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Item 7. Management’s Discussion and Analysis

2026-02-25 compared with 2025-02-26 · 134 added, 156 removed, 758 unchanged (28% of the section changed)

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We provide diversified financial services primarily though the Bank, our principal subsidiary, including commercial and consumer banking services, mortgage lending, SBA lending, accounts receivable financing, and investment advisory services.

As of December 31, 2024, the Bank had a 113 branch network in North Carolina and South Carolina and 1,371 full-time equivalent employees.

As of December 31, 2025, the Bank had 113 branches in North Carolina and South Carolina and 1,353 full-time equivalent employees.

We have grown organically as well as through strategic acquisitions as discussed previously in "Recent Developments and Acquisitions".

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• Return on average assets was 0.89% for the year ended December 31, 2025, as compared to 0.63% for the prior year.

Return on average common equity of 5.38% was reported for the year ended December 31, 2024, as compared to 8.05% for the prior year.

• Our total assets at December 31, 2024 were $12.1 billion, a 0.3% increase from a year earlier.

• Total loans outstanding contracted by $0.1 billion, or 0.7%, during the year.

Return on average common equity was 7.16% for the year ended December 31, 2025, as compared to 5.38% for the prior year.

As discussed below, the returns for 2025 and 2024 were impacted by securities loss transactions as well as Hurricane Helene provisions.

• Total assets at December 31, 2025 were $12.7 billion, a 4.3% increase from a year earlier.

• Total loans outstanding expanded by $0.6 billion, or 7.8%, during the year.

Loans totaled $8.7 billion at December 31, 2025.

• Credit quality continued to be strong with the NPA to total assets ratio at 0.39% as of December 31, 2024, as compared to 0.37% at December 31, 2023.

• Credit quality continued to be strong with the NPA to total assets ratio at 0.30% as of December 31, 2025, consistent with December 31, 2024.

Net charge offs as a percentage of average loans were 0.10% for 2025, as compared to 0.07% for the prior year.

• Capital remained strong with a total CET1 ratio of 14.35%, up from 13.20% for the prior year, and total risk-based capital ratio of 16.63% as of December 31, 2024, an increase from 15.54% for the prior year.

• We earned net income of $76.2 million, or $1.84 diluted EPS, during 2024 compared to net income of $104.1 million, or $2.53 diluted EPS, in 2023.

As noted below, 2024 results were dampened by a $13 million provision related to potential exposures from Hurricane Helene and a $36.8 million securities loss transaction that took place during the fourth quarter of 2024.

• Capital remained strong with a total CET1 ratio of 14.10%, down from 14.35% for the prior year, and total risk-based capital ratio of 16.12% as of December 31, 2025, a decrease from 16.63% for the prior year.

The decrease during 2025 in risk-based capital ratios was driven by loan growth, which carries a higher risk weight than short term investments, along with the repayment of $18.0 million of subordinated debt.

• Net income was $111.0 million, or $2.68 diluted EPS, for 2025 compared to net income of $76.2 million, or $1.84 diluted EPS, for 2024.

As noted below, 2025 results were impacted by $71.6 million of securities loss from transactions that took place during the third and fourth quarter of 2025 and the $11.1 million reversal of provision related to Hurricane Helene throughout the year.

See the following for discussion of changes to net income:

• Net interest income for 2024 decreased $14.6 million, or 4.2%, driven by increased interest expense offset by higher interest income.

The NIM on a tax-equivalent basis was 2.91% for 2024, a decrease of 15 basis points from the prior year.

Despite the growth in average earning assets, the market-driven increase in rates on liabilities in the first half of 2024 occurred at a more rapid pace than the increase in yields on assets which resulted in the reduction in NIM for 2024.

• Net interest income for 2025 increased $66.0 million, or 19.9%, driven by increased interest income and lower interest expense.

The NIM was 3.40% for 2025, an increase of 51 basis points from the prior year.

• Total interest income increased $38.0 million in 2025 as compared to 2024, driven by higher interest income on loans of $21.1 million related to a combination of higher volumes of average balances and increased yields.

Interest income on other interest-earning assets, primarily overnight funds, increased $12.8 million, primarily the result of higher volumes.

• The 2024 increase in interest expense of $44.9 million was driven by higher market rates in late 2023 and the first half of 2024 which resulted in repricing of our deposits and a corresponding $57.2 million increase in interest expense, especially in money market accounts which accounted for $47.9 million of the increase.

Offsetting the increase in interest expense on deposits was a reduction in interest expense on borrowings, which fell $12.4 million, primarily a result of lower average balances of borrowings outstanding.

• Provision for credit losses for 2024 of $16.4 million was down from $17.8 million in 2023 due primarily to the initial provision established for acquired non-PCD loans of $12.2 million in 2023,

lower organic loan growth in 2024 and generally positive updated economic forecasts, which are a key driver in the Company's CECL model as discussed further in the "Provision for Loan Losses" section below, and a reduction in the level of unfunded commitments.

This was partially offset by the $13 million provision related to potential exposure from Hurricane Helene in 2024.

• Noninterest income declined $39.4 million in 2024, which resulted primarily from the $38.0 million securities loss, $36.8 million of which was related to a securities loss-earnback transaction that took place in the fourth quarter of 2024.

Interest income on securities increased $20.5 million, primarily the result of increased yields driven by the securities loss-earnback transactions in late 2024 and the second half of 2025.

• Interest income on other interest-earning assets, primarily overnight funds, decreased $3.7 million, primarily the result of lower volumes along with the decrease in the federal funds rate.

• The 2025 decrease in interest expense of $28.0 million was driven by lower money market rates in late 2025, which resulted in repricing of our deposits and a corresponding $19.6 million decrease in

deposit interest expense, especially in money market accounts which accounted for $7.4 million of the decrease.

Additionally, interest expense on borrowings fell $8.4 million, primarily the result of average balances on outstanding borrowings.

• Provision for credit losses for 2025 of $11.5 million was down from $16.4 million in 2024 due primarily to the $13.0 million provision related to potential exposure from Hurricane Helene in 2024.

Offsetting this was higher net charge offs in 2025, provisions for higher loan growth in 2025 and an increase in the level of unfunded commitments.

See the "Provision for Loan Losses" section below.

