454 231,364 183,083 213,941 
 Noninterest income 57,490 67,985 73,611 81,346 59,529 
 Noninterest expense 254,379 195,220 184,656 161,298 157,194 
 Income before income taxes 131,956 185,219 120,319 103,131 116,276 
 Income tax expense 27,825 38,283 24,675 21,654 24,230 
 Net income 104,131 146,936 95,644 81,477 92,046 
 
 
 Per Common Share Data 
 Earnings per common share – basic $ 2.54 4.12 3.19 2.81 3.10 
 Earnings per common share – diluted 2.53 4.12 3.19 2.81 3.10 
 Cash dividends declared 0.88 0.88 0.80 0.72 0.54 
 Market Price 
 High 43.24 49.00 50.92 40.00 41.34 
 Low 26.48 32.90 32.47 17.32 31.22 
 Close 37.01 42.84 45.72 33.83 39.91 
 Stated book value – common 33.38 28.89 34.54 31.26 28.80 
 Common shares outstanding at year end 41,109,987 35,704,154 35,629,177 28,579,335 29,601,264 
 
 
 Selected Balance Sheet Data (at year end) 
 Total assets $ 12,114,942 10,625,049 10,508,901 7,289,751 6,143,639 
 Loans 8,150,102 6,665,145 6,081,715 4,731,315 4,453,466 
 Allowance for credit losses 109,853 90,967 78,789 52,388 21,398 
 Intangible assets 511,608 376,938 382,090 254,638 251,585 
 Deposits 10,031,599 9,227,529 9,124,629 6,273,596 4,931,355 
 Borrowings 630,158 287,507 67,386 61,829 300,671 
 Total shareholders’ equity 1,372,380 1,031,596 1,230,575 893,421 852,401 
 
 
 Selected Average Balances 
 Total assets 12,033,033 10,556,230 8,495,645 6,765,998 6,027,047 
 Loans 7,902,628 6,293,280 5,018,391 4,702,743 4,346,331 
 Earning assets 11,433,492 9,989,185 7,871,319 6,160,100 5,448,400 
 Deposits 10,176,966 9,283,505 7,401,910 5,644,290 4,824,216 
 Interest-bearing liabilities 7,037,105 5,758,001 4,736,343 3,897,912 3,720,536 
 Total shareholders’ equity 1,293,085 1,096,913 969,775 874,532 812,823 
 
 
 Ratios 
 Return on average assets 0.87 % 1.39 % 1.13 % 1.20 % 1.53 % 
 Return on average common equity 8.05 % 13.40 % 9.86 % 9.32 % 11.32 % 
 Total risk-based capital ratio 15.54 % 15.09 % 14.67 % 15.37 % 14.89 % 
 Net interest margin (taxable-equivalent basis) 3.06 % 3.28 % 3.16 % 3.56 % 4.00 % 
 Loans to deposits at year end 81.24 % 72.23 % 66.65 % 75.42 % 90.31 % 
 Allowance for loan losses to total loans 1.35 % 1.36 % 1.30 % 1.11 % 0.48 % 
 Nonperforming assets to total assets at year end 0.36 % 0.36 % 0.50 % 0.64 % 0.62 % 
 Net (charge-offs) recoveries to average total loans (0.08 %) (0.01 %) (0.05 %) (0.09 %) (0.04 %) 
 
 Note - During both 2023 and 2021, the Company completed significant whole-bank acquisitions impacting the comparisons for each of those years. See additional discussion under "Recent Developments and Acquisitions" in Item 1. 

 
 
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FIRST BANCORP /NC/ 10-K

Item 7. Management’s Discussion and Analysis
