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Item 2. Management’s Discussion and Analysis

2025-11-07 compared with 2025-08-07 · 172 added, 167 removed, 307 unchanged (52% 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 second quarter and year-to-date period of 2025 are presented below.

Highlights of the results for the third 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 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.

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

We earned net income of $20.4 million, or $0.49 diluted EPS, during the third quarter of 2025 compared to net income of $18.7 million, or $0.45 diluted EPS, for the third quarter of 2024.

The $19.4 million increase in net interest income in the third quarter of 2025 from the like quarter was driven primarily by a higher yield on interest earning assets and a lower cost of funds, both of which were driven by the overall interest rate environment throughout the past year.

Adjusting for the impact of the $27.9 million loss related to a securities loss-earnback transaction, our adjusted net income, which is a non-GAAP financial measure, was $41.8 million, or $1.01 per diluted share, for the third quarter of 2025.

The results for the third quarter of 2025 also include a $4.0 million reduction to the potential impacts to the allowance for credit losses from Hurricane Helene ($3.1 million after-taxes or $0.07 per diluted share).

• Net interest income for the third quarter of 2025 was $102.5 million, a 23.4% increase from the $83.0 million recorded in the third 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.

• Net interest margin ("NIM") increased 58 basis points to 3.46% in the third quarter of 2025 from 2.88% in the third quarter of 2024 as a result of the higher yields on loans and securities and lower cost of funds.

• We remained well-capitalized by all regulatory standards.

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.

Risk-based capital ratios contracted during the quarter with a total common equity Tier 1 ratio of 14.35%, Tier 1 risk-based capital ratio of 15.14% and total risk-based capital ratio of 16.58% at September 30, 2025, all down slightly from September 30, 2024.

The decreases during the quarter were driven by loan growth, which carries a higher risk weight than short term investments.

• The provision for credit losses for the third quarter of 2025 was $3.4 million, driven by loan growth and $3.0 million of net charge-offs, partially offset by a $4.0 million reduction in the incremental allowance for credit losses related to potential exposure from Hurricane Helene.

• Noninterest income for the three months ended September 30, 2025 totaled a negative $12.9 million, reflecting a decline from the $13.6 million for the comparable prior year period, primarily from the $27.9 million securities loss, related to a securities loss-earnback transaction that took place in the third quarter of 2025.

• Noninterest expense of $60.2 million increased $0.4 million, or 0.6%, for the quarter ended September 30, 2025 from the prior year.

The increase is attributable to a $0.4 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.

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

Overview and Highlights for the Nine Months Ended September 30, 2025

We earned net income of $95.3 million, or $2.30 diluted EPS, during the nine months ended September 30, 2025 compared to net income of $72.7 million, or $1.76 diluted EPS, for the nine months ended September 30, 2024.

Adjusting for the impact of the $27.9 million loss related to the loss-earnback transaction, our adjusted net income was $116.8 million, or $2.82 per diluted share, for the nine months ended September 30, 2025.

The results for the nine months ended September 30, 2025 also include a $9.5 million reduction to the potential impacts to the allowance for credit losses from Hurricane Helene ($7.3 million after-taxes or $0.18 per diluted share).

• Net interest income for the nine months ended September 30, 2025 was $292.0 million, a 20.0% increase from the $243.4 million recorded for the comparable period of 2024.

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

• NIM increased 51 basis points to 3.34% for the nine months ended September 30, 2025 from 2.83% for the nine months ended September 30, 2024 as a result of the higher yields on loans and securities and lower cost of funds as well as the repayment of short-term borrowings which contributed to the reduced cost of funds from the prior period.

• For the nine months ended September 30, 2025, the Company recorded $6.8 million in provision for credit losses as compared to $15.9 million for the nine months ended September 30, 2024.

The higher provision in 2024 was significantly impacted by the $13.0 million provision related to Hurricane Helene.

The provision for credit losses in 2025 was significantly impacted by loan growth in 2025, net charge off activity of $7.5 million, partially offset by a $9.5 million reduction in the incremental provision related to potential exposure from Hurricane Helene.

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

• Noninterest income for the nine months ended September 30, 2025 totaled $14.4 million, a decrease of $26.7 million, from the comparable period of 2024 primarily related to the $27.9 million securities loss resulting from the securities loss-earnback transaction that took place in the third quarter of 2025.

• Noninterest expense decreased $0.2 million to $177.1 million for the nine months ended September 30, 2025 as compared to the prior year period, primarily driven by a $1.2 million decrease in Other operating expenses and a $0.7 million decrease in Intangible amortization expense, partially offset by an increase in Personnel expenses of $1.9 million arising from increased salaries and wages.