• Noninterest income declined $25.8 million in 2025, which resulted primarily from the $71.6 million securities loss related to securities loss-earnback transactions that took place in the third and fourth quarter of 2025.

Noninterest income in 2024 included a securities loss of $38.0 million related to a securities loss-earnback transactions that took place in the fourth quarter of 2024.

Refer to "Noninterest Income" section below for further discussion.

• Noninterest expense decreased $18.8 million in 2024, primarily related to the GrandSouth acquisition completed January 1, 2023, which resulted in merger and acquisition expense of $13.7 million in 2023.

In 2024, the Company actively managed headcount and applied additional expense controls.

• Noninterest expense increased $3.7 million in 2025, primarily related to the $4.2 million increase in Total personnel expense driven by increased incentives expense arising from the Company's performance.

In 2024 and 2025, the Company actively managed headcount and continued to apply additional expense controls.

Refer to "Noninterest Expense" section below for further discussion.

• Income tax expense was down $5.9 million from the prior year relative to lower pre-tax income.

The 2024 effective tax rate of 22.3% was up from the prior year as the result of incremental state tax-related expenses recorded in 2024 relating to prior years.

• Income tax expense increased $6.6 million from the prior year primarily resulting from higher pre-tax income.

The 2025 effective tax rate of 20.4% was lower than the prior year as the result of net discrete tax benefits, primarily arising from state taxes, including the continued North Carolina graduated tax rate reductions.

Current Economic Conditions

Recent economic activity has shown resilience with generally positive domestic results, low unemployment and increased demand for goods and services.

While inflationary pressures continue, monetary policy actions taken by the Federal Reserve over the last three years have resulted in a lower inflation rate in 2024.

A mix of positive and negative economic indicators remained present at the end of 2024 and there continues to be some uncertainty in economic conditions, and as such, we could be subject to ongoing risks, which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations.

Economic conditions during 2025 continued to show resilience, supported by generally positive domestic results, relatively low unemployment and sustained demand for goods and services.

Inflationary pressures moderated further compared to prior periods, reflecting the impact of monetary policy actions taken by the Federal Reserve in recent years.

However, a combination of positive and negative economic indicators persisted throughout 2025 and there continues to be some uncertainty in economic conditions and outlook.

As such, we could be exposed to ongoing risks, which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations.

Our financial position and results of operations are susceptible, among other factors, to the ability of our loan customers to meet their loan obligations to us, the availability of our workforce, the availability of our vendors, and the volatility in the value of assets held by us or securing our loans.

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Certain policies inherently have a greater reliance on the use of estimates, assumptions, or judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported.

We have identified the determination of our ACL and related Allowance for Unfunded Commitments, as well as business combinations, related fair value measurements and goodwill determination to be the accounting areas that require the most subjective or complex judgments, estimates, and assumptions, and where changes in those judgments, estimates, and assumptions (based on new or additional information, changes in the economic climate and/or market interest rates, etc.) could have a significant effect on our financial statements.

our financial statements.

See the "Allowance for Credit Losses, Allowance for Unfunded Commitments, and Loan Loss Experience" discussion in the Financial Condition section of Management's Discussion and Analysis.

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To the extent actual outcomes differ from management estimates, additional provision for loan losses could be required that could adversely affect our earnings or financial position in future periods.

Under the range of macroeconomic forecast scenarios considered as of December 31, 2025, use of a "downside"/ more pessimistic scenario would have resulted in an increase to the modeled allowance results of approximately $32 million.

This estimate reflects the sensitivity of the modeled allowance estimate to macroeconomic forecast data but does not consider other qualitative adjustments that could increase or decrease modeled loss estimates calculated using this alternative economic scenario.

PCD loans represent assets that are acquired with evidence of more than insignificant credit quality deterioration since origination at the acquisition date.

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The methodology is based on a loss rate approach that starts with the probability of funding based on historical experience.

Similar to the methodology discussed above

related to the loans receivable portfolio, adjustments are made to the historical losses for current conditions and reasonable and supportable forecasts.

Similar to the methodology discussed above related to the loans receivable portfolio, adjustments are made to the historical losses for current conditions and reasonable and supportable forecasts.

Additional information on the loan portfolio and ACL can be found in the sections of this Item 7 titled “Nonperforming Assets” and “Allowance for Credit Losses and Loan Loss Experience” below.

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Non-PCD loans acquired are generally estimated at fair value using a discounted cash flow approach with assumptions of discount rate, remaining life, prepayments, probability of default, and loss given default.

The actual cash flows on these loans could differ materially from the fair value estimates.

cash flows on these loans could differ materially from the fair value estimates.

The amount we record as the fair values for the loans is generally less than the contractual unpaid principal balance due from the borrowers, with the difference being referred to as the “discount” on the acquired loans.

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We believe that the accounting for goodwill also involves a higher degree of judgment than most other significant accounting policies.

Goodwill arising from business combinations represents the excess of the purchase price over the sum of the estimated fair values of the tangible and identifiable intangible assets acquired less the estimated fair

value of the liabilities assumed.

Goodwill has an indefinite useful life and is evaluated for impairment annually or more frequently if events and circumstances indicate that the asset might be impaired.

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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 amounted to $332.3 million in 2024, a decrease of $14.6 million, or 4.2%, from $346.8 million in 2023.

The decrease was primarily due to the increase in rates on interest-bearing deposits, specifically money market accounts, partially offset by lower interest expense on borrowings, a result of lower average balances on borrowings.

Partially offsetting the increased interest expense was increased interest income, primarily the result of higher average balances on interest-bearing assets.

Within interest-bearing assets, interest income was positively impacted by growth in the average balances of loans and other interest-earning assets, primarily overnight funds, partially offset by lower average balances on taxable securities.

In line with the lower net interest income related to the increase in the cost of interest-bearing liabilities was the compression of our NIM which, on a tax-equivalent basis, declined to 2.91% in 2024 from 3.06% in 2023.

For internal purposes, we evaluate our NIM on a tax-equivalent basis by adding the tax benefit realized from tax-exempt loans and securities to reported interest income, then dividing by total average earning assets.

Net interest income amounted to $398.2 million in 2025, an increase of $66.0 million, or 19.9%, from $332.3 million in 2024.

