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Item 2. Management’s Discussion and Analysis

2025-08-07 compared with 2025-05-09 · 214 added, 150 removed, 260 unchanged (58% of the section changed)

Item 2 - Management's Discussion and Analysis of Consolidated Results of Operations and Financial Condition

Highlights of the results for the first quarter of 2025 is presented below.

Highlights of the results for the second quarter and year-to-date period of 2025 are presented below.

Refer also to additional discussion in the "Results of Operations" and "Financial Condition" sections following.

Overview and Highlights at and for Three Months Ended March 31, 2025

We earned net income of $36.4 million, or $0.88 diluted EPS, during the first quarter of 2025 compared to net income of $25.3 million, or $0.61 diluted EPS, for the first quarter of 2024.

The increase in net income in the current year was driven primarily by a $13.6 million increase in net interest income due to lower cost of funds and 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 of the $2.0 million reversal of provision related to Hurricane Helene, our adjusted net income, which is a non-GAAP financial measure, was $34.9 million, or $0.84 per diluted share, for the first quarter.

• Net interest income for the first quarter of 2025 was $92.9 million, a 17.2% increase from the $79.3 million recorded in the first quarter of 2024.

The increase in net interest income from the like quarter was driven by higher yields on earning assets and lower cost of funds.

We also grew deposits and repaid the majority of our borrowings, thereby further reducing the cost of borrowings.

• Net interest margin ("NIM") on a tax-equivalent basis ("NIM-T/E") increased 47 basis points to 3.27% in the first quarter of 2025 from 2.80% in the first quarter of 2024 as a result of the lower cost of funds and higher yields on loans, securities, and other earning assets.

The aforementioned decrease in borrowings along with a reduction in deposit costs further enhanced NIM-T/E from the prior year's like quarter.

Overview and Highlights for the Three Months Ended June 30, 2025

We earned net income of $38.6 million, or $0.93 diluted EPS, during the second quarter of 2025 compared to net income of $28.7 million, or $0.70 diluted EPS, for the second quarter of 2024.

The $15.6 million increase in net interest income in the second quarter of 2025 from the like quarter was driven primarily by a lower cost of funds and a higher yield on interest earning assets, both of which were driven by the overall interest rate environment throughout the past year.

Adjusting for the impact of the $3.5 million reversal of provision related to Hurricane Helene, our adjusted net income, which is a non-GAAP financial measure, was $35.9 million, or $0.87 per diluted share, for the second quarter.

• Net interest income for the second quarter of 2025 was $96.7 million, a 19.2% increase from the $81.1 million recorded in the second quarter of 2024.

The increase in net interest income from the like quarter was driven by lower cost of funds and higher yields on earning assets.

We also grew deposits and repaid the majority of our short-term borrowings during the second quarter of 2024, thereby further reducing the cost of funding.

• Net interest margin ("NIM") increased 48 basis points to 3.32% in the second quarter of 2025 from 2.84% in the second quarter of 2024 as a result of the lower cost of funds and higher yields on loans and securities.

The aforementioned decrease in short-term borrowings along with a reduction in deposit costs further enhanced NIM from the prior year's like quarter.

• We remained well-capitalized by all regulatory standards.

Capital grew during the quarter with a total common equity Tier 1 ratio of 14.52%, Tier 1 risk-based capital ratio of 15.34% and total risk-based capital ratio of 16.80% at March 31, 2025, all increasing from March 31, 2024.

• The provision for credit losses for the first quarter of 2025 was $1.1 million, driven by $3.3 million of net charge-off activity, partially offset by a $2.0 million reduction in the incremental provision related to potential exposure from Hurricane Helene.

Net charge-offs for the first quarter of 2025 included $1.3 million related to the sale of a credit relationship as the result of an accelerated resolution.

• Noninterest income for the three months ended March 31, 2025 totaled $12.9 million, which was consistent with the comparable prior year period.

Decreases from the like quarter of $0.8 million in SBA loan sale gains and $0.6 million in other income were partially offset by the $1.0 million securities loss in the first quarter of 2024.

• Noninterest expense of $57.9 million decreased $1.3 million, or 2.2%, for the quarter ended March 31, 2025 from the prior year.

This decrease is attributable to a $1.0 million decrease in other operating expenses and a $0.9 million decrease in occupancy and equipment expenses, partially offset by a $0.8 million increase in personnel costs resulting from increased incentives and commissions driven by improved performance.

• The first quarter results include the $2.0 million reversal of provision related to the potential impact of Hurricane Helene.

On an after-tax basis, this reversal increased our current quarter earnings by $1.5 million.

Adjusted net income and adjusted diluted EPS are non-GAAP financial measures that exclude the effect of the $2.0 million reversal of provision related to Hurricane Helene to GAAP basis net income and diluted EPS.

Capital grew during the quarter with a total common equity Tier 1 ratio of 14.64%, Tier 1 risk-based capital ratio of 15.45% and total risk-based capital ratio of 16.90% at June 30, 2025, all increasing from June 30, 2024.

• The provision for credit losses for the second quarter of 2025 was $2.2 million, driven by loan growth and $1.2 million of net charge-offs, partially offset by a $3.5 million reduction in the incremental provision related to potential exposure from Hurricane Helene.

• Noninterest income for the three months ended June 30, 2025 totaled $14.3 million, which was down slightly from the $14.6 million for the comparable prior year period.

An increase from the like quarter in Other service charges, commissions and fees of $1.3 million was partially offset by a decrease of $1.2 million in SBA loan sale gains.

• Noninterest expense of $59.0 million increased $0.7 million, or 1.2%, for the quarter ended June 30, 2025 from the prior year.

The increase is attributable to a $0.7 million increase in personnel costs resulting from increased incentives and commissions driven by improved performance.

See the discussion and reconciliations of net income and diluted EPS to adjusted net income and adjusted diluted EPS for the quarter ended June 30, 2025 in the Overview and Highlights for the Six Months Ended June 30, 2025 section below.

