FIRST BANCORP /NC/ 10-Q

Item 2 - Management's Discussion and Analysis of Consolidated Results of Operations and Financial Condition Highlights of the results for the quarter and year-to-date period are presented below (refer also to additional discussion in the "Results of Operations" and "Financial Condition" sections following). Comparisons for the financial periods presented are impacted by the GrandSouth acquisition which was completed on January 1, 2023 with the related core system conversion occurring in March 2023. Overview and Highlights at and for Three Months Ended September 30, 2024 We earned net income of $18.7 million, or $0.45 diluted EPS, during the three months ended September 30, 2024 compared to net income of $29.9 million, or $0.73 diluted EPS, for the three months ended September 30, 2023. The decrease in net income in the current year period as compared to the prior year period was driven primarily by a $14.2 million increase in provision for credit losses, $13.0 million of which was related to anticipated impact from Hurricane Helene and a higher cost of funds, partially offset by a higher yield on interest earning assets, both of which were driven by the overall interest rate environment for the past year. Adjusting for the impact from Hurricane Helene, our adjusted net income was $29.0 million, or $0.70 per diluted share, for the third quarter. • Net interest income for the third quarter of 2024 was $83.0 million, a 2.0% decrease from the $84.7 million recorded in the third quarter of 2023. The decrease in net interest income from the prior year period was driven by higher cost of funds, partially offset by higher yield on earning assets. • Net interest margin ("NIM") on a tax-equivalent basis decreased in the third quarter of 2024 to 2.90% from 2.97% for the third quarter of 2023 as a result of the higher cost of funds and decreased loan accretion, partially offset by increases in market interest rates driving higher yields on loans and other earning assets. • We remained well-capitalized by all regulatory standards. Capital grew during the quarter with a total common equity Tier 1 ratio of 14.37%, Tier 1 risk-based capital ratio of 15.19% and total risk-based capital ratio of 16.65% at September 30, 2024, all growing for the quarter and from September 30, 2023. • The provision for credit losses for the third quarter of 2024 was $14.2 million, driven by an incremental provision of $13.0 million related to the potential exposure from Hurricane Helene and $2.1 million of net charge-off activity, partially offset by generally improving economic forecasts that lead to a reduction in the reserves required for unfunded commitments. See the "Allowance for Credit Losses, Allowance for Unfunded Commitments, and Loan Loss Experience" discussion in the Financial Condition section of Management's Discussion and Analysis. • Noninterest income for the three months ended September 30, 2024 totaled $13.6 million which was a decrease of $1.6 million, or 10.5%, from the comparable period of 2023 and was primarily related to an decrease in Other income, net, related to the timing of the recognition of gain and loss from other investment activity, which does not include available for sale or held to maturity securities. • Noninterest expense of $59.9 million for the quarter ended September 30, 2024 decreased $2.4 million, or 3.8%, from the three months ended September 30, 2023. This decrease is attributable to a $2.4 million decrease in other operating expenses. • These third quarter results include the potential impact of Hurricane Helene of $13.4 million, comprised of $13.0 million of provision for potential credit loss exposure in our footprint hardest hit by Helene, $0.3 million of estimated property damages and an additional $0.1 million of other impacts. After considering the tax effect of these items, our net income was reduced by $10.3 million. Overview and Highlights at and for Nine Months Ended September 30, 2024 We earned net income of $72.7 million, or $1.76 diluted EPS, during the nine months ended September 30, 2024 compared to net income of $74.5 million, or $1.81 diluted EPS, for the nine months ended September 30, 2023. Adjusting for the potential impact from Hurricane Helene, our adjusted net income was $83.0 million, or $2.01 per diluted share, for the nine months ended September 30, 2024. Page 37 Index • Net interest income for the nine months ended September 30, 2024 was $243.4 million, a 7.9% decrease from the $264.2 million recorded for the comparable period of 2023. The decrease in net interest income was driven by higher cost of funds, partially offset by higher yields on interest earning assets. • NIM on a tax-equivalent basis decreased to 2.86% for the nine months ended September 30, 2024 from 3.12% for the nine months ended September 30, 2023 related to higher cost of funds driven by increases in market rates and competition for deposits. Higher rates on interest-bearing liabilities and lower purchase accounting loan discount accretion were partially offset by increased loan yields from market rate increases and pricing on new loans. • For the nine months ended September 30, 2024, the Company recorded $15.9 million in provision for credit losses as compared to $14.9 million for the nine months ended September 30, 2023. The higher provision in 2024 was significantly impacted by the $13.0 million provision related to Hurricane Helene. The 2023 provision was primarily driven by the GrandSouth acquisition as follows: (1) a one-time provision of $12.2 million for non-credit deteriorated loans; and (2) a one-time initial provision for unfunded commitments of $1.9 million. • Noninterest income for the nine months ended September 30, 2024 totaled $41.1 million, a decrease of $1.9 million, or 4.4%, from the comparable period of 2023 primarily related to decreased Other income, net of $1.9 million and increased securities losses of $1.2 million, partially offset by an increase in SBA loan sale gains of $1.3 million. • Noninterest expense decreased $20.7 million, or 10.4%, to $177.3 million for the nine months ended September 30, 2024 as compared to the prior year period, primarily driven by a $13.5 million decrease in merger expenses resulting from the GrandSouth acquisition along with a $4.7 million decrease in other operating expenses and a $1.6 million decrease in personnel expense. • These 2024 year to date results include the potential impact of Hurricane Helene of $13.4 million. This comprised of $13.0 million of provision for potential credit loss exposure in our footprint hardest hit by Helene, $0.3 million of estimated property damages and an additional $0.1 million of other impacts. After considering the tax effect of these items, our net income was reduced by $10.3 million. Total assets at September 30, 2024 amounted to $12.2 billion, a 0.3% increase from December 31, 2023, and was driven primarily by higher interest-bearing cash balances, partially offset by a short term strategy to intentional reduce investment securities and loan balances. The primary balance sheet changes are presented