The increase was primarily due to the increase in yields on securities, partially a result of the securities loss-earnback transactions in 2025 and 2024, and the higher volume and yields of average loans outstanding.

Additionally, interest expense decreased, primarily due the lower rates on interest-bearing deposits, specifically money market accounts, partially offset by the higher volume of average money market account balances.

The average rate on borrowings decreased due to the payoff of borrowings with higher interest rates as well as borrowings with variable interest rates decreasing after the FOMC actions in 2024 and 2025.

As a result of the higher net interest income related to the increase in the yield on interest-bearing assets and the decrease in the cost of interest-bearing liabilities, NIM expanded 51 basis points to 3.40% in 2025 from 2.89% in 2024.

For internal purposes, we evaluate our NIM on a tax-equivalent basis, 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 on a tax-equivalent basis is useful and appropriate because it allows a comparison of net interest in different periods without taking into account the different mix of taxable versus non-taxable loans and investments that may have existed during those periods.

The following is a reconciliation of reported net interest income to tax-

equivalent net interest income and the resulting NIM as reported and on a tax-equivalent basis.

The following is a reconciliation of reported net interest income to tax-equivalent net interest income and the resulting NIM as reported and on a tax-equivalent basis.

($ in thousands) Year ended December 31,

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Our total cost of deposits has been more impacted by the FOMC's changes in short term rates than the yield on our interest-earning assets.

The target federal funds rate peaked at 5.50% in July 2023 and remained there until beginning to decrease in September 2024, falling a total of 100 basis points by the end of 2024, helping to increase our NIM (tax-equivalent) to 3.07% in the fourth quarter of 2024 .

As shown in the chart below, our NIM (tax-equivalent) has grown 27 basis points since its recent low for the first quarter of 2024.

This NIM (tax-equivalent) expansion is the result of our yield on interest-earning assets continuing to earn at higher rates, increasing 11 basis points during the same period, while our total cost of deposits peaked in the third quarter of 2024, declining to 1.57% for the fourth quarter of 2024.

First Bancorp Comparison of Net Interest Margin (Tax-Equivalent),

The target federal funds rate began 2024 at 5.50% and remained there until September 2024, when it was reduced a total of 100 basis points by the end of 2024, helping to increase our NIM to 3.05% in the fourth quarter of 2024.

In the second half of 2025, after a pause in rate changes, the FOMC made further rate changes, resulting in an additional 75 basis point decrease.

As shown in the chart below, our NIM has grown consistently since the first quarter of 2024.

This NIM expansion is the result of our yield on interest-earning assets continuing to earn at higher rates, increasing 41 basis points during the same period, while our total cost of deposits peaked in the third quarter of 2024, then declined 44 basis points to 1.32% for the fourth quarter of 2025.

First Bancorp Comparison of Net Interest Margin,

Yield on Earning Assets and Total Cost of Deposits

Eight Quarters Ended December 31, 2025

Our NIM for all periods presented below benefited from the net accretion income arising from purchase accounting premiums/discounts associated with acquisitions.

Our NIM for all periods presented below 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 year presented.

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

Alternately, levels of accretion will increase as a result of acquisitions and related additions to loan discounts on acquired portfolios which are accreted to income as experienced in 2023 with the GrandSouth acquisition.

Alternately, levels of accretion will increase as a result of future acquisitions and related additions to loan discounts on acquired portfolios which are accreted to income as experienced since 2023 with the GrandSouth acquisition.

At December 31, 2025 and 2024, unaccreted loan discount on purchased loans amounted to $8.8 million and $15.1 million, respectively.

The GrandSouth acquired portfolio comprises the majority of the remaining unaccreted loan discount at December 31, 2024.

The following table presents the major components of the net interest income and NIM.

The GrandSouth acquired portfolio comprised the majority of the remaining unaccreted loan discount at December 31, 2025.

The following table presents the major components of net interest income and NIM.

Average Balances and Net Interest Income Analysis

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(2) Includes accretion of discount on acquired loans of $6.1 million, $8.9 million, and $11.5 million in 2025, 2024, and 2023, respectively.

(3) Includes tax-equivalent adjustments of $3.0 million, $2.7 million and $2.8 million in 2024, 2023, and 2022, respectively, to reflect the federal and state tax benefit that we receive related to tax-exempt securities and tax-exempt loans, which carry interest rates lower than similar taxable investments/loans due to their tax exempt status.

This amount has been computed assuming a 23% tax rate and is reduced by the related nondeductible portion of interest expense.

The following table presents additional detail regarding the estimated impact that changes in loan and deposit volumes and changes in the interest rates we earned/paid had on our net interest income in 2024 and 2023.

(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.

The following table presents additional detail regarding the estimated impact that changes in interest-earning asset and interest-bearing liability volumes and changes in the interest rates we earned/paid had on our net interest income in 2025 and 2024.

Volume and Rate Variance Analysis

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($ in thousands) Changes

in Volumes Changes

in Volume Changes

in Rates Total

(Decrease) Changes

in Volumes Changes

in Volume Changes

in Rates Total

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Note - Changes attributable to both volume and rate are allocated equally between rate and volume variances.

Overall, as demonstrated in the above table, net interest income contracted $14.6 million in 2024.

Higher rates on interest-bearing liabilities were partially offset by higher rates on interest-earning assets and higher earning asset volumes.

• For 2024, higher market rates contributed to an additional $14.6 million of loan interest income while higher loan volume resulted in a $7.8 million increase in interest income.

Variable rate loans comprised approximately 23% of the loan portfolio at December 31, 2024, and, accordingly, the magnitude of the immediate yield impact we experience from each rate change is limited.

• Decreases in the overall volume of average investment securities, partially offset by higher yields on the portfolio, resulted in decreased interest income of $4.8 million in 2024.

• Higher volumes on other interest-earning assets (primarily interest-bearing cash balances) along with higher yields resulted in an increase in interest income of $12.8 million for the year.

• The increase of $57.2 million in interest expense on deposits was driven by higher rates on accounts as we repriced deposits during late 2023 and the start of 2024 in response to the market increases and to retain and grow deposits to meet our funding needs, combined with higher volumes, primarily in money market deposit accounts.

