What changed in this filing

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Item 1. Financial Statements

2024-08-07 compared with 2024-05-08 · 294 added, 301 removed, 873 unchanged (41% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

($ in thousands - unaudited) March 31,

($ in thousands - unaudited) June 30,

2024 December 31,

2 unchanged sentences

Total cash and cash equivalents 608,412 237,855

Securities available for sale 2,088,483 2,189,379

Securities held to maturity (fair values of $ 436,655 at March 31, 2024 and $ 449,623 at December 31, 2023)

Securities available for sale (amortized cost of $ 2,277,299 and $ 2,590,099 , respectively)

1,867,211 2,189,379

Securities held to maturity (fair values of $ 431,442 and $ 449,623 , respectively)

523,600 533,678

Presold mortgages in process of settlement 7,247 2,667

3 unchanged sentences

Premises and equipment, net 147,110 150,957

Operating right-of-use lease assets 16,551 17,063

Accrued interest receivable 35,605 37,351

9 unchanged sentences

Accrued interest payable 5,728 5,699

Operating lease liabilities 17,343 17,833

Other liabilities 71,393 75,106

5 unchanged sentences

Issued & outstanding:

none as of March 31, 2024 and December 31, 2023

none as of June 30, 2024 and December 31, 2023

Common stock, no par value per share.

1 unchanged sentence

Issued & outstanding:

41,156,286 shares and 41,109,987 shares as of March 31, 2024 and December 31, 2023, respectively

41,187,943 shares and 41,109,987 shares as of June 30, 2024 and December 31, 2023, respectively

967,239 963,990

8 unchanged sentences

Consolidated Statements of Income

Three Months Ended March 31,

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

($ in thousands, except share data - unaudited) 2024 2023 2024 2023

15 unchanged sentences

Service charges on deposit accounts 4,139 4,114 8,007 8,008

Other service charges, commissions and fees 5,612 5,920

Other service charges and fees 5,361 5,650 10,973 11,570

Presold mortgage loan fees and gains on sale 588 557 926 963

Commissions from sales of financial products 1,377 1,413 2,697 2,719

SBA consulting fees 257 521

SBA loan sale gains 1,336 696 2,231 951

1 unchanged sentence

Securities losses, net ( 186 ) — ( 1,161 ) —

Other gains, net 459 188

Other income 854 739 1,570 1,448

Total noninterest income 14,648 14,235 27,586 27,771

3 unchanged sentences

Total personnel expense 34,512 34,841 68,423 70,555

Occupancy expense 3,663 3,688

Equipment related expenses 1,925 1,379

Occupancy and equipment expense 4,850 4,972 10,438 10,039

Merger and acquisition expenses — 1,334 — 13,516

15 unchanged sentences

Three Months Ended

June 30, Six Months Ended June 30,

($ in thousands - unaudited) 2024 2023 2024 2023

Net income $ 28,712 $ 29,403 $ 53,984 $ 44,564

Other comprehensive (loss) income:

Unrealized (losses) gains on securities available for sale:

Unrealized holding (losses) gains arising during the period, pretax ( 19,143 ) 35,333

Tax benefit (expense) 4,432 ( 7,425 )

Other comprehensive income (loss):

Unrealized gains (losses) on securities available for sale:

Unrealized holding gains (losses) arising during the period, pretax 8,614 ( 31,415 ) ( 10,529 ) 3,918

Tax (expense) benefit ( 1,995 ) 7,273 2,437 ( 152 )

Reclassification to realized losses 186 — 1,161 —

3 unchanged sentences

Tax benefit ( 5 ) ( 10 ) ( 11 ) ( 21 )

Other comprehensive (loss) income ( 13,943 ) 27,941

Other comprehensive income (loss) 6,782 ( 24,108 ) ( 7,161 ) 3,833

Comprehensive income $ 35,494 $ 5,295 $ 46,823 $ 48,397

9 unchanged sentences

Shares Amount

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

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

Net income 29,403 29,403

Cash dividends declared ($ 0.22 per common share)

( 9,043 ) ( 9,043 )

Change in Rabbi Trust Obligation 243 ( 243 ) —

Stock option exercised 23 488 488

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

Stock-based compensation 79 1,127 1,127

Other comprehensive loss ( 24,108 ) ( 24,108 )

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

Three Months Ended June 30, 2024

Balances, April 1, 2024 41,156 $ 965,429 $ 732,643 $ ( 1,396 ) $ 1,396 $ ( 321,973 ) $ 1,376,099

Net income 28,712 28,712

Cash dividends declared ($ 0.22 per common share)

( 9,061 ) ( 9,061 )

Change in Rabbi Trust Obligation 257 ( 257 ) —

Stock options exercised 16 379 379

Stock-based compensation 16 1,431 1,431

Other comprehensive income 6,782 6,782

Balances, June 30, 2024 41,188 $ 967,239 $ 752,294 $ ( 1,139 ) $ 1,139 $ ( 315,191 ) $ 1,404,342

See accompanying notes to unaudited consolidated financial statements.

First Bancorp and Subsidiaries

Consolidated Statements of Shareholders’ Equity

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

Earnings Stock in

Acquisition Rabbi

Obligation Accumulated

Comprehensive

Shareholders’

Shares Amount

Six Months Ended June 30, 2023

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

4 unchanged sentences

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

Stock option exercises 170 3,215 3,215

Stock option exercised 193 3,703 3,703

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

Stock-based compensation 159 2,692 2,692

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

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

Three Months Ended March 31, 2024

Other comprehensive income 3,833 3,833

Balances, June 31, 2023 41,083 $ 960,851 $ 674,933 $ ( 1,365 ) $ 1,365 $ ( 338,142 ) $ 1,297,642

Six Months Ended June 30, 2024

Balances, January 1, 2024 41,110 $ 963,990 716,420 ( 1,385 ) 1,385 ( 308,030 ) 1,372,380

3 unchanged sentences

Change in Rabbi Trust Obligation 246 ( 246 ) —

Stock options exercised 36 726 726

Stock option exercised 52 1,105 1,105

Stock withheld for payment of taxes ( 4 ) ( 126 ) ( 126 )

1 unchanged sentence

Other comprehensive loss ( 7,161 ) ( 7,161 )

Balances, March 31, 2024 41,156 $ 965,429 732,643 ( 1,396 ) 1,396 ( 321,973 ) 1,376,099

Balances, June 30, 2024 41,188 $ 967,239 $ 752,294 $ ( 1,139 ) $ 1,139 $ ( 315,191 ) $ 1,404,342

See accompanying notes to unaudited consolidated financial statements.