below. • Total loans amounted to $8.0 billion at September 30, 2024, reflecting a contraction of $136.6 million from December 31, 2023. • Total deposits were $10.5 billion at September 30, 2024, an increase of $473.3 million, or 4.72% , from December 31, 2023. • Credit quality continued to be strong at September 30, 2024, with NPAs of 0.38% of total assets as of September 30, 2024, up slightly from 0.37% at December 31, 2023. • On-balance sheet liquidity ratio was 17.7% at September 30, 2024. Available off-balance sheet sources totaled $2.4 billion at quarter end, resulting in a total liquidity ratio of 35.2%. • Capital grew during the quarter, keeping us well-capitalized by all regulatory standards. At September 30, 2024, our total common equity Tier 1 ratio was 14.37%, our Tier 1 risk-based capital ratio was 15.19% and our total risk-based capital ratio was 16.65%. All capital ratios grew during the quarter and from September 30, 2023. Critical Accounting Estimates The accounting principles we follow and our methods of applying these principles conform with GAAP and with general practices followed by the banking industry. Certain policies inherently have a greater reliance on the use of estimates, assumptions, or judgments and as such, have a greater possibility of producing results that could be materially different than originally reported. We have identified the determination of our ACL and related Allowance for Unfunded Commitments, as well as business combinations, related fair value measurements and goodwill determination to be the accounting areas that require the most subjective or complex judgments, estimates, and assumptions, and where changes in those judgments, estimates, and assumptions (based on new or additional Page 38 Index information, changes in the economic climate and/or market interest rates, etc.) could have a significant effect on our financial statements. See the "Allowance for Credit Losses, Allowance for Unfunded Commitments, and Loan Loss Experience" discussion in the Financial Condition section of Management's Discussion and Analysis. There have been no material changes to the Company's significant accounting policies as discussed in Note 1 of the Company's Annual Report on Form 10-K for the year ended December 31, 2023. Current Accounting Matters See Note 1 to the consolidated financial statements for information about recently announced or adopted accounting standards. Page 39 Index RESULTS OF OPERATIONS Net Interest Income Net interest income is our largest source of revenue and is the difference between the interest earned on interest-earning assets (generally loans and investment securities) and the interest expense incurred in connection with interest-bearing liabilities (generally deposits and borrowed funds). Changes in the net interest income are the result of changes in volume and the net interest spread which affects NIM. Volume refers to the average dollar levels of interest-earning assets and interest-bearing liabilities. Net interest spread refers to the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities. NIM refers to net interest income divided by average interest-earning assets and is influenced by the level and relative mix of interest-earning assets and interest-bearing liabilities. Net interest income is also influenced by external factors such as local economic conditions, competition for loans and deposits, and market interest rates. Net interest income for the three months ended September 30, 2024 amounted to $83.0 million, a decrease of $1.7 million, or 2.0%, from the $84.7 million recorded in the third quarter of 2023. The decrease was primarily driven by higher cost of funds, partially offset by higher yields on earning assets. While average interest-earning assets for the third quarter of 2024 increased $83.9 million, or 0.7%, from the comparable period of the prior year, the mix of assets shifted to higher earning assets, with average loans growing $79.9 million and short term investments growing $400.0 million, while taxable securities decreased $391.5 million. The increase in the cost of interest bearing deposits of 64 basis points between the third quarter of 2023 and the third quarter of 2024 more than offset improvements from earning asset mix changes and higher yields. This resulted in the reduction in our tax-equivalent NIM (see discussion below) from 2.97% for the third quarter of 2023 to 2.90% for the third quarter of 2024. For internal purposes, we evaluate our NIM on a tax-equivalent basis by adding the tax benefit realized from tax-exempt loans and securities to reported interest income then dividing by total average earning assets. We believe that analysis of tax-equivalent NIM is useful and appropriate because it allows a comparison of net interest income in different periods without taking into account the different mix of taxable versus non-taxable loans and investments that may have existed during those periods.The following is a reconciliation of reported net interest income to tax-equivalent net interest income and the resulting NIM as reported and on a tax-equivalent basis. For the Three Months Ended September 30, ($ in thousands) 2024 2023 Net interest income, as reported $ 83,043 $ 84,702 Tax-equivalent adjustment 722 740 Net interest income, tax-equivalent $ 83,765 $ 85,442 Net interest margin, as reported 2.88 % 2.95 % Net interest margin, tax-equivalent 2.90 % 2.97 % Page 40 Index The following table presents an analysis of net interest income for the three months ended September 30, 2024 and 2023: Average Balances and Net Interest Income Analysis Three Months Ended September 30, 2024 2023 ($ in thousands) Average Volume Interest Earned or Paid Average Rate Average Volume Interest Earned or Paid Average Rate Assets Loans (1) (2) $ 8,019,730 $ 111,076 5.51 % $ 7,939,783 $ 106,514 5.32 % Taxable securities 2,493,924 10,779 1.72 % 2,885,443 12,936 1.78 % Non-taxable securities 290,939 1,116 1.53 % 295,403 1,118 1.50 % Short-term investments, primarily interest-bearing cash 684,634 8,438 4.90 % 284,678 3,283 4.58 % Total interest-earning assets 11,489,227 131,409 4.55 % 11,405,307 123,851 4.31 % Cash and due from banks 84,060 94,963 Premises and equipment 146,448 152,415 Other assets 406,878 353,093 Total assets $ 12,126,613 $ 12,005,778 Liabilities Interest-bearing checking $ 1,393,611 $ 2,688 0.77 % $ 1,448,603 $ 2,007 0.55 % Money market deposits 4,173,884 34,878 3.32 % 3,530,532 23,397 2.63 % Savings deposits 549,132 317 0.23 % 646,782 307 0.19 % Other time deposits 626,341 4,726 3.00 % 646,798 4,037 2.48 % Time deposits >$250,000 390,208 3,811 3.89 % 359,884 2,893 3.19 % Total interest-bearing deposits 7,133,176 46,420 2.59 % 6,632,599 32,641 1.95 % Borrowings 97,150 1,946 7.97 % 438,808 6,508 5.88 % Total interest-bearing liabilities 7,230,326 48,366 2.66 % 7,071,407 39,149 2.20 % Noninterest-bearing checking 3,376,061 3,547,447 Other liabilities 75,197 83,675 Shareholders’ equity 1,445,029 1,303,249 Total liabilities and shareholders’ equity $ 12,126,613 $ 12,005,778 Net yield on interest-earning assets and net interest income $ 83,043 