• Lower levels of borrowings, historically short-term FHLB advances to fund loan demand and deposit fluctuations, contributed $12.6 million to the decrease in borrowings interest expense, which, in total, decreased $12.4 million in 2024.

As demonstrated in the above table, net interest income expanded $66.0 million in 2025.

Higher rates and volumes on interest-bearing assets and lower rates on interest-bearing liabilities were partially offset by higher money market volume.

• For 2025, higher loan volume resulted in a $13.2 million increase in interest income while increased market rates contributed to an additional $7.9 million of loan interest income.

Variable rate loans comprised approximately 29% of the loan portfolio at December 31, 2025, and, accordingly, the magnitude of the immediate yield impact we experience from each federal funds rate change is limited.

• Increases in the overall yield on average investment securities, along with somewhat higher volumes, resulted in increased interest income of $20.5 million in 2025.

During 2025, $585.1 million of AFS securities were purchased with a weighted average yield of 4.13%.

• Lower volumes of other interest-earning assets (primarily interest-bearing cash balances) along with lower yields resulted in a decrease in interest income of $3.7 million for the year.

• The decrease of $19.6 million in interest expense on deposits was driven by lower rates on accounts as we repriced deposits in response to the market decreases, partially offset with higher volumes, primarily in money market deposit accounts.

• Lower balances on short-term borrowings, historically comprised of short-term FHLB and Federal Reserve advances to fund loan demand in excess of deposit growth, contributed $7.1 million to the decrease in borrowings interest expense, which, in total, decreased $8.4 million in 2025.

Provision for Credit Losses and Provision for Unfunded Commitments

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

The provision recorded in each period represents the amount required such that the total ACL reflects the current estimate of life of loan credit losses in the loan portfolio and the allowance for unfunded commitments

reflects the current expected losses on unfunded loan commitments that are expected to result in outstanding loan balances.

The provision recorded in each period represents the amount required such that the total ACL reflects

the current estimate of life of loan credit losses in the loan portfolio and the allowance for unfunded commitments reflects the current expected losses on unfunded loan commitments that are expected to result in outstanding loan balances.

Our estimate of credit losses is determined using a complex model that relies on reasonable and supportable forecasts and historical loss information to determine the balance of the ACL and allowance for unfunded commitments.

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The amount of provision recorded in each period was the amount required such that the total ACL reflected the appropriate balance as determined under the CECL model.

The primary contributor to the lower provision in 2024 was the initial provision established for acquired non-PCD loans of $12.2 million recorded in 2023 as a result of the acquisition of GrandSouth.

The provision for loan losses for 2024 included $13 million related to potential credit exposure from Hurricane Helene.

The primary contributor to the reduction in provision expense was the $13.0 million related to potential credit exposure from Hurricane Helene recognized in 2024.

We subscribe to a third-party service which provides quarterly macroeconomic scenarios for the United States economy.

For 2025, we continue to utilize the baseline forecast, which incorporates an equal probability of the United States economy performing better or worse than the projection.

The economic forecasts throughout the year have exhibited general stability of the economy demonstrated in relatively low unemployment rates, solid GDP, relatively stable consumer and producer price indices, and mixed results for real estate price indices for commercial and residential properties.

These improving economic projections translated to lower forecasted losses in our loan portfolio and, thus a lower estimated ACL, exclusive of portfolio growth and the reserves related to Hurricane Helene.

Also under the CECL method, in 2024 we recorded a reduction in the provision for unfunded commitments of $2.3 million compared to a reduction of $1.9 million for 2023.

The economic forecasts throughout the year have exhibited general stability of the economy demonstrated in relatively low unemployment rates, healthy GDP levels, and mixed results for real estate price indices for commercial and residential properties.

During 2025 we recorded a provision for unfunded commitments of $1.9 million compared to a reduction of $2.3 million for 2024.

Changes in the level of provision each year are generally related to fluctuations in the level of available credit lines and updated loss drivers.

Within the portions of Western North and South Carolina that were significantly impacted by Hurricane Helene, the Company identified borrowers with approximately $744 million of loans outstanding as of December 31, 2024.

The Company continues to update analyses to identify impacts from the storm and has applied increased reserve rates based upon severe economic factors to the loans in the path of Helene.

Additionally, the Company continues to evaluate the largest commercial loans in that population 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 for potential exposure from Hurricane Helene was $13.0 million and added 16 basis points to the Allowance for Credit Losses as of December 31, 2024.

In the portions of Western North and South Carolina that were significantly impacted by Hurricane Helene in third quarter of 2024, the Company identified borrowers who were potentially impacted.

During 2025, the Company evaluated the commercial loan portfolio and adjusted risk ratings and nonaccrual status as applicable.

Therefore, for those relationships, the normal reserving process was applied for December 31, 2025.

For the potentially impacted consumer loans, the Company applied increased reserve rates based upon severe economic factors to the approximately $268 million of loans (primarily Residential 1-4 family real estate) in the most impacted path of Hurricane Helene.

Due to the potential exposure from Hurricane Helene, the ACL on these impacted consumer loans was $1.9 million as of December 31, 2025, adding 2 basis points to the overall ACL as a percent of total loans, which was 1.42% as of December 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 and Loan Loss Experience" sections following.

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Our noninterest income amounted to $7.9 million in 2025, $17.9 million in 2024, and $57.3 million in 2023.

The decreased noninterest income for the year ended December 31, 2024 as compared to the same period in 2023 is a result of "Securities losses, net" in 2024 and lower "Other income, net," partially offset by increased "SBA loan sale gains." Details of the more significant components of noninterest income are presented in the table below.

For the year ended December 31, 2024, the change in "Other income, net" was related to the timing of the recognition of gain and loss from other investment activity, which does not include AFS or HTM securities.

The decreased noninterest income for the year ended December 31, 2025 as compared to the same period in 2024 is a result of increased "Securities losses, net," partially offset by increased "Other gains, net." Details of the more significant components of noninterest income are presented in the table below.

Noninterest Income

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Service charges on deposit accounts decreased $0.4 million, or 2.3%, in 2025 as compared to 2024.

Other service charges and fees - bankcard interchange income, net represents interchange income from debit and credit card transactions, net of associated interchange expense and amounted to $9.3 million in 2024, a 0.1% decrease from the $9.3 million in 2023.

