FIRST BANCORP /NC/ 10-Q

Item 1 - Financial Statements First Bancorp and Subsidiaries Consolidated Balance Sheets ($ in thousands - unaudited) September 30, 2024 December 31, 2023 Assets Cash and due from banks, noninterest-bearing $ 74,034 $ 100,891 Due from banks, interest-bearing 670,407 136,964 Total cash and cash equivalents 744,441 237,855 Securities available for sale (amortized cost of $ 2,238,996 and $ 2,590,099 , respectively) 1,907,458 2,189,379 Securities held to maturity (fair values of $ 448,300 and $ 449,623 , respectively) 521,801 533,678 Presold mortgages in process of settlement 9,888 2,667 Loans 8,013,538 8,150,102 Allowance for credit losses on loans ( 122,718 ) ( 109,853 ) Net loans 7,890,820 8,040,249 Premises and equipment, net 144,868 150,957 Accrued interest receivable 32,890 37,351 Goodwill 478,750 478,750 Other intangible assets, net 24,466 29,507 Bank-owned life insurance 187,236 183,897 Other assets 210,812 230,652 Total assets $ 12,153,430 $ 12,114,942 Liabilities Deposits Noninterest-bearing deposits $ 3,350,237 $ 3,379,876 Interest-bearing deposits 7,154,692 6,651,723 Total deposits 10,504,929 10,031,599 Borrowings 91,694 630,158 Accrued interest payable 5,566 5,699 Other liabilities 73,716 75,106 Total liabilities 10,675,905 10,742,562 Commitments and contingencies Shareholders' Equity Preferred stock, no par value per share. Authorized: 5,000,000 shares Issued & outstanding: none and none , respectively — — Common stock, no par value per share. Authorized: 60,000,000 shares Issued & outstanding: 41,340,099 shares and 41,109,987 shares, respectively 970,450 963,990 Retained earnings 761,881 716,420 Stock in rabbi trust assumed in acquisition ( 1,148 ) ( 1,385 ) Rabbi trust obligation 1,148 1,385 Accumulated other comprehensive loss ( 254,806 ) ( 308,030 ) Total shareholders’ equity 1,477,525 1,372,380 Total liabilities and shareholders’ equity $ 12,153,430 $ 12,114,942 See accompanying notes to unaudited consolidated financial statements. Page 4 Index First Bancorp and Subsidiaries Consolidated Statements of Income Three Months Ended September 30, Nine Months Ended September 30, ($ in thousands, except share data - unaudited) 2024 2023 2024 2023 Interest Income Interest and fees on loans $ 111,076 $ 106,514 $ 331,346 $ 308,857 Interest on investment securities: Taxable interest income 10,779 12,936 34,798 39,415 Tax-exempt interest income 1,116 1,118 3,350 3,368 Other, principally overnight investments 8,438 3,283 17,351 10,546 Total interest income 131,409 123,851 386,845 362,186 Interest Expense Interest on deposits 46,420 32,641 130,299 78,887 Interest on borrowings 1,946 6,508 13,114 19,125 Total interest expense 48,366 39,149 143,413 98,012 Net interest income 83,043 84,702 243,432 264,174 Provision for credit losses 14,200 — 15,941 14,864 Net interest income after provision for credit losses 68,843 84,702 227,491 249,310 Noninterest Income Service charges on deposit accounts 4,320 4,661 12,327 13,012 Other service charges and fees 5,555 5,450 16,439 16,677 Presold mortgage loan fees and gains on sale 690 325 1,616 1,288 Commissions from sales of financial products 1,371 1,207 4,068 3,926 SBA loan sale gains 1,108 1,101 3,339 2,052 Bank-owned life insurance income 1,205 1,104 3,548 3,216 Securities losses, net — — ( 1,161 ) — Other income, net ( 670 ) 1,329 900 2,777 Total noninterest income 13,579 15,177 41,076 42,948 Noninterest Expense Salaries incentives and commissions expense 29,955 29,394 85,406 87,391 Employee benefit expense 6,495 6,539 19,467 19,097 Total personnel expense 36,450 35,933 104,873 106,488 Occupancy and equipment expense 4,856 5,003 15,294 15,042 Merger and acquisition expenses — — — 13,506 Intangibles amortization expense 1,613 1,953 5,041 6,147 Other operating expenses 16,931 19,335 52,120 56,809 Total noninterest expenses 59,850 62,224 177,328 197,992 Income before income taxes 22,572 37,655 91,239 94,266 Income tax expense 3,892 7,762 18,575 19,809 Net income $ 18,680 $ 29,893 $ 72,664 $ 74,457 Earnings per common share: Basic $ 0.45 $ 0.73 $ 1.76 $ 1.82 Diluted 0.45 0.73 1.76 1.81 Weighted average common shares outstanding: Basic 40,971,520 40,744,042 40,924,822 40,691,751 Diluted 41,366,743 41,199,058 41,294,137 41,149,990 See accompanying notes to unaudited consolidated financial statements. Page 5 Index First Bancorp and Subsidiaries Consolidated Statements of Comprehensive Income (Loss) Three Months Ended September 30, Nine Months Ended September 30, ($ in thousands - unaudited) 2024 2023 2024 2023 Net income $ 18,680 $ 29,893 $ 72,664 $ 74,457 Other comprehensive income (loss): Unrealized gains (losses) on securities available for sale: Unrealized holding gains (losses) arising during the period, pretax 78,550 ( 81,515 ) 68,021 ( 77,597 ) Tax (expense) benefit ( 18,184 ) 18,871 ( 15,747 ) 18,719 Reclassification to realized losses — — 1,161 — Tax expense — — ( 269 ) — Postretirement Plans: Amortization of unrecognized net actuarial losses 25 44 75 132 Tax benefit ( 6 ) ( 10 ) ( 17 ) ( 31 ) Other comprehensive income (loss) 60,385 ( 62,610 ) 53,224 ( 58,777 ) Comprehensive income (loss) $ 79,065 $ ( 32,717 ) $ 125,888 $ 15,680 See accompanying notes to unaudited consolidated financial statements. Page 6 Index First Bancorp and Subsidiaries Consolidated Statements of Shareholders’ Equity ($ and share data in thousands - unaudited) Common Stock Retained Earnings Stock in Rabbi Trust Assumed in Acquisition Rabbi Trust Obligation Accumulated Other Comprehensive Loss Total Shareholders’ Equity Shares Amount Three Months Ended September 30, 2023 Balances, July 1, 2023 41,083 $ 960,851 $ 674,933 $ ( 1,365 ) $ 1,365 $ ( 338,142 ) $ 1,297,642 Net income 29,893 29,893 Cash dividends declared ($ 0.22 per common share) ( 9,035 ) ( 9,035 ) Change in Rabbi Trust Obligation ( 10 ) 10 — Stock options exercised 2 66 66 Stock-based compensation — 1,727 1,727 Other comprehensive loss ( 62,610 ) ( 62,610 ) Balances, September 30, 2023 41,085 $ 962,644 $ 695,791 $ ( 1,375 ) $ 1,375 $ ( 400,752 ) $ 1,257,683 Three Months Ended September 30, 2024 Balances, July 1, 2024 41,188 $ 967,239 $ 752,294 $ ( 1,139 ) $ 1,139 $ ( 315,191 ) $ 1,404,342 Net income 18,680 18,680 Cash dividends declared ($ 0.22 per common share) ( 9,093 ) ( 9,093 ) Change in Rabbi Trust Obligation ( 9 ) 9 — Stock options exercised 111 2,324 2,324 Stock withheld for payment of taxes ( 11 ) ( 478 ) ( 478 ) Stock-based compensation 52 1,365 1,365 Other comprehensive income 60,385 60,385 Balances, September 30, 2024 41,340 $ 970,450 $ 761,881 $ ( 1,148 ) $ 1,148 $ ( 254,806 ) $ 1,477,525 See accompanying notes to unaudited consolidated financial statements. Page 7 Index First Bancorp and Subsidiaries Consolidated Statements of Shareholders’ Equity ($ and share data in thousands - unaudited) Common Stock Retained Earnings Stock in Rabbi Trust Assumed in Acquisition Rabbi Trust Obligation Accumulated Other Comprehensive Loss Total Shareholders’ Equity Shares Amount Nine Months Ended September 30, 2023 Balances, January 1, 2023 35,704 $ 725,153 $ 648,418 $ ( 1,585 ) $ 1,585 $ ( 341,975 ) $ 1,031,596 Net income 74,457 74,457 Cash dividends declared ($ 0.66 per common share) ( 27,084 ) ( 27,084 ) Change in Rabbi Trust Obligation 210 ( 210 ) — Equity issued related to acquisition 5,033 229,489 229,489 Stock options exercised 195 3,769 3,769 Stock withheld for payment of taxes ( 6 ) ( 186 ) ( 186 ) Stock-based compensation 159 4,419 4,419 Other comprehensive loss ( 58,777 ) ( 58,777 ) Balances, September 30, 2023 41,085 $ 962,644 $ 695,791 $ ( 1,375 ) $ 1,375 $ ( 400,752 ) $ 1,257,683 Nine Months Ended September 30, 2024 Balances, January 1, 2024 41,110 $ 963,990 $ 716,420 $ ( 1,385 ) $ 1,385 $ ( 308,030 ) $ 1,372,380 Net income 72,664 72,664 Cash dividends declared ($ 0.66 per common share) ( 27,203 ) ( 27,203 ) Change in Rabbi Trust Obligation 237 ( 237 ) — Stock options exercised 163 3,429 3,429 Stock withheld for payment of taxes ( 15 ) ( 604 ) ( 604 ) Stock-based compensation 82 3,635 3,635 Other comprehensive income 53,224 53,224 Balances, September 30, 2024 41,340 $ 970,450 $ 761,881 $ ( 1,148 ) $ 1,148 $ ( 254,806 ) $ 1,477,525 See accompanying notes to unaudited consolidated financial statements. Page 8 Index First Bancorp and Subsidiaries Consolidated Statements of Cash Flows Nine Months Ended September 30, ($ in thousands-unaudited) 2024 2023 Cash Flows From Operating Activities Net