2.88 % $ 84,702 2.95 % Net yield on interest-earning assets and net interest income – tax-equivalent (3) $ 83,765 2.90 % $ 85,442 2.97 % Interest rate spread 1.89 % 2.11 % Average prime rate 8.43 % 8.43 % (1) Average loans include nonaccruing loans, the effect of which is to lower the average rate shown. Interest earned includes recognized net loan fees, including late fees, prepayment fees, and net deferred loan (cost)/fee amortization in the amounts of $(342,000), and $52,000 for three months ended September 30, 2024 and 2023, respectively. (2) Includes accretion of discount on acquired loans of $2.0 million and $2.8 million for three months ended September 30, 2024 and 2023, respectively. (3) Includes tax-equivalent adjustments of $722,000 and $740,000 for three months ended September 30, 2024 and 2023, respectively, to reflect the tax benefit that we receive related to tax-exempt securities and tax-exempt loans, which carry interest rates lower than similar taxable investments/loans due to their tax-exempt status. This amount has been computed assuming a 23% tax rate and is reduced by the related nondeductible portion of interest expense. Page 41 Index Overall, as demonstrated in the table above, despite the change in the mix of earning assets to higher yielding assets, the compression in NIM drove the decrease in net interest income. • During 2023, the Federal Reserve increased the fed funds rate four times for a total of 100 basis points, in addition to the substantial increases made during 2022. During 2024, the Federal Reserve did not change rates until mid September at which point the fed funds rate was reduced 50 basis points. These changes resulted in a decrease of 50 basis points in fed funds rates between September 2023 and September 2024, with an average prime rate of 8.43% for three months ended September 30, 2024, a slight decrease from the prior year period. During much of 2024, the market yield curve was inverted. • Average loan volumes for the three months ended September 30, 2024 were $79.9 million higher than the same period in 2023. In addition, interest rates on loans increased 19 basis points to 5.51% for the third quarter of 2024, resulting in an increase in interest income on loans of $4.6 million. • Due to the impact of the aforementioned fed funds increases in 2022 and 2023 and the resulting increased market rates along with higher average balances, deposit interest expense for the three months ended September 30, 2024 increased $13.8 million compared to the same period in 2023. Average interest-bearing deposit balances increased $500.6 million while rates on those deposits increased 64 basis points as compared to the same period in the prior year. • Average borrowings were $341.7 million lower in the third quarter of 2024 as compared to the third quarter of 2023 due in large part to the decreased utilization of short-term borrowings to fund loan growth and manage fluctuations in deposit balances. This decrease in volume of borrowings between periods was partially offset by higher rates on the remaining borrowings, with overall rates increasing 209 basis points in the third quarter of 2024 from the third quarter of 2023. These changes resulted in the $4.6 million decrease in interest expense on borrowings. • The decrease in NIM was directly related to higher rates on interest-bearing liabilities driven by the aforementioned short-term Federal Reserve rate increases in 2022 and 2023, the inverted yield curve in 2024 and the repricing of our deposits during the last year occurring at a more rapid pace than the increase in yields on interest-earning assets. Net interest income for the nine months ended September 30, 2024 amounted to $243.4 million, a decrease of $20.7 million, or 7.9%, from the $264.2 million recorded in the nine months ended September 30, 2023. As described above, the Federal Reserve actions from 2022 through 2024 affected market rates which had resulting impacts on the rates we paid or received in 2023 and 2024. Similar to the impact during the three months ended September 30, 2024, the decrease for the nine months ended September 30, 2024 was also driven by higher cost of funds, partially offset by increased yields on interest-earning assets. Our tax-equivalent NIM fell to 2.86% for the nine months ended September 30, 2024 from 3.12% for the nine months ended September 30, 2023 as discussed further below. The following is a reconciliation of reported net interest income to tax-equivalent net interest income and the resulting NIM as reported and on a tax-equivalent basis. For the Nine Months Ended September 30, ($ in thousands) 2024 2023 Net interest income, as reported $ 243,432 $ 264,174 Tax-equivalent adjustment 2,186 2,139 Net interest income, tax-equivalent $ 245,618 $ 266,313 Net interest margin, as reported 2.83 % 3.09 % Net interest margin, tax-equivalent 2.86 % 3.12 % Page 42 Index The following table presents an analysis of net interest income for the nine months ended September 30, 2024 and 2023. Average Balances and Net Interest Income Analysis Nine Months Ended September 30, 2024 2023 ($ in thousands) Average Volume Interest Earned or Paid Average Rate Average Volume Interest Earned or Paid Average Rate Assets Loans (1) (2) $ 8,064,480 $ 331,346 5.49 % $ 7,840,344 $ 308,857 5.27 % Taxable securities 2,633,093 34,798 1.77 % 2,943,798 39,415 1.79 % Non-taxable securities 292,056 3,350 1.53 % 296,985 3,368 1.52 % Short-term investments, primarily interest-bearing cash 490,782 17,351 4.72 % 337,701 10,546 4.18 % Total interest-earning assets 11,480,411 $ 386,845 4.50 % 11,418,828 362,186 4.24 % Cash and due from banks 86,514 94,483 Premises and equipment 149,073 152,058 Other assets 381,806 369,968 Total assets $ 12,097,804 $ 12,035,337 Liabilities Interest bearing checking $ 1,398,137 $ 7,472 0.71 % $ 1,476,979 $ 4,205 0.38 % Money market deposits 3,961,707 95,102 3.21 % 3,253,840 52,263 2.15 % Savings deposits 567,202 942 0.22 % 683,741 705 0.14 % Other time deposits 694,469 16,235 3.12 % 773,755 14,807 2.56 % Time deposits >$250,000 372,561 10,548 3.78 % 338,797 6,907 2.73 % Total interest-bearing deposits 6,994,076 130,299 2.49 % 6,527,112 78,887 1.62 % Borrowings 280,370 13,114 6.25 % 453,694 19,125 5.64 % Total interest-bearing liabilities 7,274,446 143,413 2.63 % 6,980,806 98,012 1.88 % Noninterest bearing checking 3,346,669 3,665,313 Other liabilities 76,922 91,997 Shareholders’ equity 1,399,767 1,297,221 Total liabilities and shareholders’ equity $ 12,097,804 $ 12,035,337 Net yield on interest-earning assets and net interest income $ 243,432 2.83 % $ 264,174 3.09 % Net yield on interest-earning assets and net interest income – tax-equivalent (3) $ 245,618 2.86 % $ 266,313 3.12 % Interest rate spread 1.87 % 2.36 % Average prime rate 8.48 % 8.09 % (1) Average loans include nonaccruing loans, the effect of which is to lower the average rate shown. Interest earned includes recognized net loan fees, including late fees, prepayment fees, and deferred loan (cost)/fee amortization (including deferred PPP fees), in the amounts of $(716,000), and $458,000 for nine months ended