Other service charges and fees - bankcard interchange income, net represents interchange income from debit and credit card transactions, net of associated interchange expense and amounted to $9.5 million in 2025, a 1.7% increase from the $9.3 million in 2024.

Other service charges - other includes items such as ATM charges, wire transfer fees, safety deposit box rentals, fees from sales of personalized checks, and check cashing fees.

Also included in this category are SBA guarantee servicing fees and related servicing rights amortization which fluctuate based on the volume of and prepayment speeds on SBA loans serviced for others.

The increase in this item in 2024 was of $0.2 million, or 1.5%.

The increase in this category in 2025 was $2.1 million, or 15.9%.

Securities losses, net was $71.6 million in 2025.

Of this balance, $36.8 million related to a securities loss-earnback transaction from the fourth quarter in which the Company sold $283.8 million of AFS securities bearing 1.62% at a loss of approximately $36.8 million and a purchased a total of $494.9 million in AFS securities bearing 5.21%.

$27.9 million of this loss relates to a securities loss-earnback transaction from the third quarter in which the Company sold $194.3 million of AFS securities bearing 1.63% at a loss.

Additionally, $43.7 million of this loss relates to a securities loss-earnback transaction from the fourth quarter in which the Company sold $342.0 million of AFS securities bearing 1.67% at a loss.

Other gains, net amounted to a net gain of $8.7 million for 2025.

For 2022, the balance consisted primarily of death benefits realized on BOLI policies which were nominal in 2023 and 2024.

The decline from 2023 to 2024 was primarily driven by SBA consulting fees, which declined from $2.6 million in 2022 to $0.3 million in 2024 as the Company ceased offering these services in early 2024.

The majority of the increase from the prior year related to a pretax gain of $4.6 million realized upon the sale of an office building during the fourth quarter.

Noninterest Expenses

Total noninterest expenses totaled $239.3 million, $235.6 million, and $254.4 million, for 2025, 2024, and 2023, respectively.

The primary contributors to the $18.8 million decrease for the year ended December 31, 2024 as compared to the same period in 2023 were the $13.7 million of "Merger and acquisition expenses" recorded in 2023 and the $1.9 million decrease in "Non-credit losses." For the year ended December 31, 2024, there was an overall effort by management to actively control headcount and expenses.

The primary contributors to the $3.7 million, or 1.6%, increase for the year ended December 31, 2025 as compared to 2024 was the $4.2 million increase in Total personnel expense arising from increased incentives due to the Company's financial performance, partially offset by the $0.9 million decrease in Amortization of intangible assets.

For the year ended December 31, 2025, there was a continued overall effort by management to actively control headcount and expenses.

The following table presents the primary components of noninterest expense.

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Intangibles amortization expense 5,672 6,604 8,003

Foreclosed property (gains) losses, net (245) (150) (372)

Foreclosed real estate (gains) losses, net 261 (245) (150)

Other operating expenses 20,208 20,491 20,877

Total noninterest expense $ 239,310 $ 235,607 $ 254,379

Noninterest expenses decreased 7.4% from 2023 to 2024.

The decrease was driven by the merger and acquisition expenses of $13.7 million recorded in 2023 related to the acquisition of GrandSouth along with other elevated expenses from the acquisition.

Non-credit losses decreased $1.9 million as compared to the prior year driven by the implementation of additional measures to detect and prevent losses that led to a decrease in check fraud losses for 2024.

Impacting noninterest expense in 2023 were increases for software costs related to the GrandSouth acquisition, including the transition of new customers.

These costs did not continue in 2024.

Occupancy and equipment expense in 2023 included elevated expenses related to building repairs and maintenance.

Offsetting the previously discussed decreases in noninterest expenses, was the increase in credit card rewards and other bankcard expenses, which were related to higher volumes of customer accounts and transactions.

We recorded income tax expense of $28.5 million in 2025, $21.9 million in 2024, and $27.8 million in 2023.

Our effective tax rates were at 22.3% for 2024, 21.1% for 2023, and 20.7% for 2022.

The slight increase in effective tax rate for 2023 was attributable primarily to merger and acquisition expenses recorded resulting in non-deductible adjustments for tax purposes.

The higher effective tax rate for 2024 was attributable primarily to incremental state tax-related expense related to prior years, changes in state tax income apportionment, and the negative impact of decreasing deferred tax assets related to the North Carolina corporate income tax reduction effective January 1, 2025 and for future years.

Our effective tax rates were 20.4% for 2025, 22.3% for 2024, and 21.1% for 2023.

The effective tax rate for 2025 included approximately $2.1 million of net discrete tax benefits, primarily arising from state taxes, including the continued North Carolina graduated tax rate reductions.

The effective tax rate for 2024 included incremental state tax-related expense related to prior years, changes in state tax income apportionment, and the negative impact of

decreasing deferred tax assets related to the North Carolina corporate income tax reduction effective January 1, 2025 and for future years.

ANALYSIS OF FINANCIAL CONDITION AND CHANGES IN FINANCIAL CONDITION

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The majority of our loan portfolio is within our North Carolina and South Carolina market areas.

We also have a portfolio of SBA loans that have been made on a nationwide basis.

We also have a portfolio of SBA loans that have been made on a more dispersed geographic basis.

The diversity of the economic bases of our market areas has historically provided a stable lending environment.

Total loans amounted to $8.1 billion at December 31, 2024, a decrease of $55.4 million, or 0.7%, from December 31, 2023.

Total loans amounted to $8.7 billion at December 31, 2025, an increase of $627.7 million, or 7.8%, from December 31, 2024.

The following table provides a summary of the loan portfolio composition at each of the past five year ends.

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The majority of our loan portfolio over the years has been real estate mortgage loans, including commercial and residential mortgages.

All loan categories secured by real estate, including construction and land loans, have historically ranged from approximately 82% to 90% of the loan portfolio.

Except for construction, land development, and other land loans, the majority of our real estate loans are personal and commercial loans where cash flow from the borrower’s occupation or business is the primary repayment source, with the real estate pledged providing a secondary repayment source.

Except for construction, land development, and other land loans, the majority of our real estate loans are primarily supported by cash flows from the borrower’s occupation or business, with the real estate pledged providing a secondary repayment source.