Overview and Highlights for the Six Months Ended June 30, 2025

We earned net income of $75.0 million, or $1.81 diluted EPS, during the six months ended June 30, 2025 compared to net income of $54.0 million, or $1.31 diluted EPS, for the six months ended June 30, 2024.

Adjusting for the potential impact from Hurricane Helene, our adjusted net income was $70.7 million, or $1.71 per diluted share, for the six months ended June 30, 2025.

• Net interest income for the six months ended June 30, 2025 was $189.6 million, an 18.2% increase from the $160.4 million recorded for the comparable period of 2024.

The increase in net interest income was driven by lower cost of funds and higher yields on interest earning assets.

• NIM increased 48 basis points to 3.29% for the six months ended June 30, 2025 from 2.81% for the six months ended June 30, 2024 as a result of the lower cost of funds and higher yields on loans and securities

as well as the repayment of short-term borrowings which contributed to the reduced cost of funds from the prior period.

• For the six months ended June 30, 2025, the Company recorded $3.3 million in provision for credit losses as compared to $1.7 million for the six months ended June 30, 2024.

The higher provision in 2025 was significantly impacted by loan growth in 2025, net charge off activity of $4.5 million , partially offset by a $5.5 million reduction in the incremental provision related to potential exposure from Hurricane Helene.

The 2024 provision was dampened by lower loan balances as of June 30, 2024

• Noninterest income for the six months ended June 30, 2025 totaled $27.2 million, a decrease of $0.3 million, from the comparable period of 2024 primarily related to a decrease in SBA loan sale gains of $2.0 million and a decrease in Other income, net of $0.8 million, partially offset by an increase in Other service charges, commissions and fees of $1.6 million and the securities losses of $1.2 million experienced during the first six months of 2024.

• Noninterest expense decreased $0.6 million to $116.9 million for the six months ended June 30, 2025 as compared to the prior year period, primarily driven by a $1.1 million decrease in Other operating expenses.

Personnel expenses increased $1.5 million between the periods resulting from an increase in incentives expense.

Adjusted net income and adjusted diluted EPS are non-GAAP financial measures that exclude the effect of the $3.5 million and $5.5 million reversals of provision related to Hurricane Helene for the three and six months ended June 30, 2025, respectively, to GAAP basis net income and diluted EPS.

Management believes these non-GAAP financial measures provide additional information that is useful to investors in evaluating our performance and may facilitate comparisons with other institutions in the banking industry as well as period-to-period comparisons.

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Non-GAAP measures have limitations as analytical tools, are not audited, and may not be comparable to other similarly titled financial measures used by other companies.

Investors should not consider non-GAAP measures in isolation or as a substitute for analysis of the Company’s

results or financial condition as reported under GAAP.

The following table reconciles net income and diluted EPS to adjusted net income and adjusted diluted EPS for the quarter ended March 31, 2025:

Investors should not consider non-GAAP measures in isolation or as a substitute for analysis of the Company’s results or financial condition as reported under GAAP.

The following table reconciles net income and diluted EPS to adjusted net income and adjusted diluted EPS for the three and six ended June 30, 2025:

For the Three Months Ended June 30, 2025

For the Six Months Ended June 30, 2025

Net income $ 38,566 $ 74,972

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Adjusted EPS - diluted $ 0.87 $ 1.71

Total assets were $12.4 billion at March 31, 2025, a 2.4% increase from December 31, 2024.

Total assets were $12.6 billion at June 30, 2025, a 3.8% increase from December 31, 2024.

The increase was driven primarily by deposit growth generating investable funds that were deployed in interest-bearing cash, securities and loan balances.

The primary balance sheet changes are presented below.

• Total cash and cash equivalents amounted to $772.4 million at March 31, 2025, representing a $264.9 million, or 52.2%, increase from December 31, 2024.

• Total cash and cash equivalents amounted to $711.3 million at June 30, 2025, representing a $203.8 million, or 40.2%, increase from December 31, 2024.

Interest-bearing cash comprised $142.9 million of this increase.

• AFS securities increased $21.5 million, or 1.1%, during the quarter ended March 31, 2025.

• Total loans amounted to $8.1 billion at March 31, 2025, reflecting an increase of $8.4 million from December 31, 2024.

• Total deposits were $10.7 billion at March 31, 2025, an increase of $214.1 million, or 2.03% , from December 31, 2024.

Deposit growth during the quarter was evenly split between noninterest-bearing deposits, which saw an increase of $109.2 million, and interest-bearing deposits, which increased $105.0 million.

• Credit quality continued to be strong at March 31, 2025, with NPAs of 0.27% of total assets as of March 31, 2025, down 3 basis points from 0.30% at December 31, 2024.

• Our on-balance sheet liquidity ratio was 19.8% at March 31, 2025.

• AFS securities increased $101.8 million, or 5.0%, during the six months ended June 30, 2025.

• Total loans amounted to $8.2 billion at June 30, 2025, reflecting an increase of $131.0 million, or 1.6% , from December 31, 2024.

• Total deposits were $10.8 billion at June 30, 2025, an increase of $299.9 million, or 2.85% , from December 31, 2024.

Deposit growth during the period was split between noninterest-bearing deposits, which saw an increase of $175.0 million, and interest-bearing deposits, which increased $124.9 million.

• Credit quality continued to be strong at June 30, 2025, with NPAs of 0.28% of total assets as of June 30, 2025, down 2 basis points from 0.30% at December 31, 2024.

• Our on-balance sheet liquidity ratio was 20.0% at June 30, 2025.

Available off-balance sheet sources totaled $2.3 billion at quarter end, resulting in a total liquidity ratio of 36.1%.

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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 first quarter of 2025 amounted to $92.9 million, an increase of $13.6 million, or 17.2%, from the $79.3 million recorded in the first quarter of 2024.

The increase was primarily driven by lower cost of funds and higher yields on interest-earning assets.

While average interest-earning assets for the first quarter of 2025 increased $38.9 million, or 0.3%, from the comparable period of the prior year, the mix of assets shifted to higher earning assets, with average short-term investments growing $225.4 million, while average taxable securities decreased $186.2 million.