1 unchanged sentence

Consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

($ in thousands-unaudited) 2024 2023

1 unchanged sentence

Net income $ 53,984 $ 44,564

Reconciliation of net income to net cash (used) provided by operating activities:

Reconciliation of net income to net cash provided by operating activities:

Provision for credit losses 1,741 14,863

Net security premium amortization 4,448 4,731

Deferred tax benefit ( 379 ) ( 1,713 )

Deferred income taxes ( 1,358 ) ( 2,324 )

Loan discount accretion ( 5,645 ) ( 7,151 )

1 unchanged sentence

Foreclosed property gains, net ( 153 ) ( 35 )

Losses on calls of securities, net 975 —

Securities losses, net 1,161 —

Other gains, net ( 555 ) ( 561 )

Bank-owned life insurance income ( 2,343 ) ( 2,112 )

Net amortization of deferred loan fees ( 418 ) ( 127 )

Net amortization of deferred loan costs/(fees) ( 886 ) ( 590 )

Depreciation of premises and equipment 4,029 3,778

4 unchanged sentences

Amortization and impairment of SBA servicing assets 890 494

Fees/gains from sale of presold mortgages and SBA loans ( 1,233 ) ( 661 )

Origination of presold mortgage loans in process of settlement ( 16,241 ) ( 12,528 )

Proceeds from sales of presold mortgage loans in process of settlement 19,411 11,296

Origination of SBA loans for sale ( 15,011 ) ( 8,933 )

Proceeds from sales of SBA loans 11,940 4,679

Gains on sale of loans ( 3,157 ) ( 1,914 )

Origination of presold mortgage loans in process of settlement and SBA loans held for sale ( 76,938 ) ( 64,117 )

Proceeds from sales of presold mortgage loans in process of settlement and SBA loans 82,784 57,369

Increase in accrued interest receivable 1,746 2,001

(Increase) decrease in other assets ( 51,175 ) 8,719

Decrease in other assets 952 4,048

Increase in accrued interest payable 29 1,725

Decrease in other liabilities 453 1,553

Net cash (used) provided by operating activities ( 20,092 ) 36,615

Net cash provided by operating activities 67,630 65,154

Cash Flows From Investing Activities

2 unchanged sentences

Proceeds from sales of securities available for sale 138,182 111,862

Proceeds from sale of VISA B shares 4,522 —

Purchases of Federal Reserve and FHLB stock ( 15,804 ) ( 51,177 )

Redemptions of Federal Reserve and FHLB stock 28,880 35,892

Proceeds from bank owned life insurance death benefits 209 137

Purchases of other investments ( 1,465 ) —

4 unchanged sentences

Net cash received in acquisition activities — 22,610

Net cash provided by investing activities 171,104 32,378

Net cash provided by (used in) investing activities 403,343 ( 10,213 )

Cash Flows From Financing Activities

Net increase in deposits 271,429 98,742

Advances from other borrowings 481,000 929,000

Net increase (decrease) in deposits 455,723 ( 106,165 )

Proceeds from the issuance of other borrowings 481,000 1,224,500

Repayment of other borrowings ( 1,010,024 ) ( 1,069,569 )

Repayment of subordinated debentures ( 10,000 ) —

Cash dividends paid – common stock ( 18,094 ) ( 16,867 )

7 unchanged sentences

Consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

($ in thousands-unaudited) 2024 2023

5 unchanged sentences

Accrued dividends at end of period 9,061 9,038

Cancellation of operating lease right-of-use assets and operating lease liabilities ( 1,497 ) —

Acquisition of GrandSouth Bancorporation — See Note 2

8 unchanged sentences

All significant intercompany accounts and transactions have been eliminated.

During the second quarter of 2024, SBA Complete became inactive with certain activities transitioning to the Bank.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.

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

In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the consolidated financial position of the Company as of March 31, 2024, the consolidated results of operations for the three months ended March 31, 2024 and 2023, and the consolidated cash flows for the three months ended March 31, 2024 and 2023.

In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the consolidated financial position of the Company as of June 30, 2024, the consolidated results of income, comprehensive income and shareholders' equity for the three and six months ended June 30, 2024 and 2023, and the consolidated cash flows for the six months ended June 30, 2024 and 2023.

Any such adjustments were of a normal, recurring nature.

1 unchanged sentence

Operating results for interim period are not necessarily indicative of the results that may be expected for the full year.

Reference is made to Note 1 of the 2023 Annual Report filed with the Securities and Exchange Commission (“SEC”) for a discussion of accounting policies and other relevant information with respect to the financial statements.

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

In certain instances, amounts reported in prior years’ consolidated financial statements have been reclassified to conform to the current presentation.

Such reclassifications had no effect on previously reported shareholders’ equity or net income.

Refer to Note 1 of the 2023 Annual Report filed with the Securities and Exchange Commission (“SEC”) for a discussion of accounting policies and other relevant information with respect to the financial statements.

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

Accounting Standards Adopted in 2024

10 unchanged sentences

ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures” amends existing guidance to improve the transparency of income tax disclosures, including disclosure of specific categories in the rate reconciliation, providing additional information for certain reconciling items, and providing details on income taxes paid.

The amendments are effective for annual periods beginning after December 15, 2024.

The adoption of ASU 2023-09 is not expected to have a significant impact on the Company's consolidated financial statements.

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

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

72 unchanged sentences

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

The book values and approximate fair values of investment securities at March 31, 2024 and December 31, 2023 are summarized as follows:

($ in thousands) March 31, 2024 December 31, 2023

The book values and approximate fair values of investment securities at June 30, 2024 and December 31, 2023 are summarized as follows:

($ in thousands) June 30, 2024 December 31, 2023

Value Unrealized Amortized

11 unchanged sentences

Total held to maturity $ 523,600 $ 431,442 $ — $ ( 92,158 ) $ 533,678 $ 449,623 $ 39 $ ( 84,094 )

All of the Company’s mortgage-backed securities were issued by government-sponsored enterprises ("GSEs"), except for private mortgage-backed securities with a fair value of $ 0.7 million as of March 31, 2024 and December 31, 2023.

The following table presents information regarding all securities with unrealized losses at March 31, 2024:

The following table presents information regarding all securities with unrealized losses at June 30, 2024:

Securities in an Unrealized

21 unchanged sentences

Losses Fair Value Unrealized

US Treasury securities $ — — 172,570 2,215 172,570 2,215

Treasuries $ — $ — $ 172,570 $ 2,215 $ 172,570 $ 2,215

Government-sponsored enterprise securities — — 60,266 11,698 60,266 11,698

3 unchanged sentences

Total unrealized loss position $ 1,117 $ 5 $ 2,628,150 $ 484,839 $ 2,629,267 $ 484,844

As of March 31, 2024, the Company's securities portfolio held 651 securities of which 631 securities were in an unrealized loss position.

As of December 31, 2023, the Company's securities portfolio held 657 securities of which 632 securities were in an unrealized loss position.

In the above tables, all of the securities that were in an unrealized loss position at March 31, 2024 and December 31, 2023 are bonds that the Company has determined are in a loss position due primarily to interest rate factors and not credit quality concerns.

As of June 30, 2024, the Company's securities portfolio included 621 securities of which 600 securities were in an unrealized loss position.

As of December 31, 2023, the Company's securities portfolio included 657 securities of which 632 securities were in an unrealized loss position.

In the above tables, all of the securities that were in an unrealized loss position at June 30, 2024 and December 31, 2023 are bonds that the Company has determined are in a loss position due primarily to interest rate factors and not credit quality concerns.

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

2 unchanged sentences

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

At March 31, 2024 and December 31, 2023, the Company determined that expected credit losses associated with held to maturity securities and available for sale debt securities were insignificant.

The book values and approximate fair values of investment securities at March 31, 2024, by contractual maturity, are summarized in the table below.

At June 30, 2024 and December 31, 2023, the Company determined that expected credit losses associated with held to maturity securities and available for sale debt securities were insignificant.