The largest component of our portfolio is non-owner occupied commercial real estate loans, followed by residential 1-4 family real estate and owner occupied commercial real estate loans.

As demonstrated in the table above, while there have been some variations in the relative percentage of each loan category to the total portfolio over the years, the nature of our portfolio has not changed drastically from the prior year or the historical averages.

The higher percentage for commercial and industrial loan category in 2020 was an anomaly related to PPP loans made under the provisions of the CARES Act, which were forgiven in accordance with the PPP loan provisions starting in late 2020 and through early 2022.

A summary of scheduled loan maturities, based on contractual maturity dates, over certain time periods is presented below, with fixed rate loans and adjustable rate loans shown separately.

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Approximately 12% of our accruing loans outstanding at December 31, 2025 mature within one year and 61% of total loans mature within five years.

As of December 31, 2024, the percentages of variable rate loans and fixed rate loans as compared to total performing loans were 23% and 77%, respectively.

During 2024, the Company continued to focus on shifting more loans to variable rates as the mix was 19% variable and 81% fixed at December 31, 2023.

While fixed rate loans present market interest rate risk, we measure our interest rate risk closely.

During 2025, the Company continued to focus on shifting more loans to variable rates.

As of December 31, 2025, the percentages of variable rate loans and fixed rate loans as compared to total performing loans were 29% and 71%, respectively, compared to 23% variable and 77% fixed at December 31, 2024.

While fixed rate loans present market interest rate risk, we monitor our interest rate risk closely.

Refer to additional discussion in the section “Interest Rate Risk” below.

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Nonperforming Assets

NPAs include nonaccrual loans, modifications to borrowers in financial distress, loans past due 90 or more days and still accruing interest, foreclosed real estate and, prior to the adoption of ASU 2022-02, accruing TDRs.

NPAs include nonaccrual loans, loans past due 90 days or more and still accruing interest, foreclosed real estate and, prior to the adoption of ASU 2022-02, accruing TDRs.

Nonaccrual loans are loans on which interest income is no longer being recognized or accrued because management has determined that the collection of interest is doubtful.

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As a matter of policy, we generally place all loans that are past due 90 or more days on nonaccrual basis.

There were no accruing loans that were past due 90 or more days at December 31, 2024 and December 31, 2023.

In some cases, where borrowers are experiencing financial difficulties, loans may be restructured to provide terms significantly different from the originally contracted terms.

There were no accruing loans that were past due 90 days or more at December 31, 2025 and December 31, 2024.

The following table summarizes our NPAs at the dates indicated.

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Nonaccrual loans $ 36,315 $ 31,779 $ 32,208 $ 28,514 $ 34,696

Modifications to borrowers in financial distress 10,173 11,719 — — —

TDRs - accruing — — — 9,121 13,866

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Additional discussion of the credit quality classification status of our loans is contained in Note 4 to our consolidated financial statements.

"Commercial and industrial" is the largest category of nonaccrual loans, at $9.8 million, or 30.9% of total nonaccrual loans, followed by "Residential 1-4 family real estate" at $9.5 million, or 29.9% of total nonaccrual loans and "Commercial real estate - owner occupied" at $9.4 million, or 29.5% of total nonaccrual loans.

"Commercial real estate - owner occupied" is the largest category of nonaccrual loans, at $13.5 million, or 37.1% of total nonaccrual loans, followed by "Commercial and industrial" at $9.1 million, or 25.1% of total nonaccrual loans, and "Residential 1-4 family real estate" at $5.9 million, or 16.3% of total nonaccrual loans.

As of December 31, 2025, SBA loans accounted for approximately $14.8 million of our nonaccrual loans, or 9.1%, of the total SBA portfolio, and carried guarantees from the SBA totaling $7.3 million.

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Total foreclosed real estate amounted to $1.4 million at December 31, 2025, compared to $5.0 million in 2024.

Nine properties were added to foreclosed real estate during 2024 and we completed the sale of five properties during the year.

Two of the 2024 additions were within the population that sold in 2024.

Six properties were added to foreclosed real estate during 2025 and we completed the sale of nine properties during the year.

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

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

As discussed previously in the "Provision for Credit Losses and Provision for Unfunded Commitments" section, much of the change to the level of ACL during the year ended December 31, 2024 resulted from the provision of $13.0 million related to potential impact from Hurricane Helene.

The ACL as a percent of loans at December 31, 2024 was 1.51%, 16 basis points of which was attributable to the potential impact from Hurricane Helene.

Within the portions of Western North and South Carolina that were significantly impacted by Hurricane Helene, the Company identified borrowers with approximately $744 million of loans outstanding.

The following is a summary of the categories of those loans outstanding as of December 31, 2024:

($ in thousands) Balance

Commercial and industrial $ 10,543

Construction, development & other land loans 24,891

Commercial real estate - owner occupied 96,412

Commercial real estate - non owner occupied 287,076

Multi-family real estate 25,424

Residential 1-4 family real estate 262,166

Home equity loans/lines of credit 37,472

Consumer loans —

Total $ 743,984

The Company continues to update analyses to identify impacts from the storm and has applied increased reserve rates based upon severe economic factors to the loans in the path of Helene.

The ACL reflects our estimate of life of loan expected credit losses that will result from the inability of our borrowers to make required loan payments.

We use systematic methodologies to determine the ACL for loans and the allowance for certain off-balance-sheet credit exposures.

In the portions of Western North and South Carolina that were significantly impacted by Hurricane Helene in third quarter of 2024, the Company identified borrowers who were potentially impacted.

During 2025, the Company evaluated the commercial loan portfolio and adjusted risk ratings and nonaccrual status as applicable.

Therefore, for those relationships, for December 31, 2025, the normal reserving process was applied.

This compares to consumer and commercial loans totaling $744 million at December 31, 2024.

As of December 31, 2024, the ACL on these loans was $13.0 million, adding 16 basis points to the overall ACL as a percent of total loans, which was 1.51%.

The ACL reflects the best estimate of life of loan expected credit losses that will result from the inability of borrowers to make required loan payments.

Systematic methodologies are used to determine the ACL for loans and the allowance for certain off-balance-sheet credit exposures.

The ACL is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loan portfolio.