While the cost of interest bearing deposits decreased 19 basis points between the first quarter of 2024 and the first quarter of 2025, the biggest decrease within interest expense between the first quarter of 2025 and the like quarter was in cost of short-term borrowings, which decreased $6.5 million.

This decrease was mostly attributable to the payoff of FRB Bank Term Funding Program borrowings, which decreased the average borrowing balance by $476.8 million from the like quarter.

This resulted in the 47 basis point improvement in our NIM-T/E (see discussion below) from the like quarter to 3.27% for the first quarter of 2025.

For internal purposes, we evaluate our NIM-T/E, which is a non-GAAP financial measure, by adding the tax benefit realized from tax-exempt loans and securities to reported interest income then dividing by total average earning assets.

Net interest income for the second quarter of 2025 amounted to $96.7 million, an increase of $15.6 million, or 19.2%, from the $81.1 million recorded in the second quarter of 2024.

The increase was primarily driven by higher yields on interest-earning assets and lower cost of funds.

For the second quarter of 2025, average interest-earning assets increased $216.6 million, or 1.9%, from the comparable period of the prior year, with average loans and taxable securities growing $116.8 million and $105.7 million, respectively.

The cost of interest bearing deposits decreased 40 basis points from the second quarter of 2024 to the second quarter of 2025, with the biggest impact coming from the cost of Other time deposits, which decreased $3.0 million and the cost of Money market deposits, which decreased $2.5 million.

Additionally, the cost of short-term borrowings decreased $0.9 million between the periods, mostly attributable to the payoff of Federal Reserve Bank Term Funding Program borrowings, which decreased the average borrowing balance by $68.1 million from the like quarter.

These changes resulted in the 48 basis point improvement in our NIM (see discussion below) from the like quarter to 3.32% for the second quarter of 2025.

The following table presents an analysis of net interest income for the second quarter of 2025 and 2024:

Average Balances and Net Interest Income Analysis

Three Months Ended June 30,

($ in thousands) Average

Volume Interest

or Paid Average

Volume Interest

or Paid Average

Loans (1) (2) $ 8,187,662 $ 112,931 5.53 % $ 8,070,815 $ 110,472 5.50 %

Taxable securities 2,697,338 16,857 2.50 % 2,591,617 11,291 1.74 %

Non-taxable securities 287,848 1,116 1.55 % 292,045 1,117 1.53 %

Short-term investments, primarily interest-bearing cash 505,912 5,837 4.63 % 507,635 5,942 4.71 %

Total interest-earning assets 11,678,760 136,741 4.69 % 11,462,112 128,822 4.51 %

Cash and due from banks 153,074 84,674

Premises and equipment 142,090 149,643

Other assets 484,448 358,852

Total assets $ 12,458,372 $ 12,055,281

Interest-bearing checking $ 1,434,559 $ 2,426 0.68 % $ 1,397,367 $ 2,424 0.70 %

Money market deposits 4,358,877 29,947 2.76 % 4,004,175 32,411 3.26 %

Savings deposits 538,843 252 0.19 % 570,283 317 0.22 %

Other time deposits 534,242 3,088 2.32 % 738,290 6,053 3.30 %

Time deposits >$250,000 345,916 2,692 3.12 % 371,471 3,539 3.83 %

Total interest-bearing deposits 7,212,437 38,405 2.14 % 7,081,586 44,744 2.54 %

Short-term borrowings 848 2 1.09 % 68,933 913 5.33 %

Long-term borrowings 91,351 1,658 7.28 % 99,043 2,050 8.32 %

Total interest-bearing liabilities 7,304,636 40,065 2.20 % 7,249,562 47,707 2.65 %

Noninterest-bearing checking 3,522,117 3,350,723

Other liabilities 101,069 76,713

Shareholders’ equity 1,530,550 1,378,283

Total liabilities and shareholders’ equity $ 12,458,372 $ 12,055,281

Net yield on interest-earning assets and net interest income $ 96,676 3.32 % $ 81,115 2.84 %

Net yield on interest-earning assets and net interest income – tax-equivalent (3) $ 96,887 3.32 % $ 81,847 2.87 %

Interest rate spread 2.49 % 1.86 %

Average prime rate 7.50 % 8.50 %

(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 $(0.3) million, and $(0.4) million for three months ended June 30, 2025 and 2024, respectively.

(2) Includes accretion of discount on acquired loans of $1.5 million and $2.3 million for three months ended June 30, 2025 and 2024, respectively.

(3) Includes tax-equivalent adjustments to reflect the tax benefit that we receive related to tax-exempt securities and loans as reduced by the related nondeductible portion of interest expense.

Overall, as demonstrated in the table above, the growth in earning assets and a decrease in the cost of liabilities drove the expansion in NIM and net interest income.

• Net interest income for the second quarter of 2025 was $96.7 million, an increase of $15.6 million from the like quarter.

The increase in net interest income was primarily driven by our focused efforts to increase interest-earning assets and to manage deposit costs after the rate cuts by the Federal Reserve between September and December of 2024, which saw the federal funds rate fall 100 basis points.

We also focused on increasing loan yields as new originations were at higher rates than older loans.

Further, securities yields increased as a result of the loss-earnback transaction in the fourth quarter of 2024 along with continued paydowns and payoffs on lower-yielding bonds.

• The Company’s NIM for the second quarter of 2025 was 3.32%, an increase of 48 basis points from the like quarter.

Within interest-earning assets, the securities loss-earnback transaction during the fourth quarter of 2024 resulted in an increase of 69 basis points as compared to the like quarter.

In addition, loan yields increased 3 basis points to 5.53%.

Following the rate cuts by the Federal Reserve in late 2024, the rate on interest-bearing deposits fell 40 basis points from the like quarter to the second quarter of 2025.

• Average loan volumes for the three months ended June 30, 2025 were $116.8 million higher than the same period in 2024.