September 30, 2024 and 2023, respectively. (2) Includes accretion of discount on acquired loans of $6.7 million and $9.0 million for nine months ended September 30, 2024 and 2023, respectively. (3) Includes tax-equivalent adjustments of $2.2 million and $2.1 million for nine months ended September 30, 2024 and 2023, respectively, to reflect the tax benefit that we receive related to tax-exempt securities and tax-exempt loans, which carry interest rates lower than similar taxable investments/loans due to their tax exempt status. This amount has been computed assuming a 23% tax rate and is reduced by the related nondeductible portion of interest expense Page 43 Index Overall, as demonstrated in the table above, the reduction in NIM, partially offset by higher earning asset volumes, drove the decrease in net interest income. • During 2023, the Federal Reserve increased the fed funds rate four times for a total of 100 basis points, in addition to the substantial increases made during 2022. During 2024, the Federal Reserve did not change rates until mid September at which point the fed funds rate was reduced 50 basis points. These changes resulted in a decrease of 50 basis points in fed funds rates between September 2023 and September 2024, with an average prime rate of 8.48% for nine months ended September 30, 2024, compared to 8.09% for the prior year period. During much of 2024, the market yield curve was inverted. • Average loan volumes for the nine months ended September 30, 2024 were $224.1 million higher than the same period in 2023 due to organic loan growth. In addition, interest rates on loans increased 22 basis points to 5.49% for the nine months ended September 30, 2024, resulting in an increase in loan interest income of $22.5 million. • Primarily due to higher market rates as well as the increase in average balances, deposit interest expense for the nine months ended September 30, 2024 increased $51.4 million compared to the same period in 2023. Average interest-bearing deposit balances increased $467.0 million while rates on those deposits increased 87 basis points as compared to the same period in the prior year. • Interest expense on borrowings decreased $6.0 million for the nine months ended September 30, 2024 as compared to the same period in 2023 due to the $173.3 million decrease in the average volume of borrowings between periods, partially offset by a 61 basis point increase in the rates on those borrowings. The lower balances were due in large part to a decreased reliance on short-term borrowings during 2024 as deposit growth provided additional liquidity. The remaining borrowings are longer term in nature and carry higher interest rates than those that were paid off. • NIM decreased 26 basis points between the comparable periods as higher loan yields and reduced cost of borrowings were more than offset by the higher cost of deposits, also driven by the increases in Fed funds rates during 2022 and 2023 and competition for deposits. Our NIM for all periods presented benefited from the net accretion income arising from purchase accounting premiums/discounts associated with acquisitions. Presented in the table below is the amount of accretion which increased net interest income in each time period presented. For the Three Months Ended September 30, For the Nine Months Ended September 30, ($ in thousands) 2024 2023 2024 2023 Interest income – increased by accretion of loan discount on acquired loans $ 2,003 $ 2,766 $ 6,743 $ 9,043 Total interest income impact 2,003 2,766 6,743 9,043 Interest expense – increased by discount accretion of deposits (174) (709) (681) (2,606) Interest expense – increased by discount accretion of borrowings (193) (215) (572) (635) Total net interest expense impact (367) (924) (1,253) (3,241) Total impact on net interest income $ 1,636 $ 1,842 $ 5,490 $ 5,802 The most significant component of the purchase accounting adjustments in each year was loan discount accretion on purchased loans. Generally, the level of loan discount accretion will decline each year due to the natural reduction in outstanding balance of acquired loans. At September 30, 2024 and 2023, unaccreted loan discounts on purchased loans amounted to $17.3 million and $26.5 million, respectively. The GrandSouth acquired portfolio comprised the majority of the remaining unaccreted loan discount at September 30, 2024. In addition to the loan discount accretion recorded on acquired loans, we recorded accretion on the discounts associated with the retained unguaranteed portions of SBA loans sold in the secondary market. The level of SBA Page 44 Index loan discount accretion will fluctuate relative to the SBA loan portfolio balances. At September 30, 2024 and 2023, the unaccreted loan discounts on SBA loans amounted to $3.3 million and $4.0 million, respectively. Provision for Credit Losses and Provision for Unfunded Commitments The provision for credit losses is comprised of the provision for loan losses and the provision for unfunded commitments. The provision recorded in each period represents the amount required such that the total ACL reflects the current estimate of life of loan credit losses in the loan portfolio and the allowance for unfunded commitments reflects the current expected losses on unfunded loan commitments that are expected to result in outstanding loan balances. Our estimate of credit losses is determined using a complex model that relies on reasonable and supportable forecasts and historical loss information to determine the balance of the ACL and allowance for unfunded commitments. Refer also to “Critical Accounting Estimates” in Item 7 of the 2023 Annual Report on Form 10-K filed with the SEC for more information. The provision for credit losses was $14.2 million and zero for the three months ended September 30, 2024 and 2023, respectively, and $15.9 million and $14.9 million for the nine months ended September 30, 2024 and 2023, respectively. For the three months ended September 30, 2024 as compared to the same period in 2023, the higher provision was primarily due to the $13.0 million provision specifically attributed to Hurricane Helene. Generally improving economic forecasts that lead to a reduction in the reserves required for unfunded commitments during the three months ended September 30, 2024, but the effect was not as impactful as was the case in the three months ended September 30, 2023 by $0.6 million. For the nine months ended September 30, 2024 as compared to the same period in 2023, the higher provision was primarily due to the $13.0 million provision specifically attributed to Hurricane Helene and a $0.4 million increase in net charge off activity for the period, partially offset by generally improving economic forecasts that lead to a reduction in the reserves required for unfunded commitments. The provision for the nine months ended September 30, 2023 was directly related to the GrandSouth acquisition, which consisted of: (1) a one-time provision of $12.2 million for non-credit deteriorated loans; and (2) a one-time initial provision for unfunded commitments of $1.9 million. 