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The allocation of the ACL as presented in the following table is based on reasonable and supportable forecasts, historical data, subjective judgment, and estimates and therefore, may not be predictive of the specific amounts or loan categories in which charge-offs may ultimately occur.

In addition, bank regulatory authorities, as part of their periodic examination of the

Bank, may require adjustments to the provision for loan losses in future periods if, in their opinion, the results of their review warrant such additions.

In addition, bank regulatory authorities, as part of their periodic examination of the Bank, may require adjustments to the provision for loan losses in future periods if, in their opinion, the results of their review warrant such additions.

The following table sets forth the allocation of the ACL by loan category at the dates indicated.

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Consumer loans 3,965 5.88 % 3,497 4.95 % 2,992 4.37 % 2,900 4.78 % 2,656 4.64 %

Total allocated 122,572 109,853 90,967 78,789 52,175

Unallocated — n/a — n/a — n/a — n/a 213 n/a

Total $ 123,581 1.42 % $ 122,572 1.51 % $ 109,853 1.35 % $ 90,967 1.36 % $ 78,789 1.30 %

"% of Loan Category" represents the ACL as a percent of the respective total loan categories presented previously in the Loan Portfolio Composition table.

n/a - not applicable

For the years indicated, the following table summarized our net loss experience by loan category and key ratios demonstrating the asset quality trends over the most recent five years.

For the years indicated, the following table summarized the net loss experience by loan category and key ratios demonstrating the asset quality trends over the most recent five years.

Loan Ratios, Loss and Recovery Experience

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Average total securities during year, at amortized cost $ 2,919,710 $ 2,900,014 $ 3,216,327

The decrease in securities for the year ended December 31, 2024 was primarily due to regular principal repayments received on mortgage-backed securities as well as maturities of other securities.

Generally, we invested cash flows from amortizing investments in interest bearing cash deposits.

During 2025, we sold $536.3 million of securities, with a weighted average yield of 1.66% , at a loss of $71.6 million and we purchased $585.1 million of securities, with a weighted average yield of 4.35%.

Partially offsetting this loss was a $ 4.5 million gain on the sale of the Class B shares of Visa, Inc.

Also impacting the change in balances of AFS securities was the improvement in unrealized loss on AFS securities which was $194.1 million at December 31, 2025 as compared to $368.1 million at December 31, 2024.

Generally, we invested cash flows from amortizing investments in interest bearing cash deposits.

As a result of the securities loss-earnback transactions during 2025, the composition of the securities portfolio has shifted to having a higher percentage of variable rate securities as of December 31, 2025 compared to the prior year.

The composition of the investment securities portfolio reflects our investment strategy of maintaining an appropriate level of liquidity while providing a relatively stable source of income.

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Essentially all of our mortgage-backed securities, which include both AFS and HTM securities, are issued by GSEs or GNMA, and are traded in liquid secondary markets.

These securities are recorded on the balance sheet at fair value for the AFS portfolio and at cost for the HTM portfolio.

These securities are recorded on the balance sheet at fair value for the AFS portfolio and at amortized cost for the HTM portfolio.

The table below presents the composition, tax equivalent yields, and remaining maturities of our securities as of December 31, 2025.

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Yields on tax-exempt investments have been adjusted to a taxable equivalent basis using a 23.05% tax rate.

Nearly all of our $1.9 billion in AFS mortgage-backed securities at December 31, 2024 were issued by the FHLMC, FNMA, GNMA, or the SBA, each of which is a government agency or a GSE and guarantees the repayment of the securities.

Included in this total are private-label commerical mortgage-backed securities of $0.7 million.

Nearly all of our $1.9 billion in AFS mortgage-backed securities at December 31, 2025 were issued by the FHLMC, FNMA, GNMA, or the SBA, each of which is a GSE and guarantees the repayment of the securities.

Included in this total are private-label commercial mortgage-backed securities of $0.7 million.

Mortgage-backed securities vary in their repayment in correlation with the underlying pools of mortgage loans.

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Deposit growth for the year was entirely organic as there were no acquisitions during 2025.

Accounting for most of the growth during 2024, retail deposits grew $501.9 million, or 5.0%, from the prior year end.

During 2025, retail deposits grew $222.6 million, or 2.1%, from the prior year end.

Brokered deposits ended 2025 at $4.9 million.

We continue to have a diversified and granular deposit base which has remained a stable source of funding.

to have a diversified and granular deposit base which has remained a stable source of funding.

At December 31, 2025, noninterest-bearing deposits accounted for 32% of total deposits.

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On an individual account basis, there was a total of $159.9 million which was in excess of $250,000.

This assessment of time deposit accounts does not evaluate total deposit relationships, account ownership types or other factors for determining the actual uninsured balances by customer.

This presentation of time deposit accounts does not evaluate total deposit relationships, account ownership types or other factors for determining the actual uninsured balances by customer.

As of December 31, 2025 and December 31, 2024, the estimated uninsured deposits we held totaled approximately $4.3 billion and $4.1 billion, respectively.

As of December 31, 2024 and December 31, 2023, respectively, our insured were $6.4 billion, or 61.0% of total deposits, and $6.3 billion or 63.3% of total deposits.

When coupled with deposits collateralized by investment securities with balances totaling $690.5 million and $820.9 million as of December 31, 2024 and December 31, 2023, respectively, approximately 67.6% and 71.5% of our total deposits were insured or collateralized as December 31, 2024 and December 31, 2023, respectively.

As of December 31, 2025 and December 31, 2024, respectively, our insured deposits were estimated to be $6.5 billion, or 60.2% of total deposits, and $6.4 billion or 61.0% of total deposits.

When coupled with deposits collateralized by investment securities with balances totaling $730.4 million and $690.5 million as of December 31, 2025 and December 31, 2024, respectively, approximately 67.0% and 67.6% of our total deposits were insured or collateralized at December 31, 2025 and December 31, 2024, respectively.

We do not take deposits through foreign offices.

Deposits at December 31, 2025 from foreign depositors were nominal.

Although not the case as of December 31, 2024, we have historically utilized short-term borrowings to provide balance sheet liquidity and to fund imbalances in our loan growth compared to our deposit growth.

In addition, we have long-term debt in the form of trust preferred securities and subordinated debentures and have the availability to borrow from the FHLB or FRB.