The book values and approximate fair values of investment securities at June 30, 2024, by contractual maturity, are summarized in the table below.

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

8 unchanged sentences

Total securities $ 2,277,299 $ 1,867,211 $ 523,600 $ 431,442

At March 31, 2024 and December 31, 2023, investment securities with carrying values of $ 910.8 million and $ 971.3 million, respectively, were pledged as collateral for public deposits.

In addition, at March 31, 2024 and December 31, 2023, investment securities with carrying values of $ 668.9 million and $ 679.0 million, respectively, were pledged as collateral for Federal Reserve Bank ("Federal Reserve") borrowings.

At March 31, 2024 and December 31, 2023, there were no holdings of securities of any one issuer, other than U.S.

At June 30, 2024 and December 31, 2023, investment securities with carrying values of $ 874.1 million and $ 971.3 million, respectively, were pledged as collateral for public deposits.

In addition, at June 30, 2024 and December 31, 2023, investment securities with carrying values of $ 627.0 million and $ 679.0 million, respectively, were pledged as collateral for Federal Reserve Bank ("Federal Reserve") borrowings.

At June 30, 2024 and December 31, 2023, there were no holdings of securities of any one issuer, other than the U.S.

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

There were no sales of investment securities during the three months ended March 31, 2024.

During that same period, the Company received proceeds from the call of a security of $ 5.2 million and recorded a $ 975.2 thousand loss related to the unamortized premium balance at the time of the call.

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

During the second quarter of 2024, the Company sold all of its holdings of Class B shares of Visa, Inc.

(“Visa”) stock that were received upon Visa’s initial public offering and recognized a gain of $ 4.5 million.

As the Class B stock did not initially have a readily determinable fair value, it was carried at $0 prior to the sale.

During the three and six months ended June 30, 2024, the Company received proceeds from sales of securities of $ 138.2 million and recorded $ 4.7 million in gross losses from the sales.

This loss was partially offset by the $ 4.5 million gain on the sale of the Visa stock discussed above.

During the first quarter of 2024, the Company received proceeds from the call of a security of $ 5.2 million and recorded a $ 975 thousand loss related to the unamortized premium balance at the time of the call.

During the first quarter of 2023, the Company sold substantially all of the securities acquired from GrandSouth at their initially recorded fair values.

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

Included in “Other assets” in the consolidated balance sheets are investments in Federal Home Loan Bank (“FHLB”) and Federal Reserve stock totaling $ 41.4 million and $ 54.5 million at March 31, 2024 and December 31, 2023, respectively.

These investments do not have readily determinable fair values.

The FHLB stock had a cost of $ 8.5 million and $ 21.7 million at March 31, 2024 and December 31, 2023, respectively, and serves as part of the collateral for the Company’s line of credit with the FHLB and is also a requirement for membership in the FHLB system.

The Federal Reserve stock had a cost and fair value of $ 32.9 million and $ 32.8 million at March 31, 2024 and December 31, 2023, respectively, and is a requirement for Federal Reserve member bank qualification.

The FHLB stock had a cost of $ 8.5 million and $ 21.7 million at June 30, 2024 and December 31, 2023, respectively, and serves as part of the collateral for the Company’s line of credit with the FHLB and is also a requirement for membership in the FHLB system.

The Federal Reserve stock had a cost and fair value of $ 32.9 million and $ 32.8 million at June 30, 2024 and December 31, 2023, respectively, and is a requirement for Federal Reserve member bank qualification.

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

The Company determined that neither stock was impaired at either period end.

On March 31, 2024, the Company owned 12,356 Class B shares of Visa, Inc.

(“Visa”) stock that were received upon Visa’s initial public offering.

These shares were expected to convert into Class A Visa shares subsequent to the settlement of certain litigation against Visa, to which the Company is not a party.

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

The conversion rate at March 31, 2024 was 1.5875 , which means the Company would have received approximately 19,615 Class A shares if the stock had converted on that date.

As the Class B stock did not have a readily determinable fair value, it was carried at zero .

In April 2024, the Class B shares were sold at a conversion rate of 1.5875 and a gain of $ 4.5 million was recognized.

Loans, Allowance for Credit Losses, and Asset Quality Information

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

($ in thousands) March 31, 2024 December 31, 2023

($ in thousands) June 30, 2024 December 31, 2023

Amount Percentage Amount Percentage

8 unchanged sentences

Subtotal 8,069,140 100 % 8,150,280 100 %

Unamortized net deferred loan fees 240 ( 178 )

Unamortized net deferred loan costs/(fees) 708 ( 178 )

Total loans $ 8,069,848 $ 8,150,102

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

($ in thousands) March 31, 2024 December 31, 2023

($ in thousands) June 30, 2024 December 31, 2023

Guaranteed portions of SBA loans included in table above $ 41,033 $ 35,462

2 unchanged sentences

Sold portions of SBA loans with servicing retained - not included in tables above $ 338,648 $ 349,275

At March 31, 2024 and December 31, 2023, there were remaining unaccreted discounts on the retained portion of sold SBA loans amounting to $ 3.4 million and $ 3.5 milion, respectively.

At March 31, 2024 and December 31, 2023, l oans in the amount of $ 6.5 billion were pledged as collateral for certain borrowings.

At March 31, 2024 and December 31, 2023, total loans included loans to executive officers and directors of the Company, and their associates, totaling approximately $ 64.6 million and $ 63.7 million, respectively.

There were no new loans, advances on existing loans totaled approximately $ 1.4 million for the three months ended March 31, 2024, and repayments amounted to $ 0.5 million for that period.

Available credit on related party loans totaled $ 1.2 million and $ 2.7 million at March 31, 2024 and December 31, 2023, respectively.

As of March 31, 2024 and December 31, 2023, unamortized discounts on all acquired loans totaled $ 21.6 million and $ 24.0 million, respectively.

At June 30, 2024 and December 31, 2023, there were remaining unaccreted discounts on the retained portion of sold SBA loans amounting to $ 3.2 million and $ 3.5 milion, respectively.

At June 30, 2024 and December 31, 2023, l oans in the amount of $ 6.6 billion and $ 6.5 billion, respectively, were pledged as collateral for certain borrowings.

At June 30, 2024 and December 31, 2023, total loans included loans to executive officers and directors of the Company, and their associates, totaling approximately $ 63.9 million and $ 63.7 million, respectively.

While there was one new loan, advances on existing loans totaled approximately $ 1.3 million for the six months ended June 30, 2024, and repayments amounted to $ 1.0 million for that period.

Available credit on related party loans totaled $ 1.3 million and $ 2.7 million at June 30, 2024 and December 31, 2023, respectively.

As of June 30, 2024 and December 31, 2023, unamortized discounts on all acquired loans totaled $ 19.3 million and $ 24.0 million, respectively.

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

Nonperforming assets ("NPAs") are defined as nonaccrual loans, modifications to borrowers in financial distress, loans past due 90 or more days and still accruing interest, and foreclosed real estate.

The following table summarizes the NPAs for each period presented.

($ in thousands) March 31,

The following table summarizes the NPAs for each date presented.