income $ 72,664 $ 74,457 Reconciliation of net income to net cash provided by operating activities: Provision for credit losses 15,941 14,864 Net security premium amortization 6,700 7,082 Deferred income taxes, net ( 5,814 ) ( 2,839 ) Loan discount accretion ( 8,060 ) ( 10,354 ) Deposit and debt discount accretion, net 1,253 3,241 Foreclosed property gains, net ( 214 ) ( 131 ) Securities losses, net 1,161 — Other (gains) losses, net ( 504 ) ( 1,402 ) Bank-owned life insurance income ( 3,548 ) ( 3,216 ) Net amortization of deferred loan costs/(fees) ( 975 ) ( 1,087 ) Depreciation of premises and equipment 5,884 5,583 Amortization of operating lease right-of-use assets 1,420 1,559 Repayments of lease obligations ( 1,360 ) ( 1,473 ) Stock-based compensation expense 3,458 3,972 Amortization of intangible assets 5,041 6,147 Amortization and impairment of SBA servicing assets 1,248 952 Gains on sale of loans ( 4,955 ) ( 3,340 ) Origination of presold mortgage loans and SBA loans held for sale ( 120,281 ) ( 107,878 ) Proceeds from sales of presold mortgage loans and SBA loans 131,430 92,162 Decrease (increase) in accrued interest receivable 4,461 1,033 (Increase) decrease in other assets ( 2,527 ) 10,713 (Decrease) increase in accrued interest payable ( 133 ) 2,391 Increase (decrease) in other liabilities 3,762 793 Net cash provided by (used in) operating activities 106,052 93,229 Cash Flows From Investing Activities Proceeds from maturities, calls and principal repayments of securities available for sale 204,848 133,341 Proceeds from maturities, calls and principal repayments of securities held to maturity 7,567 2,807 Proceeds from sales of securities available for sale 138,182 111,863 Proceeds from sale of VISA B shares 4,522 — Purchases of Federal Reserve and FHLB stock ( 39,553 ) ( 61,162 ) Redemptions of Federal Reserve and FHLB stock 52,810 45,372 Proceeds from bank owned life insurance death benefits 209 136 Purchases of other investments ( 1,858 ) ( 7,460 ) Net decrease (increase) in loans 125,241 ( 347,419 ) Proceeds from sales of foreclosed properties 687 554 Purchases of premises and equipment ( 2,159 ) ( 3,201 ) Proceeds from sales of premises and equipment 754 59 Net cash received in acquisition activities — 22,610 Net cash provided by (used in) investing activities 491,250 ( 102,500 ) Cash Flows From Financing Activities Net increase (decrease) in deposits 472,649 ( 40,040 ) Proceeds from the issuance of other borrowings 986,000 1,665,000 Repayment of other borrowings ( 1,515,036 ) ( 1,590,099 ) Repayment of subordinated debentures ( 10,000 ) — Cash dividends paid – common stock ( 27,154 ) ( 25,902 ) Proceeds from stock option exercises 3,429 3,769 Payment of taxes related to stock withheld ( 604 ) ( 186 ) Net cash (used) provided by financing activities ( 90,716 ) 12,542 Increase (decrease) in cash and cash equivalents 506,586 3,271 Cash and cash equivalents, beginning of period 237,855 270,318 Cash and cash equivalents, end of period $ 744,441 $ 273,589 (Continued) Page 9 Index First Bancorp and Subsidiaries Consolidated Statements of Cash Flows Nine Months Ended September 30, ($ in thousands-unaudited) 2024 2023 Supplemental Disclosures of Cash Flow Information: Cash paid during the period for interest $ 142,610 $ 92,383 Cash paid during the period for income taxes 26,084 21,856 Non-cash: Unrealized gain (loss) on securities available for sale, net of taxes 53,166 ( 58,878 ) Non-cash: Foreclosed loans transferred to other real estate 1,066 1,000 Non-cash: Accrued dividends at end of period 9,093 9,039 Non-cash: Cancellation of operating lease right-of-use assets and operating lease liabilities ( 1,497 ) — Non-cash: Initial recognition of operating lease right-of-use assets and operating lease liabilities — 260 Non-cash: Revision of operating lease right-of-use assets and operating lease liabilities — ( 562 ) Acquisition of GrandSouth Bancorporation — See Note 2 See accompanying notes to consolidated financial statements. Page 10 Index First Bancorp and Subsidiaries Notes to Consolidated Financial Statements (unaudited) Note 1. Organization and Basis of Presentation The consolidated financial statements include the accounts of First Bancorp (the “Company”) and its wholly owned subsidiary First Bank (the “Bank”). The Bank has three wholly owned subsidiaries that are fully consolidated, SBA Complete, Inc. (“SBA Complete”), Magnolia Financial, Inc. ("Magnolia Financial"), and First Troy SPE, LLC. 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 September 30, 2024, the consolidated results of income, comprehensive income and shareholders' equity for the three and nine months ended September 30, 2024 and 2023, and the consolidated cash flows for the nine months ended September 30, 2024 and 2023. Any such adjustments were of a normal, recurring nature. These interim financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes in the 2023 Annual Report for the year ended December 31, 2023. Operating results for interim period are not necessarily indicative of the results that may be expected for the full year. 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 consolidated financial statements. The Company has evaluated all subsequent events through the date the consolidated financial statements were issued. Accounting Standards Adopted in 2024 Accounting Standards Update ("ASU") 2023-02 , “ Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method ” permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. This update is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The adoption of ASU 2023-02 did not have a significant impact on the Company's consolidated financial statements. Accounting Standards Pending Adoption ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" amended existing guidance to improve disclosures about a public entity’s reportable segments and provide more detailed information about a reportable segment’s expenses. ASU 2023-07 clarifies that an entity which has a single reportable segment is to provide all the disclosures required by Topic 280 and ASU 2023-07. The amendment is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The adoption of ASU 2023-07 is not expected to have a significant impact on the Company's consolidated financial statements. 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 Page 11 Index 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 consolidated financial statements. Note 2. Acquisitions On January 1, 2023, the Company completed its acquisition of GrandSouth Bancorporation ("GrandSouth"), in an all-stock transaction. The results of GrandSouth are included beginning on the January 1, 2023 acquisition date. This transaction was accounted for using the acquisition method of accounting for business combinations, and accordingly, the assets acquired, intangible assets identified, and liabilities assumed of GrandSouth were recorded based on estimates of fair values as of January 1, 2023. The operations of GrandSouth have been integrated into existing First Bank operations and therefore separate results of operations or balance sheet information is not presented. Note 3. Securities The book values and approximate fair values of investment securities at September 30, 2024 and December 31, 2023 are summarized as follows: ($ in thousands) September 30, 2024 December 31, 2023 Amortized Cost Fair Value Unrealized Amortized Cost Fair Value Unrealized Gains (Losses) Gains (Losses) Securities available for sale: U.S. Treasuries $ — $ — $ — $ — $ 174,785 $ 172,570 $ — $ ( 2,215 ) Government-sponsored enterprise securities 71,968 62,872 — ( 9,096 ) 71,964 60,266 — ( 11,698 ) Mortgage-backed securities 2,150,849 1,828,802 39 ( 322,086 ) 2,323,674 1,937,784 30 ( 385,920 ) Corporate bonds 16,179 15,784 — ( 395 ) 19,676 18,759 — ( 917 ) Total available for sale $ 2,238,996 $ 1,907,458 $ 39 $ ( 331,577 ) $ 2,590,099 $ 2,189,379 $ 30 $ ( 400,750 ) Securities held to maturity: Mortgage-backed securities $ 9,923 $ 9,564 $ — $ ( 359 ) $ 12,085 $ 11,447 $ — $ ( 638 ) State and local governments 511,878 438,736 29 ( 73,171 ) 521,593 438,176 39 ( 83,456 ) Total held to maturity $ 521,801 $ 448,300 $ 29 $ ( 73,530 ) $ 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 September 30, 2024 and December 31, 2023. The following table presents information regarding all securities with unrealized losses at September 30, 2024: Securities in an Unrealized Loss