Adjusted net income and adjusted diluted EPS are non-GAAP financial measures that exclude the effect of the $27.9 million securities loss resulting from the securities loss-earnback transaction for the three and nine months ended September 30, 2025, respectively, from the GAAP basis net income and diluted EPS for those periods.

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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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

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

For the Three Months Ended For the Nine Months Ended

September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024

Net income $ 20,363 $ 18,680 $ 95,335 $ 72,664

Impact of Hurricane Helene

Provision for (benefit from) credit losses (3,500) (5,500)

Impact of loss-earnback

Securities loss from loss-earnback 27,905 — 27,905 —

Less, tax impact (6,472) — (6,472) —

After-tax impact of Hurricane Helene (2,688) (4,224)

After-tax impact of loss-earnback 21,433 — 21,433 —

Adjusted net income $ 41,796 $ 18,680 $ 116,768 $ 72,664

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Adjusted EPS - diluted $ 1.01 $ 0.45 $ 2.82 $ 1.76

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

Total assets were $12.8 billion at September 30, 2025, a 5.0% 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 $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 $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.

• Total cash and cash equivalents amounted to $598.0 million at September 30, 2025, representing a $90.5 million, or 17.8%, increase from December 31, 2024.

Noninterest-bearing cash comprised $59.8 million of this increase.

• AFS securities increased $122.6 million, or 6.0%, during the nine months ended September 30, 2025.

During the third quarter of 2025, as part of a securities loss-earnback transaction in the securities portfolio, $194.3 million of securities were sold at a loss of $27.9 million and $167.4 million of securities were purchased, with a weighted average yield of 4.83%.

• Total loans amounted to $8.4 billion at September 30, 2025, reflecting an increase of $324.5 million, or 4.0%, from December 31, 2024.

• Total deposits were $10.9 billion at September 30, 2025, an increase of $350.6 million, or 3.33%, from December 31, 2024.

Deposit growth during the period was split between noninterest-bearing deposits, which saw an increase of $212.9 million, and interest-bearing deposits, which increased $137.7 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.

• Credit quality continued to be strong at September 30, 2025, with NPAs of 0.31% of total assets as of September 30, 2025, up 1 basis point from 0.30% at December 31, 2024.

• Our on-balance sheet liquidity ratio was 18.2% at September 30, 2025.

Available off-balance sheet sources totaled $2.5 billion at quarter end, resulting in a total liquidity ratio of 35.3%.

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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).

Net interest income is our largest source of revenue and is the difference between the interest earned on interest-earning assets (primarily loans and investment securities) and the interest expense incurred in connection with interest-bearing liabilities (primarily 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.

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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 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.

Net Interest Income for the Three Months Ended September 30, 2025

Net interest income for the third quarter of 2025 amounted to $102.5 million, an increase of $19.4 million, or 23.4%, from the $83.0 million recorded in the third 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:

For the third quarter of 2025, average interest-earning assets increased $304.8 million, or 2.7%, from the comparable period of the prior year, with average loans and taxable securities growing $277.9 million and $143.8 million, respectively while average short term investments contracted by $112.7 million.

The cost of interest bearing deposits decreased 41 basis points from the third quarter of 2024 to the third quarter of 2025, with the biggest decrease coming from the cost of Money market deposits, which declined $3.2 million and the cost of Other time deposits, which declined $1.7 million.

These changes resulted in the 58 basis point improvement in our NIM (see discussion below) from the like quarter to 3.46% for the third quarter of 2025.

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

Average Balances and Net Interest Income Analysis

Three Months Ended June 30,

Three Months Ended September 30,

($ in thousands) Average

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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 $(0.3) 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.

(2) Includes accretion of discount on acquired loans of $1.6 million and $2.0 million for three months ended September 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.

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

• Net interest income for the third quarter of 2025 was $102.5 million, an increase of $19.4 million from the like quarter.

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.

Further, securities yields increased as a result of the loss-earnback transactions in the fourth quarter of 2024 and the third quarter of 2025 along with continued paydowns and payoffs on lower-yielding bonds.

• The Company’s NIM for the third quarter of 2025 was 3.46%, an increase of 58 basis points from the like quarter.

Within interest-earning assets, the securities loss-earnback transactions during the fourth quarter of 2024 and the third quarter of 2025 resulted in an increase of 84 basis points on the yield on total securities as compared to the like quarter.

In addition, loan yields increased 18 basis points to 5.69%.

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.

Following the rate cuts by the Federal Reserve in late 2024 and third quarter of 2025, the rate on interest-bearing deposits fell 41 basis points from the like quarter to the third quarter of 2025.