($ in thousands) June 30,

2024 December 31,

1 unchanged sentence

Modifications to borrowers in financial distress 10,495 11,719

Accruing loans > 90 days past due — —

Total nonperforming loans 43,597 43,927

1 unchanged sentence

Total nonperforming assets $ 44,747 $ 44,789

At March 31, 2024 and December 31, 2023, the Company had $ 1.6 million and $ 1.0 million, respectively, in residential mortgage loans in the process of foreclosure.

At March 31, 2024 and December 31, 2023, there was one loan with a commitment to lend an immaterial amount of additional funds to a borrower whose loan was nonperforming.

The following table is a summary of the Company’s nonaccrual loans by major categories as of March 31, 2024:

At June 30, 2024 and December 31, 2023, the Company had $ 1.8 million and $ 1.0 million, respectively, in residential mortgage loans in the process of foreclosure.

At June 30, 2024 and December 31, 2023, there was one loan with a commitment to lend an immaterial amount of additional funds to a borrower whose loan was nonperforming.

The following table is a summary of the Company’s nonaccrual loans by major categories as of June 30, 2024:

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

18 unchanged sentences

There was no interest income recognized during the periods presented on nonaccrual loans.

The Company follows its nonaccrual policy of reversing contractual interest income in the income statement when the Company places a loan on nonaccrual status.

In the period that the Company places a loan on nonaccrual status, contractual interest income is reversed in the consolidated income statement.

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

($ in thousands) Three Months Ended March 31, 2024 For the Year Ended December 31,

2023 Three Months Ended March 31, 2023

($ in thousands) Six Months Ended June 30, 2024 Six Months Ended June 30, 2023

Commercial and industrial $ 226 $ 162

6 unchanged sentences

Total $ 499 $ 272

The following table presents an analysis of the payment status of the Company’s loans as of March 31, 2024:

The following table presents an analysis of the payment status of the Company’s loans as of June 30, 2024:

($ in thousands) Accruing

Current Accruing

Due Nonaccrual

Loans Accruing

Current Total Loans

Loans Total Loans

Commercial and industrial $ 848,838 $ 1,615 $ 958 $ 11,955 $ 863,366

7 unchanged sentences

Total $ 8,025,133 $ 5,890 $ 5,015 $ 33,102 8,069,140

Unamortized net deferred loan fees 240

Unamortized net deferred loan costs/(fees) 708

Total loans $ 8,069,848

1 unchanged sentence

($ in thousands) Accruing

Current Accruing

Due Nonaccrual

Loans Accruing

Current Total Loans

Loans Total Loans

Commercial and industrial $ 892,003 $ 3,726 $ 257 $ 9,876 $ 905,862

7 unchanged sentences

Total $ 8,088,299 $ 24,975 $ 4,798 $ 32,208 8,150,280

Unamortized net deferred loan fees ( 178 )

Unamortized net deferred loan costs/(fees) ( 178 )

Total loans $ 8,150,102

1 unchanged sentence

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

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

The following table presents an analysis of collateral dependent loans of the Company as of March 31, 2024:

These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the Allowance for Credit Losses ("ACL").

The following table presents an analysis of collateral dependent loans of the Company as of June 30, 2024:

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

3 unchanged sentences

Commercial real estate - non owner occupied — — 14,090 14,090

Residential 1-4 family real estate 1,035 — — 1,035

Home equity loans/lines of credit 525 — — 525

Total $ — $ 860 $ 22,109 $ 22,969

6 unchanged sentences

Total $ 534 $ 2,385 $ 7,263 $ 10,182

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

The ACL is calculated on an individual loan basis based on the shortfall between the fair value of the loan's collateral, which is adjusted for liquidation costs/discounts, and amortized cost.

If the fair value of the collateral exceeds the amortized cost, no allowance is required.

The Company's policy is to obtain third-party appraisals on any significant pieces of collateral.

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

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

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

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

There have been no material changes from the treatment of collateral dependent loans under CECL as discussed in Note 4 of the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

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

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

The change to the level of ACL during the three months ended March 31, 2024 was determined based primarily on updated economic forecasts, which are a key assumption in the CECL model and which indicated a continued deterioration of the commercial real estate index, thus projecting a higher allowance for credit losses balance, partially offset by reductions in loan balances during the period.

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

The change to the level of ACL during the six months ended June 30, 2024 was determined based primarily on updated economic forecasts, which are a key assumption in the CECL model and which indicated improvement in certain economic forecasts along with reductions in loan balances during the period, partially offset by a continued reduction of the commercial real estate pricing index, thus resulting in little change to the ACL for the quarter or year to date.

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

As of and for the three months ended March 31, 2024

As of and for the three months ended June 30, 2024

Commercial and industrial $ 20,294 $ ( 2,478 ) $ 857 $ 1,164 $ 19,837

7 unchanged sentences

Total $ 110,067 $ ( 2,657 ) $ 1,198 $ 1,450 $ 110,058

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

As of and for the year ended December 31, 2023

As of and for the six months ended June 30, 2024

Commercial and industrial $ 21,227 $ ( 4,063 ) $ 1,100 $ 1,573 $ 19,837

8 unchanged sentences

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

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

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

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

7 unchanged sentences

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

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

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

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

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

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

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

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

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

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

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

Credit Quality Indicators

The Company tracks credit quality based on its internal risk ratings.

Upon origination, a loan is assigned an initial risk grade, which is generally based on several factors such as the borrower’s credit score, the loan-to-value ratio, the debt-to-income ratio, etc.

Loans that are risk-graded as substandard during the origination process are declined.

After loans are initially graded, they are monitored regularly for credit quality based on many factors, such as payment history, the borrower’s financial status, and changes in collateral value.

Loans can be downgraded or upgraded depending on management’s evaluation of these factors.

Internal risk-grading policies are consistent throughout each loan type.

The following describes the Company’s internal risk grades in ascending order of likelihood of loss:

Risk Grade Description

1 Loans with virtually no risk, including cash secured loans.

2 Loans with documented significant overall financial strength.

These loans have minimum chance of loss due to the presence of multiple sources of repayment – each clearly sufficient to satisfy the obligation.

3 Loans with documented satisfactory overall financial strength.

These loans have a low loss potential due to presence of at least two clearly identified sources of repayment – each of which is sufficient to satisfy the obligation under the present circumstances.

4 Loans to borrowers with acceptable financial condition.

These loans could have signs of minor operational weaknesses, lack of adequate financial information, or loans supported by collateral with questionable value or marketability.

5 Loans that represent above average risk due to minor weaknesses and warrant closer scrutiny by management.

Collateral is generally required and believed to provide reasonable coverage with realizable liquidation values in normal circumstances.

Repayment performance is satisfactory.

(Pass) Consumer loans that are of satisfactory credit quality with borrowers who exhibit good personal credit history, average personal financial strength and moderate debt levels.

These loans generally conform to Bank policy, but may include approved mitigated exceptions to the guidelines.

Special Mention:

6 Existing loans with defined weaknesses in primary source of repayment that, if not corrected, could cause a loss to the Bank.

7 An existing loan inadequately protected by the current sound net worth and paying capacity of the obligor or the collateral pledged, if any.

These loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.

8 Loans that have a well-defined weakness that make the collection or liquidation in full highly questionable and improbable.

Loss appears imminent, but the exact amount and timing is uncertain.

9 Loans that are considered uncollectible and are in the process of being charged-off.

This grade is a temporary grade assigned for administrative purposes until the charge-off is completed.