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. 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 path of Helene. Additionally, the Company performed an initial evaluation of the largest commercial loans in its impacted markets and applied incremental reserves to those loans that were suspected of having higher potential property damage or economic impact from the storm The incremental provision related to the potential exposure from Hurricane Helene added 0.16% to the ACL as of September 30, 2024. Additional discussion of the CECL method and our asset quality and credit metrics, which impact our provision for credit losses, is provided in the "Nonperforming Assets" and "Allowance for Credit Losses, Allowance for Unfunded Commitments, and Loan Loss Experience" sections following. Page 45 Index Noninterest Income Our noninterest income amounted to $13.6 million and $15.2 million for the three months ended September 30, 2024 and 2023, respectively, and $41.1 million and $42.9 million for the nine months ended September 30, 2024 and 2023, respectively. The lower noninterest income in the current quarter as compared to the same prior year period is primarily the result of lower "Other income, net," partially offset by an increase in "Presold mortgage loan fees and gains on sale." The decreased noninterest income for the nine months ended September 30, 2024 as compared to the same period in 2023 is a result of "Securities losses, net" in 2024 and lower "Other income, net," partially offset by increased "SBA loan sale gains." Details of the more significant components of noninterest income are presented in the table below. For the three and nine months ended September 30, 2024, the change in "Other income, net" was related to the timing of the recognition of gain and loss from other investment activity, which does not include available for sale or held to maturity securities. For the Three Months Ended September 30, For the Nine Months Ended September 30, ($ in thousands) 2024 2023 2024 2023 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 - other 3,183 3,211 9,394 9,487 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 Expenses Total noninterest expenses totaled $59.9 million and $62.2 million for the three months ended September 30, 2024 and 2023, respectively, and $177.3 million and $198.0 million for the nine months ended September 30, 2024 and 2023, respectively. The primary contributors to the $2.4 million, or 3.8%, decrease in noninterest expense for the third quarter of 2024 as compared to the same period of 2023 were the $1.4 million decrease in "Other operating expenses", the $0.6 million decrease in "Non-credit losses," and the $0.5 million decrease in "Equipment related expenses," partially offset by an increase in "Total personnel expense" of $0.5 million. The primary contributors to the $20.7 million decrease for the nine months ended September 30, 2024 as compared to the same period in 2023 were the $13.5 million decrease in "Merger and acquisition expenses," the $2.7 million decrease in "Other operating expenses," the $1.7 million decrease in "Non-credit losses," and the $1.6 million decrease in "Total personnel expenses." The decline in "Other operating expenses" was primarily related to a $2.4 million charge in 2023 for the estimated termination costs associated with the Company's pension plan. For the three and nine months ended September 30, 2024, there was an overall effort my management to cut costs and control expenses. Page 46 Index The following table presents the primary components of noninterest expenses. For the Three Months Ended September 30, For the Nine Months Ended September 30, ($ in thousands) 2024 2023 2024 2023 Salaries $ 29,955 $ 29,394 $ 85,406 $ 87,391 Employee benefits 6,495 6,539 19,467 19,097 Total personnel expense 36,450 35,933 104,873 106,488 Occupancy expense 3,738 3,409 10,910 10,644 Equipment related expenses 1,118 1,594 4,384 4,398 Credit card rewards and other bankcard expenses 1,813 1,397 4,670 3,840 Telephone and data lines 727 996 2,557 2,973 Software licenses and other software costs 1,942 1,860 5,928 6,163 Data processing expense 2,275 2,098 6,580 6,370 Professional fees 1,479 1,765 4,694 4,631 Advertising and marketing 755 997 2,685 3,207 Non-credit losses 953 1,564 2,264 4,000 FDIC insurance costs 1,442 1,729 5,099 5,286 Corporate insurance costs 558 579 1,728 1,687 Other operating expenses 5,048 6,446 16,129 18,783 Merger and acquisition expenses — — — 13,506 Amortization of intangible assets 1,613 1,953 5,041 6,147 Foreclosed property gains, net (61) (96) (214) (131) Total noninterest expense $ 59,850 $ 62,224 $ 177,328 $ 197,992 Income Taxes We recorded income tax expense of $3.9 million and $7.8 million for the three months ended September 30, 2024 and 2023, respectively. Our effective tax rate was 17.2% and 20.6% for the three months ended September 30, 2024 and 2023, respectively. The lower effective tax rate for 2024 was attributable primarily to decreased pretax income driven by the potential impact of Hurricane Helene. For the nine months ended September 30, 2024 and 2023, we recorded tax expense of $18.6 million and $19.8 million, respectively. Our effective tax rate was 20.4% and 21.0% for the nine months ended September 30, 2024 and 2023, respectively. FINANCIAL CONDITION Total assets at September 30, 2024 amounted to $12.2 billion, a $38.5 million, or 0.3%, increase from December 31, 2023 and was primarily related to higher interest-bearing cash balances, partially offset by reductions in investment securities and loan balances. Total loans at September 30, 2024 amounted to $8.0 billion, a decrease of $136.6 million, or 1.7%, from December 31, 2023. The mix of our loan portfolio remained substantially the same at September 30, 2024 as compared to December 31, 2023, with the exception of "Construction, development & other land loans," which, as a percentage of the loan portfolio, fell from 12% at December 31, 2023 to 9% at September 30, 2024. The majority of our real estate loans were personal mortgages and commercial loans where real estate provides additional security for the loan. Note 4 to the consolidated financial statements presents additional detail regarding our mix of loans. At September 30, 2024, we had no notable concentrations in geographies or industries, including in office or hospitality categories. The Company's exposure to non-owner occupied commercial office loans represented approximately 5.7% of the total portfolio at September 30, 2024, with the largest loan being $26.6 million and the average loan outstanding balance being $1.3 million. Non-owner occupied office loans were generally in non-metro markets and the 10 largest loans in this category represented less than 2% of the total loan portfolio at September 30, 2024. Total investment securities were $2.4 billion at September 30, 2024, a decrease of $293.8 million from December 31, 2023. During the three and nine months ended September 30, 2024, the Company made no purchases of investment securities. There were no sales of investment securities during the third quarter of 2024. Page 47 