In addition, interest rates on loans increased 3 basis points to 5.53% for the second quarter of 2025, resulting in an increase in interest income on loans of $2.5 million.

• Due to the impact of the aforementioned Federal Reserve rate cuts in 2024 and the resulting decreased market rates partially offset by higher average balances, deposit interest expense for the three months ended June 30, 2025 decreased $6.3 million compared to the same period in 2024.

Average interest-bearing deposit balances increased $130.9 million while rates on those deposits decreased 40 basis points as compared to the like quarter.

• Average borrowings were $75.8 million lower in the second quarter of 2025 as compared to the second quarter of 2024 due in large part to the decreased utilization of short-term borrowings.

This decrease in volume of borrowings was mainly attributable to the pay off of the Federal Reserve Bank Term Funding Program borrowings, which,during the second quarter of 2024, had an average balance of approximately $68.1 million and carried an average interest rate of 4.84%.

Interest expense on borrowings decreased $1.3 million.

For internal purposes, we also evaluate our NIM on a tax equivalent basis ("NIM-T/E"), which is a non-GAAP financial measure, by adding the tax benefit realized from tax-exempt loans and securities to reported interest income then dividing by total average earning assets.

We believe that analysis of NIM-T/E 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 to NIM-T/E.

For the Three Months Ended March 31,

For the Three Months Ended June 30,

($ in thousands) 2025 2024

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Net interest margin, tax-equivalent 3.32 % 2.87 %

The following table presents an analysis of net interest income for the first quarter of 2025 and 2024:

Net interest income for the six months ended June 30, 2025 amounted to $189.6 million, an increase of $29.2 million, or 18.2%, from the $160.4 million recorded in the six months ended June 30, 2024.

As described above, the rate cuts by the Federal Reserve in the second half of 2024 affected market rates which had resulting impacts on the rates we paid or received in 2024 and 2025.

Similar to the impact during the three months ended June 30, 2025, the increase for the six months ended June 30, 2025 was also driven by lower cost of funds, and increased yields on interest-earning assets.

Our NIM increased to 3.29% for the six months ended June 30, 2025 from 2.81% for the six months ended June 30, 2024 as discussed further below.

The following table presents an analysis of net interest income for the six months ended June 30, 2025 and 2024.

Average Balances and Net Interest Income Analysis

Three Months Ended March 31,

Six Months Ended June 30,

($ in thousands) Average

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Shareholders’ equity 1,499,384 1,376,887

Total liabilities and shareholders’ equity $ 12,226,810 $ 12,111,201

Total liabilities and

shareholders’ equity $ 12,343,231 $ 12,083,241

Net yield on interest-earning assets and net interest income $ 189,559 3.29 % $ 160,389 2.81 %

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(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 $(0.4) million, and $(0.1) million for three months ended March 31, 2025 and 2024, respectively.

(2) Includes accretion of discount on acquired loans of $2.2 million and $2.9 million for three months ended March 31, 2025 and 2024, respectively.

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 $(590,000), and $(886,000) for six months ended June 30, 2025 and 2024, respectively.

(2) Includes accretion of discount on acquired loans of $3.2 million and $4.7 million for six months ended June 30, 2025 and 2024, respectively.

(3) Includes tax-equivalent adjustments to reflect the tax benefit that we receive related to tax-exempt securities and loans as reduced by the related nondeductible portion of interest expense.

Overall, as demonstrated in the table above, the change in the mix of earning assets to higher yielding assets and a decrease in the cost of liabilities drove the expansion in NIM and net interest income.

While not impacting NIM-T/E, net interest income was impacted by the one less earning day in the first quarter of 2025 compared to the first quarter of 2024.

• Net interest income for the first quarter of 2025 was $92.9 million, an increase of $13.6 million from the like quarter.

The increase in net interest income was primarily driven by our focused efforts to reduce borrowings and manage deposit costs after the rate cuts by the Federal Reserve in the second half of 2024, which saw the federal funds rate fall 100 basis points.

We also focused on increasing loan yields as new originations were at higher rates than older loans.

Further, securities yields increased as a result of the loss-earnback transaction in the fourth quarter of 2024.

• The Company’s NIM for the first quarter of 2025 was 3.27%, an increase of 47 basis points from the like quarter.

Within interest-earning assets, the loss-earnback transaction in the securities portfolio during the fourth quarter of 2024 resulted in an increase of 50 basis points as compared to the like quarter.

In addition, loan yields increased 7 basis points to 5.52%.

Following the three rate cuts by the Federal Reserve between September and December of 2024, the rate on interest-bearing deposits fell 19 basis points from the like quarter to the first quarter of 2025.

• Average loan volumes for the three months ended March 31, 2025 were $4.0 million higher than the same period in 2024.

In addition, interest rates on loans increased 7 basis points to 5.52% for the first quarter of 2025, resulting in an increase in interest income on loans of $0.7 million.

• Due to the impact of the aforementioned Federal Reserve rate cuts in 2024 and the resulting decreased market rates partially offset by higher average balances, deposit interest expense for the three months ended March 31, 2025 decreased $1.0 million compared to the same period in 2024.

Average interest-bearing deposit balances increased $453.1 million while rates on those deposits decreased 19 basis points basis points as compared to the same period in the prior year.

• Average borrowings were $486.0 million lower in the first quarter of 2025 as compared to the first quarter of 2024 due in large part to the decreased utilization of short-term borrowings.

This decrease in volume of borrowings between periods was mainly attributable to the pay off of the FRB Bank Term Funding Program and FHLB Fixed Rate Credit borrowings, which,during the first quarter of 2024, had an average balance of approximately $477.6 million and carried an interest rate of 5.15%.

Coupled with the payoff of $10.0 million of subordinated debt with an interest rate of 8.99% as of March 31, 2024, these changes resulted in the $6.5 million decrease in interest expense on borrowings.

Overall, as demonstrated in the table above, the expansion in NIM, coupled with higher earning asset volumes, drove the increase in net interest income.