Position for Less than Twelve Months Securities in an Unrealized Loss Position for More than Twelve Months Total ($ in thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Government-sponsored enterprise securities $ — $ — $ 62,872 $ 9,096 $ 62,872 $ 9,096 Mortgage-backed securities 318 — 1,835,466 322,445 1,835,784 322,445 Corporate bonds 380 49 13,654 346 14,034 395 State and local governments 520 — 433,118 73,171 433,638 73,171 Total unrealized loss position $ 1,218 $ 49 $ 2,345,110 $ 405,058 $ 2,346,328 $ 405,107 Page 12 Index The following table presents information regarding all securities with unrealized losses at December 31, 2023: Securities in an Unrealized Loss Position for Less than Twelve Months Securities in an Unrealized Loss Position for More than Twelve Months Total ($ in thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses U.S. Treasuries $ — $ — $ 172,570 $ 2,215 $ 172,570 $ 2,215 Government-sponsored enterprise securities — — 60,266 11,698 60,266 11,698 Mortgage-backed securities 1,117 5 1,945,830 386,553 1,946,947 386,558 Corporate bonds — — 17,008 917 17,008 917 State and local governments — — 432,476 83,456 432,476 83,456 Total unrealized loss position $ 1,117 $ 5 $ 2,628,150 $ 484,839 $ 2,629,267 $ 484,844 As of September 30, 2024, the Company's securities portfolio included 620 securities of which 586 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 September 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. The state and local government investments are comprised almost entirely of highly-rated municipal bonds issued by state and local governments throughout the nation. The Company has no significant concentrations of bond holdings from one state or local government entity. Nearly all of our mortgage-backed securities were issued by 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 September 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 fair values of investment securities at September 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. Securities Available for Sale Securities Held to Maturity ($ in thousands) Amortized Cost Fair Value Amortized Cost Fair Value Due after one year but within five years $ 39,996 $ 35,320 $ 5,394 $ 5,289 Due after five years but within ten years 48,151 43,336 183,914 159,345 Due after ten years — — 322,570 274,102 Mortgage-backed securities 2,150,849 1,828,802 9,923 9,564 Total securities $ 2,238,996 $ 1,907,458 $ 521,801 $ 448,300 At September 30, 2024 and December 31, 2023, investment securities with carrying values of $ 924.8 million and $ 971.3 million, respectively, were pledged as collateral for public deposits. In addition, at September 30, 2024 and December 31, 2023, investment securities with carrying values of $ 582.6 million and $ 679.0 million, respectively, were pledged as collateral for Federal Reserve Bank ("Federal Reserve") borrowings. At September 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 September 30, 2024. Page 13 Index 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 second quarter of 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. Included in "Securities losses, net" in the consolidated statements of income, 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 $ 41.2 million and $ 54.5 million at September 30, 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 September 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 $ 32.7 million and $ 32.8 million at September 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. Note 4. Loans, Allowance for Credit Losses, and Asset Quality Information The following is a summary of the major categories of total loans outstanding: ($ in thousands) September 30, 2024 December 31, 2023 Amount Percentage Amount Percentage Commercial and industrial $ 847,284 11 % $ 905,862 11 % Construction, development & other land loans 760,949 9 % 992,980 12 % Commercial real estate - owner occupied 1,226,050 15 % 1,259,022 16 % Commercial real estate - non owner occupied 2,572,901 32 % 2,528,060 31 % Multi-family real estate 460,565 6 % 421,376 5 % Residential 1-4 family real estate 1,737,133 22 % 1,639,469 20 % Home equity loans/lines of credit 331,072 4 % 335,068 4 % Consumer loans 76,787 1 % 68,443 1 % Subtotal 8,012,741 100 % 8,150,280 100 % Unamortized net deferred loan costs/(fees) 797 ( 178 ) Total loans $ 8,013,538 $ 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) September 30, 2024 December 31, 2023 Guaranteed portions of SBA loans included in table above $ 36,131 $ 35,462 Unguaranteed portions of SBA loans included in table above 104,472 107,784 Total SBA loans included in the table above $ 140,603 $ 143,246 Sold portions of SBA loans with servicing retained - not included in tables above $ 341,517 $ 349,275 At September 30, 2024 and December 31, 2023, there were remaining unaccreted discounts on the retained portion of sold SBA loans amounting to $ 3.3 million and $ 3.5 million, respectively. Page 14 Index At September 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 September 30, 2024 and December 31, 2023, total loans included loans to executive officers and directors of the Company, and their associates, totaling approximately $ 63.3 million and $ 63.7 million, respectively. While there was one new loan, advances on existing loans totaled approximately $ 1.3 million for the nine months ended September 30, 2024, and repayments amounted to $ 1.6 million for that period. Available credit on related party loans totaled $ 1.0 million and $ 2.7 million at September 30, 2024 and December 31, 2023, respectively. As of September 30, 2024 and December 31, 2023, unamortized discounts on all acquired loans totaled $ 17.3 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. There was no impairment of acquired loans during the three and nine months ended September 30, 2024 that would require acceleration of amortization or charge off of unamortized discount. 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 date presented. ($ in thousands) September 30, 2024 December 31, 2023 Nonaccrual loans $ 34,125 $ 32,208 Modifications to borrowers in financial distress 10,262 11,719 Total nonperforming loans 44,387 43,927 Foreclosed real estate 1,519 862 Total nonperforming assets $ 45,906 $ 44,789 At September 30, 2024 and December 31, 2023, the Company had $ 0.8 million and $ 1.0 million, respectively, in residential mortgage loans in the process of foreclosure. At September 30, 2024 and December 31, 2023, there were two and one loans, respectively, with commitments 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 September 30, 2024: ($ in thousands) Nonaccrual Loans with No Allowance Nonaccrual Loans with an Allowance Total Nonaccrual Loans Commercial and industrial $ — $ 10,310 $ 10,310 Construction, development & other land loans — 17 17 Commercial real estate - owner occupied 879 9,211 10,090 Commercial real estate - non owner occupied — 6,067 6,067 Residential 1-4 family real estate — 5,578 5,578 Home equity loans/lines of credit — 1,925 1,925 Consumer loans — 138 138 Total $ 879 $ 33,246 $ 34,125 Page 15 Index The following table is a summary of the Company’s nonaccrual loans by major categories as of December 31, 2023: ($ in thousands) Nonaccrual Loans with No Allowance Nonaccrual Loans with an Allowance Total Nonaccrual Loans Commercial and industrial $ 944 $ 8,932 $ 9,876 Construction, development & other land loans — 399 399 Commercial real estate - owner occupied 960 6,082 7,042 Commercial real estate - non owner occupied 6,121 1,082 7,203 Residential 1-4 family real estate — 4,843 4,843 Home equity loans/lines of credit 534 2,169 2,703 Consumer loans — 142 142 Total $ 8,559 $ 23,649 $ 32,208 There was no interest income recognized during the periods presented on nonaccrual loans. 