Index During the second quarter of 2024, the Company sold $142.9 million of available for sale investment securities at a $4.7 million loss that was substantially offset by the $4.5 million gain on sale of the VISA B shares during that quarter. The call of a security during the first quarter of 2024 resulted in a loss of $975 thousand related to the unamortized premium balance. In addition, the Company continues to utilize cash flows from investment securities to fund earning assets and repay borrowings and brokered deposits. The composition of our investment portfolio remained substantially the same at September 30, 2024 as at December 31, 2023, with the exception of U.S. Treasuries, of which $175.9 million was sold or matured during the first nine months of 2024 and Mortgage-backed securities, of which $34.6 million and $169.3 million were sold, matured or were paid down during the three and nine months ended September 30, 2024, respectively. The composition of the investment portfolio continued to reflect our investment strategy of maintaining an appropriate level of liquidity while providing a stable source of income. The investment portfolio also provides a balance to interest rate risk and credit risk in other categories of the balance sheet while providing a vehicle for the investment of available funds, furnishing liquidity, and supplying securities to pledge as required collateral for certain deposits. The unrealized loss on available for sale securities totaled $331.5 million at September 30, 2024. Refer to Note 3 to the consolidated financial statements for additional detailed information regarding our mix of investments and the unrealized losses for each category. We evaluated the unrealized losses on individual securities at September 30, 2024 and determined them to be of a temporary nature due primarily to interest rate factors and not credit quality concerns. In arriving at this conclusion, we reviewed third-party credit ratings and considered the severity of the impairment. Total deposits amounted to $10.5 billion at September 30, 2024, an increase of $473.3 million, or 4.7%, from December 31, 2023. Brokered deposits decreased $3.1 million from year end, while organic growth from customer deposits totaled $476.4 million. We continue to have a diversified and granular deposit base which has remained stable with continued growth in customer deposits, primarily money market accounts. Our deposit mix has remained relatively consistent and has not changed significantly and there has been no notable shift in deposits from noninterest-bearing to interest-bearing. September 30, 2024 December 31, 2023 ($ in thousands) Amount Percentage Amount Percentage Noninterest-bearing checking accounts $ 3,350,237 32 % $ 3,379,876 34 % Interest-bearing checking accounts 1,426,356 13 % 1,411,142 14 % Money market accounts 4,189,174 40 % 3,653,506 36 % Savings accounts 541,501 5 % 608,380 6 % Other time deposits 602,148 6 % 610,887 6 % Time deposits >$250,000 385,995 4 % 355,209 4 % Total customer deposits 10,495,411 100 % 10,019,000 100 % Brokered deposits 9,518 — % 12,599 — % Total deposits $ 10,504,929 100 % $ 10,031,599 100 % As of September 30, 2024, the estimated insured deposits totaled $6.5 billion or 61.8% of total deposits. In addition, we had collateralized deposits at that date of $730.8 million such that approximately 68.7% of our total deposits were insured or collateralized at September 30, 2024. Page 48 Index Nonperforming Assets NPAs are defined as nonaccrual loans, modifications to borrowers in financial distress, loans past due 90 or more days and still accruing interest, and foreclosed real estate. NPAs are summarized as follows: ($ in thousands) September 30, 2024 December 31, 2023 Nonperforming assets 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 Asset Quality Ratios Nonaccrual loans to total loans 0.43 % 0.40 % Nonperforming loans to total loans 0.55 % 0.54 % Nonperforming assets to total loans and foreclosed properties 0.57 % 0.55 % Nonperforming assets to total assets 0.38 % 0.37 % Allowance for credit losses to total loans 1.53 % 1.35 % Allowance for credit losses to nonaccrual loans 359.61 % 341.07 % Allowance for credit losses to nonperforming loans 276.47 % 250.08 % As shown in the table above, total NPAs at September 30, 2024 increased slightly to $45.9 million from year end and related primarily to the $1.9 million increase in nonaccrual loans, partially offset by the $1.5 million decrease in modifications to borrowers in financial distress. "Commercial and industrial" is the largest category of nonaccrual loans, at $10.3 million, or 30.2%, of total nonaccrual loans, followed by "Commercial real estate - owner occupied" at $10.1 million, or 29.6%, of total nonaccrual loans. Included in various loan categories are nonaccrual SBA loans totaling $21.7 million at September 30, 2024, or 63.5% of total nonaccrual loans, and which have $11.8 million in guarantees from the SBA. As reflected in Note 4 to the accompanying consolidated financial statements, total classified loans decreased 4.9% to $51.5 million at September 30, 2024 compared to $54.2 million at December 31, 2023. The decrease resulted primarily from improvements in "Home equity loans/lines of credit" loans of $1.9 million and "Commercial real estate - owner occupied" loans of $1.8 million, partially offset by an increase in "Residential 1-4 family real estate" of $2.0 million. Special mention loans increased 34.2% from $44.1 million at December 31, 2023 to $59.2 million at September 30, 2024. The majority of the increase was attributable to "Commercial real estate - owner occupied" loans, which increased $14.7 million. Allowance for Credit Losses, Allowance for Unfunded Commitments, and Loan Loss Experience The total allowance for credit losses amounted to $122.7 million at September 30, 2024 compared to $109.9 million at December 31, 2023. Fluctuations in the ACL are based on loan mix and growth, changes in the levels of nonperforming loans, economic forecasts impacting loss drivers, other assumptions and inputs to the CECL model, and as occurred in 2023, adjustments for acquired loan portfolios. As discussed previously in the "Provision for Credit Losses and Provision for Unfunded Commitments" section, much of the change to the level of ACL during the period ended September 30, 2024 was primarily related to the provision of $13.0 million related to potential impact from Hurricane Helene, slower prepayment assumptions and updated economic forecasts which are a key assumption in the CECL model and which indicated improvement in some factors, but also to a continued reduction of the commercial real estate pricing index, thus projecting a higher allowance for credit losses balance, partially offset by reductions in loan balances during the period. The ACL as a percent of loans at September 30, 2024 was 1.53%, 16 basis points of which was attributable to the potential impact from Hurricane Helene. Within the portions of Western North and South Carolina that were significantly impacted by Hurricane Helene, the Company identified borrowers with