Although none were outstanding as of December 31, 2025, short-term borrowings can be utilized to provide balance sheet liquidity and to fund imbalances in our loan growth compared to our deposit growth.

In addition, we have long-term debt in the form of trust preferred securities and have the availability to borrow from the FHLB or FRB.

Total borrowings at December 31, 2025 decreased $17.3 million from the prior year end.

Redemptions of FHLB advances comprised $280.0 million of the decrease and redemptions of FRB borrowings under the Bank Term Funding Program comprised $249.0 million of the decrease.

During the year, the Company redeemed $18.0 million of subordinated debentures.

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FHLB advances $ 753 $ 802

FRB borrowings — 249,000

Trust preferred capital issuances 77,324 77,324

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The Company issued $46.4 million of these securities with the balance assumed from acquisitions.

The $18.0 million of unsecured subordinated debentures are borrowings issued by GrandSouth which we acquired and which qualify as Tier II capital for regulatory capital adequacy requirements.

At December 31, 2025, the Company had several sources of readily available borrowing capacity:

• An existing borrowing capacity with the FHLB of approximately $1.4 billion which can be structured as either short-term or long-term borrowings, depending on the particular funding or liquidity need, and is secured by a blanket lien on most of our real estate loan portfolio, select investment securities, and our FHLB stock (of which $0.8 million and $280.9 million were outstanding at December 31, 2024 and December 31, 2023, respectively).

• Borrowing capacity with the FHLB of approximately $1.4 billion which can be structured as either short-term or long-term borrowings, depending on the particular funding or liquidity need, and is secured by a blanket lien on most of our real estate loan portfolio, select investment securities, and our FHLB stock (of which $0.8 million were outstanding at December 31, 2025 and December 31, 2024).

• Federal funds lines with several correspondent banks totaling $265.0 million which provide for overnight unsecured federal funds purchased (of which none were outstanding at December 31, 2025 and December 31, 2024);

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The increase in available lines of credit during 2025

was a result of the redemption of FHLB advances along with additional loan and security collateral being transferred to the FHLB and the Federal Reserve to enhance the levels of off-balance sheet liquidity.

was a result of additional loan and security collateral being transferred to the FHLB to enhance the levels of off-balance sheet liquidity.

We continue to manage liquidity sources and believe our liquidity sources, including unused lines of credit, are at an acceptable level and remain adequate to meet our operating needs in the foreseeable future.

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Non-qualified postretirement plan liabilities 575 1,179 1,148 3,883 6,785

Committed investment obligations 16,062 16,062 — — 32,124

Committed LIHTC investment obligations 36,363 70,473 1,775 2,245 110,856

Estimated interest expense on borrowings and time deposits (1)

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than 1 Year 1-3 Years 4-5 Years After 5 Years Total

$ — $ — $ — $ 312,222 $ 312,222

Lines of credit and loan commitments

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Capital Resources and Shareholders’ Equity

Shareholders’ equity at December 31, 2024 amounted to $1.4 billion, a $73.2 million, or 5.3%, incre ase from December 31, 2023.

Shareholders’ equity at December 31, 2025 amounted to $1.7 billion, a $208.6 million, or 14.4%, increase from December 31, 2024.

The two basic components that typically have the largest impact on our shareholders’ equity are net income, which increases shareholders’ equity, and dividends declared, which decreases shareholders’ equity.

Additionally, any stock issuances can significantly increase shareholders’ equity, including those associated

with acquisitions such as in 2023, and any stock repurchases reduce shareholders’ equity.

Finally, fluctuations in the amount of AOCI, generally driven by market interest rate changes resulting in increases or decreases in unrealized gains/losses on AFS securities, can have a significant impact on total equity.

Additionally, any stock issuances can significantly increase shareholders’ equity, including those associated with acquisitions such as in 2023, and any stock repurchases reduce shareholders’ equity.

Finally, fluctuations in the

amount of AOCI, generally driven by market interest rate changes resulting in increases or decreases in unrealized gains/losses on AFS securities, can have a significant impact on total equity.

In 2025, the most significant factors that impacted our shareholders' equity were (1) $111.0 million net income reported for 2025, which increased equity, (2) common stock dividends declared of $37.7 million, which reduced equity;

and (3) $132.7 million increase in equity related to changes in AOCI driven by lower unrealized losses on AFS securities.

As discussed in “Borrowings” above, we also currently have $77.3 million in trust preferred securities outstanding, all of which qualify as Tier I capital under regulatory standards and $18.0 million of unsecured subordinated debentures which qualify as Tier II capital for regulatory capital adequacy requirements.

As discussed in “Borrowings” above, we also currently have $77.3 million in trust preferred securities outstanding, all of which qualify as Tier I capital under regulatory standards.

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.

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At December 31, 2025, our leverage ratio was 11.21% compared to the regulatory well capitalized bank-level threshold of 4.00% and our total risk-based capital ratio was 16.12% compared to the 10.50% regulatory well capitalized threshold.

The increase in capital levels in 2024 was related to the growth in net income, reduction in risk weighted assets, and improvements in our AOCI unrealized losses on AFS securities, partially offset by the redemption of $10 million of subordinated debentures.

The decrease in regulatory capital ratios in 2025 was related to the increase in risk weighted assets and the redemption of $18 million of subordinated debentures, partially offset by retained net income.

In addition to regulatory capital ratios, we also closely monitor our ratio of TCE to tangible assets, which is a non-GAAP financial measure.

The TCE ratio was 8.22% at December 31, 2024 compared to 7.56% at December 31, 2023, with the increase of 66 basis points related primarily to the improvement in our AOCI unrealized loss on AFS securities included in equity.

The TCE ratio was 9.61% at December 31, 2025 compared to 8.22% at December 31, 2024, with the increase of 139 basis points related primarily to the improvement in our AOCI unrealized loss on AFS securities included in equity, partially a result of the securities loss-earnback transaction along with market improvements.

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

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Total risk-based capital ratio 16.12 % 16.63 % 15.54 % 15.09 % 14.67 %

Net interest margin 3.40 % 2.89 % 3.03 % 3.25 % 3.13 %

Net interest margin (taxable-equivalent basis) 3.42 % 2.93 % 3.06 % 3.28 % 3.16 %

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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-K

Item 7. Management’s Discussion and Analysis