• During the second half of 2024, the Federal Reserve decreased the fed funds rate a total of 100 basis points, after substantial increases occurring in 2022 and 2023.

During the first six months of 2025, the Federal Reserve has not changed fed funds rates, resulting in a 100 basis points decrease in fed funds rates between June 2024 and June 2025.

The average prime rate was 7.50% for the six months ended June 30, 2025, compared to 8.50% for the prior year period.

During much of 2024, the market yield curve was inverted, while during 2025, the yield curve has been positively sloping beyond three years, although longer term treasury rates are still fairly close to fed funds rates.

• Average loan volumes for the six months ended June 30, 2025 were $60.6 million higher than the same period in 2024 due to organic loan growth.

In addition, interest rates on loans increased 5 basis points to 5.52% for the six months ended June 30, 2025, collectively resulting in an increase in loan interest income of $3.2 million.

• Due to lower market rates and a shift from higher costing deposits to lower costing deposits, partially offset by an overall growth of deposits, interest expense on deposits for the six months ended June 30, 2025 decreased $7.4 million compared to the same period in 2024.

Average total interest-bearing deposit balances increased $292.0 million while rates on those deposits decreased 30 basis points as compared to the same period in the prior year.

Within this population, average balances on Money market deposits increased $493.8 million while rates on those accounts decreased 40 basis points as compared to the same period in the prior year, both resulting in a $1.1 million decrease in interest expense.

Average balances on Other time deposits decreased $177.5 million and rates on these accounts decreased 82 basis points as compared to the same period in the prior year, collectively resulting in a $5.1 million decrease in interest expense.

• Interest expense on borrowings decreased $7.9 million for the six months ended June 30, 2025 as compared to the same period in 2024 due to the $280.9 million decrease in the average volume of borrowings between periods, partially offset by a 125 basis point increase in the rates on the remaining borrowings.

The lower balances were due in large part to a decreased reliance on short-term borrowings during as deposit growth provided additional liquidity.

The remaining borrowings are longer term in nature and generally carry higher interest rates than those that were paid off.

• NIM increased 48 basis points between the comparable periods due higher interest-earning asset balances and yields, lower rates on interest bearing deposits and lower average balances on borrowings, partially offset by higher deposit average balances higher rates on borrowings.

The following is a reconciliation of reported net interest income to tax-equivalent net interest income and the resulting NIM to NIM-T/E.

For the Six Months Ended June 30,

($ in thousands) 2025 2024

Net interest income, as reported $ 189,559 $ 160,389

Tax-equivalent adjustment 648 1,463

Net interest income, tax-equivalent $ 190,207 $ 161,852

Net interest margin, as reported 3.29 % 2.81 %

Net interest margin, tax-equivalent 3.30 % 2.83 %

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 March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

($ in thousands) 2025 2024 2025 2024

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Generally, the level of loan discount accretion will decline each year due to the natural reduction in outstanding balance of acquired loans.

At March 31, 2025 and 2024, unaccreted loan discounts on purchased loans amounted to $13.3 million and $21.6 million, respectively.

At June 30, 2025 and 2024, unaccreted loan discounts on purchased loans amounted to $11.8 million and $19.3 million, respectively.

The portfolio acquired with the GrandSouth Bancorporation acquisition on January 1, 2023 comprised the majority of the remaining unaccreted loan discount.

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The level of SBA loan discount accretion will fluctuate relative to the SBA loan portfolio balances.

At March 31, 2025 and 2024, the unaccreted loan discounts on SBA loans amounted to $2.5 million and $3.4 million, respectively.

Provision for Credit Losses and Provision for Unfunded Commitments

At June 30, 2025 and 2024, the unaccreted loan discounts on SBA loans amounted to $2.3 million and $3.2 million, respectively.

Provision for Credit Losses

The provision for credit losses is comprised of the provision for loan losses and the provision for unfunded commitments.

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Refer also to “Critical Accounting Estimates” in Item 7 of the 2024 Annual Report on Form 10-K filed with the SEC for more information.

The provision for credit losses was $1.1 million and $1.2 million for the three months ended March 31, 2025 and 2024, respectively.

The provision for loan losses for the first quarter of 2025 included $2.0 million reversal specifically attributed to Hurricane Helene and totaled $1.4 million as compared to $1.8 million for the first quarter of 2024.

The provision for unfunded commitments reflected reversals of $0.3 million and $0.6 million for the three months ended March 31, 2025 and 2024, respectively.

The provision for credit losses was $2.2 million and $0.5 million for the three months ended June 30, 2025 and 2024, respectively, and $3.3 million and $1.7 million for the six months ended June 30, 2025 and 2024, respectively.

The provision for loan losses for the second quarter of 2025 included $3.5 million reversal specifically attributed to Hurricane Helene and totaled $1.1 million as compared to $1.5 million for the second quarter of 2024.

The provision for unfunded commitments reflected an expense of $1.1 million and a reversal of $0.9 million for the three months ended June 30, 2025 and 2024, respectively, and an expense of $0.9 million and a reversal of $1.5 million for the six months ended June 30, 2025 and 2024, respectively.

Within the portions of Western North and South Carolina that were significantly impacted by Hurricane Helene, the Company identified borrowers with approximately $703 million of loans outstanding.

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The Company applied increased reserve rates based upon severe economic factors to the approximately $703 million of loans in the path of Helene.

Additionally, the Company performed an 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 reserve related to the potential exposure from Hurricane Helene added 0.14% to the ACL as of March 31, 2025.

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.

Noninterest Income

Our noninterest income amounted to $12.9 million for the three months ended March 31, 2025 and 2024.

Decreases of $0.8 million in SBA loan sale gains and $0.6 million in Other income were partially offset by the $1.0 million Securities losses, net in the first quarter of 2024.

Our noninterest income amounted to $14.3 million and $14.6 million for the three months ended June 30, 2025 and 2024, respectively, and $27.2 million and $27.5 million for the six months ended June 30, 2025 and 2024, respectively.