approximately $755 million of loans outstanding. The following is a summary of the categories of those loans outstanding as of September 30, 2024: Page 49 Index ($ 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 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 impact from from Hurricane Helene, the ACL on these impacted loans increased by $13.0 million, expanding the ACL as a percent of loans in the impacted markets from 1.29% to 3.01% as of September 30, 2024 and adding 0.16% to the overall ACL as a percent of total loans as of September 30, 2024. The ACL reflects our estimate of life of loan expected credit losses that will result from the inability of our borrowers to make required loan payments. We use systematic methodologies to determine the ACL for loans and the allowance for certain off-balance-sheet credit exposures. We consider the effects of past events, current conditions, and reasonable and supportable forecasts on the collectability of the loan portfolio. The ACL is calculated using collectively evaluated pools for loans with similar risk characteristics applying the discounted cash flow ("DCF") method. When a loan no longer shares similar risk characteristics with its segment, the loan is evaluated on an individual basis applying a DCF or asset approach for collateral-dependent loans. For the periods indicated, the following table summarizes our balances of loans outstanding, average loans outstanding, ACL, charge-offs and recoveries, and key ratios: ($ in thousands) Nine Months Ended September 30, 2024 Twelve Months Ended December 31, 2023 Nine Months Ended September 30, 2023 Loans outstanding at end of period $ 8,013,538 $ 8,150,102 $ 8,027,037 Average amount of loans outstanding 8,064,480 7,902,628 7,840,344 Allowance for credit losses, at period end 122,718 109,853 108,198 Total charge-offs (7,460) (10,175) (7,575) Total recoveries 2,292 3,701 2,845 Net charge-offs $ (5,168) $ (6,474) $ (4,730) Ratios: Net charge-offs as a percent of average loans (annualized) 0.09 % 0.08 % 0.08 % Allowance for credit losses as a percent of loans at end of period 1.53 % 1.35 % 1.35 % While our estimate of the ACL involves a high degree of judgment, we believe the ACL was adequate at each period end presented. Our assessment of the ACL involves uncertainty and judgment and is subject to change in future periods. The amount of any changes could be significant if the assessment of loan quality or collateral values changes substantially with respect to one or more loan relationships or portfolios or if there is a significant change in the reasonable and supportable forecast or assumptions used to model our expected credit losses. No assurance can be given that we will not in any particular period sustain loan losses that are sizable in relation to the amounts reserved or that subsequent evaluations of the loan portfolio, in light of conditions and factors then prevailing, will not require significant changes in the ACL or future charges to earnings. In addition, various regulatory agencies, as an integral part of their examination process, periodically review our ACL and the value of our collateral-dependent Page 50 Index loans. Such agencies may require us to recognize adjustments to the ACL based on their judgments about information available at the time of their examinations. Refer also to “Critical Accounting Policies – Allowance for Credit Losses on Loans and Allowance for Unfunded Commitments” in Note 1 to the 2023 Annual Report on Form 10-K filed with the SEC for more information. In addition to the ACL on loans, we maintain an allowance for lending-related commitments such as unfunded loan commitments. We estimate expected credit losses associated with these commitments over the contractual period in which we are exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable. The allowance for lending-related commitments on off-balance sheet credit exposures is adjusted as a component of the provision for credit losses expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The allowance for unfunded commitments of $9.3 million and $11.4 million at September 30, 2024 and December 31, 2023, respectively, is classified on the consolidated balance sheets within "Other liabilities." The decline in the level of the allowance between periods was driven by the reduction in reserve rates and balances of available lines of credit during the nine months ended September 30, 2024. Liquidity, Commitments, and Contingencies Our liquidity is determined by our ability to convert assets to cash or acquire alternative sources of funds to meet the needs of our customers who are withdrawing or borrowing funds, and to maintain required reserve levels, pay expenses and operate the Company on an ongoing basis. Our primary liquidity sources are net income from operations, cash and due from banks, federal funds sold and other short-term investments. Our securities portfolio has a high percentage of amortizing mortgage-backed securities generating monthly cash flows. In addition, the portfolio is comprised almost entirely of readily marketable securities, which could also be sold to provide cash. We also maintain available lines of credit from the FHLB and the Federal Reserve, as well as federal funds lines from several correspondent banks which are summarized below. At September 30, 2024, the Company had the following sources of readily available borrowing capacity: • An existing borrowing capacity with the FHLB of approximately $1.3 billion which can be structured as either short-term or long-term borrowings, depending on the particular funding or liquidity need, and is secured by a blanket lien on most of our real estate loan portfolio, select securities from our investment portfolio, and our FHLB stock (of which $0.8 million and $280.9 million were outstanding at September 30, 2024 and December 31, 2023, respectively); • Federal funds lines with several correspondent banks totaling $265.0 million, which provide for overnight unsecured federal funds purchased (of which none were outstanding at September 30, 2024 or December 31, 2023); and, • A line of credit with the Federal Reserve through its discount window borrowing program of approximately $799.6 million which is secured by a blanket lien on a portion of our commercial and consumer loan portfolio (excluding real estate loans) and specific investment securities. All of this line was available at both September 30, 2024 and December 31, 2023. Our overall on-balance sheet liquidity ratio was 17.7% at September 30, 2024 compared to 14.6% at December 31, 2023. We define our liquidity ratio as net liquid assets (cash, unpledged securities and other marketable assets) as a percentage of our net liabilities (unpledged deposits and borrowings). Our total liquidity ratio, including the $2.4 billion in available lines of credit at quarter end, was 35.2% as of September 30, 2024. Not included in these ratios are the readily available sources of funds through brokered deposits. As of September 30, 2024, our brokered deposits availability was $1.8 billion per our internal policy. The amount and