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) Nine Months Ended September 30, 2024 Nine Months Ended September 30, 2023 Commercial and industrial $ 360 $ 182 Construction, development & other land loans — 2 Commercial real estate - owner occupied 238 105 Commercial real estate - non owner occupied 55 8 Residential 1-4 family real estate 45 29 Home equity loans/lines of credit 26 39 Consumer loans 1 2 Total $ 725 $ 367 The following table presents an analysis of the payment status of the Company’s loans as of September 30, 2024: ($ in thousands) Accruing Current Accruing 30-59 Days Past Due Accruing 60-89 Days Past Due Nonaccrual Loans Total Loans Receivable Commercial and industrial $ 834,306 $ 2,468 $ 200 $ 10,310 $ 847,284 Construction, development & other land loans 759,957 910 65 17 760,949 Commercial real estate - owner occupied 1,215,472 279 209 10,090 1,226,050 Commercial real estate - non owner occupied 2,566,325 287 222 6,067 2,572,901 Multi-family real estate 460,419 146 — — 460,565 Residential 1-4 family real estate 1,725,659 1,794 4,102 5,578 1,737,133 Home equity loans/lines of credit 327,772 1,278 97 1,925 331,072 Consumer loans 76,095 322 232 138 76,787 Total $ 7,966,005 $ 7,484 $ 5,127 $ 34,125 8,012,741 Unamortized net deferred loan costs/(fees) 797 Total loans $ 8,013,538 Page 16 Index The following table presents an analysis of the payment status of the Company’s loans as of December 31, 2023: ($ in thousands) Accruing Current Accruing 30-59 Days Past Due Accruing 60-89 Days Past Due Nonaccrual Loans Total Loans Receivable Commercial and industrial $ 892,003 $ 3,726 $ 257 $ 9,876 $ 905,862 Construction, development & other land loans 992,084 241 256 399 992,980 Commercial real estate - owner occupied 1,250,670 906 404 7,042 1,259,022 Commercial real estate - non owner occupied 2,520,496 361 — 7,203 2,528,060 Multi-family real estate 421,376 — — — 421,376 Residential 1-4 family real estate 1,612,357 18,868 3,401 4,843 1,639,469 Home equity loans/lines of credit 331,413 603 349 2,703 335,068 Consumer loans 67,900 270 131 142 68,443 Total $ 8,088,299 $ 24,975 $ 4,798 $ 32,208 8,150,280 Unamortized net deferred loan costs/(fees) ( 178 ) Total loans $ 8,150,102 Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. The Company reviews individually evaluated loans on nonaccrual with a net book balance of $ 500,000 or greater for designation as collateral dependent loans, as well as certain other loans that may still be accruing interest and/or are less than $ 500,000 in size that management of the Company designates as having higher risk. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the Allowance for Credit Losses ("ACL"). The following table presents an analysis of collateral dependent loans of the Company as of September 30, 2024: ($ in thousands) Residential Property Business Assets Commercial Property Total Collateral-Dependent Loans Commercial real estate - owner occupied $ — $ — $ 879 $ 879 Commercial real estate - non owner occupied — — 5,050 5,050 Total $ — $ — $ 5,929 $ 5,929 The following table presents an analysis of collateral dependent loans of the Company as of December 31, 2023: ($ in thousands) Residential Property Business Assets Commercial Property Total Collateral-Dependent Loans Commercial and industrial $ — $ 2,385 $ — $ 2,385 Commercial real estate - owner occupied — — 1,142 1,142 Commercial real estate - non owner occupied — — 6,121 6,121 Home equity loans/lines of credit 534 — — 534 Total $ 534 $ 2,385 $ 7,263 $ 10,182 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 to include Purchase Credit Deterioration (“PCD”) activity in applicable periods. 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 nine months ended September 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. Other than the impact from Hurricane Helene, there was little change to the ACL for the quarter or year to date. Page 17 Index ($ in thousands) Beginning balance Charge-offs Recoveries Provisions / (Reversals) Ending balance As of and for the three months ended September 30, 2024 Commercial and industrial $ 19,837 $ ( 1,913 ) $ 246 $ ( 27 ) $ 18,143 Construction, development & other land loans 9,996 — 35 1,394 11,425 Commercial real estate - owner occupied 17,859 ( 21 ) 4 657 18,499 Commercial real estate - non owner occupied 25,876 — 3 2,754 28,633 Multi-family real estate 5,129 — — 161 5,290 Residential 1-4 family real estate 24,855 — 28 9,183 34,066 Home equity loans/lines of credit 3,177 — 232 165 3,574 Consumer loans 3,329 ( 754 ) 17 496 3,088 Total $ 110,058 $ ( 2,688 ) $ 565 $ 14,783 $ 122,718 As of and for the nine months ended September 30, 2024 Commercial and industrial $ 21,227 $ ( 5,976 ) $ 1,346 $ 1,546 $ 18,143 Construction, development & other land loans 13,940 ( 79 ) 182 ( 2,618 ) 11,425 Commercial real estate - owner occupied 18,218 ( 109 ) 12 378 18,499 Commercial real estate - non owner occupied 24,916 ( 158 ) 46 3,829 28,633 Multi-family real estate 3,825 — — 1,465 5,290 Residential 1-4 family real estate 21,396 ( 6 ) 255 12,421 34,066 Home equity loans/lines of credit 3,339 ( 2 ) 254 ( 17 ) 3,574 Consumer loans 2,992 ( 1,130 ) 197 1,029 3,088 Total $ 109,853 $ ( 7,460 ) $ 2,292 $ 18,033 $ 122,718 ($ 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 September 30, 2023 Commercial and industrial $ 23,442 $ — $ ( 2,650 ) $ 450 $ 1,202 $ 22,444 Construction, development & other land loans 18,477 — ( 120 ) 54 ( 4,761 ) 13,650 Commercial real estate - owner occupied 16,381 — ( 24 ) 34 1,873 18,264 Commercial real estate - non owner occupied 26,274 — — 302 ( 1,240 ) 25,336 Multi-family real estate 3,946 — — 3 ( 481 ) 3,468 Residential 1-4 family real estate 14,305 — — 50 4,374 18,729 Home equity loans/lines of credit 3,717 — — 11 ( 431 ) 3,297 Consumer loans 2,688 — ( 409 ) 67 664 3,010 Total $ 109,230 $ — $ ( 3,203 ) $ 971 $ 1,200 $ 108,198 As of and for the nine months ended September 30, 2023 Commercial and industrial $ 17,718 $ 5,197 $ ( 6,361 ) $ 1,216 $ 4,674 $ 22,444 Construction, development & other land loans 15,128 49 ( 120 ) 277 ( 1,684 ) 13,650 Commercial real estate - owner occupied 14,972 191 ( 24 ) 104 3,021 18,264 Commercial real estate - non owner occupied 22,780 51 ( 235 ) 734 2,006 25,336 Multi-family real estate 2,957 — — 10 501 3,468 Residential 1-4 family real estate 11,354 113 — 275 6,987 18,729 Home equity loans/lines of credit 3,158 8 ( 2 ) 85 48 3,297 Consumer loans 2,900 1 ( 833 ) 144 798 3,010 Total $ 90,967 $ 5,610 $ ( 7,575 ) $ 2,845 $ 16,351 $ 108,198 Credit Quality Indicators 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. Page 18 Index 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. The tables below present the Company’s recorded investment in loans by credit quality indicators by year of origination or renewal as of the periods indicated. Acquired loans are presented in the year originated, not in the year of acquisition. Page 19 Index Term Loans by Year of Origination ($ in thousands) 2024 2023 2022 2021 2020 Prior Revolving Total As of September 30, 2024 Commercial and industrial Pass $ 91,552 $ 88,620 $ 128,666 $ 88,256 $ 61,355 $ 73,296 $ 299,188 $ 830,933 Special Mention 944 361 174 207 347 794 1,890 4,717 Classified 160 1,817 3,440 486 1,009 4,181 541 11,634 Total commercial and industrial 92,656 90,798 132,280 88,949 62,711 78,271 301,619 847,284 Gross charge-offs, YTD 126 460 800 195 134 752 3,509 5,976 Construction, development & other land loans Pass 321,727 192,331 114,704 32,788 14,857 9,801 70,195 756,403 Special Mention 2,497 612 164 9 — 265 13 3,560 Classified 910 — — — 67 9 — 986 Total construction, development & other land loans 325,134 192,943 114,868 32,797 14,924 10,075 70,208 760,949 Gross charge-offs, YTD — 79 — — — — — 79 Commercial real estate - owner occupied Pass 120,529 229,996 272,334 261,248 158,253 127,257 16,711 1,186,328 Special Mention 13,218 1,940 3,515 187 147 7,654 — 26,661 Classified 957 179 1,977 1,268 1,572 7,108 — 13,061 Total commercial real estate - owner occupied 134,704 232,115 277,826 262,703 159,972 142,019 16,711 1,226,050 Gross charge-offs, YTD — 25 — 19 — 65 — 109 Commercial real estate - non owner occupied Pass 345,170 435,235 683,731 638,235 263,275 149,114 29,739 2,544,499 Special Mention 14,968 268 189 13 337 5,890 — 21,665 Classified 234 401 570 11 4,233 1,288 — 6,737 Total commercial real estate - non owner occupied 360,372 435,904 684,490 638,259 267,845 156,292 29,739 2,572,901 Gross charge-offs, YTD — — — — — 158 — 158 Multi-family real estate Pass 55,518 41,990 115,324 161,142 41,642 14,628 29,379 459,623 Special Mention — 146 — — — 796 — 942 Classified — — — — — — — — Total multi-family real estate 55,518 42,136 115,324 161,142 41,642 15,424 29,379 460,565 Gross charge-offs, YTD — — — — — — — — Residential 1-4 family real estate Pass 181,377 333,878 416,275 301,453 176,169 311,209 3,298 1,723,659 Special Mention 215 — 11 139 62 910 — 1,337 Classified 1,892 245 2,257 549 1,198 5,996 — 12,137 Total residential 1-4 family real estate 183,484 334,123 418,543 302,141 177,429 318,115 