(Fail) Consumer loans with a well-defined weakness, such as exceptions of any kind with no mitigating factors, history of paying outside the terms of the note, insufficient income to support the current level of debt, etc.

There have been no material changes from the treatment of credit quality tracking and risk grade descriptions as discussed in Note 4 of the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

In the tables that follow, substantially all of the "Classified" loans have grades of 7 or Fail, with those categories having similar levels of risk.

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($ in thousands) 2024 2023 2022 2021 2020 Prior Revolving Total

As of March 31, 2024

As of June 30, 2024

Commercial and industrial

47 unchanged sentences

Total loans $ 794,847 $ 1,453,863 $ 1,914,386 $ 1,557,883 $ 754,598 $ 791,036 $ 802,527 8,069,140

Unamortized net deferred loan fees 240

Total loans, net of deferred loan fees 8,076,506

Unamortized net deferred loan costs/(fees) 708

Total loans, net of deferred loan costs/(fees) $ 8,069,848

Total gross charge-offs, year to date $ 71 $ 221 $ 594 $ 200 $ 121 $ 979 $ 2,586 $ 4,772

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Total loans $ 1,886,592 $ 2,026,392 $ 1,690,561 $ 817,077 $ 382,928 $ 537,330 $ 809,400 8,150,280

Unamortized net deferred loan fees ( 178 )

Total loans, net of deferred loan fees 8,150,102

Unamortized net deferred loan costs/(fees) ( 178 )

Total loans, net of deferred loan costs/(fees) $ 8,150,102

Total gross charge-offs, year to date $ 205 $ 1,115 $ 1,070 $ 560 $ 821 $ 1,764 $ 4,640 $ 10,175

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

The followings tables present the amortized cost basis at March 31, 2024 and March 31, 2023 of the loans modified during the three months then ended for borrowers experiencing financial difficulty, by loan category and type of concession granted.

The followings tables present the amortized cost basis at June 30, 2024 and June 30, 2023 of the loans modified during the three and six months then ended for borrowers experiencing financial difficulty, by loan category and type of concession granted.

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

As of and for the three months ended March 31, 2024

As of and for the three months ended June 30, 2024

Commercial and industrial $ — $ 1 $ — $ 96 $ 97 0.01 %

Residential 1-4 family real estate — 203 — — 203 0.01 %

Home equity loans/lines of credit — 290 — — 290 0.09 %

Total $ — $ 494 $ — $ 96 $ 590 0.01 %

As of and for the six months ended June 30, 2024

Commercial and industrial $ 114 $ 1 $ 878 $ 96 $ 1,089 0.13 %

Commercial real estate - non owner occupied — 111 — — 111 — %

Residential 1-4 family real estate — 203 — — 203 0.01 %

Home equity loans/lines of credit — 323 — 176 499 0.15 %

1 unchanged sentence

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

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

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

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

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

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

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

Total $ 1,551 $ 2,103 $ — $ 3,654 0.05 %

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

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

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

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

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

3 unchanged sentences

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

For the three months ended March 31, 2024 and March 31, 2023, there were no modifications for borrowers experiencing financial difficulty with principal forgiveness concessions.

The following table describes the financial effect for the three months ended March 31, 2024 of the modifications made for borrowers experiencing financial difficulty:

For the three and six months ended June 30, 2024 and June 30, 2023, there were no modifications for borrowers experiencing financial difficulty with principal forgiveness concessions.

The following table describes the financial effect for the three and six months ended June 30, 2024 of the modifications made for borrowers experiencing financial difficulty:

Financial Effect of Modification to Borrowers Experiencing Financial Difficulty

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(in months) Weighted Average Term Extension

For the three months ended March 31, 2024

For the three months ended June 30, 2024

Commercial and industrial 0.75 % 0 27

Residential 1-4 family real estate — % 0 103

Home equity loans/lines of credit — % 0 95

For the six months ended June 30, 2024

Commercial and industrial 0.75 % 36 13

Commercial real estate - non owner occupied — % 0 13

Residential 1-4 family real estate — % 0 103

Home equity loans/lines of credit 2.10 % 0 69

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

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

Financial Effect of Modification to Borrowers Experiencing Financial Difficulty

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(in months) Weighted Average Term Extension

For the three months ended March 31, 2023

For the three months ended June 30, 2023

Commercial and industrial — % 2 25

Commercial real estate - owner occupied — % 12 49

Residential 1-4 family real estate — % 0 25

Home equity loans/lines of credit — % 0 42

For the six months ended June 30, 2023

Commercial and industrial — % 2 13

Construction, development & other land loans 1.50 % 0 7

Commercial real estate - owner occupied — % 12 49

Commercial real estate - non owner occupied — % 0 15

3 unchanged sentences

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

The following table depicts the performance of loans that have been modified in the last 12 months as of March 31, 2024:

The following table depicts the performance of loans that were modified in the last twelve months as of June 30, 2024:

Payment Status (Amortized Cost Basis)

6 unchanged sentences

Home equity loans/lines of credit 1,691 — — —

Consumer loans 3 — — —

$ 7,262 $ — $ 92 $ —

The following table depicts the performance of loans that have been modified in the last 12 months as of December 31, 2023:

The following table depicts the performance of loans that were modified in the last twelve months as of December 31, 2023:

Payment Status (Amortized Cost Basis)

8 unchanged sentences

$ 11,640 $ 79 $ — $ —

None of the modifications made for borrowers experiencing financial difficulty during the three months ended March 31, 2024 and March 31, 2023 are considered to have had a payment default.

None of the modifications made for borrowers experiencing financial difficulty during the three and six months ended June 30, 2024 and June 30, 2023 are considered to have had a payment default.

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

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The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information, and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss rates that are used in computing the ACL on loans.

The allowance for unfunded loan commitments of $ 10.8 million and $ 11.4 million at March 31, 2024 and December 31, 2023, respectively, were separately classified on the consolidated balance sheets within "Other liabilities."

The following table presents the balance and activity in the allowance for unfunded loan commitments for the three months ended March 31, 2024 and 2023 and for the twelve months ended December 31, 2023:

($ in thousands) March 31, 2024 December 31, 2023 March 31, 2023

allowance for unfunded loan commitments of $ 9.9 million and $ 11.4 million at June 30, 2024 and December 31, 2023, respectively, were separately classified on the consolidated balance sheets within "Other liabilities."

The following table presents the balance and activity in the allowance for unfunded loan commitments for the six months ended June 30, 2024 and 2023:

($ in thousands) June 30, 2024 June 30, 2023

Beginning balance $ 11,369 $ 13,306

5 unchanged sentences

Allowance for Credit Losses - Securities Held to Maturity

The ACL for securities held to maturity was insignificant at March 31, 2024 and December 31, 2023.

Goodwill and Other Intangible Assets

The ACL for securities held to maturity was insignificant at June 30, 2024 and December 31, 2023.

Goodwill, Other Intangible Assets and Servicing Assets

The following is a summary of the gross carrying amount and accumulated amortization of amortizable intangible assets and the carrying amount of unamortized intangible assets as of the periods presented.