timing of our contractual obligations and commercial commitments have not changed materially since December 31, 2023, the detail of w hich is presented in the "Contractual Obligations and Other Commercial Commitments" table of our 2023 Annual Report on Form 10-K. In addition, we are not involved in any legal proceedings that, in our opinion, could have a material effect on our consolidated financial position. Off-Balance Sheet Arrangements and Derivative Financial Instruments Off-balance sheet arrangements include transactions, agreements, or other contractual arrangements pursuant to which we have obligations or provide guarantees on behalf of an unconsolidated entity. We have no off-balance Page 51 Index sheet arrangements of this kind other than letters of credit and repayment guarantees associated with our trust preferred securities and subordinated debentures. In the normal course of business, we are exposed to certain risks arising from both our business operations and economic conditions. As an element of our risk management strategies, we may enter into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Derivative financial instruments include futures, forwards, interest rate swaps, options contracts, and other financial instruments with similar characteristics. We do not engage in significant derivatives activities. However, in 2023 to accommodate customers, we implemented a program whereby we enter into interest rate swaps with certain commercial loan customers, with offsetting positions to dealers under a back-to-back swap program. At September 30, 2024, the Company's derivative financial instruments consisted entirely of customer back-to-back interest rate swaps which are not designated as hedges. Under this program, the Company executes interest rate swaps with commercial banking customers to facilitate their risk management strategies. Those interest rate swaps are simultaneously economically hedged by offsetting derivatives that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate derivatives associated with this program are not designated as hedging instruments, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings. There have been no material changes from the derivative positions discussed in Note 13 of the Company's Annual Report on Form 10-K for the year ended December 31, 2023. Capital Resources The Company is regulated by the Federal Reserve and is subject to the securities registration and public reporting regulations of the SEC. Our Bank is also regulated by the Federal Reserve and the North Carolina Office of the Commissioner of Banks ("NCCOB"). We must comply with regulatory capital requirements established by the Federal Reserve and the NCCOB. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on our financial statements. We are not aware of any recommendations of regulatory authorities or otherwise which, if they were to be implemented, would have a material effect on our liquidity, capital resources, or operations. Under Basel III standards and capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Our capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. The Federal Reserve's capital standards require us to maintain minimum ratios of “common equity tier 1” capital to total risk-weighted assets, “tier 1” capital to total risk-weighted assets, and total capital to risk-weighted assets of 4.50%, 6.00% and 8.00%, respectively. Common equity tier 1 capital is comprised of common stock and related surplus, plus retained earnings, and is reduced by goodwill and other intangible assets, net of associated deferred tax liabilities. Tier 1 capital is comprised of common equity tier 1 capital plus "additional tier 1 capital", which includes non-cumulative perpetual preferred stock and trust preferred securities. Total risk-based capital is comprised of tier 1 capital plus qualifying subordinated debentures, and certain adjustments, the largest of which is our ACL and allowance for unfunded commitments. The Company has elected to exclude AOCI related primarily to available for sale securities from common equity tier 1 capital. Risk-weighted assets refer to our on- and off-balance sheet exposures, adjusted for their related risk levels using formulas set forth in Federal Reserve regulations. In addition to the risk-based capital requirements described above, we are subject to a leverage capital requirement, which calls for a minimum ratio of Tier 1 capital (as defined above) to quarterly average total assets of 3.00% to 5.00%, depending upon the institution’s composite ratings as determined by its regulators. The Federal Reserve has not advised us of any requirement specifically applicable to us. At September 30, 2024, our capital ratios exceeded the regulatory minimum ratios discussed above. The capital ratios at September 30, 2024 increased as compared to 2023 year end ratios related primarily to retention of earnings increasing capital, combined with loan reductions and shifts in asset mix to lower risk-weighted assets. Page 52 Index The following table presents the capital ratios for the Company and the regulatory minimums discussed above for the periods indicated: September 30, 2024 December 31, 2023 Minimum required Risk-based capital ratios: Common equity Tier 1 to Tier 1 risk weighted assets 14.37 % 13.20 % 7.00 % Tier I capital to Tier 1 risk weighted assets 15.19 % 13.99 % 8.50 % Total risk-based capital to Tier II risk weighted assets 16.65 % 15.54 % 10.50 % Leverage capital ratio: Tier 1 capital to quarterly average total assets 11.29 % 10.91 % 4.00 % The Bank is also subject to capital requirements that do not vary materially from the Company’s capital ratios presented above. At September 30, 2024, the Bank exceeded the minimum ratios established by the regulatory authorities. In addition to regulatory capital ratios, we also closely monitor our ratio of tangible common equity ("TCE") to tangible assets, which is a non-GAAP financial measure. The TCE ratio was 8.47% at September 30, 2024 compared to 7.56% at December 31, 2023. The following table reconciles common equity to TCE and provides the calculation of the TCE ratio: ($ in thousands) September 30, 2024 December 31, 2023 Reconciliation of Common Equity to TCE Total shareholders' common equity $ 1,477,525 $ 1,372,380 Less: Goodwill and other intangibles, net of related taxes (489,139) (493,211) Tangible common equity $ 988,386 $ 879,169 Reconciliation of Total Assets to Tangible Assets Total assets $ 12,153,430 $ 12,114,942 Less: Goodwill and other intangibles, net of related taxes (489,139) (493,211) Tangible assets $ 11,664,291 $ 11,621,731 TCE divided by Tangible Assets 8.47 % 7.56 % Stock Repurchase Plans On January 30, 2024, the Board of Directors of the Company authorized the repurchase of up to $40 million in shares of the Company’s common stock. Any such repurchases would be made pursuant to a plan approved by and containing provisions about the timing, purchase prices and quantities purchased determined by management in its discretion. During the quarter ended September 30, 2024, the Company did not make any such purchases.