3,298 1,737,133 Gross charge-offs, YTD — — — — — 6 — 6 Home equity loans/lines of credit Pass 2,128 2,679 661 377 175 943 317,182 324,145 Special Mention 121 152 — — — — 16 289 Classified 175 54 — 137 89 8 6,175 6,638 Total home equity loans/lines of credit 2,424 2,885 661 514 264 951 323,373 331,072 Gross charge-offs, YTD — — — — — — 2 2 Consumer loans Pass 13,328 11,137 8,076 2,757 1,252 373 39,517 76,440 Special Mention — — — — — — 23 23 Classified 6 72 46 21 — 28 151 324 Total consumer loans 13,334 11,209 8,122 2,778 1,252 401 39,691 76,787 Gross charge-offs, YTD 6 53 24 33 — — 1,014 1,130 Total loans $ 1,167,626 $ 1,342,113 $ 1,752,114 $ 1,489,283 $ 726,039 $ 721,548 $ 814,018 8,012,741 Unamortized net deferred loan costs/(fees) 797 Total loans, net of deferred loan costs/(fees) $ 8,013,538 Total gross charge-offs, year to date $ 132 $ 617 $ 824 $ 247 $ 134 $ 981 $ 4,525 $ 7,460 Page 20 Index Term Loans by Year of Origination ($ in thousands) 2023 2022 2021 2020 2019 Prior Revolving Total As of December 31, 2023 Commercial and industrial Pass $ 136,735 $ 161,131 $ 111,069 $ 75,312 $ 38,495 $ 60,626 $ 302,684 $ 886,052 Special Mention 2,832 2,547 167 185 448 672 1,135 7,986 Classified 1,626 1,152 720 1,389 1,647 4,487 803 11,824 Total commercial and industrial 141,193 164,830 111,956 76,886 40,590 65,785 304,622 905,862 Gross charge-offs, YTD 171 1,036 713 537 821 1,547 3,533 8,358 Construction, development & other land loans Pass 563,998 231,450 90,374 16,662 11,598 5,816 70,852 990,750 Special Mention 489 273 59 — 2 4 19 846 Classified 657 708 — — 8 11 — 1,384 Total construction, development & other land loans 565,144 232,431 90,433 16,662 11,608 5,831 70,871 992,980 Gross charge-offs, YTD — — — — — 120 — 120 Commercial real estate - owner occupied Pass 210,449 323,852 299,135 196,343 92,452 86,784 23,198 1,232,213 Special Mention 338 2,533 271 817 5,755 2,253 — 11,967 Classified 4,456 1,505 1,721 895 2,288 3,904 73 14,842 Total commercial real estate - owner occupied 215,243 327,890 301,127 198,055 100,495 92,941 23,271 1,259,022 Gross charge-offs, YTD — — 49 — — 92 3 144 Commercial real estate - non owner occupied Pass 509,596 748,854 722,472 287,235 119,515 84,690 29,001 2,501,363 Special Mention 11,353 199 36 393 1,183 5,942 342 19,448 Classified 871 32 14 4,214 634 1,484 — 7,249 Total commercial real estate - non owner occupied 521,820 749,085 722,522 291,842 121,332 92,116 29,343 2,528,060 Gross charge-offs, YTD — — 235 — — — — 235 Multi-family real estate Pass 57,378 137,533 139,879 43,881 12,231 10,323 20,151 421,376 Special Mention — — — — — — — — Classified — — — — — — — — Total multi-family real estate 57,378 137,533 139,879 43,881 12,231 10,323 20,151 421,376 Gross charge-offs, YTD — — — — — — — — Residential 1-4 family real estate Pass 363,410 400,483 317,515 186,459 94,567 260,102 3,247 1,625,783 Special Mention 681 41 202 64 587 1,987 — 3,562 Classified 1,848 50 474 741 472 6,539 — 10,124 Total residential 1-4 family real estate 365,939 400,574 318,191 187,264 95,626 268,628 3,247 1,639,469 Gross charge-offs, YTD — — — — — 4 — 4 Home equity loans/lines of credit Pass 2,830 1,136 1,141 223 499 1,233 319,199 326,261 Special Mention 163 — 122 — — — 18 303 Classified 255 — 146 91 112 10 7,890 8,504 Total home equity loans/lines of credit 3,248 1,136 1,409 314 611 1,243 327,107 335,068 Gross charge-offs, YTD — — — — — — 309 309 Consumer loans Pass 16,497 12,906 4,999 2,173 432 429 30,757 68,193 Special Mention — — — — — — — — Classified 130 7 45 — 3 34 31 250 Total consumer loans 16,627 12,913 5,044 2,173 435 463 30,788 68,443 Gross charge-offs, YTD 34 79 73 23 — 1 795 1,005 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 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 Page 21 Index Loan Modifications to Borrowers Experiencing Financial Difficulty Occasionally, the Company modifies loans to borrowers in financial distress as a part of our loss mitigation activities. Various types of modification may be offered including principal forgiveness, term extension, payment delays, or interest rate reductions. In some cases, the Company will modify a certain loan by providing multiple types of concessions. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession may be granted. For loans included in the “combination” columns below, multiple types of modifications have been made on the same loan within the current reporting period. The followings tables present the amortized cost basis at September 30, 2024 and September 30, 2023 of the loans modified during the three and nine months then ended for borrowers experiencing financial difficulty, by loan category and type of concession granted. ($ in thousands) Payment Delay Term Extension Combination - 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 September 30, 2024 Construction, development & other land loans $ — $ 143 $ — $ — $ 143 0.02 % Home equity loans/lines of credit — 96 — — 96 0.03 % Total $ — $ 239 $ — $ — $ 239 — % As of and for the nine months ended September 30, 2024 Commercial and industrial $ 114 $ 1 $ 878 $ 92 $ 1,085 0.13 % Construction, development & other land loans — 208 — — 208 0.03 % Commercial real estate - non owner occupied — 107 — — 107 — % Residential 1-4 family real estate — 199 — — 199 0.01 % Home equity loans/lines of credit — 417 — 173 590 0.18 % Total $ 114 $ 932 $ 878 $ 265 $ 2,189 0.03 % Page 22 Index ($ 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 September 30, 2023 Commercial and industrial $ 1,142 $ 117 $ — $ 1,259 0.14 % Construction, development & other land loans — 594 — 594 0.06 % Commercial real estate - owner occupied — 4,023 — 4,023 0.32 % Commercial real estate - non owner occupied — 131 — 131 0.01 % Residential 1-4 family real estate — 245 — 245 0.02 % Home equity loans/lines of credit 24 401 99 524 0.16 % Consumer loans — 9 — 9 0.01 % Total $ 1,166 $ 5,520 $ 99 $ 6,785 0.08 % As of and for the nine months ended September 30, 2023 Commercial and industrial $ 2,589 $ 216 $ — $ 2,805 0.31 % Construction, development & other land loans — 594 10 604 0.06 % Commercial real estate - owner occupied 185 4,302 — 4,487 0.36 % Commercial real estate - non owner occupied — 219 — 219 0.01 % Residential 1-4 family real estate — 750 — 750 0.05 % Home equity loans/lines of credit 24 1,669 99 1,792 0.54 % Consumer loans — 66 — 66 0.10 % Total $ 2,798 $ 7,816 $ 109 $ 10,723 0.13 % For the three and nine months ended September 30, 2024 and September 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 nine months ended September 30, 2024 of the modifications made for borrowers experiencing financial difficulty: Financial Effect of Modification to Borrowers Experiencing Financial Difficulty Weighted Average Interest Rate Reduction Weighted Average Payment Delay (in months) Weighted Average Term Extension (in months) For the three months ended September 30, 2024 Construction, development & other land loans — % 0 8 Home equity loans/lines of credit — % 0 40 For the nine months ended September 30, 2024 Commercial and industrial 0.75 % 36 13 Construction, development & other land loans — % 0 6 Commercial real estate - non owner occupied — % 0 13 Residential 1-4 family real estate — % 0 103 Home equity loans/lines of credit 2.13 % 0 65 Page 23 Index The following table describes the financial effect for the three and nine months ended September 30, 2023 of the modifications made for borrowers experiencing financial difficulty: Financial Effect of Modification to Borrowers Experiencing Financial Difficulty Weighted Average Interest Rate Reduction Weighted Average Payment Delay (in months) Weighted Average Term Extension (in months) For the three months ended September 30, 2023 Commercial and industrial — % 6 26 Construction, development & other land loans — % 0 8 Commercial real estate - owner occupied — % 0 32 Commercial real estate - non owner occupied — % 0 11 Residential 1-4 family real estate — % 0 23 Home equity loans/lines of credit 2.61 % 24 84 Consumer loans — % 0 24 For the nine months ended September 30, 2023 Commercial and industrial — % 4 20 Construction, development & other land loans 1.53 % 0 9 Commercial real estate - owner occupied — % 12 34 Commercial real estate - non owner occupied — % 0 13 Residential 1-4 family real estate — % 0 24 Home equity loans/lines of credit 2.61 % 24 55 Consumer loans — % 0 9 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 were modified in the last twelve months as of September 30, 2024: Payment Status (Amortized Cost Basis) ($ in thousands) Current 30-59 Days Past Due 60-89 Days Past Due 90+ Days Past Due Commercial and industrial $ 1,086 $ — $ — $ — Construction, development & other land loans 250 — — — Commercial real estate - non owner occupied 107 — — — Residential 1-4 family real estate 134 — 65 — Home equity loans/lines of credit 1,278 — — — $ 2,855 $ — $ 65 $ — 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) ($ in thousands) Current 30-59 Days Past Due 60-89 Days Past Due 90+ Days Past Due Commercial and industrial $ 2,841 $ — $ — $ — Construction, development & other land loans 362 — — — Commercial real estate - owner occupied 4,455 — — — Commercial real estate - non owner occupied 206 — — — Residential 1-4 family real estate 656 79 — — Home equity loans/lines of credit 3,114 — — — Consumer loans 6 — — — $ 11,640 $ 79 $ — $ — Page 24 Index None of the modifications made for borrowers experiencing financial difficulty during the three and nine months ended September 30, 2024 and September 30, 2023 are considered to have had a payment default. Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the ACL is adjusted by the same amount. Concentration of Credit Risk Most of the Company's business activity is with customers located within the markets where it has banking operations. Therefore, the Company’s exposure to credit risk is significantly affected by changes in the economy within its markets. Approximately 88 % of the Company's loan portfolio is secured by real estate and is therefore susceptible to changes in real estate valuations. There have been no material changes to the primary loan markets (as identified by counties) from year end. Impact of Hurricane Helene Within the portions of Western North and South Carolina that were significantly impacted by Hurricane Helene, the Company identified borrowers with approximately $ 755 million of loans outstanding. The following is a summary of the categories of those loans outstanding as of September 30, 2024: ($ in thousands) Balance Commercial and industrial $ 10,481 Construction, development & other land loans 29,429 Commercial real estate - owner occupied 98,958 Commercial real estate - non owner occupied 284,825 Multi-family real estate 25,677 Residential 1-4 family real estate 266,554 Home equity loans/lines of credit 39,470 Consumer loans — Total $ 755,394 Given that the storm impacted the area just prior to September 30, 2024 and recovery continues in many communities, the Company performed analyses to identify possible impacts from the storm and has reserved accordingly based upon the information available at this time. The Company applied increased reserve rates based upon severe economic factors to the approximately $ 755 million of loans in the most impacted path of Hurricane Helene. Additionally, the Company performed an initial evaluation of the largest commercial loans in that area and applied incremental reserves to those loans that were suspected of having higher potential property damage or economic impact from the storm. Due to the potential exposure from Hurricane Helene, the ACL on these impacted loans increased by $ 13.0 million, expanding the ACL as a percent of loans in the impacted geography from 1.29 % to 3.01 % as of September 30, 2024 and adding 16 basis points to the overall ACL as a percent of total loans, which was 1.53 % as of September 30, 2024. Allowance for Unfunded Loan Commitments In addition to the ACL on loans, the Company maintains an allowance for lending-related commitments such as unfunded loan commitments and letters of credit. The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for lending-related commitments on off-balance sheet credit exposures is adjusted as a provision for unfunded commitments expense. 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 $ 9.3 million and $ 11.4 million at September 30, 2024 and Page 25 Index 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 and nine months ended September 30, 2024 and 2023: Three months ended September 30, Nine months ended September 30, ($ in thousands) 2024 2023 2024 2023 Beginning balance $ 9,860 $ 13,019 $ 11,369 $ 13,306 Initial provision for credit losses on unfunded commitments acquired from GrandSouth — — — 1,921 Charge-offs — — — — Recoveries — — — — Reversal of provision for unfunded commitments ( 583 ) ( 1,200 ) ( 2,092 ) ( 3,408 ) Ending balance $ 9,277 $ 11,819 $ 9,277 $ 11,819 Allowance for Credit Losses - Securities Held to Maturity The ACL for securities held to maturity was insignificant at September 30, 2024 and December 31, 2023. Note 5. 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. September 30, 2024 December 31, 2023 ($ in thousands) Gross Carrying Amount Accumulated Amortization Net Amount Gross Carrying Amount Accumulated Amortization Net Amount Amortizable intangible assets: Customer lists $ 1,600 $ 1,307 $ 293 $ 2,700 $ 2,167 $ 533 Core deposit intangibles 57,890 33,717 24,173 57,890 28,933 28,957 Other intangibles 100 100 — 100 83 17 Total amortizable intangible assets $ 59,590 $ 35,124 $ 24,466 $ 60,690 $ 31,183 $ 29,507 Unamortizable intangible assets: Goodwill $ 478,750 $ 478,750 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 amortizable intangible assets totaled $ 1.6 million and $ 2.0 million for the three months ended September 30, 2024 and 2023, respectively, and $ 5.0 million and $ 6.1 million for the nine months ended September 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. Goodwill is also evaluated for impairment any time there is a triggering event indicating that impairment may have occurred. No triggering events were identified during 2024 to date and, therefore, the Company did not perform interim impairment evaluations. 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 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 Page 26 Index 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 Expense October 1, 2024 to December 31, 2024 $ 1,562 2025 5,672 2026 4,704 2027 3,951 2028 3,197 Thereafter 5,380 Total $ 24,466 The Company recorded SBA guaranteed servicing fee income of $ 0.8 million for the three months ended September 30, 2024 and 2023, and $ 2.3 million and $ 2.7 million for the nine months ended September 30, 2024 and 2023, respectively. There was no impairment of SBA servicing assets at September 30, 2024 and December 31, 2023 and no significant methodology changes have been made since 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 nine months ended September 30, 2024 and 2023: Three months ended September 30, Nine months ended September 30, ($ in thousands) 2024 2023 2024 2023 Beginning balance, net $ 3,003 $ 3,781 $ 3,350 $ 4,004 Add: New servicing assets 315 191 858 464 Less: Amortization expense and impairment charges 358 457 1,248 953 Ending balance, net $ 2,960 $ 3,515 $ 2,960 $ 3,515 Page 27 Index Note 6. Borrowings The following tables present information regarding the Company’s outstanding borrowings at September 30, 2024 ($ in thousands): Description Due date Call Feature Balance at September 30, 2024 Interest Rate FHLB Principal Reducing Credit 6/26/2028 to 12/20/2028 None $ 814 0.00 % to 1.00 % fixed Trust Preferred Securities 1/23/2034 Quarterly by Company beginning 1/23/2009 10,310 8.17 % at 9/30/24 adjustable rate 3 month CME Term SOFR+ 2.91 % Trust Preferred Securities 1/23/2034 Quarterly by Company beginning 1/23/2009 10,310 8.27 % at 9/30/24 adjustable rate 3 month CME Term SOFR + 3.01 % Trust Preferred Securities 9/20/2034 Quarterly by Company beginning 9/20/2009 12,372 7.23 % at 9/30/24 adjustable rate 3 month CME Term SOFR + 2.41 % Trust Preferred Securities 1/7/2035 Quarterly by Company beginning 1/7/2010 10,310 7.56 % at 9/30/24 adjustable rate 3 month CME Term SOFR + 2.00 % Trust Preferred Securities 6/15/2036 Quarterly by Company beginning 6/15/2011 25,774 6.60 % at 9/30/24 adjustable rate 3 month CME Term SOFR + 1.65 % Trust Preferred Securities 6/23/2036 Quarterly by the Company beginning 6/23/2011 8,248 6.86 % at 9/30/24 adjustable rate 3 month CME Term SOFR + 2.11 % Subordinated Debentures 11/15/2030 Continuous by Company beginning 11/15/2025 18,000 4.38 % fixed Total borrowings / weighted average rate as of September 30, 2024 96,138 6.69 % Unamortized discount on acquired borrowings ( 4,444 ) Total borrowings $ 91,694 Page 28 Index The following tables present