• Average loan volumes for the three months ended September 30, 2025 were $277.9 million higher than the same period in 2024.

In addition, interest rates on loans increased 18 basis points to 5.69% for the third quarter of 2025, resulting in an increase in interest income on loans of $7.7 million.

• Due to the impact of the aforementioned Federal Reserve rate cuts in 2024 and 2025 and the resulting decreased market rates partially offset by higher average balances, deposit interest expense for the three months ended September 30, 2025 decreased $6.4 million compared to the same period in 2024.

Average interest-bearing deposit balances increased $159.0 million while rates on those deposits decreased 41 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.

Average money market deposits increased $336.8 million while the rate on those deposits fell 53 basis points, accounting for $3.2 million of the decrease in interest expense.

Average Other time deposits contracted $108.6 million while the rate on those deposits fell 68 basis points, resulting in a $1.7 million decrease in interest expense on these deposits.

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 June 30,

For the Three Months Ended September 30,

($ in thousands) 2025 2024

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Net interest margin, tax-equivalent 3.47 % 2.91 %

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.

Net Interest Income for the Nine Months Ended September 30, 2025

Net interest income for the nine months ended September 30, 2025 amounted to $292.0 million, an increase of $48.6 million, or 20.0%, from the $243.4 million recorded in the nine months ended September 30, 2024.

As described above, the rate cuts by the Federal Reserve in the second half of 2024 and third quarter of 2025 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 September 30, 2025, the increase for the nine months ended September 30, 2025 was also driven by lower cost of funds, and increased yields on interest-earning assets.

Our NIM increased to

3.34% for the nine months ended September 30, 2025 from 2.83% for the nine months ended September 30, 2024 as discussed further below.

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

Average Balances and Net Interest Income Analysis

Six Months Ended June 30,

Nine Months Ended September 30,

($ in thousands) Average

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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 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.

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 $(0.9) million, and $(1.3) million for nine months ended September 30, 2025 and 2024, respectively.

(2) Includes accretion of discount on acquired loans of $4.8 million and $6.7 million for nine months ended September 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 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.

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

Coupled with the 0.25% decrease late in the third quarter of 2025, the fed funds rate has seen a 75 basis points decrease between September 2024 and September 2025.

The average prime rate was 7.49% for the nine months ended September 30, 2025, compared to 8.48% 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.

• Average loan volumes for the nine months ended September 30, 2025 were $133.8 million higher than the same period in 2024 due to organic loan growth.

In addition, interest rates on loans increased 9 basis points to 5.58% for the nine months ended September 30, 2025, collectively resulting in an increase in loan interest income of $10.9 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 nine months ended September 30, 2025 decreased $13.7 million compared to the same period in 2024.

Average total interest-bearing deposit balances increased $247.4 million while rates on those deposits decreased 34 basis points as compared to the prior year.

Within this population, average balances on Money market deposits increased $441.3 million while rates on those accounts decreased 45 basis points as compared to the prior year, both resulting in a $4.3 million decrease in interest expense.

Average balances on Other time deposits decreased $154.4 million and rates on these accounts decreased 78 basis points as compared to the prior year, collectively resulting in a $6.8 million decrease in interest expense.

• Interest expense on borrowings decreased $8.1 million for the nine months ended September 30, 2025 as compared to the same period in 2024 due to the $188.2 million decrease in the average volume of borrowings between periods, partially offset by a 99 basis point increase in the rates on total borrowings.

The lower balances were due in large part to a decreased reliance on short-term borrowings 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.

• NIM increased 51 basis points between the comparable periods resulting from 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,

For the Nine Months Ended September 30,

($ in thousands) 2025 2024

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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 June 30, For the Six Months Ended June 30,

For the Three Months Ended September 30, For the Nine Months Ended September 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 June 30, 2025 and 2024, unaccreted loan discounts on purchased loans amounted to $11.8 million and $19.3 million, respectively.

At September 30, 2025 and 2024, unaccreted loan discounts on purchased loans amounted to $10.1 million and $17.3 million, respectively.

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

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.

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 for which the guaranteed portion was sold in the secondary market.

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

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

At September 30, 2025 and 2024, the unaccreted loan discounts on SBA loans amounted to $2.3 million and $3.3 million, respectively.

Provision for Credit Losses

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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 $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.

The provision for credit losses was $3.4 million and $14.2 million for the three months ended September 30, 2025 and 2024, respectively, and $6.8 million and $15.9 million for the nine months ended September 30, 2025 and 2024, respectively.