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

($ in thousands) Gross Carrying

7 unchanged sentences

Other intangibles 100 96 4 100 83 17

Intangibles before servicing assets 60,690 32,941 27,749 60,690 31,182 29,508

SBA servicing assets 14,190 11,053 3,137 13,966 10,616 3,350

Total amortizable intangible assets $ 59,590 $ 33,510 $ 26,080 $ 60,690 $ 31,183 $ 29,507

2 unchanged sentences

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

Amortization expense of all other intangible assets, excluding the SBA servicing assets, totaled $ 1.8 million and $ 2.1 million for the three months ended March 31, 2024 and 2023, respectively.

During the three months ended March 31, 2024 and 2023, the Company recorded $ 0.7 million and $ 1.0 million, respectively in SBA guaranteed servicing fee income.

There was no impairment of SBA servicing assets at March 31, 2024 and December 31, 2023 and no significant changes in fair value assumptions from year end.

The following table presents the changes in the SBA servicing assets and SBA servicing income for the three months ended March 31, 2024 and 2023.

Three months ended March 31,

Beginning balance, net $ 3,350 4,004

New servicing assets 224 77

Amortization expense and impairment charges 437 184

Ending balance, net $ 3,137 3,897

Amortization expense of all amortizable intangible assets totaled $ 1.7 million and $ 2.0 million for the three months ended June 30, 2024 and 2023, respectively, and $ 3.4 million and $ 4.2 million for the six months ended June 30, 2024 and 2023, respectively.

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

2 unchanged sentences

The Company's most recent evaluation of goodwill, which occurred in the fourth quarter of 2023, indicated that there was no goodwill impairment.

There was no change to carrying amounts of goodwill during the first quarter of 2024.

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

There was no change to carrying amounts of goodwill during 2024.

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

These amounts will be recorded as "Intangibles amortization expense" within the noninterest expense section of the consolidated statements of income.

These estimates are subject to change in future periods to the extent management determines it is necessary to make adjustments to the carrying value or estimated useful lives of amortized intangible assets.

These estimates are subject to change in future periods

to the extent management determines it is necessary to make adjustments to the carrying value or estimated useful lives of amortizable intangible assets.

($ in thousands) Estimated Amortization

April 1, 2024 to December 31, 2024 $ 4,844

July 1, 2024 to December 31, 2024 $ 3,176

Thereafter 5,380

Total $ 26,080

The following tables present information regarding the Company’s outstanding borrowings at March 31, 2024 and December 31, 2023 (dollars in thousands):

Description Due date Call Feature Balance at March 31, 2024 Interest Rate

FHLB Principal Reducing Credit 6/26/2028 None $ 200 0.25 % fixed

FHLB Principal Reducing Credit 7/17/2028 None 29 0.00 % fixed

FHLB Principal Reducing Credit 8/18/2028 None 148 1.00 % fixed

FHLB Principal Reducing Credit 8/22/2028 None 149 1.00 % fixed

FHLB Principal Reducing Credit 12/20/2028 None 312 0.50 % fixed

FRB Bank Term Funding Program 12/20/2024 None 174,000 4.85 % fixed

FRB Bank Term Funding Program 12/27/2024 None 25,000 4.83 % fixed

FRB Bank Term Funding Program 1/10/2025 None 32,000 4.81 % fixed

The Company recorded SBA guaranteed servicing fee income of $ 0.8 million and $ 0.9 million for the three months ended June 30, 2024 and 2023, respectively, and $ 1.5 million and $ 1.8 million for the six months ended June 30, 2024 and 2023, respectively.

There was no impairment of SBA servicing assets at June 30, 2024 and December 31, 2023 and no significant changes in fair value assumptions from year end.

The following table presents the changes in the SBA servicing assets (included in "Other assets" in the Company's consolidated balance sheet) for the three and six months ended June 30, 2024 and 2023:

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

($ in thousands) 2024 2023 2024 2023

Beginning balance, net $ 3,137 $ 3,897 $ 3,350 $ 4,004

New servicing assets 319 195 543 271

Amortization expense and impairment charges 453 311 890 494

Ending balance, net $ 3,003 $ 3,781 $ 3,003 $ 3,781

The following tables present information regarding the Company’s outstanding borrowings at June 30, 2024 and December 31, 2023 (dollars in thousands):

Description Due date Call Feature Balance at June 30, 2024 Interest Rate

FHLB Principal Reducing Credit 6/26/2028 to 12/20/2028

None $ 826 0.00 % to 1.00 % fixed

Trust Preferred Securities 1/23/2034 Quarterly by Company

9 unchanged sentences

Trust Preferred Securities 6/23/2036 Quarterly by the Company beginning 6/23/2011 8,248 7.46 % at 6/30/24 adjustable rate 3 month CME Term SOFR + 2.11 %

Subordinated Debentures 11/30/2028 Continuous by Company beginning 11/30/2023 10,000 8.99 % at 3/31/24 adjustable rate 3 month CME Term SOFR + 3.69 %

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

Total borrowings / weighted average rate as of March 31, 2024

Total borrowings / weighted average rate as of June 30, 2024

96,150 6.93 %

1 unchanged sentence

Total borrowings $ 91,513

During the first and second quarters of 2024, the Company redeemed borrowings under the FRB Bank Term Funding Program totaling $ 18.0 million and $ 231.0 million, respectively.

Also during the second quarter, the Company redeemed $ 10.0 million of subordinated debentures.

Description Due date Call Feature Balance at December 31, 2023 Interest Rate

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

As of March 31, 2024, the Company leased 16 bank branch offices for which the land and buildings are leased and ten branch offices for which the land is leased but the buildings are owned.

As of June 30, 2024, the Company leased 14 bank branch offices for which the land and buildings are leased and ten branch offices for which the land is leased but the buildings are owned.

The Company also leases office space for several operational departments.

The lease agreements have maturity dates ranging from July 2024 through May 2076, some of which include options for multiple five - and ten-year extensions.

The weighted average remaining life of the lease term for these leases was 19.9 years as of March 31, 2024.

The lease agreements have maturity dates ranging from November 2024 through May 2076, some of which include options for multiple five - and ten-year extensions.

The weighted average remaining life of the lease term for these leases was 20.9 years as of June 30, 2024.

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

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

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

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

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

The weighted average discount rate for leases was 3.22 % and 3.19 % as of March 31, 2024 and December 31, 2023, respectively.

The right-of-use assets and lease liabilities were $ 16.6 million and $ 17.3 million as of March 31, 2024, respectively, and were $ 17.1 million and $ 17.8 million as of December 31, 2023, respectively.

Total operating lease expenses were $ 0.7 million and $ 0.8 million for the three months ended March 31, 2024 and 2023, respectively.

Future undiscounted lease payments for operating leases with initial terms of greater than one year as of March 31, 2024 are as follows:

The weighted average discount rates for leases were 3.30 % and 3.19 % as of June 30, 2024 and December 31, 2023, respectively.

The right-of-use assets, included in "Other assets" on the Company's consolidated balance sheet, and lease liabilities, included in "Other liabilities" on the Company's consolidated balance sheet, were $ 14.6 million and $ 15.3 million as of June 30, 2024, respectively, and were $ 17.1 million and $ 17.8 million as of December 31, 2023, respectively.

Total operating lease expenses, included in "Other operating expenses" in the Company's consolidated statement of income, were $ 0.5 million and $ 0.8 million for the three months ended June 30, 2024 and 2023, respectively, and $ 1.2 million and $ 1.5 million for the six months ended June 30, 2024 and 2023, respectively.