In comparing the three months ended June 30, 2025 to the like quarter, a decrease of $1.2 million in SBA loan sale gains was partially offset by the $1.1 million increase in Other service charges - other.

For the year to date periods, decreases of $2.0 million in SBA loan sale gains and $0.8 million in Other income were partially offset by an increase of $1.4 million in Other service charges and fees - other and the $1.2 million Securities losses recognized during the six months ended June 2024.

Details of the more significant components of noninterest income are presented in the table below.

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

($ in thousands) 2025 2024 2025 2024

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SBA loan sale gains

151 1,336 203 2,231

Bank-owned life insurance income 1,221 1,179 2,449 2,343

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Noninterest Expenses

Total noninterest expenses totaled $57.9 million and $59.2 million for the three months ended March 31, 2025 and 2024, respectively.

The primary contributors to the $1.3 million, or 2.2%, decrease in noninterest expense for the first quarter of 2025 were the $0.9 million decrease in Occupancy and equipment expenses, the $0.4 million decrease in FDIC insurance costs, the $0.4 million decrease in Professional fees and the $0.4 million decrease in software licenses and other software costs, partially offset by increases of $0.8 million in Total personnel costs and $0.4 million in Non-credit losses.

For the three months ended March 31, 2025, there was a continued overall effort by management to control costs and reduce expenses.

Total noninterest expenses totaled $59.0 million and $58.3 million for the three months ended June 30, 2025 and 2024, respectively, and $116.9 million and $117.5 million for the six months ended June 30, 2025 and 2024, respectively.

The primary contributor to the $0.7 million, or 1.2%, increase in noninterest expense for the second quarter of 2025 was the $0.7 million increase in Total personnel costs.

For the six months ended June 30, 2025, there was a continued overall effort by management to control costs and reduce expenses, with decreases in FDIC insurance costs of $0.8 million and professional fees of $0.7 million being partially offset by an increase of $1.5 million in Total personnel costs.

The following table presents the primary components of noninterest expenses.

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

($ in thousands) 2025 2024 2025 2024

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Total noninterest expense $ 58,983 $ 58,291 $ 116,876 $ 117,478

We recorded income tax expense of $10.4 million and $6.5 million for the three months ended March 31, 2025 and 2024, respectively.

Our effective tax rate was 22.2% and 20.5% for the three months ended March 31, 2025 and 2024, respectively.

We recorded income tax expense of $11.3 million and $8.2 million for the three months ended June 30, 2025 and 2024, respectively.

Our effective tax rate was 22.6% and 22.2% for the three months ended June 30, 2025 and 2024, respectively.

For the six months ended June 30, 2025 and 2024, we recorded tax expense of $21.6 million and $14.7 million, respectively.

Our effective tax rate was 22.4% and 21.4% for the six months ended June 30, 2025 and 2024, respectively.

FINANCIAL CONDITION

Total assets at March 31, 2025 amounted to $12.4 billion, a $288.6 million, or 2.4%, increase from December 31, 2024 and was primarily related to higher interest-bearing cash, investment securities and loan balances.

Total loans at March 31, 2025 were $8.1 billion, an increase of $8.4 million, or 0.1%, from December 31, 2024.

The mix of our loan portfolio remained substantially the same at March 31, 2025 as compared to December 31, 2024.

The majority of our real estate loans were personal mortgages and commercial loans where real estate provides additional security for the loan.

Total assets at June 30, 2025 amounted to $12.6 billion, a $460.6 million, or 3.8%, increase from December 31, 2024 and was primarily related to higher interest-bearing cash, AFS securities and loans.

Total loans at June 30, 2025 were $8.2 billion, an increase of $131.0 million, or 1.6%, from December 31, 2024.

The mix of our loan portfolio remained substantially the same at June 30, 2025 as compared to December 31, 2024.

Note 3 to the consolidated financial statements presents additional detail regarding our mix of loans.

At March 31, 2025, 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 6.0% of the total portfolio at March 31, 2025, with the largest loan being $26.3 million and the average outstanding loan 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 March 31, 2025.

Total investment securities were $2.6 billion at March 31, 2025, a decrease of $19.7 million from December 31, 2024.

During the three months ended March 31, 2025, the Company purchased $10.0 million of investment

There were no sales of investment securities during the first quarter of 2025.

The unanticipated call of a security during the first quarter of 2024 resulted in a loss of $975 thousand related to the unamortized premium balance.

At June 30, 2025, 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 6.5% of the total portfolio at June 30, 2025, with the largest loan being $30.0 million and the average outstanding loan balance being $1.4 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 June 30, 2025.

Total investment securities were $2.7 billion at June 30, 2025, an increase of $98.2 million from December 31, 2024.

During the six months ended June 30, 2025, the Company purchased $137.0 million of investment securities.

There were no sales of investment securities during the six months ended June 30, 2025.

In addition, the Company continues to utilize cash flows from investment securities to fund other earning assets.

The composition of our investment portfolio remained substantially the same at March 31, 2025 as at December 31, 2024, with the exception of Corporate bonds, which increased $10.0 million due to the aforementioned purchase.

The unrealized loss on AFS securities totaled $321.2 million at March 31, 2025.

The composition of our investment portfolio remained substantially the same at June 30, 2025 as at December 31, 2024, with the exception of Mortgage-backed securities, which increased due to the aforementioned purchase, partially offset by paydowns.

The unrealized loss on AFS securities totaled $298.9 million at June 30, 2025.

Refer to Note 2 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 March 31, 2025 and determined them to be of a temporary nature due primarily to interest rate factors and not credit quality concerns.

We evaluated the unrealized losses on individual securities at June 30, 2025 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 $10.7 billion at March 31, 2025, an increase of $214.1 million, or 2.0%, from December 31, 2024.

Organic growth accounted for the growth, as brokered deposits remained flat during the quarter.

We continue to have a diversified and granular deposit base which has remained stable with continued growth in customer deposits, primarily money market accounts.

Total deposits amounted to $10.8 billion at June 30, 2025, an increase of $299.9 million, or 2.8%, from December 31, 2024.