information regarding the Company’s outstanding borrowings at December 31, 2023 ($ in thousands): Description Due date Call Feature Balance at December 31, 2023 Interest Rate FHLB Principal Reducing Credit 6/26/2028 to 12/20/2028 None $ 851 0.00 % to 1.00 % fixed FHLB Fixed Rate Credit 1/16/2024 None 80,000 5.59 % fixed FHLB Fixed Rate Credit 2/27/2024 None 100,000 5.61 % fixed FHLB Fixed Rate Credit 3/20/2024 None 100,000 5.61 % fixed FRB Bank Term Funding Program 12/20/2024 None 224,000 4.85 % fixed FRB Bank Term Funding Program 12/27/2024 None 25,000 4.83 % fixed Trust Preferred Securities 1/23/2034 Quarterly by Company beginning 1/23/2009 10,310 8.30 % at 12/31/23 adjustable rate 3 month CME Term SOFR + 2.91 % Trust Preferred Securities 1/23/2034 Quarterly by Company beginning 1/23/2009 10,310 8.40 % at 12/31/23 adjustable rate 3 month CME Term SOFR + 3.01 % Trust Preferred Securities 9/20/2034 Quarterly by Company beginning 9/20/2009 12,372 7.78 % at 12/31/23 adjustable rate 3 month CME Term SOFR + 2.41 % Trust Preferred Securities 1/7/2035 Quarterly by Company beginning 1/7/2010 10,310 7.66 % at 12/31/23 adjustable rate 3 month CME Term SOFR + 2.00 % Trust Preferred Securities 6/15/2036 Quarterly by Company beginning 6/15/2011 25,774 7.04 % at 12/31/23 adjustable rate 3 month CME Term SOFR + 1.65 % Trust Preferred Securities 6/23/2036 Quarterly by Company beginning 6/23/2011 8,248 7.47 % at 12/31/23 adjustable rate 3 month CME Term SOFR + 2.11 % Subordinated Debentures 11/30/2028 Continuous by Company beginning 11/30/2023 10,000 9.09 % at 12/31/23 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 December 31, 2023 635,175 5.57 % Unamortized discount on acquired borrowings ( 5,017 ) Total borrowings $ 630,158 Note 7. Leases The Company enters into leases in the normal course of business. As of September 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 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 21.1 years as of September 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. The short-term lease cost for each period presented was insignificant. Leases are classified as either operating or finance leases at the lease commencement date and all of the Company's leases have been determined to be operating leases. Lease expense for operating leases and short-term leases is recognized on a straight-line basis over the applicable lease term. Right-of-use assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. Page 29 Index 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 rates for leases were 3.32 % and 3.19 % as of September 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 $ 14.1 million and $ 14.9 million as of September 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 $ 0.6 million and $ 0.8 million for the three months ended September 30, 2024 and 2023, respectively, and $ 1.8 million and $ 2.3 million for the nine months ended September 30, 2024 and 2023, respectively. Future undiscounted lease payments for operating leases with initial terms of greater than one year as of September 30, 2024 are as follows: ($ in thousands) October 1, 2024 to December 31, 2024 $ 550 2025 1,800 2026 1,517 2027 1,236 2028 1,145 Thereafter 16,120 Total undiscounted lease payments 22,368 Less effect of discounting ( 7,436 ) Present value of estimated lease payments (lease liability) $ 14,932 Note 8. Pension Plans The Company recorded periodic pension cost totaling $ 63,000 and $ 51,000 for the three months ended September 30, 2024 and 2023, respectively, and $ 189,000 and $ 152,000 for the nine months ended September 30, 2024 and 2023, respectively. Note 9. Fair Value of Financial Instruments Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal and most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair value: Level 1: Quoted prices (unadjusted) of identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3: 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. Page 30 Index The following table summarizes the Company’s financial instruments that were measured at fair value on a recurring and nonrecurring basis at September 30, 2024: ($ in thousands) Description of Financial Instruments Fair Value at September 30, 2024 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Recurring Securities available for sale: Government-sponsored enterprise securities $ 62,872 $ — $ 62,872 $ — Mortgage-backed securities 1,828,802 — 1,828,802 — Corporate bonds 15,784 — 15,784 — Total available for sale securities $ 1,907,458 $ — $ 1,907,458 $ — Derivative financial assets $ 551 $ — $ 551 $ — Presold mortgages in process of settlement $ 9,888 $ — $ 9,888 $ — Derivative financial liabilities $ 553 $ — $ 553 $ — Nonrecurring Individually evaluated loans $ 4,746 $ — $ — $ 4,746 The following table summarizes the Company’s financial instruments that were measured at fair value on a recurring and nonrecurring basis at December 31, 2023: ($ in thousands) Description of Financial Instruments Fair Value at December 31, 2023 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Recurring Securities available for sale: US Treasury securities $ 172,570 $ — $ 172,570 $ — Government-sponsored enterprise securities 60,266 — 60,266 — Mortgage-backed securities 1,937,784 — 1,937,784 — Corporate bonds 18,759 — 18,759 — Total available for sale securities $ 2,189,379 $ — $ 2,189,379 $ — Derivative financial assets $ 295 $ — $ 295 $ — Presold mortgages in process of settlement $ 2,667 $ — $ 2,667 $ — Derivative financial liabilities $ 349 $ — $ 349 $ — Nonrecurring Individually evaluated loans $ 1,953 $ — $ — $ 1,953 The following is a description of the valuation methodologies used for financial instruments measured at fair value. Securities Available for Sale — When quoted market prices are available in an active market, the securities are classified as Level 1 in the valuation hierarchy. If quoted market prices are not available, but fair values can be estimated by observing quoted prices of securities with similar characteristics, the securities are classified as Level 2 on the valuation hierarchy. Most of the fair values for the Company’s Level 2 securities are determined by the Company's third-party bond accounting provider using matrix pricing. Matrix pricing is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities. For the Company, Level 2 securities include U.S Treasury bonds, mortgage-backed securities, commercial mortgage-backed obligations, government-sponsored enterprise securities, and corporate bonds. In cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. Page 31 Index The Company reviews the pricing methodologies utilized by the bond accounting provider to ensure the fair value determination is consistent with the applicable accounting guidance and that the investments are properly classified in the fair value hierarchy. Presold Mortgages in Process of Settlemen t - The fair value is based on the committed price that an investor has agreed to pay for the loan which is considered a Level 2 input. Derivative financial assets and liabilities - The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. These are considered a Level 2 input. Individually evaluated loans — Fair values for individually evaluated loans are measured on a non-recurring basis and are based on the underlying collateral values securing the loans, adjusted for estimated selling costs, or the net present value of the cash flows expected to be received for such loans. Collateral may be in the form of real estate or business assets including equipment, inventory and accounts receivable. The vast majority of the collateral is real estate. The value of real estate collateral is generally determined by third-party appraisers using an income or market valuation approach based on an appraisal conducted by an independent, licensed third party appraiser (Level 3). The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable borrower’s financial statements if not considered significant. 