Future undiscounted lease payments for operating leases with initial terms of greater than one year as of June 30, 2024 are as follows:

($ in thousands)

April 1, 2024 to December 31, 2024 $ 1,813

July 1, 2024 to December 31, 2024 $ 1,139

Thereafter 16,120

3 unchanged sentences

Pension Plans

The Company sponsors a Supplemental Executive Retirement Plan (the “SERP”) which was historically for the benefit of certain senior management executives of the Company.

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

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

During 2023, the Company terminated its qualified retirement plan (the "Pension Plan") which had previously been available to all employees, although the Pension Plan had been frozen with accrual of benefits discontinued in 2012.

In the fourth quarter of 2023, the Pension Plan settled benefits through lump-sum payments of approximately $ 9.2 million to eligible participants electing that option and purchased annuity contracts from One America (the "Insurer") which irrevocably transferred to the Insurer approximately $ 19.5 million of the Pension Plan's obligations and related assets, thereby reducing the Pension Plan's obligations at December 31, 2023 to zero .

The Insurer will administer all future payments to remaining participants of the Pension Plan.

The Company recorded periodic pension cost totaling $ 63,000 and $ 51,000 for the three months ended March 31, 2024 and 2023, respectively.

The following table contains the components of the pension cost:

Three Months Ended March 31, 2024

($ in thousands) SERP

Service cost $ —

Interest cost 38

Expected return on plan assets —

Amortization of net loss 25

Net periodic pension cost $ 63

Three Months Ended March 31, 2023

($ in thousands) Pension Plan SERP Total Both Plans

Service cost $ — — —

Interest cost 267 28 295

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

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

Net periodic pension cost $ 159 ( 108 ) 51

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

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

The Company recorded periodic pension cost totaling $ 63,000 and $ 50,000 for the three months ended June 30, 2024 and 2023, respectively, and $ 126,000 and $ 101,000 for the six months ended June 30, 2024 and 2023, respectively.

Fair Value of Financial Instruments

5 unchanged sentences

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

The following table summarizes the Company’s financial instruments that were measured at fair value on a recurring and nonrecurring basis at March 31, 2024:

The following table summarizes the Company’s financial instruments that were measured at fair value on a recurring and nonrecurring basis at June 30, 2024:

($ in thousands)

Description of Financial Instruments

Fair Value at March 31, 2024 Quoted Prices in Active Markets for Identical Assets

Fair Value at June 30, 2024 Quoted Prices in Active Markets for Identical Assets

(Level 1) Significant Other

3 unchanged sentences

Securities available for sale:

Treasury $ 123,770 — 123,770 —

Government-sponsored enterprise securities $ 60,127 $ — $ 60,127 $ —

41 unchanged sentences

Likewise, values for inventory and accounts receivable collateral are based on borrower financial statement balances or aging reports on a discounted basis as appropriate (Level 3).

Appraisals used in this analysis are generally obtained at least annually based on when the loans

first became impaired, and thus the appraisals are not necessarily as of the period ends presented.

Appraisals used in this analysis are generally obtained at least annually based on when the loans first became impaired, and thus the appraisals are not necessarily as of the period ends presented.

Any fair value adjustments are recorded in the period incurred as provision for credit losses on the consolidated statements of income.

For Level 3 assets and liabilities measured at fair value on a non-recurring basis as of March 31, 2024, the significant unobservable inputs used in the fair value measurements were as presented in the tables below:

($ in thousands) Fair Value at March 31, 2024 Valuation

For Level 3 assets and liabilities measured at fair value on a non-recurring basis as of June 30, 2024, the significant unobservable inputs used in the fair value measurements were as presented in the tables below:

($ in thousands) Fair Value at June 30, 2024 Valuation

Technique Significant Unobservable

8 unchanged sentences

The discount applied for estimated costs to sell collateral on individually evaluated loans was 10%.

The carrying amounts and estimated fair values of financial instruments not carried at fair value at March 31, 2024 and December 31, 2023 were as follows:

March 31, 2024 December 31, 2023

The carrying amounts and estimated fair values of financial instruments not carried at fair value at June 30, 2024 and December 31, 2023 were as follows:

June 30, 2024 December 31, 2023

($ in thousands) Level in Fair

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

Significant assets and liabilities that are not considered financial assets or liabilities include net premises and equipment, intangible and other assets such as deferred income taxes, prepaid expense

accounts, income taxes currently payable, and other various accrued expenses.

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

Stock-Based Compensation

The Company recorded total stock-based compensation expense of $ 0.7 million and $ 1.1 million for the three months ended March 31, 2024 and 2023, respectively, which is included in "Total personnel expense" on the accompanying consolidated statements of income.

The Company recog nized $ 153,000 an d $ 259,000 of income tax benefits related to stock-based compensation expense in its income statement for the three months ended March 31, 2024 and 2023, respectively.

At March 31, 2024, the sole equity-based compensation plan of the Company was the First Bancorp 2014 Equity Plan (the "Equity Plan"), which was approved by shareholders on May 8, 2014.

As of March 31, 2024, the Equity Plan had 191,593 shares remaining available for grant.

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

The Company recorded total stock-based compensation expense of $ 0.9 million and $ 1.1 million for the three months ended June 30, 2024 and 2023, respectively, and $ 1.6 million and $ 2.2 million for the six months ended June 30, 2024 and 2023, respectively.

These amounts are included in "Total personnel expense" on the accompanying consolidated statements of income.

The Company recog nized income tax benefits related to stock-based compensation expense in its income statement of $ 218,000 an d $ 261,000 for the three months ended June 30, 2024 and 2023, respectively and $ 371,000 and $ 520,000 for the six months ended June 30, 2024 and 2023, respectively.

At June 30, 2024, the sole equity-based compensation plan of the Company was the First Bancorp 2024 Equity Plan (the "Equity Plan"), which was approved by shareholders on May 31, 2024.

As of June 30, 2024, the Equity Plan had 1,976,567 shares remaining available for grant.

During the quarter, the First Bancorp 2014 Equity Plan expired and was replaced by the Equity Plan.

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

The Equity Plan allows for both grants of stock options and other types of equity-based compensation, including stock appreciation rights, restricted and unrestricted stock, restricted performance stock, and performance units.

For the last several years, the only equity-based compensation granted by the Company has been shares of restricted stock, as it relates to employees, and unrestricted stock as it relates to non-employee directors.

Recent restricted stock awards to employees typically include service-related vesting conditions only.

Compensation expense for these grants is recorded over the requisite service periods.

Upon forfeiture, any previously recognized compensation cost is reversed.

Upon a change in control (as defined in the Equity Plan), unless the awards remain outstanding or substitute equivalent awards are provided, the awards become immediately vested.

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

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

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

Over the past five years, there have been insignificant amounts of forfeitures, and therefore the Company assumes that all awards granted with service conditions will vest.

The Company recognizes forfeitures as they occur.

In addition to employee equity awards, the Company's practice is to grant unrestricted common shares to each non-employee director (currently 14 in total) in June of each year.

The grants was valued at approximately $ 37,500 in 2023 and is expected to be the same in 2024.