The higher provision in 2024 primarily resulted from the $13.0 million provision related to Hurricane Helene.

The provision for loan losses for the third quarter of 2025 included $4.0 million reversal specifically attributed to Hurricane Helene and totaled $3.4 million as compared to $14.8 million for the third quarter of 2024, when the higher provision was primarily due to the $13.0 million provision specifically attributed to Hurricane Helene.

The provision for unfunded commitments reflected an expense of $0.1 million and a reversal of $0.6 million for the three months ended September 30, 2025 and 2024, respectively, and an expense of $0.9 million and a reversal of $2.1 million for the nine months ended September 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 $674 million of loans outstanding.

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The Company applied increased reserve rates based upon severe economic factors to the approximately $674 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 0.10% to the ACL as of June 30, 2025.

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 0.05% to the ACL as of September 30, 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 $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.

Total noninterest income for the three months ended September 30, 2025 was negative $12.9 million, reflecting the inclusion of the $27.9 million loss on securities.

Excluding the loss on securities, noninterest income totaled $15.0 million during the third quarter of 2025, a 10.7% increase from the $13.6 million recorded for the three months ended September 2024.

As compared to the third quarter of 2024, Other service charges - other increased $0.9 million and Other Income increased $0.8 million.

For the nine months ended September 30, 2025 and 2024, total noninterest income was $14.4 million and $41.1 million, respectively.

Adjusting for the loss on securities, noninterest income totaled $42.3 million and $42.2 million for the nine months ended September 30, 2025 and 2024, respectively.

For the year to date periods, a $2.3 million decrease in SBA loan sale gains was offset by a $2.2 million increase Other service charges - other.

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

For the Three Months Ended June 30,

For the Six Months Ended June 30,

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

($ in thousands) 2025 2024 2025 2024

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Noninterest 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.

Total noninterest expenses totaled $60.2 million and $59.9 million for the three months ended September 30, 2025 and 2024, respectively, and $177.1 million and $177.3 million for the nine months ended September 30, 2025 and 2024, respectively.

Noninterest expense increased $0.4 million, or 0.6%, in the third quarter of 2025 compared to the prior year.

For the nine months ended September 30, 2025, total noninterest expenses decreased $0.2 million, or 0.1%.

This was primarily attributable a $0.8 million decrease in Professional fees, a $0.7 million decrease in Intangible amortization expense and a $0.5 million decrease in Credit card rewards and other bankcard expenses, partially offset by a $1.9 million increase in Total personnel expense and a $0.7 million increase in Data processing expense.

The following table presents the primary components of noninterest expenses.

For the Three Months Ended June 30,

For the Six Months Ended June 30,

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

($ in thousands) 2025 2024 2025 2024

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Total noninterest expense $ 60,211 $ 59,850 $ 177,087 $ 177,328

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.

We recorded income tax expense of $5.6 million and $3.9 million for the three months ended September 30, 2025 and 2024, respectively.

Our effective tax rate was 21.6% and 17.2% for the three months ended September 30, 2025 and 2024, respectively.

For the nine months ended September 30, 2025 and 2024, we recorded tax expense of $27.2 million and $18.6 million, resulting in effective tax rates of 22.2% and 20.4%, respectively.

FINANCIAL CONDITION

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.

Total assets at September 30, 2025 amounted to $12.8 billion, a $602.6 million, or 5.0%, increase from December 31, 2024 and was primarily related to higher loans, AFS securities and interest-bearing cash.

Total loans at September 30, 2025 were $8.4 billion, an increase of $324.5 million, or 4.0%, from December 31, 2024.

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

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

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 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.

At September 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 6.2% of the total portfolio at September 30, 2025, with the largest loan being $33.0 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 September 30, 2025.

Total investment securities were $2.7 billion at September 30, 2025, an increase of $117.3 million from December 31, 2024.

During the nine months ended September 30, 2025, the Company purchased $353.7 million and sold $194.3 million of investment securities.

A securities loss-earnback transaction occurred during the third quarter of 2025 in which $194.3 million of securities were sold at a loss of $27.9 million and $167.4 million of securities were purchased, with a weighted average yield of 4.83%.

The composition of our investment portfolio remained substantially the same at September 30, 2025 as at December 31, 2024, with the exception of U.S.

Treasuries and Mortgage-backed securities, which increased due to the aforementioned purchases and securities loss-earnback transaction, partially offset by paydowns.

The unrealized loss on AFS securities totaled $251.8 million at September 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 June 30, 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 September 30, 2025 and determined them to be of a temporary nature due primarily to interest rate factors and not credit quality

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

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.