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. Any fair value adjustments are recorded in the period incurred as provision for credit losses on the consolidated statements of income. There were no significant changes in the reported amount of Level 3 assets and liabilities measured at fair value on either a recurring or a non-recurring basis as of September 30, 2024. The carrying amounts and estimated fair values of financial instruments not carried at fair value at September 30, 2024 and December 31, 2023 were as follows: September 30, 2024 December 31, 2023 ($ in thousands) Level in Fair Value Hierarchy Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value Cash and due from banks, noninterest-bearing Level 1 $ 74,034 $ 74,034 $ 100,891 $ 100,891 Due from banks, interest-bearing Level 1 670,407 670,407 136,964 136,964 Securities held to maturity Level 2 521,801 448,300 533,678 449,623 Total loans, net of allowance Level 3 7,890,820 7,232,306 8,040,249 7,379,079 SBA Servicing Asset Level 3 2,960 3,946 3,351 4,049 Demand deposits, money market and savings Level 1 9,507,268 9,507,268 9,052,905 9,052,905 Time deposits Level 2 997,661 994,002 978,694 972,513 Borrowings Level 2 91,694 80,268 630,158 615,614 Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no highly liquid market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. 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 Page 32 Index net premises and equipment, intangible and other assets such as deferred income taxes, prepaid expense accounts, income taxes currently payable, and other various accrued expenses. In addition, the income tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates. Note 10. Stock-Based Compensation The Company recorded total stock-based compensation expense of $ 1.4 million and $ 1.2 million for the three months ended September 30, 2024 and 2023, respectively, and $ 3.0 million and $ 3.4 million for the nine months ended September 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 $ 304,000 an d $ 278,000 for the three months ended September 30, 2024 and 2023, respectively, and $ 675,000 and $ 798,000 for the nine months ended September 30, 2024 and 2023, respectively. At September 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 September 30, 2024, the Equity Plan had 1,929,731 shares remaining available for grant. During the second 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. 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 nine months of 2024 related to the Company’s outstanding restricted stock awards: Long-Term Restricted Stock Awards Number of Units Weighted-Average Grant-Date Fair Value Nonvested at January 1, 2024 291,291 $ 38.01 Granted during the period 67,080 38.09 Vested during the period ( 50,501 ) 39.29 Forfeited or expired during the period — — Nonvested at September 30, 2024 307,870 $ 37.42 Total unrecognized compensation expense as of September 30, 2024 amounted to $ 4.4 million with a weighted average remaining term of 1.9 years. For the nonvested awards that were outstanding at September 30, 2024, the Company expects to record $ 2.9 million in compensation expense in the next twelve months, $ 1.3 million of which is expected to be recorded in the remaining quarter of 2024. Page 33 Index Note 11. Earnings Per Share The following is a reconciliation of the numerators and denominators used in computing Basic and Diluted Earnings Per Common Share ("EPS"): For the Three Months Ended September 30, 2024 2023 ($ in thousands except per share amounts) Income (Numerator) Shares (Denominator) Per Share Amount Income (Numerator) Shares (Denominator) Per Share Amount Basic EPS: Net income $ 18,680 $ 29,893 Less: income allocated to restricted stock ( 134 ) ( 247 ) Basic EPS per common share $ 18,546 40,971,520 $ 0.45 $ 29,646 40,744,042 $ 0.73 Diluted EPS: Net income $ 18,680 40,971,520 $ 29,893 40,744,042 Effect of dilutive securities — 395,223 — 455,016 Diluted EPS per common share $ 18,680 41,366,743 $ 0.45 $ 29,893 41,199,058 $ 0.73 For the Nine Months Ended September 30, 2024 2023 ($ in thousands except per share amounts) Income (Numerator) Shares (Denominator) Per Share Amount Income (Numerator) Shares (Denominator) Per Share Amount Basic EPS: Net income $ 72,664 $ 74,457 Less: income allocated to restricted stock ( 471 ) ( 539 ) Basic EPS per common share $ 72,193 40,924,822 $ 1.76 $ 73,918 40,691,751 $ 1.82 Diluted EPS: Net income $ 72,664 40,924,822 $ 74,457 40,691,751 Effect of dilutive securities — 369,315 — 458,239 Diluted EPS per common share $ 72,664 41,294,137 $ 1.76 $ 74,457 41,149,990 $ 1.81 Page 34 Index Note 12. Accumulated Other Comprehensive Income (Loss) The components of accumulated other comprehensive income (loss) ("AOCI") for the Company for the periods shown were as follows: ($ in thousands) September 30, 2024 December 31, 2023 Unrealized loss on securities available for sale $ ( 331,538 ) $ ( 400,720 ) Deferred tax asset 76,751 92,767 Net unrealized loss on securities available for sale ( 254,787 ) ( 307,953 ) Postretirement plans liability ( 25 ) ( 100 ) Deferred tax asset 6 23 Net postretirement plans liability ( 19 ) ( 77 ) Total accumulated other comprehensive loss $ ( 254,806 ) $ ( 308,030 ) The following tables disclose the changes in AOCI for the three and nine months ended September 30, 2024 and 2023 (all amounts are net of tax): For the Three Months Ended September 30, 2024 ($ in thousands) Unrealized Loss on Securities Available for Sale Postretirement Plans Asset (Liability) Total Beginning balance $ ( 315,153 ) $ ( 38 ) $ ( 315,191 ) Other comprehensive income before reclassifications 60,366 — 60,366 Amounts reclassified from accumulated other comprehensive income — 19 19 Net current period other comprehensive income 60,366 19 60,385 Ending balance $ ( 254,787 ) $ ( 19 ) $ ( 254,806 ) For the Three Months Ended September 30, 2023 ($ in thousands) Unrealized Loss on Securities Available for Sale Postretirement Plans Asset (Liability) Total Beginning balance $ ( 338,251 ) $ 109 $ ( 338,142 ) Other comprehensive loss before reclassifications ( 62,644 ) — ( 62,644 ) Amounts reclassified from accumulated other comprehensive income — 34 34 Net current period other comprehensive (loss) income ( 62,644 ) 34 ( 62,610 ) Ending balance $ ( 400,895 ) $ 143 $ ( 400,752 ) Page 35 Index For the Nine Months Ended September 30, 2024 ($ in thousands) Unrealized Loss on Securities Available for Sale Postretirement Plans Asset (Liability) Total Beginning balance $ ( 307,953 ) $ ( 77 ) $ ( 308,030 ) Other comprehensive income before reclassifications 52,274 — 52,274 Amounts reclassified from accumulated other comprehensive income 892 58 950 Net current-period other comprehensive income 53,166 58 53,224 Ending balance $ ( 254,787 ) $ ( 19 ) $ ( 254,806 ) For the Nine Months Ended September 30, 2023 ($ in thousands) Unrealized Loss on Securities Available for Sale Postretirement Plans Asset (Liability) Total Beginning balance $ ( 342,017 ) $ 42 $ ( 341,975 ) Other comprehensive loss before reclassifications ( 58,878 ) — ( 58,878 ) Amounts reclassified from accumulated other comprehensive income — 101 101 Net current-period other comprehensive (loss) income ( 58,878 ) 101 ( 58,777 ) Ending balance $ ( 400,895 ) $ 143 $ ( 400,752 ) Amounts reclassified from AOCI for unrealized gain (loss) on securities available for sale represent realized securities gains or losses, net of tax effects. Amounts reclassified from AOCI for postretirement plans asset (liability) represent amortization of amounts included in AOCI, net of taxes, and are recorded in the "Other operating expenses" line item of the consolidated statements of income. Note 13. Revenue from Contracts with Customers All of the Company’s revenues that are in the scope of the “ Revenue from Contracts with Customers ” accounting standard (“ASC 606”) are recognized within noninterest income. The following table presents the Company’s sources of noninterest income for the three and nine months ended September 30, 2024 and 2023. Items outside the scope of ASC 606 are noted as such. For the Three Months Ended For the Nine Months Ended ($ in thousands) September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Noninterest Income in-scope of ASC 606: Service charges on deposit accounts $ 4,320 $ 4,661 $ 12,327 $ 13,012 Other service charges and fees: Bankcard interchange income, net 2,372 2,239 7,045 7,190 Other service charges and fees 1,710 1,354 5,208 4,184 Commissions from sales of financial products 1,371 1,207 4,068 3,926 Portion of other income in-scope of ASC 606 — 478 312 1,408 Noninterest income (in-scope of ASC 606) 9,773 9,939 28,960 29,720 Noninterest income (out-of-scope of ASC 606) 3,806 5,238 12,116 13,228 Total noninterest income $ 13,579 $ 15,177 $ 41,076 $ 42,948 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. Page 36 Index