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

The following table presents information regarding the activity for the first three months of 2024 related to the Company’s outstanding restricted stock awards:

last several years, the only equity-based compensation granted by the Company has been shares of restricted stock, as it relates to employees, and unrestricted stock as it relates to non-employee directors.

There have been no material changes to the treatment of stock awards and equity grants as discussed in Note 15 of the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

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

The grants were valued at approximately $ 37,500 in 2024.

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

The following table presents information regarding the activity for the first six months of 2024 related to the Company’s outstanding restricted stock awards:

Long-Term Restricted Stock Awards

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Forfeited or expired during the period — —

Nonvested at March 31, 2024 294,582 $ 37.31

Total unrecognized compensation expense as of March 31, 2024 amounted to $ 4.6 million with a weighted average remaining term of 1.7 years.

For the nonvested awards that were outstanding at March 31, 2024, the Company

expects to record $ 3.0 million in compensation expense in the next twelve months, $ 2.6 million of which is expected to be recorded in the remaining quarters of 2024.

Nonvested at June 30, 2024 300,921 $ 37.31

Total unrecognized compensation expense as of June 30, 2024 amounted to $ 3.9 million with a weighted average remaining term of 1.5 years.

For the nonvested awards that were outstanding at June 30, 2024, the Company expects to record $ 2.6 million in compensation expense in the next 12 months, $ 1.7 million of which is expected to be recorded in the remaining quarters of 2024.

Earnings Per Share

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

For the Three Months Ended March 31,

($ in thousands except per

share amounts) Income

For the Three Months Ended June 30,

($ in thousands except per share amounts) Income

(Numerator) Shares

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Diluted EPS per common share $ 28,712 41,262,091 $ 0.70 $ 29,403 41,129,100 $ 0.71

For the Six Months Ended June 30,

($ in thousands except per share amounts) Income

(Numerator) Shares

(Denominator) Per Share

Amount Income

(Numerator) Shares

(Denominator) Per Share

Net income $ 53,984 $ 44,564

income allocated to restricted stock ( 384 ) ( 299 )

Basic EPS per common share $ 53,600 40,861,775 $ 1.31 $ 44,265 40,665,172 $ 1.09

Net income $ 53,984 40,861,775 $ 44,564 40,665,172

Effect of dilutive securities — 394,306 — 458,697

Diluted EPS per common share $ 53,984 41,256,081 $ 1.31 $ 44,564 41,123,869 $ 1.08

Accumulated Other Comprehensive Income (Loss)

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

($ in thousands) March 31, 2024 December 31, 2023

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

($ in thousands) June 30, 2024 December 31, 2023

Unrealized loss on securities available for sale $ ( 410,088 ) $ ( 400,720 )

5 unchanged sentences

Total accumulated other comprehensive loss $ ( 315,191 ) $ ( 308,030 )

The following tables disclose the changes in AOCI for the three months ended March 31, 2024 and 2023 (all amounts are net of tax):

For the Three Months Ended March 31, 2024

The following tables disclose the changes in AOCI for the three and six months ended June 30, 2024 and 2023 (all amounts are net of tax):

For the Three Months Ended June 30, 2024

($ in thousands) Unrealized Loss on

2 unchanged sentences

Beginning balance $ ( 321,915 ) $ ( 58 ) $ ( 321,973 )

Other comprehensive income before reclassifications 6,619 — 6,619

Amounts reclassified from accumulated other comprehensive income

Net current period other comprehensive income 6,762 20 6,782

Ending balance $ ( 315,153 ) $ ( 38 ) $ ( 315,191 )

For the Three Months Ended June 30, 2023

($ in thousands) Unrealized Loss on

Available for Sale Postretirement Plans Asset

(Liability) Total

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

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

2 unchanged sentences

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

For the Three Months Ended March 31, 2023

For the Six Months Ended June 30, 2024

($ in thousands) Unrealized Loss on

2 unchanged sentences

Beginning balance $ ( 307,953 ) $ ( 77 ) $ ( 308,030 )

Other comprehensive loss before reclassifications ( 8,092 ) — ( 8,092 )

Amounts reclassified from accumulated other comprehensive income

Net current-period other comprehensive (loss) income ( 7,200 ) 39 ( 7,161 )

Ending balance $ ( 315,153 ) $ ( 38 ) $ ( 315,191 )

For the Six Months Ended June 30, 2023

($ in thousands) Unrealized Loss on

Available for Sale Postretirement Plans Asset

(Liability) Total

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

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

3 unchanged sentences

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

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

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

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

The following table presents the Company’s sources of noninterest income for the three months ended March 31, 2024 and 2023.

The following table presents the Company’s sources of noninterest income for the three and six months ended June 30, 2024 and 2023.

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

For the Three Months Ended

($ in thousands) March 31, 2024 March 31, 2023

For the Three Months Ended For the Six Months Ended

($ in thousands) June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

Noninterest Income in-scope of ASC 606:

Service charges on deposit accounts $ 4,139 $ 4,114 $ 8,007 $ 8,008

Other service charges, commissions and fees:

Other service charges and fees:

Bankcard interchange income, net 2,359 2,368 4,673 4,950

Other service charges and fees 1,650 3,255 3,498 6,572

Commissions from the sales of financial products 1,320 1,306

SBA consulting fees 257 521

Commissions from sales of financial products 1,377 1,413 2,697 2,719

Portion of other income in-scope of ASC 606 55 409 312 930

Noninterest income (in-scope of ASC 606) 9,580 11,559 19,187 23,179

1 unchanged sentence

Total noninterest income $ 14,648 $ 14,235 $ 27,586 $ 27,771

A description of the Company’s revenue streams accounted for under ASC 606 is detailed below.

Service Charges on Deposit Accounts:

The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services.

Overdraft fees are recognized at the point in time that the overdraft occurs.

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

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

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

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

Other service charges, commissions, and fees:

The Company earns interchange income on its customers’ debit and credit card usage and earns fees from other services utilized by its customers.

"Bankcard interchange income" is primarily comprised of interchange fees earned whenever the Company’s debit and credit cards are processed through card payment networks such as MasterCard.

Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder.

Interchange fees are offset with interchange expenses and are presented on a net basis.

"Other service charges and fees" includes revenue from processing wire transfers, bill pay

service, cashier’s checks, ATM surcharge fees, and other services.

The Company’s performance obligation for fees, exchange, and other service charges are largely satisfied, and related revenue recognized, when the services are rendered or upon completion.

Payment is typically received immediately or in the following month.

Commissions from the sales of financial products:

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

The Company’s performance obligation is generally satisfied upon the issuance of the financial product.

Shortly after the policy is issued, the carrier remits the commission payment to the Company, and the Company recognizes the revenue.

The Company also earns some fees from asset management, which is billed quarterly and due upon billing for services rendered in the most recent period, for which the performance obligation has been satisfied.

SBA Consulting fees:

The Company earns fees for its consulting services related to the origination of SBA loans.

Fees are based on a percentage of the dollar amount of the originated loans and are recorded when the performance obligation has been satisfied and are due upon billing.

The Company has made no significant judgments in applying the revenue guidance prescribed in ASC 606 that affect the determination of the amount and timing of revenue from the above-described contracts with customers.

There have been no material changes from the Company's revenue streams accounted for under ASC 606 as discussed in Note 20 of the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

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

What changed 10-Q

Item 1. Financial Statements