Total deposits amounted to $10.9 billion at September 30, 2025, an increase of $350.6 million, or 3.3%, from December 31, 2024.

Brokered deposits decreased 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.

June 30, 2025 December 31, 2024

September 30, 2025 December 31, 2024

($ in thousands) Amount Percentage Amount Percentage

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Total deposits $ 10,881,170 100 % $ 10,530,525 100 %

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.

As of September 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 $682.7 million at September 30, 2025 which were collateralized by investment securities such that approximately 66.0% of our total deposits were insured or collateralized at that date.

Nonperforming Assets

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($ in thousands)

June 30, 2025 December 31, 2024

September 30, 2025 December 31, 2024

Nonperforming assets

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Allowance for credit losses to nonperforming loans 324.35 % 385.70 %

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.

As shown in the table above, total NPAs at September 30, 2025 increased to $39.0 million from year end and related primarily to the $5.5 million increase in Nonaccrual loans, partially offset by the $3.2 million decrease in Foreclosed real estate.

Commercial real estate - owner occupied is the largest category of nonaccrual loans, at $12.7 million, or 34.0%, followed by Commercial and industrial at $10.0 million, or 26.9%.

Included in various loan categories are nonaccrual SBA loans totaling $16.0 million at September 30, 2025, or 42.8% 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 10.1% to $59.1 million at September 30, 2025 compared to $65.8 million at December 31, 2024.

resulted primarily from improvements in Commercial real estate - non owner occupied loans of $8.8 million, partially offset by increases in Commercial real estate - owner occupied loans of $1.6 million and Residential 1-4 family real estate of $1.1 million.

Special mention loans decreased 31.10% to $25.6 million at September 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 $5.6 million, Commercial real estate - owner occupied loans, which decreased $3.4 million and Commercial and Industrial loans, which decreased $1.4 million.

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

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 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.

The total allowance for credit losses amounted to $120.9 million at September 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 September 30, 2025 was primarily related to the releases of $4.0 million and $9.5 million of the credit reserves arising from Hurricane Helene during the three and nine months ended September 30, 2025, respectively.

The ACL as a percent of loans at September 30, 2025 was 1.44%, 5 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 $674 million of loans outstanding.

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

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

($ in thousands) Balance

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Total $ 673,562

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 June 30, 2025.

The Company applied increased reserve rates based upon severe economic factors to the approximately $674 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 $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.

Additionally, the Company evaluated 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 $3.5 million as of September 30, 2025, adding 5 basis points to the overall ACL as a percent of total loans.

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) Six Months Ended June 30, 2025 Twelve Months Ended December 31, 2024 Six Months Ended June 30, 2024

($ in thousands) Nine Months Ended September 30, 2025 Twelve Months Ended December 31, 2024 Nine Months Ended September 30, 2024

Loans outstanding at end of period $ 8,419,224 $ 8,094,676 $ 8,013,538

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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 $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.

The allowance for unfunded commitments of $10.0 million and $9.1 million at September 30, 2025 and December 31, 2024, respectively, is classified on the consolidated balance sheets within "Other liabilities." The increase in the level of the allowance between periods was driven by an increase in balances of available lines of credit during the nine months ended September 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 June 30, 2025, the Company had the following sources of readily available borrowing capacity:

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

• A $1.4 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 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;

As of September 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 September 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 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.

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

• A line of credit of approximately $776.3 million through the Federal Reserve's discount window borrowing program, which was secured at September 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 $321.2 million and specific investment securities with a carrying value of $666.8 million.

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

Our overall on-balance sheet liquidity ratio was 18.2% at September 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 $2.3 billion in available lines of credit, was 36.1% as of June 30, 2025.

Our total liquidity ratio, including the $2.5 billion in available lines of credit, was 35.3% as of September 30, 2025.

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

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

As of September 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 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.

At September 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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The Federal Reserve has not advised us of any requirement specifically applicable to us.

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.

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

The capital ratios at September 30, 2025 decreased slightly as compared to 2024 year end ratios.

The decreases during the period were driven by loan growth, which carries a higher risk weight than short term investments.

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

June 30, 2025 December 31, 2024 Minimum required

September 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 June 30, 2025, the Bank exceeded the minimum ratios established by the regulatory authorities.

At September 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 8.83% at June 30, 2025 compared to 8.22% at December 31, 2024.

The TCE ratio was 9.12% at September 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) June 30, 2025 December 31, 2024

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

Reconciliation of Common Equity to TCE

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The Board of Directors renewed this authorization in January 2025.

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.

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

The dollar value of shares that may yet be repurchased under the program was $39.0 million as of September 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