Organic growth accounted for the growth, as brokered deposits remained flat from year-end.

We continue to have a diversified and granular deposit base which has remained stable with continued growth in customer deposits, primarily Noninterest-bearing checking accounts and Money market accounts.

Our deposit mix has remained relatively consistent and has not changed significantly.

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

($ in thousands) Amount Percentage Amount Percentage

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Total deposits $ 10,830,380 100 % $ 10,530,525 100 %

As of March 31, 2025, the estimated insured deposits totaled $6.5 billion or 60.2% of total deposits, while approximately $4.3 billion of the Company's total deposits were uninsured.

In addition to insured deposits, there were deposits with a balance totaling $725.9 million at March 31, 2025 which were collateralized by investment securities such that approximately 66.9% of our total deposits were insured or collateralized at that date.

As of June 30, 2025, the estimated insured deposits totaled $6.5 billion, or 59.7% of total deposits, while approximately $4.4 billion of the Company's total deposits were uninsured.

In addition to insured deposits, there were deposits with a balance totaling $707.0 million at June 30, 2025 which were collateralized by investment securities such that approximately 66.3% of our total deposits were insured or collateralized at that date.

Nonperforming Assets

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($ in thousands)

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

Nonperforming assets

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Allowance for credit losses to nonperforming loans 348.14 % 385.70 %

As shown in the table above, total NPAs at March 31, 2025 decreased to $33.9 million from year end and related primarily to the $2.7 million decrease in nonaccrual loans.

Commercial and industrial is the largest category of nonaccrual loans, at $9.7 million, or 33.3%, of total nonaccrual loans, followed by Commercial real estate - owner occupied at $9.4 million, or 32.3% Included in various loan categories are nonaccrual SBA loans totaling $15.4 million at March 31, 2025, or 53.0% of total nonaccrual loans, and which have $6.7 million in guarantees from the SBA.

As reflected in Note 3 to the accompanying consolidated financial statements, total classified loans decreased 21.4% to $51.7 million at March 31, 2025 compared to $65.8 million at December 31, 2024.

The decrease resulted primarily from improvements in Commercial real estate - owner occupied loans of $8.4 million and Commercial real estate - owner occupied loans of $3.7 million.

Special mention loans decreased 14.37% to $31.8 million at March 31, 2025 compared to $37.1 million at December 31, 2024.

As shown in the table above, total NPAs at June 30, 2025 decreased to $35.8 million from year end and related primarily to the $3.7 million decrease in Foreclosed real estate, partially offset by the $2.8 million increase in Nonaccrual loans.

Commercial and industrial is the largest category of nonaccrual loans, at $10.6 million, or 30.6%, of total nonaccrual loans, followed by Commercial real estate - owner occupied at $10.0 million, or 28.9% Included in various loan categories are nonaccrual SBA loans totaling $17.6 million at June 30, 2025, or 50.9% of total nonaccrual loans, and which have $7.3 million in guarantees from the SBA.

As reflected in Note 3 to the accompanying consolidated financial statements, total classified loans decreased 9.6% to $59.5 million at June 30, 2025 compared to $65.8 million at December 31, 2024.

The decrease resulted primarily from improvements in Commercial real estate - owner occupied loans of $3.1 million and Commercial real estate - non owner occupied loans of $2.2 million.

Special mention loans decreased 15.84% to $31.2 million at June 30, 2025 compared to $37.1 million at December 31, 2024.

The majority of the decrease was attributable to Commercial real estate - non owner occupied loans, which decreased $4.8 million.

Allowance for Credit Losses, Allowance for Unfunded Commitments, and Loan Loss Experience

The total allowance for credit losses amounted to $120.6 million at March 31, 2025 compared to $122.6 million at December 31, 2024.

The total allowance for credit losses amounted to $120.5 million at June 30, 2025 compared to $122.6 million at December 31, 2024.

Fluctuations in the ACL are based on loan mix and growth, changes in the levels of

nonperforming loans, economic forecasts impacting loss drivers, and other assumptions and inputs to the CECL model.

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 March 31, 2025 was primarily related to the release of $2.0 million of the credit reserves arising from Hurricane Helene.

The ACL as a percent of loans at March 31, 2025 was 1.49%, 14 basis points of which was attributable to the potential impact from Hurricane Helene.

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 June 30, 2025 was primarily related to the releases of $3.5 million and $5.5 million of the credit reserves arising from Hurricane Helene during the three and six months ended June 30, 2025.

The ACL as a percent of loans at June 30, 2025 was 1.47%, 10 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 $703 million of loans outstanding.

The following is a summary of the categories of those loans outstanding as of March 31, 2025:

The following is a summary of the categories of those loans outstanding as of June 30, 2025:

($ in thousands) Balance

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Total $ 702,538

Given that the recovery from the storm is ongoing in many impacted communities, the Company continues to evaluate possible impacts from the storm on borrowers and has reserved accordingly based upon the information available as of March 31, 2025.

The Company applied increased reserve rates based upon severe economic factors to the approximately $703 million of loans in the most impacted path of Hurricane Helene.

Additionally, the Company continues to evaluate 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 was $11.0 million as of March 31, 2025, adding 14 basis points to the overall ACL as a percent of total loans,which was 1.49% as of March 31, 2025.

Due to the potential exposure from Hurricane Helene, the ACL on these impacted loans was $7.5 million as of June 30, 2025, adding 10 basis points to the overall ACL as a percent of total loans,which was 1.47% as of June 30, 2025.

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.

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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) Three Months Ended March 31, 2025 Twelve Months Ended December 31, 2024 Three Months Ended March 31, 2024

($ in thousands) Six Months Ended June 30, 2025 Twelve Months Ended December 31, 2024 Six Months Ended June 30, 2024

Loans outstanding at end of period $ 8,225,650 $ 8,094,676 $ 8,069,848

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In addition, various regulatory agencies, as an integral part of their examination process, periodically review our ACL and the value of our collateral-dependent 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.

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 2024 Annual Report on Form 10-K filed with the SEC for more information.

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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 $8.8 million and $9.1 million at March 31, 2025 and December 31, 2024, respectively, is classified on the consolidated balance sheets within "Other liabilities." The decline in the level of the allowance between periods was driven by a reduction in reserve rates partially offset by an increase in balances of available lines of credit during the three months ended March 31, 2025.

The allowance for unfunded commitments of $9.9 million and $9.1 million at June 30, 2025 and December 31, 2024, respectively, is classified on the consolidated balance sheets within "Other liabilities." The decline in the level of the allowance between periods was driven by a reduction in reserve rates partially offset by an increase in balances of available lines of credit during the six months ended June 30, 2025.

Liquidity, Commitments, and Contingencies

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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 March 31, 2025, the Company had the following sources of readily available borrowing capacity:

At June 30, 2025, the Company had the following sources of readily available borrowing capacity:

• A $1.3 billion line of credit with the FHLB that can be structured as either short-term or long-term borrowings, depending on the particular funding or liquidity needs.

As of March 31, 2025, the line of credit is secured by a blanket lien on portions of the Company's real estate loan portfolio totaling approximately $2.3 billion and the Company's FHLB stock totaling $8.5 million.

$0.8 million was outstanding on the line of credit at March 31, 2025 and December 31, 2024;

As of June 30, 2025, the line of credit is secured by a blanket lien on portions of the Company's real estate loan portfolio totaling approximately $2.3 billion and the Company's FHLB stock totaling $8.6 million.

$0.8 million was outstanding on the line of credit at June 30, 2025 and December 31, 2024;

• Federal funds lines of credit with correspondent banks totaling $265.0 million which allow the Company to purchase federal funds on an overnight, unsecured basis.

No borrowings were outstanding at March 31, 2025 or December 31, 2024;

• An approximately $801.9 million line of credit through the Federal Reserve's discount window borrowing program, which was secured at March 31, 2025 by a blanket lien on a portion of the Company’s commercial and consumer loan portfolios (excluding those secured by real estate collateral) totaling approximately $338.3 million and specific investment securities with a carrying value of $695.9 million.

No borrowings were outstanding at March 31, 2025 or December 31, 2024.

Our overall on-balance sheet liquidity ratio was 19.8% at March 31, 2025 compared to 17.6% at December 31, 2024.

No borrowings were outstanding at June 30, 2025 or December 31, 2024;

• An approximately $761.1 million line of credit through the Federal Reserve's discount window borrowing program, which was secured at June 30, 2025 by a blanket lien on a portion of the Company’s commercial and consumer loan portfolios (excluding those secured by real estate collateral) totaling approximately $314.4 million and specific investment securities with a carrying value of $669.0 million.

No borrowings were outstanding at June 30, 2025 or December 31, 2024.

Our overall on-balance sheet liquidity ratio was 20.0% at June 30, 2025 compared to 17.6% at December 31, 2024.

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, was 36.4% as of March 31, 2025.

Our total liquidity ratio, including the $2.3 billion in available lines of credit, was 36.1% as of June 30, 2025.

Not included in these ratios are the readily available sources of funds through brokered deposits.

As of March 31, 2025, our brokered deposits availability was $1.9 billion per our internal policy.

As of June 30, 2025, our brokered deposits availability was $1.9 billion per our internal policy.

The amount and timing of our contractual obligations and commercial commitments have not changed materially since December 31, 2024, the detail of w hich is presented in the "Contractual Obligations and Other Commercial Commitments" table of our 2024 Annual Report on Form 10-K.

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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 March 31, 2025, the Company's derivative financial instruments consisted entirely of customer back-to-back interest rate swaps which are not designated as hedges.

At June 30, 2025, 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.

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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 AFS 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.

There have been no material changes to the treatment of capital resources as discussed in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

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 March 31, 2025, as shown in the table below, we were well-capitalized.

The capital ratios at March 31, 2025 increased as compared to 2024 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.

At June 30, 2025, as shown in the table below, we were well-capitalized.

The capital ratios at June 30, 2025 increased as compared to 2024 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.

The following table presents the capital ratios for the Company and the regulatory minimums discussed above for the periods indicated:

March 31, 2025 December 31, 2024 Minimum required

June 30, 2025 December 31, 2024 Minimum required

Risk-based capital ratios:

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The Bank is also subject to capital requirements that do not vary materially from the Company’s capital ratios presented above.

At March 31, 2025, the Bank exceeded the minimum ratios established by the regulatory authorities.

At June 30, 2025, 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.

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Investors should not consider non-GAAP measures in isolation or as a substitute for analysis of the Company’s results or financial condition as reported under GAAP.

The TCE ratio was 8.55% at March 31, 2025 compared to 8.22% at December 31, 2024.

The TCE ratio was 8.83% at June 30, 2025 compared to 8.22% at December 31, 2024.

The following table reconciles common equity to TCE and provides the calculation of the TCE ratio:

($ in thousands) March 31, 2025 December 31, 2024

($ in thousands) June 30, 2025 December 31, 2024

Reconciliation of Common Equity to TCE

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Stock Repurchase Plans

The following table discloses shares of our common stock repurchased during the three months ended March 31, 2025.

($ in millions, except per share data) Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs(1)

January 1, 2025 to January 31, 2025 — $ — — $ 40,000,000

February 1, 2025 to February 28, 2025 — $ — — $ 40,000,000

March 1, 2025 to March 31, 2025 24,849 $ 39.87 24,849 $ 39,009,202

Total 24,849 $ 39.87 24,849 $ 39,009,202

In January 2024, the Board of Directors of the Company authorized the repurchase of up to $40 million of the Company’s common stock.

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The Board of Directors renewed this authorization in January 2025.

As of March 31, 2025, the Company had repurchased a total of 24,849 shares at an average price per share of $39.87.

The Company did not complete any share repurchases during the three months ended June 30, 2025.

The dollar value of shares that may yet be repurchased under the program was $39.0 million as of June 30, 2025.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis