FIRST BANCORP /NC/ 10-K

Item 8. Financial Statements and Supplementary Data First Bancorp Consolidated Balance Sheets ($ in thousands) December 31, 2025 December 31, 2024 Assets Cash and due from banks, noninterest-bearing $ 146,759 $ 78,596 Due from banks, interest-bearing 162,836 428,911 Total cash and cash equivalents 309,595 507,507 Securities available for sale (amortized cost of $ 2,242,678 and $ 2,411,117 , respectively) 2,048,556 2,043,062 Securities held to maturity (fair values of $ 448,452 and $ 428,571 , respectively) 513,099 519,998 Presold mortgages in process of settlement 7,790 5,942 Loans 8,722,419 8,094,676 Allowance for credit losses on loans ( 123,581 ) ( 122,572 ) Net loans 8,598,838 7,972,104 Premises and equipment, net 139,125 143,459 Accrued interest receivable 39,206 36,329 Goodwill 478,750 478,750 Other intangible assets, net 17,232 22,904 Bank-owned life insurance 193,286 188,460 Other assets 322,862 229,179 Total assets $ 12,668,339 $ 12,147,694 Liabilities Deposits Noninterest-bearing deposits $ 3,486,985 $ 3,367,624 Interest-bearing deposits 7,261,436 7,162,901 Total deposits 10,748,421 10,530,525 Borrowings 74,569 91,876 Accrued interest payable 3,747 4,604 Other liabilities 187,434 75,078 Total liabilities 11,014,171 10,702,083 Commitments and contingencies (see Note 12) Shareholders’ Equity Preferred stock, no par value per share. Authorized: 5,000,000 shares Issued & outstanding: none and none , respectively — — Common stock, no par value per share. Authorized: 60,000,000 shares Issued & outstanding: 41,466,227 shares and 41,347,418 shares, respectively 973,884 971,313 Retained earnings 829,659 756,327 Stock in rabbi trust assumed in acquisition ( 885 ) ( 1,148 ) Rabbi trust obligation 885 1,148 Accumulated other comprehensive income (loss) ( 149,375 ) ( 282,029 ) Total shareholders’ equity 1,654,168 1,445,611 Total liabilities and shareholders’ equity $ 12,668,339 $ 12,147,694 See accompanying notes to consolidated financial statements. 60 Table of Contents First Bancorp Consolidated Statements of Income Year Ended December 31, ($ in thousands, except per share data) 2025 2024 2023 Interest Income Interest and fees on loans $ 462,306 $ 441,181 $ 418,853 Interest on investment securities: Taxable interest income 68,055 47,510 52,276 Tax-exempt interest income 4,461 4,466 4,485 Other, principally overnight investments 22,413 26,083 13,330 Total interest income 557,235 519,240 488,944 Interest Expense Interest on deposits 152,518 172,085 114,866 Interest on borrowings 6,470 14,882 27,235 Total interest expense 158,988 186,967 142,101 Net interest income 398,247 332,273 346,843 Provision for credit losses 11,502 16,448 17,813 Net interest income after provision for credit losses 386,745 315,825 329,030 Noninterest Income Service charges on deposit accounts 16,237 16,620 16,800 Other service charges and fees 24,486 22,267 22,085 Presold mortgage loan fees and gains on sale 1,819 2,292 1,613 Commissions from sales of financial products 6,274 5,270 5,503 SBA loan sale gains 1,072 3,630 2,489 Bank-owned life insurance income 5,113 4,773 4,350 Securities losses, net ( 71,627 ) ( 37,981 ) — Other income, net 8,691 1,028 4,465 Total noninterest income ( 7,935 ) 17,899 57,305 Noninterest Expense Salaries incentives and commissions expense 119,478 113,853 114,415 Employee benefit expense 24,706 26,169 25,436 Total personnel expense 144,184 140,022 139,851 Occupancy and equipment expense 20,435 20,535 21,554 Merger and acquisition expenses — — 13,695 Intangibles amortization expense 5,672 6,604 8,003 Other operating expenses 69,019 68,446 71,276 Total noninterest expense 239,310 235,607 254,379 Income before income taxes 139,500 98,117 131,956 Income tax expense 28,452 21,902 27,825 Net income $ 111,048 $ 76,215 $ 104,131 Earnings per common share: Basic $ 2.68 $ 1.85 $ 2.54 Diluted 2.68 1.84 2.53 Weighted average common shares outstanding: Basic 41,196,459 41,021,475 40,746,772 Diluted 41,453,247 41,327,216 41,164,834 See accompanying notes to consolidated financial statements. 61 Table of Contents First Bancorp Consolidated Statements of Comprehensive Income (Loss) Year Ended December 31, ($ in thousands) 2025 2024 2023 Net income $ 111,048 $ 76,215 $ 104,131 Other comprehensive income (loss): Unrealized gains (losses) on securities available for sale: Unrealized holding gains (losses) arising during the period, pretax 102,306 ( 5,316 ) 43,343 Tax (expense) benefit ( 24,607 ) 2,043 ( 9,279 ) Reclassification to realized losses 71,627 37,981 — Tax benefit ( 16,508 ) ( 8,869 ) — Postretirement plans: Net (losses) gains arising during period ( 102 ) 111 ( 607 ) Tax benefit (expense) 23 ( 26 ) 141 Amortization of unrecognized net actuarial (losses) gains ( 111 ) 100 ( 545 ) Tax benefit (expense) 26 ( 23 ) 126 Reclassification of net actuarial losses due to settlement to realized losses — — 998 Tax benefit — — ( 232 ) Other comprehensive income (loss) 132,654 26,001 33,945 Comprehensive income (loss) $ 243,702 $ 102,216 $ 138,076 See accompanying notes to consolidated financial statements. 62 Table of Contents First Bancorp Consolidated Statements of Shareholders’ Equity ($ in thousands, except per share data) Common stock Retained earnings Stock in rabbi trust assumed in acquisition Rabbi trust obligation Accumulated other comprehensive income (loss) Total shareholders’ equity Shares Amount Balances, January 1, 2023 35,704 $ 725,153 $ 648,418 $ ( 1,585 ) $ 1,585 $ ( 341,975 ) $ 1,031,596 Net income 104,131 104,131 Cash dividends declared ($ 0.88 per common share) ( 36,129 ) ( 36,129 ) Change in Rabbi Trust Obligation 200 ( 200 ) — Equity issued pursuant to acquisition 5,033 229,489 229,489 Stock option exercises 237 4,519 4,519 Stock withheld for payment of taxes ( 23 ) ( 743 ) ( 743 ) Stock-based compensation 159 5,572 5,572 Other comprehensive income 33,945 33,945 Balances, December 31, 2023 41,110 963,990 716,420 ( 1,385 ) 1,385 ( 308,030 ) 1,372,380 Net income 76,215 76,215 Cash dividends declared ($ 0.88 per common share) ( 36,308 ) ( 36,308 ) Change in Rabbi Trust Obligation 237 ( 237 ) — Stock option exercises 192 4,094 4,094 Stock withheld for payment of taxes ( 38 ) ( 1,691 ) ( 1,691 ) Stock-based compensation 83 4,920 4,920 Other comprehensive income 26,001 26,001 Balances, December 31, 2024 41,347 971,313 756,327 ( 1,148 ) 1,148 ( 282,029 ) 1,445,611 Net income 111,048 111,048 Cash dividends declared ($ 0.91 per common share) ( 37,716 ) ( 37,716 ) Change in Rabbi Trust Obligation 263 ( 263 ) — Stock repurchases ( 25 ) ( 991 ) ( 991 ) Stock option exercises 84 1,491 1,491 Stock withheld for payment of taxes ( 39 ) ( 1,692 ) ( 1,692 ) Stock-based compensation 99 3,763 3,763 Other comprehensive income 132,654 132,654 Balances, December 31, 2025 41,466 $ 973,884 $ 829,659 $ ( 885 ) $ 885 $ ( 149,375 ) $ 1,654,168 See accompanying notes to consolidated financial statements. 63 Table of Contents First Bancorp Consolidated Statements of Cash Flows Year Ended December 31, ($ in thousands) 2025 2024 2023 Cash Flows From Operating Activities Net income $ 111,048 $ 76,215 $ 104,131 Reconciliation of net income to net cash provided by operating activities: Provision for credit losses 11,502 16,448 17,813 Net security premium amortization 5,142 8,628 9,337 Deferred income taxes, net 30,917 ( 4,869 ) ( 782 ) Loan discount accretion ( 7,438 ) ( 10,718 ) ( 13,277 ) Deposit and debt discount accretion, net 1,087 1,593 3,943 Foreclosed real estate gains, net 261 ( 245 ) ( 150 ) Securities losses, net 71,627 37,981 — Other (gains) losses, net ( 8,660 ) ( 633 ) ( 1,857 ) Bank-owned life insurance income ( 5,113 ) ( 4,773 ) ( 4,350 ) Net amortization of deferred loan costs/(fees) 450 ( 1,366 ) ( 1,225 ) Depreciation of premises and equipment 6,793 7,760 7,754 Amortization of operating lease right-of-use assets 1,323 1,815 2,100 Repayments of lease obligations ( 1,257 ) ( 1,738 ) ( 1,988 ) Stock-based compensation expense 3,763 4,920 5,125 Amortization of intangible assets 5,672 6,604 8,003 Amortization and impairment of SBA servicing assets 1,141 1,699 1,356 Gains on sale of loans ( 2,891 ) ( 5,922 ) ( 4,102 ) Origination of presold mortgage loans and SBA loans held for sale ( 92,058 ) ( 133,352 ) ( 137,483 ) Proceeds from sales of presold mortgage loans and SBA loans 100,428 174,541 124,887 Increase (decrease) in accrued interest receivable ( 2,877 ) 1,022 ( 1,904 ) (Increase) decrease in other assets ( 6,220 ) ( 5,396 ) 12,435 (Decrease) increase in accrued interest payable ( 857 ) ( 1,095 ) 2,579 (Decrease) increase in other liabilities ( 20,652 ) 5,662 ( 949 ) Net cash provided by (used in) operating activities 203,131 174,781 131,396 Cash Flows From Investing Activities Purchases of securities available for sale ( 585,084 ) ( 494,895 ) ( 1,169 ) Proceeds from maturities, calls and principal repayments of securities available for sale 216,476 243,029 165,358 Proceeds from maturities, calls and principal repayments of securities held to maturity 2,525 8,272 3,453 Proceeds from sales of securities available for sale 464,652 385,125 111,863 Proceeds from sale of VISA B shares — 4,522 — Purchases of Federal Reserve and FHLB stock ( 399 ) ( 39,697 ) ( 85,819 ) Redemptions of Federal Reserve and FHLB stock — 52,990 70,928 Proceeds from bank owned life insurance death benefits 287 210 137 Purchases of other investments ( 29,927 ) ( 6,824 ) ( 9,754 ) Net (increase) decrease in loans ( 638,661 ) 17,494 ( 466,488 ) Proceeds from sales of foreclosed real estate 5,052 758 967 Purchases of premises and equipment ( 4,245 ) ( 2,657 ) ( 4,421 ) Proceeds from sales of premises and equipment 7,255 1,339 970 Net cash received in acquisition activities — — 22,610 Net cash provided by (used in) investing activities ( 562,069 ) 169,666 ( 191,365 ) Cash Flows From Financing Activities Net increase (decrease) in deposits 217,552 498,100 ( 244,339 ) Proceeds from the issuance of FHLB and FRB borrowings 2,000 986,000 3,348,000 Repayment of FHLB and FRB borrowings ( 2,050 ) ( 1,515,049 ) ( 3,044,991 ) Repayment of subordinated debentures ( 18,000 ) ( 10,000 ) — Cash dividends paid – common stock ( 37,284 ) ( 36,249 ) ( 34,940 ) Repurchases of common stock ( 991 ) — — Proceeds from stock option exercises 1,491 4,094 4,519 Payment of taxes related to stock withheld ( 1,692 ) ( 1,691 ) ( 743 ) Net cash provided (used) by financing activities 161,026 ( 74,795 ) 27,506 (Decrease) increase in cash and cash equivalents ( 197,912 ) 269,652 ( 32,463 ) Cash and Cash Equivalents, beginning of year 507,507 237,855 270,318 Cash and Cash Equivalents, end of year $ 309,595 $ 507,507 $ 237,855 (Continued) 64 Table of Contents First Bancorp Consolidated Statements of Cash Flows (Continued) Year Ended December 31, ($ in thousands) 2025 2024 2023 Supplemental Disclosures of Cash Flow Information: Cash paid during the period for interest $ 159,156 $ 186,894 $ 135,704 Cash paid during the period for income taxes 11,020 33,500 29,734 Cash paid during the period for the purchase of transferable tax credits 9,337 — — Non-cash: Unrealized gain (loss) on securities available for sale, net of taxes 132,818 25,839 34,064 Non-cash: Foreclosed loans transferred to foreclosed real estate 1,774 4,551 1,036 Non-cash: Accrued dividends at end of period 9,537 9,105 9,046 Non-cash: Cancellation of operating lease right-of-use assets and operating lease liabilities — ( 1,497 ) — Non-cash: Initial recognition of operating lease right-of-use assets and liabilities 939 — 260 Non-cash: Revision of operating lease right-of-use assets and operating lease liabilities — — ( 562 ) Non-cash: Affordable housing investments obtained in exchange for funding commitments 130,743 — — Acquisition of GrandSouth Bancorporation — — See Note 2 See accompanying notes to consolidated financial statements. 65 Table of Contents First Bancorp Notes to Consolidated Financial Statements December 31, 2025 Note 1. Summary of Significant Accounting Policies Basis of Presentation - The consolidated financial statements include the accounts of First Bancorp (the “Company”) and its wholly owned subsidiary First Bank (the “Bank”). The Bank has two wholly owned subsidiaries that are fully consolidated, Magnolia Financial, Inc. ("Magnolia Financial") and First Troy SPE, LLC. The Company is a bank holding company. The principal activity of the Company is the ownership and operation of the Bank, a state chartered bank with its main office in Southern Pines, North Carolina. Magnolia Financial is a business financing company that makes loans throughout the southeastern United States. First Troy SPE, LLC was formed in order to hold and dispose of certain real estate foreclosed upon by the Bank. The Company is also the parent company for a series of statutory trusts that were formed for the purpose of issuing trust preferred debt securities. The trusts are not consolidated for financial reporting purposes as they are variable interest entities and the Company is not the primary beneficiary. The Bank formerly operated a third subsidiary, SBA Complete, Inc. ("SBA Complete"), which specialized in providing consulting services for financial institutions across the country related to Small Business Administration (“SBA”) loan origination and servicing. During the second quarter of 2024, SBA Complete became inactive with certain activities transitioning to the Bank. All significant intercompany accounts and transactions have been eliminated. Certain reclassifications have been made to the 2024 and 2023 consolidated financial statements to be comparable to 2025. These reclassifications had no effect on net income. Subsequent events have been evaluated through the date of filing this Annual Report Form 10-K. Use of Estimates – The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates. The most significant estimates made by the Company in the preparation of its consolidated financial statements are the determination of the allowance for credit losses on loans and the allowance for unfunded commitments. Loss Contingencies – Loss contingencies, including claims and legal actions arising in the ordinary course of business, are record as liabilities when the likelihood of loss is probable, and an amount or range of loss can be reasonably estimated. The Company does not believe there now are such matters that will have a material effect on the financial statements. Dividend Restriction – Banking regulations require maintaining certain capital levels and may limit the dividends paid by the bank to the holding company or by the holding company to shareholders. Business Combinations – The Company accounts for business combinations using the acquisition method of accounting. The accounts of an acquired entity are included as of the date of acquisition, and any excess of purchase price over the fair value of the net assets acquired is capitalized as goodwill. Under this method, all identifiable assets acquired, including purchased loans, and liabilities assumed are recorded at fair value. The Company typically issues common stock and/or pays cash for an acquisition, depending on the terms of the acquisition agreement. The value of common shares issued is determined based on the market price of the stock as of the closing of the acquisition. Cash and Cash Equivalents - The Company considers all highly liquid assets with original maturities of 90 days or less, such as cash on hand, noninterest-bearing and interest-bearing amounts due from banks and federal funds sold, to be “cash equivalents.” Securities - Debt securities that the Company has the positive intent and ability to hold to maturity are classified as “held to maturity” ("HTM") and carried at amortized cost. Debt securities not classified as held to maturity are classified as “available for sale” ("AFS") and carried at fair value, with unrealized holding gains and losses being reported as other comprehensive income or loss and reported as a separate component of shareholders’ equity. 66 Table of Contents Interest income includes amortization of purchase premiums or discounts. Premiums and discounts are generally amortized and accreted into income on a level yield basis, with premiums being amortized to the earliest call date and discounts being accreted to the stated maturity date. Gains and losses on sales of securities are recognized at the time of sale based upon the specific identification method. A debt security is placed on nonaccrual status at the time any principal or interest payments become 90 days delinquent. Interest accrued but not received for a security placed on nonaccrual is reversed against interest income. Allowance for Credit Losses ("ACL") - Securities Held to Maturity - The Company measures expected credit losses on HTM debt securities on a pooled basis in accordance with Accounting Standards Codification ("ASC") 326 ("CECL"). The estimate of expected credit losses is primarily based on the ratings assigned to the securities by debt rating agencies and the average of the annual historical loss rates associated with those ratings. The Company then multiplies those loss rates, as adjusted for any modifications to reflect current conditions and reasonable and supportable forecasts as considered necessary, by the remaining lives of each individual security to arrive at a lifetime expected loss amount. The CECL assumptions, including reasonable and supportable forecast periods, reversion method, and prepayments as applicable, are consistent with those utilized for the ACL on loans as discussed further below. Virtually all of the mortgage-backed securities held by the Company are issued by government-sponsored enterprises ("GSEs"). These securities are either explicitly guaranteed by the U.S. government or guaranteed by GSEs that have credit ratings and perceived credit risk comparable to the U.S. government, are highly rated by major rating agencies, and have a long history of no credit losses. Substantially all of the state and local government securities held by the Company are highly rated by major rating agencies. Accrued interest receivable on HTM debt securities was excluded from the estimate of credit losses. Allowance for Credit Losses - Securities Available for Sale - For AFS debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or if it is more likely than not that it will be required to sell the security before recovery of the amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value. For debt securities AFS that do not meet the aforementioned criteria, the Company evaluates whether any decline in fair value is due to credit loss factors. In making this assessment, management considers any changes to the rating of the security by a rating agency and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses on AFS securities is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income (loss). Changes in the ACL under CECL are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectibility of an AFS security is confirmed or when either of the criteria regarding intent or requirement to sell is met. Accrued interest receivable on AFS debt securities was excluded from the estimate of credit losses. Presold Mortgages Held for Sale - As a part of normal business operations, the Company originates residential mortgage loans that have been pre-approved by secondary investors to be sold on a best efforts basis. The terms of the loans are set by the secondary investors, and the purchase price that the investor will pay for the loan is agreed to prior to the funding of the loan by the Company. Loans are transferred to the investor in a short period following funding in accordance with the agreed-upon terms. The Company records gains from the sale of these loans on the settlement date of the sale equal to the difference between the proceeds received and the carrying amount of the loan. Additionally, the Company records gains for loans in the process of closing, based on the changes in fair value of the loans and related commitments. Between the initial funding of the loans by the Company and the subsequent reimbursement by the investors, the Company carries the loans on its balance sheet at fair value. Loans - Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost. Amortized cost is the principal balance outstanding, net of purchase premiums and discounts and deferred fees and costs. Accrued interest receivable related to these loans totaled $ 29.8 million at December 31, 2025 and $ 27.6 million at December 31, 2024, and was reported in accrued interest receivable on the consolidated balance sheets. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using methods that approximate a level yield without anticipating prepayments. 67 Table of Contents Past due status is based on contractual terms of the loan. A loan is considered to be past due when a scheduled payment has not been received 30 days after the contractual due date. The accrual of interest is generally discontinued when a loan becomes 90 days past due and is not well collateralized and in the process of collection, or when management believes, after considering economic and business conditions and collection efforts, that the principal or interest will not be collectible in the normal course of business. All accrued interest is reversed against interest income when a loan is placed on nonaccrual status. So long as a loan is on nonaccrual status, interest received on such loans is accounted for using the cost-recovery method. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, there is a sustained period of repayment performance, and future payments are reasonably assured. Purchased Financial Assets with Credit Deterioration ("PCD") - Loans acquired in a business combination that have experienced more-than-insignificant deterioration in credit quality since origination are considered PCD loans. In determining whether an acquired loan is a PCD loan, the Company considers internal loan grades, delinquency status, and other relevant factors. At the acquisition date, an estimate of expected credit losses is made for groups of PCD loans with similar risk characteristics and individual PCD loans without similar risk characteristics. The initial amortized cost of PCD loans is determined by reducing the loans par value by the initial ACL, with any difference between the resulting amount and the loans purchase price or acquisition date fair value recorded as a non-credit-related discount or premium. Discounts and premiums are recognized through interest income on a level-yield method over the life of the loans. Subsequent to initial recognition, PCD loans are subject to the same interest income recognition and impairment model as non-PCD loans, with changes to the ACL recorded through provision expense. Allowance for Credit Losses - Loans - The ACL is an estimate that is deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial assets. The level of the allowance is determined under the CECL methodology and includes management's evaluation of historical default and loss experience, current and projected economic conditions, asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrowers' ability to repay a loan (including the timing of future payments), the estimated value of any underlying collateral, composition of the loan portfolio, reasonable and supportable forecasts, and other pertinent factors. Credit losses are estimated on the amortized cost basis of loans, which includes the principal balance outstanding, purchase discounts and premiums, and deferred loan fees and costs. Accrued interest receivable is presented separately on the consolidated balance sheets and excluded from the estimate of credit losses. Loans are charged off when the Company determines that such financial assets are deemed uncollectible. The ACL is increased through provision for loan losses and decreased by charge-offs, net of recoveries. The ACL is measured on a collective basis for pools of loans with similar risk characteristics. The Discounted Cash Flow (“DCF”) method is utilized for substantially all pools, with discounted cash flows computed for each loan in a pool based on its individual characteristics (e.g. maturity date, payment amount, interest rate, etc.), and the results are aggregated at the pool level. A probability of default and loss given default, as adjusted for recoveries, are applied to the discounted cash flows for each pool, while considering prepayment and principal curtailment assumptions. When the DCF method is used to determine the ACL, management adjusts the effective interest rate used to discount expected cash flows to incorporate expected prepayments. When management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. The Company has identified the following primary pools for measuring expected credit losses. There are additional sub-segmentations within each pool, including risk categories. • Owner occupied commercial real estate loans - Owner occupied commercial real estate mortgage loans are secured by commercial office buildings, industrial buildings, warehouses or retail buildings where the owner of the building occupies the property. For such loans, repayment is largely dependent upon the operation of the borrower's business. The Company generally requires loan to value of 80 % or lower and debt service coverage of 1.30 x or better. Terms outside of these guidelines will have strengths to mitigate additional risk. • Non-owner occupied commercial real estate loans - These loans represent investment real estate loans secured by office buildings, industrial buildings, warehouses, retail buildings, and multifamily residential housing. Repayment is primarily dependent on lease income generated from the underlying collateral. The 68 Table of Contents Company generally requires loan to value of 80 % or lower, debt service coverage of 1.30 x or better and overall lease terms to match or extend beyond the term of the loan. • Consumer real estate mortgage loans - Consumer real estate mortgage consists primarily of loans secured by 1-4 family residential properties, including home equity lines of credit. Repayment is primarily dependent on the personal cash flow of the borrower and may be affected by changes in general economic conditions. The Company generally requires a debt-to-income below 40 % on all home equity lines of credit with loan to value generally 80 % or less and a minimum credit score of 660 . Portfolio mortgage loans will vary depending on the product, but generally require credit scores of 640 or greater, debt to income below 50 % and loan to value maximum of 90 %. • Construction and land development loans - This pool includes loans where the repayment is dependent on the successful completion and eventual sale, refinance or operation of the related real estate project and are thus impacted by market demand and real estate valuations. Construction and land development loans include 1-4 family construction projects and commercial construction projects. Residential construction loans for resale generally have a loan to value of 85 % or lower. Loan to value would generally be under 80 % for commercial speculative construction projects. Owner occupied and non-owner occupied commercial construction projects are underwritten to standard guidelines discussed above. • Commercial and industrial loans - These loans include loans to business enterprises issued for commercial, industrial and/or other professional purposes. These loans are generally secured by equipment, inventory, and accounts receivable of the borrower and repayment is primarily dependent on business cash flows. Commercial and Industrial loans generally require debt service coverage of 1.25 x or better. The Company typically limits equipment and accounts receivable to loan to value of 80 % and eligible inventory limited to 40 % loan to value. • Consumer and other loans - Consumer and other loans include all loans issued to individuals not included in the consumer real estate mortgage classification, including automobile loans, consumer credit cards and loans to finance education, among others. Many consumer loans are unsecured and repayment is primarily dependent on the personal cash flow of the borrower which may be impacted by changes in economic conditions and unemployment. The Company generally limits consumer loans to those clients with a minimum 660 credit score and debt-to-income below 40 %. Loan to value will vary based on the collateral type and useful life. In determining the proper level of default rates and loss given default, management has determined that the loss experience of the Company provides the best basis for its assessment of expected credit losses. It therefore utilizes its own historical credit loss experience by each loan segment over an economic cycle, while excluding loss experience from certain acquired institutions. Management considers forward-looking information in estimating expected credit losses. For substantially all segments of loans, the Company incorporates two or more macroeconomic drivers using a statistical regression modeling methodology. The Company subscribes to a third-party service which provides a quarterly macroeconomic baseline forecast and alternative scenarios for the United States economy. The baseline forecast, which incorporates an equal probability of the United States economy performing better or worse than the projection, along with the alternative scenarios, are evaluated by management to determine the best forecast to use for macroeconomic factors in the model. Management has also evaluated the appropriateness of the reasonable and supportable forecast scenarios utilized for each period and has made adjustments as needed. For the contractual term that extends beyond the reasonable and supportable forecast period, the Company reverts to the long-term mean of historical factors over 12 quarters using a straight-line approach. The Company generally utilizes a four-quarter forecast and a 12-quarter reversion period to the long-term average, which is then held static for the remainder of the life of the loans. Included in its systematic methodology to determine its ACL on loans, management considers the need to qualitatively adjust expected credit losses for information not already captured in the loss estimation process. This is done through the use of a scorecard, which considers, through the use of weighting and risk scoring, a range of maximum and minimum loss rates and can either increase or decrease the quantitative model estimation (i.e., formulaic model results). Through the use of the score card, each period the Company considers qualitative factors that are relevant within the qualitative framework that includes the following: 1) changes in lending policies, procedures, and strategies, 2) changes in the nature and volume of the portfolio, 3) staff experience, 4) changes in volume and trends in classified loans, delinquencies, and nonaccrual loans, 5) concentration risk, 6) trends in underlying collateral value, 7) external factors, including competition and legal and regulatory factors, 8) changes in the quality of the Company's loan review system, and 9) economic conditions not already captured. 69 Table of Contents Allowance for Credit Losses - Off-Balance Sheet Credit Exposure - The Company estimates expected credit losses on commitments to extend credit over the contractual period (unfunded commitments) in which the Company is exposed to credit risk on the underlying commitments, unless the obligation is unconditionally cancellable by the Company. The allowance for unfunded commitments, which is reflected within "Other liabilities" on the consolidated balance sheets is adjusted for as an increase or decrease to the provision for credit losses for unfunded commitments. 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 is calculated using the same aggregate reserve rates calculated for the funded portion of loans at the portfolio level applied to the amount of commitments expected to fund. Loan Modifications to Borrowers Experiencing Financial - A loan that is refinanced or restructured by the Company when a borrower is experiencing financial difficulty is generally considered a Financial Difficulty Modification ("FDM"). Such modification is evaluated to determine if the changes to the loan result in a new loan or a continuation of the existing loan, and to determine the appropriate treatment of deferred loan fees/costs, (i.e. to recognize in income if considered a new loan or to continue amortization if determined to be a continuation of the loan). The ACL on a FDM is measured using the same method as all other loans held for investment. FDMs that share similar risk characteristics and consistently discounted based on the post-modification effective rate. Small Business Administration ("SBA") Loans Held for Sale and SBA Retained Loan Discount – All SBA loans originated are underwritten and documented as prescribed by the SBA. SBA loans are generally fully amortizing and have maturity dates and amortizations of up to 25 years. The portion of SBA loans originated that are guaranteed and intended for sale on the secondary market may be classified as held for sale if the Company intends to sell them in the near future and generally has acceptable bids for such loans. SBA loans classified as held for sale are carried at the lower of cost or fair value. For any guaranteed portion of an SBA loan that is sold, the Company generally sells that portion as soon as its eligible to be sold and retains the servicing right. When the guaranteed portion of an SBA loan is sold, the Company allocates the carrying basis of the loan between the guaranteed portion of the loan sold, the unguaranteed portion of the loans retained, and the servicing asset based on their relative fair values. A gain is recorded for the difference between the proceeds received from the sale and the basis allocated to the sold portion. The relative fair value allocation results in a discount that is recorded on the unguaranteed portion of the loan that is retained. The discount is amortized as a yield adjustment over the life of the loan, so long as the loan performs. SBA Servicing Assets - When the Company sells the guaranteed portion of an SBA loan, the Company continues to perform the servicing on the loan and collects a fee related to the sold portion of the loan. A SBA servicing asset is recorded for the fair value of that fee based on an analysis of discounted cash flows that incorporates estimates of (1) market servicing costs, (2) market-based prepayment rates, and (3) market profit margins. SBA servicing assets are included in “Other assets” on the consolidated balance sheets. SBA servicing assets are initially recorded at fair value and amortized against income over the lives of the related loans as a reduction of servicing fee income, generally five years . SBA servicing asset amortization expense is recorded in noninterest income as an offset to SBA servicing fees within the line item "Other service charges and fees" on the consolidated statement of income. SBA servicing assets are tested for impairment on a quarterly basis by comparing their estimated fair values, aggregated by year of origination, to the related carrying values. Changes in observable market data relating to market interest rates, loan prepayment speeds, and other factors, could result in impairment or reversal of impairment of these servicing assets and, as such, impact the Company's financial condition and results of operations. Transfers of Financial Assets - Transfers of financial assets are accounted for as sales, when control over the assets has been relinquished. Control over financial assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. If the sale criteria are not met, the transfer is recorded as a secured borrowing in which the assets remain on the balance sheet and the proceeds from the transaction are recognized as a liability. Premises and Equipment - Premises and equipment are stated at cost less accumulated depreciation. Recorded within noninterest expense as "Occupancy expense" on the consolidated statements of income, depreciation, computed by the straight-line method, is charged to operations over the estimated useful lives of the properties or, in the case of leasehold improvements, over the term of the lease, if shorter. Land is carried at cost. Maintenance and repairs are charged to operations in the year incurred. Gains and losses on dispositions are included in current 70 Table of Contents operations and are recorded within noninterest expense on the "Other operating expenses" line on the consolidated statements of income. Goodwill and Other Intangible Assets - Business combinations are accounted for using the acquisition method of accounting. Identifiable intangible assets, primarily core deposit intangibles ("CDI"), are recognized separately and are amortized over their estimated useful lives, which for the Company has generally been five to ten years and at an accelerated rate. Goodwill is recognized in business combinations to the extent that the price paid exceeds the fair value of the net assets acquired, including any identifiable intangible assets. Goodwill is not amortized, but rather is subject to fair value impairment tests on at least an annual basis. Foreclosed Real Estate - Foreclosed real estate consists primarily of real estate acquired by the Company through legal foreclosure or deed in lieu of foreclosure. The property is initially carried at the estimated fair value of the property less estimated selling costs. Subsequent to foreclosure, any decline in fair value or gain or loss on disposition are recorded through noninterest expense on the "Other operating expenses" line in the consolidated statements of income. Capital expenditures made to improve the property are capitalized. Costs incurred to maintain the property are expensed as incurred and are also included in "Other operating expenses." Foreclosed real estate are included in the "Other assets" line on the consolidated balance sheets and totaled $ 1.4 million and $ 5.0 million at December 31, 2025 and 2024, respectively. Bank-Owned Life Insurance – The Company has purchased life insurance policies on certain current and past key employees and directors where the insurance policy benefits and ownership are retained by the employer. These policies are recorded at their cash surrender value. Income from these policies and changes in the net cash surrender value are recorded within noninterest income as “Bank-owned life insurance income” on the consolidated statements of income. Income Taxes - On December 14, 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 amends ASC 740, Income Taxes to expand income tax disclosures and requires that the Company disclose (i) the income tax rate reconciliation using both percentages and reporting currency amounts; (ii) specific categories within the income tax rate reconciliation; (iii) additional information for reconciling items that meet a quantitative threshold; (iv) the composition of state and local income taxes by jurisdiction; and (v) the amount of income taxes paid disaggregated by jurisdiction. The Company adopted ASU 2023-09 for the year ended December 31, 2025 on a prospective basis. See Note 7 for additional information. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced, if necessary, by the amount of such benefits that are more likely than not expected to be realized based upon available evidence. Other Investments – The Company accounts for its investments in limited partnerships and limited liability companies (“LLCs”) using the equity method of accounting if the percentage ownership and degree of management influence in the investments warrants such accounting treatment. Other investments are recorded in "Other assets" on the consolidated balance sheets. Under the equity method of accounting, the Company records its initial investment at cost. Subsequently, the carrying amount of the investment is increased or decreased to reflect the Company’s share of income or loss of the investee, recorded within noninterest income as "Other income, net" on the consolidated statements of income. The Company’s recognition of earnings or losses from an equity method investment is based on the Company’s ownership percentage in the investee and the investee’s earnings on a quarterly basis. The investees generally provide their financial information during the quarter following the end of a given period. The Company’s policy is to record its share of earnings or losses on equity method investments in the quarter the financial information is received. All of the Company’s investments in limited partnerships and LLCs and their market values are not readily available. The Company’s management evaluates its investments in investees for impairment based on the investee’s ability to generate cash through its operations or obtain alternative financing, and other subjective factors. There are inherent risks associated with the Company’s investments in such companies, which may result in income statement volatility in future periods. 71 Table of Contents Federal Home Loan Bank ("FHLB") Stock - The Company is a member of the FHLB system. Members are required to own a certain amount of stock based on the level of borrowings and other factors. FHLB stock is carried at cost and is recorded in "Other assets" on the consolidated balance sheets. Cash dividends are reported as income, recorded within interest income in the "Other, principally overnight investments" line on the consolidated statements of income. Federal Reserve Bank ("Federal Reserve", "FRB") Stock - The Company is a member of its regional Federal Reserve and is required to own stock based on its level of capital. Federal Reserve stock is carried at cost and is recorded in "Other assets" on the consolidated balance sheets. Cash dividends are reported as income, recorded within interest income in the "Other, principally overnight investments" line on the consolidated statements of income. Loan Commitments and Related Financial Instruments - Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded. Leases - The Company leases certain branch locations and administrative offices which are generally classified as operating leases with right-of-use assets and the associated lease obligations being recorded, respectively, in "Other assets" and "Other liabilities" on the consolidated balance sheets. For leases where the Company is the lessee that have initial terms greater than one year, right-of-use assets and corresponding lease liabilities are reported on the balance sheet. Leases with an initial term of less than one year are not recorded on the balance sheet, rather, the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Operating lease expense is recognized on a straight-line basis over the lease term and included in "Occupancy expense" on the consolidated statements of income. Stock-Based Compensation - Restricted stock awards are the primary form of equity grant utilized by the Company. Compensation cost is based on the fair value of the award, which is the closing price of the Company's common stock on the date of the grant. Restricted stock awards issued by the Company typically have vesting periods with service conditions. Compensation cost is recognized as expense over the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period. Because of the insignificant amount of forfeitures the Company has experienced, forfeitures are recognized as they occur. Earnings Per Share ("EPS") Amounts - Basic EPS is calculated by dividing net income, less income allocated to participating securities, by the weighted average number of common shares outstanding during the period, excluding unvested shares of restricted stock. For the Company, participating securities are comprised of unvested shares of restricted stock. Diluted EPS is computed by assuming the issuance of common shares for all potentially dilutive common shares outstanding during the reporting period. For the periods presented, the Company’s potentially dilutive common stock issuances related to unvested shares of restricted stock, dilutive stock options and contingently issuable shares which are determined using the treasury stock method. If any of the potentially dilutive common stock issuances have an anti-dilutive effect, the potentially dilutive common stock issuance is disregarded. Fair Value of Financial Instruments - Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument, as more fully described in Note 14. Because no highly liquid market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Impairment - Goodwill is evaluated for impairment on at least an annual basis, and more often if a triggering event is identified, by comparing the estimated fair value of the reporting unit to its related carrying value. If the carrying value of a reporting unit exceeds its fair value, the Company utilizes various valuation techniques to determine whether the implied fair value of the goodwill exceeds its carrying value. If the carrying value of the goodwill exceeds the implied fair value of the goodwill, an impairment loss is recorded in an amount equal to that excess. 72 Table of Contents The Company reviews all other long-lived assets, including identifiable intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Company’s policy is that an impairment loss is recognized if the sum of the undiscounted future cash flows is less than the carrying amount of the asset. Any long-lived assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs to sell. To date, the Company has not recorded any impairment write-downs of its long-lived assets or goodwill. Comprehensive Income (Loss) - Comprehensive income (loss) includes revenues, expenses, gains, and losses that are excluded from earnings under current accounting standards, primarily unrealized gain (loss) on available for sale securities and unrealized and realized gains and losses on postretirement benefit plans. Variable Interest Entities - The Company's statutory trust subsidiaries (First Bancorp Capital Trust II, Trust III and Trust IV, Carolina Capital Trust, New Century Statutory Trust I, and GrandSouth Capital Trust I), (collectively "the Trusts") qualify as variable interest entities. Notes issued by the Company to the Trusts in return for the proceeds from the issuance of the trust preferred securities have terms that are substantially the same as the corresponding trust preferred securities. As qualified variable interest entities, the Trusts' balance sheet and statement of operations have never been consolidated with those of the Company because the Company is not the primary beneficiary. Further, the Company has no exposure to loss of the operations of the Trusts as the Company is limited to the repayment of the underlying obligations and would not absorb the losses of the Trusts if losses were to occur. The trust preferred securities qualify as capital for regulatory capital adequacy requirements. Segment Reporting - Accounting standards require management to report selected financial and descriptive information about reportable operating segments that exceed certain thresholds. The standards also require related disclosures about products and services, geographic areas, and major customers. Generally, disclosures are required for segments internally identified to evaluate performance and resource allocation. The Company’s operations are substantially all within a single banking segment, and the financial statements presented herein reflect the combined results of all of its operations with that segment. The Company has no foreign operations or customers. Derivative Instruments and Hedging Activities - The Company occasionally enters into derivative financial instruments as part of its interest rate risk management strategies. These derivative financial instruments consist primarily of interest rate swaps to accommodate certain commercial loan customers, with offsetting positions to dealers under a back-to-back swap program. All derivative instruments are recorded on the consolidated balance sheets as either an asset (included in "Other assets") or liability (included in "Other liabilities") at their fair value. The Company has master netting agreements with the counterparties with which it does business, but reflects gross assets and liabilities at fair value on the consolidated balance sheets. The accounting for the gain or loss resulting from the change in fair value depends on the intended use of the derivative. The Company classifies its derivative financial instruments as either (1) a hedge of an exposure to changes in the fair value of a recorded asset or liability (“fair value hedge”), (2) a hedge of an exposure to changes in the cash flows of a recognized asset, liability or forecasted transaction (“cash flow hedge”), or (3) derivatives not designated as accounting hedges ("undesignated hedges"). As of December 31, 2025, the Company has only entered into derivatives classified as undesignated hedges for which changes in fair value are recognized in current period earnings in either noninterest income or noninterest expense. The Company also originates certain residential mortgage loans with the intention of selling these loans. The Company enters into forward sale agreements to mitigate risk and to protect the expected gain on the eventual loan sale. The commitments to originate residential mortgage loans and forward loan sales commitments are freestanding derivative instruments which are entered into as part of an economic hedging strategy to manage exposure related to mortgage loans held for sale. Recent Accounting Pronouncements Accounting Standards Adopted in 2025 ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” amended existing guidance to improve the transparency of income tax disclosures, including disclosure of specific categories in the rate reconciliation, providing additional information for certain reconciling items, and providing details on income taxes paid. The amendments are effective for annual periods beginning after December 15, 2024. The adoption of ASU 73 Table of Contents 2023-09 did not have a significant impact on the Company's consolidated financial statements. Disclosures have been updated in Note 7 to comply with the ASU as required. Accounting Standards Pending Adoption ASU 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” amended the Income Statement—Reporting Comprehensive Income topic in the Accounting Standards Codification to require public companies to disclose, in interim and annual reporting periods, additional information about certain expenses in the notes to financial statements. The amendments are effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company will apply the amendments retrospectively to all prior periods presented in the financial statements after the effective date. The adoption of ASU 2023-09 is not expected to have a significant impact on the Company's consolidated financial statements. ASU 2025-07, "Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606) " amended the Derivatives and Hedging and Revenue from Contracts with Customers topics in the Accounting Standards Codification to refine derivative scope and clarify the accounting treatment of share-based noncash consideration from customers in revenue contracts. The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim periods within those annual reporting periods. Early adoption is permitted. Entities may apply the guidance prospectively or on a modified retrospective basis. The adoption of ASU 2025-07 is not expected to have a significant impact on the Company's consolidated financial statements. ASU 2025-08, "Financial Instruments-Credit Losses (Topic 326): Purchased Loans" amended the Financial Instruments—Credit Losses topic in the Accounting Standards Codification to expand the population of acquired financial assets subject to the gross-up approach. The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. The Company does not expect these amendments to have a material effect on its financial statements. The accounting for future business combinations, if any, would be impacted. ASU 2025-09, "Derivatives and Hedging (Topic 815): Hedge Accounting Improvements" amended the Derivatives and Hedging topic in the Accounting Standards Codification to clarify certain aspects of the guidance on hedge accounting and to address several incremental hedge accounting issues arising from the global reference rate reform initiative. The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted on any date on or after the issuance of this ASU. Upon adoption of the amendments, entities are permitted to modify certain critical terms of certain existing hedging relationships without dedesignating the hedge. The Company does not expect these amendments to have a material effect on its financial statements. ASU 2025-11, "Interim Reporting (Topic 270): Narrow-Scope Improvements" amended the Interim Reporting topic in the Accounting Standards Codification to clarify current interim reporting requirements. The amendments are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company will apply the amendments retrospectively to any or all prior periods presented in the financial statements. The Company does not expect these amendments to have a material effect on its financial statements. Other accounting standards that have been issued or proposed by the Financial Accounting Standards Board, ("FASB") or other standards-setting bodies are not expected to have a material impact on the Company’s consolidated financial statements. Note 2. Acquisitions On January 1, 2023, the Company completed its acquisition of 100 % of GrandSouth Bancorporation ("GrandSouth"), in an all-stock transaction pursuant to the Agreement and Plan of Merger and Reorganization (the "Merger Agreement"), dated June 21, 2022, between the Company and GrandSouth. At the closing of the transaction, GrandSouth merged into the Company. Following the merger of the Company and GrandSouth, GrandSouth Bank, a wholly-owned subsidiary of GrandSouth, merged into the Bank with the Bank being the surviving entity. The results of GrandSouth are included beginning on the January 1, 2023 acquisition date. 74 Table of Contents Pursuant to the Merger Agreement, each share of common and preferred stock of GrandSouth issued and outstanding immediately prior to the effective time of the acquisition was converted into 0.91 shares of the Company's common stock. As a result, the Company issued 5,032,834 shares of the Company common stock effective January 1, 2023. In addition, GrandSouth common stock options outstanding at the merger effective time were converted to options to acquire 0.91 shares of the Company's common stock resulting in 542,345 options with an average exercise price of approximately $ 20.14 . The total consideration transferred at the close of the transaction was $ 229.5 million which was determined based on the number of shares issued and the closing market price of the Company's stock immediately prior to the merger effective time of $ 42.84 . In addition to the stock issued, the fair value of the converted stock options calculated in accordance with ASC 805-30-55 was included in the total consideration of the transaction. As a result of the merger, eight branches in South Carolina were added to the Company's branch network. The acquisition accomplished the Company's strategic initiative to expand its presence in South Carolina, specifically in the high-growth markets of the state including Greenville, Charleston and Columbia. Significant synergies were anticipated to be gained from the acquisition, with asset growth and revenue enhancement opportunities from the new markets and expanded customer base. Accordingly, the Company recognized goodwill in the transaction related primarily to the reasons noted, as well as the positive earnings of GrandSouth. This transaction was accounted for using the acquisition method of accounting for business combinations, and accordingly, the assets acquired, intangible assets identified, and liabilities assumed of GrandSouth were recorded based on estimates of fair values as of January 1, 2023. The determination of fair value requires management to make estimates about discount rates, future expected cash flows, market conditions, and other future events that are highly subjective in nature and subject to change. Estimated fair values were based on management’s best estimates, using the information available at the date of acquisition, including the use of third-party valuation specialists. Management has finalized the valuations of all acquired assets and liabilities assumed in the GrandSouth acquisition. The following table summarizes the fair value of acquired assets, identified intangible assets, and liabilities assumed as of January 1, 2023. Following the table is a discussion of valuation approaches utilized in estimating the fair values. The $ 114.5 million in goodwill that resulted from this transaction is non-deductible for tax purposes. ($ in thousands) Fair Value Estimate Assets acquired: Cash and cash equivalents $ 22,610 Securities available for sale 112,363 Loans, gross 996,833 Allowance for credit losses ( 5,610 ) Premises and equipment 20,268 Core deposit intangible 28,840 Operating right-of-use assets 732 Other assets 27,163 Total 1,203,199 Liabilities assumed: Deposits 1,045,308 Borrowings 38,800 Other liabilities 4,089 Total 1,088,197 Net identifiable assets acquired 115,002 Less: Total consideration 229,489 Goodwill recorded related to acquisition of GrandSouth $ 114,487 The following is a description of the methods used to determine the fair values of significant assets acquired and liabilities assumed included in the table above. Cash and cash equivalents: This consists primarily of cash and due from banks, and interest-bearing deposits with banks. The carrying amount of these assets was a reasonable estimate of fair value based on the short-term nature of these assets. 75 Table of Contents Securities available for sale: Fair value of securities was measured based on quoted market prices, where available. If a quoted market price was not available, fair value was estimated using quoted market prices for similar securities and adjusted for differences between the quoted instrument and the instrument being valued. Substantially all of the securities acquired from GrandSouth were liquidated at their recorded fair value upon close of the transaction or shortly thereafter. There was no gain or loss recorded on the sale of acquired securities. Loans: Fair value of loans acquired was based on a discounted cash flow methodology that considered factors including loan type and related collateral, classification status, remaining term of the loan, fixed or variable interest rate, amortization status, and current discount rates. Expected cash flows were derived using inputs consistent with management's assessment of credit risk for allowance measurement, including estimated future credit losses and estimated prepayments. A total fair value mark of $ 29.5 million was recorded. PCD loans were determined based primarily on internal grades, delinquency status, and other evidence of credit deterioration. The Company calculated the initial allowance of $ 5.6 million on PCD loans in accordance with its CECL model and reclassified that amount from the fair value mark to establish the initial ACL on PCD loans. The following table presents additional information related to the acquired loan portfolio at the acquisition date: ($ in thousands) January 1, 2023 PCD Loans: Par value $ 152,487 Allowance for credit losses ( 5,610 ) Non-credit discount ( 1,370 ) Purchase price 145,507 Non-PCD Loans: Fair Value 845,716 Gross contractual amounts receivable 865,132 Estimate of contractual cash flows not expected to be collected 22,542 Premises: Land and buildings held for use were valued at appraised values, which reflected considerations of recent disposition values for similar property types with adjustments for characteristics of individual properties. Intangible assets: The CDI asset represents the value of the relationships with deposit customers. The fair value for the CDI asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of deposit base, net maintenance cost attributable to customer deposits and an estimate of the cost associated with alternative funding sources. The discount rates used for CDI assets were based on market rates. The CDI is being amortized over ten years utilizing the sum of the months digits accelerated method, which results in a weighted-average amortization period of approximately 41 months. Lease Assets and Lease Liabilities: Lease assets and lease liabilities were measured using a methodology that involved estimating the future lease payments over the remaining lease term with discounting using a discount rate. The lease term was determined for individual leases based on management's assessment of the probability of exercising existing renewal options. Deposits: The fair values used for the demand and savings deposits by definition equal the amount payable on demand at the acquisition date. Fair values for time deposits were estimated using a discounted cash flow analysis applying interest rates currently offered to the contractual interest rates on such time deposits. Borrowings: The fair values of long-term debt instruments were estimated based on quoted market prices for instrument if available, or for similar instruments if not available. Supplemental Pro Forma Financial Information The following table discloses the impact of the acquisition of GrandSouth from the acquisition date of January 1, 2023 through December 31, 2023. These amounts are included in the Company’s consolidated financial statements as of and for the year ended December 31, 2023. The operations of GrandSouth have been integrated into the Bank's existing operations and therefore separate results of operations are not presented for the years ended December 31, 2025 and December 31, 2024. Merger-related costs have been excluded from these amounts and 76 Table of Contents the provisions for credit loss amounts associated with non-PCD loans and unfunded commitments that were discussed above have also been excluded. ($ in thousands, unaudited) Revenue Net Income Year Ended December 31, 2023 Actual GrandSouth results included in statement of income since acquisition date $ 58,301 $ 22,058 Note 3. Securities The book values and approximate fair values of investment securities at December 31, 2025 and 2024 are summarized as follows: 2025 2024 Amortized Cost Fair Value Unrealized Amortized Cost Fair Value Unrealized ($ in thousands) Gains (Losses) Gains (Losses) Securities available for sale: US Treasury securities $ 165,137 $ 168,095 $ 3,004 $ ( 46 ) $ 121,051 $ 120,581 $ — $ ( 470 ) Government-sponsored enterprise securities 1,968 1,758 — ( 210 ) 11,961 9,614 — ( 2,347 ) Mortgage-backed securities 2,057,381 1,860,357 4,008 ( 201,032 ) 2,261,924 1,897,175 60 ( 364,809 ) Corporate bonds 18,192 18,346 193 ( 39 ) 16,181 15,692 — ( 489 ) Total available for sale $ 2,242,678 $ 2,048,556 $ 7,205 $ ( 201,327 ) $ 2,411,117 $ 2,043,062 $ 60 $ ( 368,115 ) Securities held to maturity: Mortgage-backed securities $ 6,735 $ 6,536 $ — $ ( 199 ) $ 9,198 $ 8,739 $ — $ ( 459 ) State and local governments 506,364 441,916 19 ( 64,467 ) 510,800 419,832 1 ( 90,969 ) Total held to maturity $ 513,099 $ 448,452 $ 19 $ ( 64,666 ) $ 519,998 $ 428,571 $ 1 $ ( 91,428 ) All of the Company’s mortgage-backed securities were issued by government-sponsored enterprises ("GSEs"), except for private mortgage-backed securities with a fair value of $ 0.7 million as of December 31, 2025 and 2024. Accrued interest receivable on AFS debt securities was $ 5.2 million and $ 4.6 million at December 31, 2025 and December 31, 2024, respectively. Accrued interest receivable on HTM debt securities was of $ 4.2 million as of December 31, 2025 and December 31, 2024. 77 Table of Contents The following table presents information regarding all securities with unrealized losses at December 31, 2025: Securities in an Unrealized Loss Position for Less than 12 Months Securities in an Unrealized Loss Position for More than 12 Months Total ($ in thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses US Treasury securities $ 19,959 $ 46 $ — $ — $ 19,959 $ 46 Government-sponsored enterprise securities — — 1,758 210 1,758 210 Mortgage-backed securities 157,405 684 1,074,038 200,547 1,231,443 201,231 Corporate bonds 3,711 39 — — 3,711 39 State and local governments — — 436,511 64,467 436,511 64,467 Total temporarily impaired securities $ 181,075 $ 769 $ 1,512,307 $ 265,224 $ 1,693,382 $ 265,993 The following table presents information regarding all securities with unrealized losses at December 31, 2024: Securities in an Unrealized Loss Position for Less than 12 Months Securities in an Unrealized Loss Position for More than 12 Months Total ($ in thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses US Treasury securities $ 120,581 $ 470 $ — $ — $ 120,581 $ 470 Government-sponsored enterprise securities — — 9,614 2,347 9,614 2,347 Mortgage-backed securities 317,015 1,845 1,538,156 363,423 1,855,171 365,268 Corporate bonds 380 51 13,562 438 13,942 489 State and local governments 4,513 75 414,331 90,894 418,844 90,969 Total temporarily impaired securities $ 442,489 $ 2,441 $ 1,975,663 $ 457,102 $ 2,418,152 $ 459,543 As of December 31, 2025, the Company's securities portfolio included 573 securities of which 491 securities were in an unrealized loss position. As of December 31, 2024, the Company's securities portfolio included 584 securities of which 560 securities were in an unrealized loss position. In the above tables, all of the securities that were in an unrealized loss position at December 31, 2025 and 2024 are bonds that the Company has determined are in a loss position due primarily to interest rate factors and not credit quality concerns. In arriving at this conclusion, the Company reviewed third-party credit ratings and considered the severity of the impairment. The state and local government investments are comprised almost entirely of highly-rated municipal bonds issued by state and local governments throughout the nation. The Company has no significant concentrations of bond holdings from any one state or local government entity. Nearly all of the Company's mortgage-backed securities were issued by Federal Home Loan Mortgage Corporation ("FHLMC"), Federal National Mortgage Association ("FNMA"), Government National Mortgage Association ("GNMA"), or SBA, each of which is a GSE and guarantees the repayment of its securities. The Company does not intend to sell these securities, and it is more likely than not that the Company will not be required to sell these securities before recovery of the amortized cost. At December 31, 2025 and 2024, the Company determined that expected credit losses associated with HTM securities were insignificant. 78 Table of Contents The book values and fair values of investment securities at December 31, 2025, by contractual maturity, are summarized in the table below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities Available for Sale Securities Held to Maturity ($ in thousands) Amortized Cost Fair Value Amortized Cost Fair Value Due within one year $ — $ — $ — $ — Due after one year but within five years 149,881 152,847 8,872 8,587 Due after five years but within ten years 35,416 35,352 243,080 214,751 Due after ten years — — 254,412 218,578 Mortgage-backed securities 2,057,381 1,860,357 6,735 6,536 Total securities $ 2,242,678 $ 2,048,556 $ 513,099 $ 448,452 At December 31, 2025 and 2024, investment securities with carrying values of $ 876.8 million and $ 806.0 million, respectively, were pledged as collateral for public deposits. In addition, at December 31, 2025 and 2024, investment securities with carrying values of $ 622.1 million and $ 661.0 million, respectively, were pledged as collateral to the FRB to secure any such borrowings. At December 31, 2025 and 2024, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies or GSEs, in an amount greater than 10% of shareholders' equity. During 2025, the Company received proceeds from sales of securities of $ 464.7 million and recorded $ 71.6 million in gross losses from the sales. During 2024, the Company received proceeds from sales of securities of $ 385.1 million and recorded $ 41.5 million in gross losses from the sales. These losses were partially offset by the $ 4.5 million gain on the sale of the Visa stock discussed below. Also Included in "Securities losses, net" in the consolidated statements of income, during 2024, the Company received proceeds from the call of a security of $ 5.2 million and recorded a $ 1.0 million loss related to the unamortized premium balance at the time of the call. In 2023, there were no sales of investment securities with the exception of securities acquired from GrandSouth which were subsequently liquidated as discussed in Note 2. There was no gain or loss associated with the sale of acquired securities. During the second quarter of 2024, the Company sold all of its holdings of Class B shares of Visa, Inc. (“Visa”) stock that were received upon Visa’s initial public offering and recognized a gain of $ 4.5 million. As the Class B stock did not initially have a readily determinable fair value, it was carried at $ 0 prior to the sale. Included in “Other assets” in the consolidated balance sheets are investments in FHLB and Federal Reserve stock totaling $ 41.6 million and $ 41.3 million at December 31, 2025 and 2024, respectively. These investments do not have readily determinable fair values. The FHLB stock had a cost of $ 8.5 million at December 31, 2025 and 2024, and serves as part of the collateral for the Company’s line of credit with the FHLB and is also a requirement for membership in the FHLB system. The Federal Reserve stock had a cost of $ 33.1 million and $ 32.7 million at December 31, 2025 and 2024, respectively, and is a requirement for Federal Reserve member bank qualification. Periodically, both the FHLB and Federal Reserve recalculate the Company’s required level of holdings, and the Company either buys more stock or redeems a portion of the stock at cost. The Company determined that neither stock was impaired at either period end. 79 Table of Contents Note 4. Loans, Allowance for Credit Losses, and Asset Quality Information The following is a summary of the major categories of total loans outstanding: December 31, 2025 December 31, 2024 ($ in thousands) Amount Percentage Amount Percentage Commercial and industrial $ 1,046,438 12 % $ 919,690 11 % Construction, development & other land loans 753,199 9 % 647,167 8 % Commercial real estate - owner occupied 1,353,912 15 % 1,248,812 16 % Commercial real estate - non owner occupied 2,843,555 33 % 2,625,554 33 % Multi-family real estate 537,015 6 % 506,407 6 % Residential 1-4 family real estate 1,736,453 20 % 1,729,322 21 % Home equity loans/lines of credit 383,652 4 % 345,883 4 % Consumer loans 67,458 1 % 70,653 1 % Subtotal 8,721,682 100 % 8,093,488 100 % Unamortized net deferred loan costs/(fees) 737 1,188 Total loans $ 8,722,419 $ 8,094,676 The above table includes SBA loans, generally originated under the SBA 7A loan program, with additional information on these loans presented in the table below. ($ in thousands) December 31, 2025 December 31, 2024 Guaranteed portions of SBA Loans included in table above $ 61,501 $ 34,095 Unguaranteed portions of SBA Loans included in table above 100,509 101,356 Total SBA loans included in the table above $ 162,010 $ 135,451 Sold portions of SBA loans with servicing retained - not included in table above $ 284,649 $ 330,482 At December 31, 2025 and December 31, 2024, there were remaining unaccreted discounts on the retained portion of sold SBA loans amounting to $ 2.0 million and $ 2.9 million respectively. At December 31, 2025 and December 31, 2024, loans in the amount of $ 7.1 billion and $ 6.7 billion, respectively, were pledged as collateral to the Federal Reserve and the FHLB for borrowing capacity. Refer to Note 9 for further discussion. At December 31, 2025 and 2024, total loans included loans to directors and executive officers of the Company, and their associates, totaling approximately $ 60.7 million and $ 62.9 million, respectively. There were no new loans or advances on existing loans for the year ended December 31, 2025 and repayments amounted to $ 1.9 million for that period. Loans with a total balance of $ 0.3 million were removed from the population as the director retired from the board during 2025. Available credit on related party loans totaled $ 0.3 million and $ 1.0 million at December 31, 2025 and December 31, 2024, respectively. As of December 31, 2025 and 2024, unamortized discounts on all acquired loans totaled $ 8.8 million and $ 15.1 million, respectively. Nonperforming assets ("NPAs") are defined as nonaccrual loans, loans past due 90 or more days and still accruing interest, and foreclosed real estate. The following table summarizes the NPAs for each date presented. ($ in thousands) December 31, 2025 December 31, 2024 Nonperforming assets Nonaccrual loans $ 36,315 $ 31,779 Accruing loans > 90 days past due — — Total nonperforming loans 36,315 31,779 Foreclosed real estate 1,425 4,965 Total nonperforming assets $ 37,740 $ 36,744 80 Table of Contents At December 31, 2025 and 2024, the Company had $ 1.0 million and $ 1.2 million, respectively, in residential mortgage loans in process of foreclosure. At December 31, 2025 and December 31, 2024, there were commitments to lend immaterial amounts of additional funds to borrowers whose loans were nonperforming. The following table is a summary of the Company’s nonaccrual loans by major categories as of December 31, 2025. ($ in thousands) Nonaccrual Loans with No Allowance Nonaccrual Loans with an Allowance Total Nonaccrual Loans Commercial and industrial $ — $ 9,130 $ 9,130 Construction, development & other land loans — 202 202 Commercial real estate - owner occupied 1,825 11,639 13,464 Commercial real estate - non owner occupied 4,269 709 4,978 Residential 1-4 family real estate — 5,908 5,908 Home equity loans/lines of credit — 2,407 2,407 Consumer loans — 226 226 Total $ 6,094 $ 30,221 $ 36,315 The following table is a summary of the Company’s nonaccrual loans by major categories as of December 31, 2024. ($ in thousands) Nonaccrual Loans with No Allowance Nonaccrual Loans with an Allowance Total Nonaccrual Loans Commercial and industrial $ — $ 9,804 $ 9,804 Construction, development & other land loans — 90 90 Commercial real estate - owner occupied 879 8,488 9,367 Commercial real estate - non owner occupied — 887 887 Residential 1-4 family real estate — 9,487 9,487 Home equity loans/lines of credit — 1,795 1,795 Consumer loans — 349 349 Total $ 879 $ 30,900 $ 31,779 There was no interest income recognized during the periods presented on nonaccrual loans. In the period that the Company places a loan on nonaccrual status, contractual interest income is reversed in the consolidated income statement. The following table presents an analysis of the payment status of the Company’s loans as of December 31, 2025. ($ in thousands) Accruing Current Accruing 30-59 Days Past Due Accruing 60- 89 Days Past Due Nonaccrual Loans Total Loans Receivable Commercial and industrial $ 1,034,943 $ 1,824 $ 541 $ 9,130 $ 1,046,438 Construction, development & other land loans 752,388 602 7 202 753,199 Commercial real estate - owner occupied 1,338,042 2,130 276 13,464 1,353,912 Commercial real estate - non owner occupied 2,838,054 — 523 4,978 2,843,555 Multi-family real estate 537,015 — — — 537,015 Residential 1-4 family real estate 1,720,305 6,685 3,555 5,908 1,736,453 Home equity loans/lines of credit 379,437 1,570 238 2,407 383,652 Consumer loans 66,692 290 250 226 67,458 Total $ 8,666,876 $ 13,101 $ 5,390 $ 36,315 8,721,682 Unamortized net deferred loan fees 737 Total loans $ 8,722,419 81 Table of Contents The following table presents an analysis of the payment status of the Company’s loans as of December 31, 2024. ($ in thousands) Accruing Current Accruing 30-59 Days Past Due Accruing 60- 89 Days Past Due Nonaccrual Loans Total Loans Receivable Commercial and industrial $ 906,903 $ 2,442 $ 541 $ 9,804 $ 919,690 Construction, development & other land loans 647,077 — — 90 647,167 Commercial real estate - owner occupied 1,236,396 2,073 976 9,367 1,248,812 Commercial real estate - non owner occupied 2,614,843 9,678 146 887 2,625,554 Multi-family real estate 506,407 — — — 506,407 Residential 1-4 family real estate 1,699,800 12,973 7,062 9,487 1,729,322 Home equity loans/lines of credit 342,551 1,118 419 1,795 345,883 Consumer loans 69,775 317 212 349 70,653 Total $ 8,023,752 $ 28,601 $ 9,356 $ 31,779 8,093,488 Unamortized net deferred loan (fees) costs 1,188 Total loans $ 8,094,676 Collateral dependent loans are individually evaluated loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. The Company reviews loans on nonaccrual with a net book balance of $ 500,000 or greater for designation as collateral dependent loans, as well as certain other loans that may still be accruing interest and/or are less than $ 500,000 in size that management of the Company designates as having higher risk. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the ACL. The following table presents an analysis of collateral dependent loans of the Company as of December 31, 2025. ($ in thousands) Commercial Property Total Collateral-Dependent Loans Commercial real estate - owner occupied $ 5,390 $ 5,390 Commercial real estate - non owner occupied 4,269 4,269 Total $ 9,659 $ 9,659 The following table presents an analysis of collateral dependent loans of the Company as of December 31, 2024. ($ in thousands) Commercial Property Total Collateral-Dependent Loans Commercial real estate - owner occupied $ 879 $ 879 Total $ 879 $ 879 Under CECL, for collateral dependent loans, the Company has adopted the practical expedient to measure the ACL based on the fair value of collateral. The ACL is calculated on an individual loan basis based on the shortfall between the fair value of the loan's collateral, which is adjusted for liquidation costs/discounts, and amortized cost. If the fair value of the collateral exceeds the amortized cost, no allowance is required. The Company's policy is to obtain third-party appraisals on any significant pieces of collateral. For loans secured by real estate, the Company's policy is to write nonaccrual loans down to 90 % of the appraised value, which considers estimated selling costs. For real estate collateral, the Company may discount the collateral values due to factors including market trends, collateral condition, or near-term sales. For loans secured by non-real estate collateral, the Company generally writes nonaccrual loans down to provide for selling costs and liquidity discounts that are usually incurred when disposing of non-real estate collateral. For reviewed loans that are not on nonaccrual basis, the Company assigns a specific allowance based on the parameters noted above. Fluctuations in the ACL each period are based on loan mix and growth, changes in the levels of nonperforming loans, economic forecasts impacting loss drivers, other assumptions and inputs to the CECL model, and as 82 Table of Contents occurred in 2025, adjustments for acquired loan portfolios. Much of the change to the level of ACL during the year ended December 31, 2025 is attributed to the potential exposure from Hurricane Helene. The balance of the change was a result of loan growth during the year and updated prepayment speed estimates in the CECL model, thus requiring additional allowance for the estimated longer life of loans. The following tables present the activity in the ACL on loans for each of the periods indicated. Fluctuations in the ACL each period are based on loan mix and growth, changes in the levels of nonperforming loans, economic forecasts impacting loss drivers, other assumptions and inputs to the CECL model. ($ in thousands) Beginning balance Charge-offs Recoveries Provisions/(Reversals) Ending balance As of and for the year ended December 31, 2025 Commercial and industrial $ 19,474 $ ( 7,741 ) $ 2,017 $ 6,294 $ 20,044 Construction, development & other land loans 9,314 — 168 1,983 11,465 Commercial real estate - owner occupied 19,380 ( 1,340 ) 158 2,100 20,298 Commercial real estate - non owner occupied 27,768 ( 938 ) 38 ( 1,851 ) 25,017 Multi-family real estate 5,476 — — ( 271 ) 5,205 Residential 1-4 family real estate 33,552 ( 127 ) 447 196 34,068 Home equity loans/lines of credit 4,111 ( 69 ) 83 ( 606 ) 3,519 Consumer loans 3,497 ( 1,414 ) 163 1,719 3,965 $ 122,572 $ ( 11,629 ) $ 3,074 $ 9,564 $ 123,581 ($ in thousands) Beginning balance Charge-offs Recoveries Provisions/(Reversals) Ending balance As of and for the year ended December 31, 2024 Commercial and industrial $ 21,227 $ ( 7,278 ) $ 2,363 $ 3,162 $ 19,474 Construction, development & other land loans 13,940 ( 79 ) 229 ( 4,776 ) 9,314 Commercial real estate - owner occupied 18,218 ( 223 ) 36 1,349 19,380 Commercial real estate - non owner occupied 24,916 ( 462 ) 107 3,207 27,768 Multi-family real estate 3,825 — — 1,651 5,476 Residential 1-4 family real estate 21,396 ( 18 ) 310 11,864 33,552 Home equity loans/lines of credit 3,339 ( 2 ) 272 502 4,111 Consumer loans 2,992 ( 1,525 ) 238 1,792 3,497 $ 109,853 $ ( 9,587 ) $ 3,555 $ 18,751 $ 122,572 ($ in thousands) Beginning balance Initial ACL for acquired PCD loans Charge-offs Recoveries Provisions/(Reversals) Ending balance As of and for the year ended December 31, 2023 Commercial and industrial $ 17,718 $ 5,197 $ ( 8,358 ) $ 1,393 $ 5,277 $ 21,227 Construction, development & other land loans 15,128 49 ( 120 ) 370 ( 1,487 ) 13,940 Commercial real estate - owner occupied 14,972 191 ( 144 ) 465 2,734 18,218 Commercial real estate - non owner occupied 22,780 51 ( 235 ) 737 1,583 24,916 Multi-family real estate 2,957 — — 13 855 3,825 Residential 1-4 family real estate 11,354 113 ( 4 ) 377 9,556 21,396 Home equity loans/lines of credit 3,158 8 ( 309 ) 98 384 3,339 Consumer loans 2,900 1 ( 1,005 ) 248 848 2,992 $ 90,967 $ 5,610 $ ( 10,175 ) $ 3,701 $ 19,750 $ 109,853 Credit Quality Indicators The Company tracks credit quality based on its internal risk ratings. Upon origination, a loan is assigned an initial risk grade, which is generally based on several factors such as the borrower’s credit score, the loan-to-value ratio, the debt-to-income ratio, etc. Loans that are risk-graded as substandard during the origination process are declined. After loans are initially graded, they are monitored regularly for credit quality based on many factors, such as payment history, the borrower’s financial status, and changes in collateral value. Loans can be downgraded or upgraded depending on management’s evaluation of these factors. Internal risk-grading policies are consistent throughout each loan type. 83 Table of Contents The following describes the Company’s internal risk grades in ascending order of likelihood of loss: Risk Grade Description Pass: 1 Loans with virtually no risk, including cash secured loans. 2 Loans with documented significant overall financial strength. These loans have minimum chance of loss due to the presence of multiple sources of repayment – each clearly sufficient to satisfy the obligation. 3 Loans with documented satisfactory overall financial strength. These loans have a low loss potential due to presence of at least two clearly identified sources of repayment – each of which is sufficient to satisfy the obligation under the present circumstances. 4 Loans to borrowers with acceptable financial condition. These loans could have signs of minor operational weaknesses, lack of adequate financial information, or loans supported by collateral with questionable value or marketability. 5 Loans that represent above average risk due to minor weaknesses and warrant closer scrutiny by management. Collateral is generally available and felt to provide reasonable coverage with realizable liquidation values in normal circumstances. Repayment performance is satisfactory. P (Pass) Consumer loans that are of satisfactory credit quality with borrowers who exhibit good personal credit history, average personal financial strength and moderate debt levels. These loans generally conform to Bank policy, but may include approved mitigated exceptions to the guidelines. Special Mention: 6 Existing loans with defined weaknesses in primary source of repayment that, if not corrected, could cause a loss to the Company. Classified: 7 An existing loan inadequately protected by the current sound net worth and paying capacity of the obligor or the collateral pledged, if any. These loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. 8 Loans that have a well-defined weakness that make the collection or liquidation in full highly questionable and improbable. Loss appears imminent, but the exact amount and timing is uncertain. 9 Loans that are considered uncollectible and are in the process of being charged-off. This grade is a temporary grade assigned for administrative purposes until the charge-off is completed. F (Fail) Consumer loans with a well-defined weakness, such as exceptions of any kind with no mitigating factors, history of paying outside the terms of the note, insufficient income to support the current level of debt, etc. In the tables that follow, substantially all of the "Classified" loans have grades of 7 or Fail for consumer loans, with those categories having similar levels of risk. The tables below present the Company’s recorded investment in loans by credit quality indicators by year of origination or renewal as of the periods indicated. Acquired loans are presented in the year originated, not in the year of acquisition. As presented in the tables that follow, as of December 31, 2025, the Company had $ 29.3 million in loans graded Special Mention and $ 58.5 million in loans graded Classified, which includes all nonaccrual loans at that date. As of December 31, 2024, the Company had $ 37.1 million in loans graded Special Mention and $ 65.8 million in loans graded Classified, which includes all nonaccrual loans at that date. 84 Table of Contents Term Loans by Year of Origination ($ in thousands) 2025 2024 2023 2022 2021 Prior Revolving Total As of December 31, 2025 Commercial and industrial Pass $ 213,147 $ 79,715 $ 43,504 $ 91,590 $ 57,804 $ 108,133 $ 439,840 $ 1,033,733 Special Mention 85 260 164 109 82 262 1,416 2,378 Classified 515 157 949 3,177 416 3,692 1,421 10,327 Total commercial and industrial 213,747 80,132 44,617 94,876 58,302 112,087 442,677 1,046,438 Gross charge-offs, YTD 35 646 780 903 174 802 4,401 7,741 Construction, development & other land loans Pass 469,670 115,650 76,839 18,463 18,724 8,840 39,702 747,888 Special Mention 4,172 — 573 48 — — — 4,793 Classified 57 49 72 68 2 270 — 518 Total construction, development & other land loans 473,899 115,699 77,484 18,579 18,726 9,110 39,702 753,199 Gross charge-offs, YTD — — — — — — — — Commercial real estate - owner occupied Pass 298,490 187,305 185,070 215,615 220,148 184,358 25,429 1,316,415 Special Mention 2,428 2,856 1,802 3,018 406 6,541 1,757 18,808 Classified 112 1,393 568 2,313 474 13,786 43 18,689 Total commercial real estate - owner occupied 301,030 191,554 187,440 220,946 221,028 204,685 27,229 1,353,912 Gross charge-offs, YTD — 420 — 17 — 903 — 1,340 Commercial real estate - non owner occupied Pass 724,974 374,312 376,910 594,522 529,233 205,946 29,622 2,835,519 Special Mention 136 1,131 — — 1 382 — 1,650 Classified 78 662 — 546 — 5,100 — 6,386 Total commercial real estate - non owner occupied 725,188 376,105 376,910 595,068 529,234 211,428 29,622 2,843,555 Gross charge-offs, YTD — 905 — 33 — — — 938 Multi-family real estate Pass 100,953 65,838 63,983 109,323 148,234 33,429 15,124 536,884 Special Mention — — — — — — — — Classified — — 131 — — — — 131 Total multi-family real estate 100,953 65,838 64,114 109,323 148,234 33,429 15,124 537,015 Gross charge-offs, YTD — — — — — — — — Residential 1-4 family real estate Pass 166,356 230,701 301,965 373,118 264,824 381,796 61 1,718,821 Special Mention 390 424 — — 267 630 — 1,711 Classified 151 2,561 420 2,273 1,894 8,622 — 15,921 Total residential 1-4 family real estate 166,897 233,686 302,385 375,391 266,985 391,048 61 1,736,453 Gross charge-offs, YTD — — — — — 127 — 127 Home equity loans/lines of credit Pass 3,785 1,255 1,894 659 203 420 369,296 377,512 Special Mention — — — — — — — — Classified 158 34 254 — 88 3 5,603 6,140 Total home equity loans/lines of credit 3,943 1,289 2,148 659 291 423 374,899 383,652 Gross charge-offs, YTD — — — 68 — — 1 69 Consumer loans Pass 15,044 8,619 4,952 3,390 1,063 580 33,403 67,051 Special Mention — — — — — — — — Classified 49 74 36 24 4 — 220 407 Total consumer loans 15,093 8,693 4,988 3,414 1,067 580 33,623 67,458 Gross charge-offs, YTD 25 149 115 12 1 37 1,075 1,414 Total loans $ 2,000,750 $ 1,072,996 $ 1,060,086 $ 1,418,256 $ 1,243,867 $ 962,790 $ 962,937 8,721,682 Unamortized net deferred loan fees 737 Total loans, net of deferred loan fees $ 8,722,419 Total gross charge-offs, year to date $ 60 $ 2,120 $ 895 $ 1,033 $ 175 $ 1,869 $ 5,477 $ 11,629 85 Table of Contents Term Loans by Year of Origination ($ in thousands) 2024 2023 2022 2021 2020 Prior Revolving Total As of December 31, 2024 Commercial and industrial Pass $ 114,786 $ 81,851 $ 120,769 $ 82,810 $ 59,218 $ 70,986 $ 373,850 $ 904,270 Special Mention 1,076 26 190 36 259 804 1,825 4,216 Classified 266 2,496 3,254 713 1,199 2,634 642 11,204 Total commercial and industrial 116,128 84,373 124,213 83,559 60,676 74,424 376,317 919,690 Gross charge-offs, YTD 306 669 849 318 137 929 4,070 7,278 Construction, development & other land loans Pass 355,734 124,323 60,305 29,823 12,727 5,276 57,177 645,365 Special Mention — 605 77 8 — 2 11 703 Classified 227 449 80 — 67 276 — 1,099 Total construction, development & other land loans 355,961 125,377 60,462 29,831 12,794 5,554 57,188 647,167 Gross charge-offs, YTD — 79 — — — — — 79 Commercial real estate - owner occupied Pass 194,193 222,718 261,634 252,929 153,634 109,559 15,772 1,210,439 Special Mention 9,927 1,869 2,731 184 147 7,007 — 21,865 Classified 4,506 235 2,085 1,294 1,188 7,200 — 16,508 Total commercial real estate - owner occupied 208,626 224,822 266,450 254,407 154,969 123,766 15,772 1,248,812 Gross charge-offs, YTD — 25 — 19 114 65 — 223 Commercial real estate - non owner occupied Pass 482,433 434,713 668,168 602,028 252,260 132,316 29,922 2,601,840 Special Mention 1,648 265 189 11 331 5,721 54 8,219 Classified 12,725 429 566 — 88 1,687 — 15,495 Total commercial real estate - non owner occupied 496,806 435,407 668,923 602,039 252,679 139,724 29,976 2,625,554 Gross charge-offs, YTD — — — — 304 158 — 462 Multi-family real estate Pass 87,803 65,508 114,627 159,038 40,940 9,926 27,630 505,472 Special Mention — — — — — 793 — 793 Classified — 142 — — — — — 142 Total multi-family real estate 87,803 65,650 114,627 159,038 40,940 10,719 27,630 506,407 Gross charge-offs, YTD — — — — — — — — Residential 1-4 family real estate Pass 216,725 347,472 404,809 278,197 166,013 296,870 2,768 1,712,854 Special Mention 74 — 10 95 61 740 — 980 Classified 3,968 227 2,558 544 1,558 6,633 — 15,488 Total residential 1-4 family real estate 220,767 347,699 407,377 278,836 167,632 304,243 2,768 1,729,322 Gross charge-offs, YTD — — — — — 18 — 18 Home equity loans/lines of credit Pass 2,096 2,672 645 251 259 832 333,434 340,189 Special Mention 120 153 — — — — 15 288 Classified 88 43 68 90 — 7 5,110 5,406 Total home equity loans/lines of credit 2,304 2,868 713 341 259 839 338,559 345,883 Gross charge-offs, YTD — — — — — — 2 2 Consumer loans Pass 14,623 10,005 7,059 2,380 1,049 320 34,747 70,183 Special Mention — — — — — — 21 21 Classified 33 21 27 9 — 28 331 449 Total consumer loans 14,656 10,026 7,086 2,389 1,049 348 35,099 70,653 Gross charge-offs, YTD 6 121 41 37 2 10 1,308 1,525 Total loans $ 1,503,051 $ 1,296,222 $ 1,649,851 $ 1,410,440 $ 690,998 $ 659,617 $ 883,309 8,093,488 Unamortized net deferred loan fees 1,188 Total loans, net of deferred loan fees $ 8,094,676 Total gross charge-offs, year to date $ 312 $ 894 $ 890 $ 374 $ 557 $ 1,180 $ 5,380 $ 9,587 86 Table of Contents Loan Modifications to Borrowers Experiencing Financial Difficulty Occasionally, the Company modifies loans to borrowers in financial distress as a part of our loss mitigation activities. Various types of modification may be offered including principal forgiveness, term extension, payment delays, or interest rate reductions. In some cases, the Company will modify a certain loan by providing multiple types of concessions. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession may be granted. For loans included in the “combination” columns below, multiple types of modifications have been made on the same loan within the current reporting period. The following table presents the amortized cost basis at December 31, 2025 of the FDMs modified during the twelve months then ended for borrowers experiencing financial difficulty, by loan category and type of concession granted. ($ in thousands) Payment Delay Term Extension Combination - Payment Delay and Term Extension Combination - Interest Rate Reduction and Term Extension Total Percent of Total Class of Loans Commercial and industrial $ 484 $ 674 $ — $ 38 $ 1,196 0.11 % Commercial real estate - owner occupied 722 112 — — 834 0.06 % Commercial real estate - non owner occupied 45 4,269 — — 4,314 0.15 % Residential 1-4 family real estate — 135 10 — 145 0.01 % Home equity loans/lines of credit — 804 — — 804 0.21 % Total $ 1,251 $ 5,994 $ 10 $ 38 $ 7,293 0.08 % The following table presents the amortized cost basis at December 31, 2024 of the FDMs modified during the twelve months then ended for borrowers experiencing financial difficulty, by loan category and type of concession granted. ($ in thousands) Payment Delay Term Extension Combination - Payment Delay and Term Extension Combination - Interest Rate Reduction and Term Extension Total Percent of Total Class of Loans Commercial and industrial $ 180 $ 911 $ 878 $ 92 $ 2,061 0.22 % Construction, development & other land loans — 171 — — 171 0.03 % Commercial real estate - owner occupied — — 131 — 131 0.01 % Commercial real estate - non owner occupied — 102 — — 102 — % Residential 1-4 family real estate — 195 — — 195 0.01 % Home equity loans/lines of credit — 413 — 238 651 0.19 % Total $ 180 $ 1,792 $ 1,009 $ 330 $ 3,311 0.04 % For the twelve months ended December 31, 2025 and December 31, 2024, there were no modifications for borrowers experiencing financial difficulty with principal forgiveness concessions. 87 Table of Contents The following table reflects the financial effect for the twelve months ended December 31, 2025 of the modifications made for borrowers experiencing financial difficulty: Financial Effect of Modification to Borrowers Experiencing Financial Difficulty Weighted Average Interest Rate Reduction Weighted Average Payment Delay (in months) Weighted Average Term Extension (in months) Commercial and industrial 2.24 % 6 22 Commercial real estate - owner occupied — % 6 52 Commercial real estate - non owner occupied — % 12 10 Residential 1-4 family real estate — % 12 61 Home equity loans/lines of credit — % 0 50 The following table reflects the financial effect for the twelve months ended December 31, 2024 of the modifications made for borrowers experiencing financial difficulty: Financial Effect of Modification to Borrowers Experiencing Financial Difficulty Weighted Average Interest Rate Reduction Weighted Average Payment Delay (in months) Weighted Average Term Extension (in months) Commercial and industrial 0.75 % 11 10 Construction, development & other land loans — % 0 5 Commercial real estate - owner occupied 4.26 % 12 0 Commercial real estate - non owner occupied — % 0 13 Residential 1-4 family real estate — % 0 103 Home equity loans/lines of credit 1.76 % 0 61 The Company closely monitors the performance of the FDMs that are modified for borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of loans that have been modified in the last twelve months as of December 31, 2025: Payment Status (Amortized Cost Basis) ($ in thousands) Current 30-59 Days Past Due 60-89 Days Past Due 90+ Days Past Due Commercial and industrial $ 594 $ 38 $ — $ 563 Commercial real estate - owner occupied 500 334 — — Commercial real estate - non owner occupied 4,316 — — — Residential 1-4 family real estate 144 — — — Home equity loans/lines of credit 674 130 — — Total $ 6,228 $ 502 $ — $ 563 88 Table of Contents The following table presents the performance of FDMs that have been modified in the last twelve months as of December 31, 2024: Payment Status (Amortized Cost Basis) ($ in thousands) Current 30-59 Days Past Due 60-89 Days Past Due 90+ Days Past Due Commercial and industrial $ 1,183 $ — $ — $ 878 Construction, development & other land loans 171 — — — Commercial real estate - owner occupied 131 — — — Commercial real estate - non owner occupied 102 — — — Residential 1-4 family real estate 137 — — 58 Home equity loans/lines of credit 583 — 68 — Total $ 2,307 $ — $ 68 $ 936 The following table presents the amortized cost basis of FDMs that had a payment default during the year ended December 31, 2025 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty by loan category and type of concession granted. Amortized Cost Basis of Modified Receivables That Subsequently Defaulted Payment Delay Term Extension Combination - Interest Rate Reduction and Term Extension Total Commercial and industrial $ 75 $ 488 $ 38 $ 601 Commercial real estate - non owner occupied 334 — — 334 Home equity loans/lines of credit — 130 — 130 Total $ 409 $ 618 $ 38 $ 1,065 The following table presents the amortized cost basis of FDMs that had a payment default during the year ended December 31, 2024 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty by loan category and type of concession granted. Amortized Cost Basis of Modified Receivables That Subsequently Defaulted Term Extension Total Residential 1-4 family real estate $ 58 $ 58 Total $ 58 $ 58 At December 31, 2025, there were no commitments to lend additional funds to a borrower experiencing financial difficulty for whom a modification had been made. At December 31, 2024, there was a commitment to lend $ 0.1 million of additional funds to one borrower experiencing financial difficulty for whom a modification had been made. Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the ACL is adjusted by the same amount. Concentration of Credit Risk The Company’s loan portfolio is not concentrated in loans to any single borrower or to a relatively small number of borrowers. Additionally, management is not aware of any concentrations of loans to classes of borrowers or industries that would be similarly affected by economic conditions. Approximately 87 % of the Company's loan portfolio is secured by real estate and is therefore susceptible to changes in real estate valuations. 89 Table of Contents Most of the Company's business activity is with customers located within the markets where we have banking operations. While our exposure to credit risk is affected by changes in the economy within our markets, the risk is not significantly concentrated. The following table presents the total lending exposure for the counties with the largest percentage of our loan portfolio as of December 31, 2025 and 2024. No other market (as defined by county) had total loans outstanding in excess of 5% of the total portfolio at year end. Percentage of Loans Outstanding 2025 2024 New Hanover County, North Carolina 9.5 % 8.9 % Wake County, North Carolina 9.4 % 9.7 % Mecklenburg County, North Carolina 8.2 % 7.8 % Buncombe County, North Carolina 5.0 % 5.2 % In addition to monitoring potential concentrations of loans to particular borrowers or groups of borrowers, industries, and geographic regions, the Company monitors exposure to credit risk that could arise from potential concentrations of lending products and practices The Company has determined that there is no concentration of credit risk associated with its lending policies or practices. Impact of Hurricane Helene 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 for December 31, 2025 was applied. 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. As of December 31, 2024, the ACL on the population of potentially impacted commercial and consumer loans was $ 13.0 million, adding 16 basis points to the overall ACL as a percent of total loans, which was 1.51 %. Allowance for Unfunded Loan Commitments In addition to the ACL on loans, the Company maintains an allowance for lending-related commitments such as unfunded loan commitments and letters of credit. The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for lending-related commitments on off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information, and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss rates that are used in computing the ACL on loans, and are discussed in Note 1. The allowance for unfunded loan commitments were included in "Other liabilities" on the consolidated balance sheets. The following table prese nts the balance and activity in the allowance for unfunded loan commitments for twelve months ended December 31, 2025 and December 31, 2024: ($ in thousands) December 31, 2025 December 31, 2024 Beginning balance $ 9,066 $ 11,369 Charge-offs — — Recoveries — — Provision (reversal) for unfunded commitments 1,938 ( 2,303 ) Ending balance $ 11,004 $ 9,066 90 Table of Contents Note 5. Premises and Equipment Premises and equipment at December 31, 2025 and 2024 consisted of the following: ($ in thousands) Estimated Useful Lives December 31, 2025 December 31, 2024 Land $ 50,472 $ 51,053 Buildings 15 to 40 years 122,969 125,632 Furniture and equipment 5 to 10 years 36,814 35,696 Vehicles 3 to 5 years 2,447 2,460 Leasehold improvements 1 to 39 years 3,462 1,906 Total cost 216,164 216,747 Less accumulated depreciation and amortization ( 77,039 ) ( 73,288 ) Total premises and equipment $ 139,125 $ 143,459 Depreciation expense amounted to $ 6.8 million, $ 7.8 million, and $ 7.8 million for the years ended December 31, 2025, 2024, and 2023, respectively, and is recorded in occupancy and equipment expense. Note 6. Goodwill, Other Intangible Assets and Servicing Assets The following is a summary of the gross carrying amount and accumulated amortization of amortizable intangible assets and the carrying amount of unamortized intangible assets as of the periods presented. December 31, 2025 December 31, 2024 ($ in thousands) Gross Carrying Amount Accumulated Amortization Net Amount Gross Carrying Amount Accumulated Amortization Net Amount Amortizable intangible assets: Customer lists $ 1,600 $ 1,600 $ — $ 1,600 $ 1,387 $ 213 Core deposit intangibles 57,890 40,658 17,232 57,890 35,199 22,691 Other 100 100 — 100 100 — Total amortizable intangible assets $ 59,590 $ 42,358 $ 17,232 $ 59,590 $ 36,686 $ 22,904 Unamortizable intangible assets: Goodwill $ 478,750 $ 478,750 Customer lists are generally amortized over five years and core deposit intangibles are generally amortized over 10 years, both at an accelerated rate. Amortization expense of all amortizable intangible assets totaled $ 5.7 million, $ 6.6 million, and $ 8.0 million for the years ended December 31, 2025, 2024 and 2023, respectively. Goodwill is evaluated for impairment on at least an annual basis, with the annual evaluation occurring as of October 31 of each year. Goodwill is also evaluated for impairment any time there is a triggering event indicating that impairment may have occurred. No triggering events were identified during 2025 or 2024 and, therefore, the Company did not perform interim impairment evaluations in either of those years. The Company's most recent evaluation of goodwill, which occurred in the fourth quarter of 2025, indicated that there was no goodwill impairment. There was no change to carrying amounts of goodwill during 2025 or 2024. The following table presents the estimated amortization expense schedule related to amortizable intangible assets. These amounts will be recorded as "Intangibles amortization expense" within the noninterest expense section of the consolidated statements of income. These estimates are subject to change in future periods to the extent 91 Table of Contents management determines it is necessary to make adjustments to the carrying value or estimated useful lives of amortizable intangible assets. ($ in thousands) Estimated Amortization Expense 2026 $ 4,705 2027 3,950 2028 3,197 2029 2,443 2030 1,688 Thereafter 1,249 Total $ 17,232 During 2025, 2024 and 2023, the Company recorded $ 2.8 million, $ 3.2 million, and $ 3.5 million, respectively, in SBA guaranteed servicing fee income, which is included in "Other service charges and fees" on the consolidated income statements. There was no impairment of SBA servicing assets at December 31, 2025 and December 31, 2024. A summary of the key assumptions used in the discounted cash flow method utilized to estimate the fair value of the SBA servicing assets were as follows: December 31, 2025 December 31, 2024 Prepayment rate assumption: Weighted average 20.30 % 19.89 % Range 12.44 % - 33.44 % 10.69 % - 35.20 % Discount rate: Weighted average 13.83 % 12.91 % Range 6.51 % - 18.83 % 5.49 % - 18.92 % Servicing cost 0.40 % 0.40 % The following table presents the changes in the SBA servicing assets (included in "Other assets" in the Company's consolidated balance sheet) for each period indicated. ($ in thousands) December 31, 2025 December 31, 2024 Beginning balance, net $ 2,605 $ 3,350 Add: New servicing assets 284 954 Less: Amortization expense ( 1,141 ) ( 1,699 ) Ending balance, net $ 1,748 $ 2,605 92 Table of Contents Note 7. Income Taxes The components of income tax expense (benefit) for the years ended December 31, 2025, 2024, and 2023 are as follows: ($ in thousands) 2025 2024 2023 Current - Federal $ ( 2,615 ) $ 23,134 $ 24,750 - State 439 3,637 3,857 Deferred - Federal 29,235 ( 4,569 ) ( 481 ) - State 1,393 ( 300 ) ( 301 ) Total $ 28,452 $ 21,902 $ 27,825 Beginning in 2025 on a prospective basis, the Company adopted ASU 2023-09. See Accounting Standards Adopted in 2025 in Note 1 for additional details on the adoption. The following is a reconciliation of federal income tax expense at the statutory rate of 21% at December 31, 2025 to the income tax provision reported in the financial statements. ($ in thousands) 2025 Amount Percent Tax provision at statutory rate $ 29,295 21.00 % State and local income taxes, net of federal income tax effect (1) 1,444 1.04 % Non-taxable / non-deductible items ( 2,032 ) ( 1.46 ) % Tax credits (2) ( 828 ) ( 0.59 ) % Other adjustments 573 0.41 % Total provision for income taxes and effective tax rate $ 28,452 20.40 % (1) - State taxes in North Carolina made up the majority (greater than 50 percent) of this category. (2) - Net of proportional amortization of qualifying affordable housing investments. As previously disclosed for the years ended December 31, 2024 and December 31, 2023, the following is a reconciliation of federal income tax expense at the statutory rate of 21% to the income tax provision reported in the financial statements. ($ in thousands) 2024 2023 Tax provision at statutory rate $ 20,605 $ 27,711 Increase (decrease) in income taxes resulting from: Tax-exempt interest income, net ( 1,937 ) ( 1,934 ) State income taxes, net of federal benefit 2,928 2,809 Other, net 306 ( 761 ) Total $ 21,902 $ 27,825 In the table above, for 2024, the Other, net amount includes $ 1.7 million related to incremental state tax-related expenses for prior years, net of associated federal benefit amounts and $ 0.8 million related to deferred tax adjustments. The following table presents income taxes paid (net of refunds received) for the year ended December 31, 2025. ($ in thousands) 2025 US Federal $ 9,000 North Carolina 1,070 Other US State and Local 950 Total $ 11,020 93 Table of Contents The sources and tax effects of temporary differences that give rise to significant portions of the deferred tax assets, which are included in Other assets on the consolidated balance sheets are as follows at December 31, 2025 and 2024: ($ in thousands) 2025 2024 Deferred tax assets: Net operating loss carryforwards $ 134,335 $ — Unrealized losses on securities available for sale 44,764 85,940 Allowance for credit losses on loans and unfunded commitments — 30,257 Operating lease liability 3,211 3,342 Purchase accounting adjustments 1,254 3,358 All other 7,086 8,077 Gross deferred tax assets 190,650 130,974 Deferred tax liabilities: Security valuation ( 58,352 ) — Loan valuation ( 72,232 ) — Amortizable basis of intangible assets ( 13,427 ) ( 14,442 ) Depreciable basis of fixed assets ( 5,777 ) ( 4,647 ) Right of use lease asset ( 3,015 ) ( 3,161 ) Loan fees ( 2,485 ) ( 2,483 ) All other ( 882 ) ( 578 ) Gross deferred tax liabilities ( 156,170 ) ( 25,311 ) Net deferred tax asset $ 34,480 $ 105,663 The Company recorded de minimis valuation allowances for 2025 and 2024 related to state net operating loss carryforwards for which the realization of the remaining deferred tax assets is determined to be more likely than not. The Company had no significant uncertain tax positions, and thus no such reserve for uncertain tax positions has been recorded. Additionally, the Company determined that it has no material unrecognized tax benefits that if recognized would affect the effective tax rate. The Company’s general policy is to record tax penalties and interest as a component of “Other operating expenses.” The Company is subject to routine audits of its tax returns by the Internal Revenue Service and various state taxing authorities. The Company’s tax returns are subject to income tax audit by federal and state agencies beginning with the year 2021. There are no indications of any material adjustments relating to any examination currently being conducted by any taxing authority. 94 Table of Contents Note 8. Deposits The following table lists the composition of the deposit portfolio as of the end of the respective years. ($ in thousands) December 31, 2025 December 31, 2024 Noninterest-bearing checking accounts $ 3,486,985 $ 3,367,624 Interest-bearing checking accounts 1,420,795 1,398,395 Money market accounts 4,510,356 4,285,405 Savings accounts 526,643 542,133 Other time deposits 493,282 566,514 Time deposits >$250,000 305,473 360,854 Total customer deposits 10,743,534 10,520,925 Brokered Deposits - time deposits 4,887 9,600 Total deposits $ 10,748,421 $ 10,530,525 At December 31, 2025, the scheduled maturities of time deposits were as follows: ($ in thousands) 2026 $ 771,820 2027 18,072 2028 7,022 2029 3,055 2030 3,529 Thereafter 144 $ 803,642 Deposits received from executive officers and directors and their associates totaled approximately $ 3.4 million and $ 5.0 million at December 31, 2025 and 2024, respectively. Deposit overdrafts of approximately $ 1.1 million at December 31, 2025 and 2024 are included within "Loans" on the consolidated balance sheets. As of December 31, 2025 and 2024, the Company held $ 305.5 million and $ 360.9 million, respectively, in time deposits of more than $250,000 (which was the FDIC insurance limit for insured deposits as of December 31, 2025). Brokered deposits were $ 4.9 million and $ 9.6 million at December 31, 2025 and 2024, respectively. Total reciprocal deposits through CDARS and ICS were $ 19.9 million and $ 18.4 million at December 31, 2025 and 2024, respectively. As of December 31, 2025, the estimated insured deposits totaled $ 6.5 billion or 60.2 % of total deposits, while approximately $ 4.3 billion of the Company's total deposits were uninsured deposits. In addition to insured deposits, there were deposits with a balance totaling $ 730.4 million at December 31, 2025 which were collateralized by investment securities such that approximately 67.0 % of our total deposits were insured or collateralized at that date. The Company’s deposit portfolio is not concentrated in deposits from any single customer or to a relatively small number of customers. Additionally, management is not aware of any concentrations of deposits to classes of customers or industries that would be similarly affected by economic conditions. The following table presents the counties with the largest share of our deposit base as of December 31, 2025 and 2024. No other market area (as defined by county) comprises more than 5% of our deposit base at the dates presented. Percentage of Total Deposits 2025 2024 Moore County, North Carolina (1) 9.0 % 9.2 % Buncombe County, North Carolina 7.3 % 7.2 % Guilford County, North Carolina 5.1 % 4.8 % 95 Table of Contents Note 9. Borrowings and Borrowings Availability The following tables presents information regarding the Company’s outstanding borrowings at December 31, 2025 ($ are in thousands) : Description Due Date Call Feature Balance Interest Rate FHLB Principal Reducing Credit 6/26/2028 to 12/20/2028 None $ 753 0.00 % to 1.00 % fixed Trust Preferred Securities 1/23/2034 Quarterly by Company beginning 1/23/2009 10,310 6.75 % at 12/31/25 adjustable rate 3 month CME Term SOFR + 2.91 % Trust Preferred Securities 1/23/2034 Quarterly by Company beginning 1/23/2009 10,310 6.85 % at 12/31/25 adjustable rate 3 month CME Term SOFR + 3.01 % Trust Preferred Securities 9/20/2034 Quarterly by Company beginning 9/20/2009 12,372 6.11 % at 12/31/25 adjustable rate 3 month CME Term SOFR + 2.41 % Trust Preferred Securities 1/7/2035 Quarterly by Company beginning 1/7/2010 10,310 6.17 % at 12/31/25 adjustable rate 3 month CME Term SOFR + 2.00 % Trust Preferred Securities 6/15/2036 Quarterly by Company beginning 6/15/2011 25,774 5.37 % at 12/31/25 adjustable rate 3 month CME Term SOFR + 1.65 % Trust Preferred Securities 6/23/2036 Quarterly by Company beginning 6/23/2011 8,248 5.80 % at 12/31/25 adjustable rate 3 month CME Term SOFR + 2.11 % Total borrowings / weighted average rate as of December 31, 2025 78,077 5.97 % Unamortized discount on acquired borrowings ( 3,508 ) Total borrowings $ 74,569 The following table presents information regarding the Company’s outstanding borrowings at December 31, 2024 (dollars are in thousands) : Description Due date Call Feature Balance Interest Rate FHLB Principal Reducing Credit 6/26/2028 to 12/20/2028 None $ 802 0.00 % to 1.00 % fixed Trust Preferred Securities 1/23/2034 Quarterly by Company beginning 1/23/2009 10,310 7.50 % at 12/31/24 adjustable rate 3 month CME Term SOFR + 2.91 % Trust Preferred Securities 1/23/2034 Quarterly by Company beginning 1/23/2009 10,310 7.61 % at 12/31/24 adjustable rate 3 month CME Term SOFR + 3.01 % Trust Preferred Securities 9/20/2034 Quarterly by Company beginning 9/20/2009 12,372 6.77 % at 12/31/24 adjustable rate 3 month CME Term SOFR + 2.41 % Trust Preferred Securities 1/7/2035 Quarterly by Company beginning 1/7/2010 10,310 6.92 % at 12/31/24 adjustable rate 3 month CME Term SOFR + 2.00 % Trust Preferred Securities 6/15/2036 Quarterly by Company beginning 6/15/2011 25,774 6.01 % at 12/31/24 adjustable rate 3 month CME Term SOFR + 1.65 % Trust Preferred Securities 6/23/2036 Quarterly by Company beginning 6/23/2011 8,248 6.45 % at 12/31/24 adjustable rate 3 month CME Term SOFR + 2.11 % Subordinated Debentures 11/15/2030 Continuous by Company beginning 11/15/2025 18,000 4.38 % fixed at 12/31/23 until 11/15/25, then adjustable rate 3 month CME Term SOFR + 4.16 % Total borrowings / weighted average rate as of December 31, 2024 96,126 6.22 % Unamortized discount on acquired borrowings ( 4,250 ) Total borrowings $ 91,876 Any borrowings from the FHLB and FRB are subject to acceleration in certain circumstances, including material adverse changes in the condition of the Company or if the Company’s qualifying collateral amounts to less than that required under the terms of the borrowing agreement. 96 Table of Contents In the above tables, at December 31, 2025 and December 31, 2024, there were no short-term borrowings (original maturity of less than twelve months). Trust Preferred Securities in the above tables are borrowings structured as trust preferred capital securities which were issued by various unconsolidated subsidiaries of the Company as discussed in Note 1. These unsecured debt securities qualify as Tier I capital for capital adequacy requirements. The Subordinated Debentures in the 2024 table above were borrowings issued by GrandSouth and assumed by the Company on January 1, 2023. These unsecured debt securities qualified as Tier II capital for capital adequacy requirements. The Company repaid the Subordinated Debentures during the fourth quarter of 2025. At December 31, 2025, the Company had several 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 December 31, 2025, the line of credit is secured by a blanket lien on portions of the Company's real estate loan portfolio totaling approximately $ 2.3 billion and the Company's FHLB stock totaling $ 8.6 million. $ 0.8 million was outstanding on the line of credit at December 31, 2025 and $ 0.8 million was outstanding at December 31, 2024; • A total of $ 265.0 million federal funds lines of credit with correspondent banks which allow the Company to purchase federal funds on an overnight, unsecured basis. None was outstanding at December 31, 2025 or 2024; and • An approximately $ 763.8 million line of credit through the Federal Reserve's discount window borrowing program, which was secured at December 31, 2025 by a blanket lien on a portion of the Company’s commercial and consumer loan portfolios (excluding real estate collateral) totaling approximately $ 319.6 million and specific investment securities with a carrying value of $ 644.8 million. No borrowings were outstanding at December 31, 2025 or 2024, respectively. At December 31, 2025, the contractual maturities of borrowings were as follows for the years ending: ($ in thousands) FHLB Principal Reducing Credit Trust Preferred Securities Total 2026 $ — $ — $ — 2027 — — — 2028 753 — 753 2029 — — — 2030 — — — Thereafter — 77,324 77,324 Total $ 753 $ 77,324 78,077 Unamortized discount on acquired borrowings ( 3,508 ) Total borrowings $ 74,569 Note 10. Leases The Company enters into leases in the normal course of business. As of December 31, 2025, the Company leased 13 branch offices for which the land and buildings are leased and ten branch offices for which the land is leased but the building is owned. The Company also leases office space for several operational departments. All of the Company’s leases are operating leases and the lease agreements have maturity dates ranging from April 2026 to May 2076, some of which include options for multiple five - and ten-year extensions. The Company includes lease extension options in the lease term if, after considering relevant economic, market, and strategic factors, it is reasonably certain the Company will exercise the option. The weighted average remaining life of the lease term for these leases was 20.8 years as of December 31, 2025 and 21.2 years as of December 31, 2024. Certain of the Company's lease agreements include variable lease payments based on changes in inflation, with the impact of that factor being insignificant to the Company's total lease expense. As permitted by applicable accounting standards, the Company has elected not to recognize leases with original lease terms of 12 months or less (short-term leases) 97 Table of Contents on the Company's consolidated balance sheets. The short-term lease cost for each period presented was insignificant. Leases are classified as either operating or finance leases at the lease commencement date and all of the Company's leases have been determined to be operating leases. Lease expense for operating leases and short-term leases is recognized on a straight-line basis over the lease term. Right-of-use assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The Company uses its incremental borrowing rate, on a collateralized basis, at lease commencement to calculate the present value of lease payments when the rate implicit in the lease is not known. The weighted average discount rate for leases was 3.41 % and 3.34 % as of December 31, 2025 and 2024, respectively. The right-of-use assets, included in " Other assets " on the Company's consolidated balance sheet, and lease liabilities, included in " Other liabilities " on the Company's consolidated balance sheet were $ 13.4 million and $ 14.2 million as of December 31, 2025, respectively, and were $ 13.8 million and $ 14.6 million as of December 31, 2024, respectively. Total operating lease expenses, included in "Other operating expenses" in the Company's consolidated statement of income, was $ 2.5 million in 2025, $ 2.5 million in 2024, and $ 3.1 million in 2023. Future undiscounted lease payments for operating leases with initial terms of greater than one year as of December 31, 2025 are as follows: ($ in thousands) 2026 $ 1,616 2027 1,338 2028 1,251 2029 1,196 2030 923 Thereafter 14,802 Total undiscounted lease payments 21,126 Less effect of discounting ( 6,890 ) Present value of estimated lease payments (lease liability) $ 14,236 Note 11. Employee Benefit Plans 401(k) Plan The Company sponsors a retirement savings plan (the "401(k) Plan") pursuant to Section 401(k) of the Internal Revenue Code ("IRC"). New employees who have met the age requirement are automatically enrolled in the 401(k) Plan at a 6 % deferral rate. The automatic deferral can be modified by the employee at any time. An eligible employee may contribute up to 15 % of annual salary to the plan, not to exceed IRC limits. For the years ended December 31, 2025, 2024, and 2023, the Company matched 100 % of the employee’s contribution up to 6 %, 4 % and 6 %, respectively. The Company’s matching contribution expense was $ 6.0 million, $ 6.8 million, and $ 6.1 million for the years ended December 31, 2025, 2024, and 2023, respectively. Discretionary contributions by the Company are permitted by the plan. The Company's matching and discretionary contributions are made according to the same investment elections each participant has established for their deferral contributions. During 2024, upon the dissolution of the Pension Plan, as discussed below, the remaining balance of plan assets was transferred to the 401(k) Plan, the expense for which is included in the 2024 contribution expense shown above. The balance was allocated to participants per the terms of the plan. The Company did not make any other discretionary contributions to the plan. Pension Plan Historically, the Company offered a noncontributory defined benefit retirement plan (the “Pension Plan”) that qualified under Section 401(a) of the IRC. In 2023, the Company’s Board of Directors (the "Board") approved a resolution to terminate the Pension Plan. During 2023, the Company commenced the Pension Plan termination 98 Table of Contents process and on July 31, 2023, the Pension Plan was amended to terminate it as of that date. Subsequently in 2023, the Pension Plan settled benefits through lump-sum payments of approximately $ 9.2 million to eligible participants electing that option and purchased annuity contracts from One America (the "Insurer") which irrevocably transferred to the Insurer approximately $ 19.5 million of the Pension Plan's obligations and related assets, thereby reducing the Pension Plan's obligations at December 31, 2023 to zero . The Company utilized the remaining surplus for future contributions under the Company’s 401(k) Plan and the remaining balance was transferred to the 401(k) Plan during 2024. Supplemental Executive Retirement Plan Historically, the Company has sponsored a Supplemental Executive Retirement Plan (the “SERP”) for the benefit of certain senior management executives of the Company. The purpose of the SERP is to provide additional monthly pension benefits. The SERP is an unfunded plan. Payments are made from the general assets of the Company. Effective December 31, 2012, the Company froze the SERP to all participants. The following table reconciles the beginning and ending balances of the SERP’s benefit obligation, as computed by the Company’s independent actuarial consultants: ($ in thousands) 2025 2024 2023 Change in benefit obligation Benefit obligation at beginning of year $ 3,151 $ 3,352 $ 3,521 Service cost — — — Interest cost 160 151 158 Actuarial loss (gain) 102 ( 111 ) ( 86 ) Benefits paid ( 241 ) ( 241 ) ( 241 ) Accumulated benefit obligation at end of year 3,172 3,151 3,352 Plan assets — — — Funded status at end of year $ ( 3,172 ) $ ( 3,151 ) $ ( 3,352 ) The accumulated benefit obligation presented above is included in "Other liabilities" in the consolidated balance sheets at December 31, 2025 and 2024. The following table presents information regarding the amounts recognized in AOCI at December 31, 2025 and 2024, as it relates to the SERP: ($ in thousands) 2025 2024 Net (loss) gain $ ( 102 ) $ 111 Prior service cost — — Amount recognized in AOCI before tax effect ( 102 ) 111 Tax benefit (expense) 23 ( 26 ) Net amount recognized as (decrease) increase to AOCI $ ( 79 ) $ 85 The following table reconciles the beginning and ending balances of AOCI at December 31, 2025 and 2024, as it relates to the SERP: ($ in thousands) 2025 2024 Accumulated other comprehensive income (loss) at beginning of fiscal year $ 85 $ ( 77 ) Net (loss) gain arising during period ( 102 ) 111 Prior service cost — — Amortization of unrecognized actuarial (loss) gain ( 111 ) 100 Amortization of prior service cost and transition obligation — — Tax benefit (expense) related to changes during the year, net 49 ( 49 ) Accumulated other comprehensive (loss) income at end of fiscal year $ ( 79 ) $ 85 99 Table of Contents The following table reconciles the beginning and ending balances of the prepaid pension cost related to the SERP: ($ in thousands) 2025 2024 Accrued liability as of beginning of fiscal year $ ( 3,261 ) $ ( 3,251 ) Net periodic pension cost for fiscal year ( 49 ) ( 251 ) Benefits paid 241 241 Accrued liability as of end of fiscal year $ ( 3,069 ) $ ( 3,261 ) Net pension cost for the SERP included the following components for the years ended December 31, 2025, 2024, and 2023: ($ in thousands) 2025 2024 2023 Service cost – benefits earned during the period $ — $ — $ — Interest cost on projected benefit obligation 160 151 158 Amortization of net actuarial (loss) gain ( 111 ) 100 ( 1,737 ) Net periodic pension cost (income) $ 49 $ 251 $ ( 1,579 ) The components of net periodic benefit cost other than the service cost component are included in the line item "Other operating expenses" in the consolidated statements of income. The following table is an estimate of the benefits that will be paid in accordance with the SERP for each of the five calendar years ending December 31, 2030 and thereafter: ($ in thousands) Estimated benefit payments 2026 $ 286 2027 305 2028 396 2029 289 2030 281 2031-2035 1,270 The following assumptions were used in determining the actuarial information for the SERP for the years ended December 31, 2025, 2024, and 2023: 2025 2024 2023 Discount rate used to determine net periodic pension cost 5.31 % 4.68 % 4.90 % Discount rate used to calculate end of year liability disclosures 4.89 % 5.31 % 4.68 % The Company’s discount rate policy for the SERP is to use the FTSE yield curve that matches the expected cash flows of the SERP. Note 12. Commitments and Contingencies In the normal course of business, there are various outstanding commitments to extend credit that are not reflected in the financial statements. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment. Commitments may expire without being used. The following table presents the Company’s outstanding loan commitments, including credit cards, at December 31, 2025 and December 31, 2024. December 31, 2025 December 31, 2024 ($ in thousands) Fixed Rate Variable Rate Total Fixed Rate Variable Rate Total Loan commitments $ 219,520 $ 379,963 $ 599,483 $ 157,221 $ 266,425 $ 423,646 Unused lines of credit 403,740 1,684,204 2,087,944 384,078 1,538,439 1,922,517 Total $ 623,260 $ 2,064,167 $ 2,687,427 $ 541,299 $ 1,804,864 $ 2,346,163 In addition to loan commitments, at December 31, 2025 and 2024, the Company had $ 30.8 million and $ 24.5 million, respectively, in standby letters of credit outstanding. The Company has no carrying amount for these standby letters of credit at either of those dates. The nature of the standby letters of credit is a stand-alone 100 Table of Contents obligation made on behalf of the Company’s customers to suppliers of the customers to guarantee payments owed to the supplier by the customer. The standby letters of credit are generally for a term of one year, at which time they may be renewed for another year if both parties agree. The Company maintains an allowance for unfunded loan commitments which is included in "Other liabilities" in the consolidated balance sheets. The allowance for unfunded loan commitments is determined as part of the quarterly ACL analysis. The Company, in the normal course of business, may be subject to various pending and threatened lawsuits in which claims for monetary damages are asserted. The Company is not involved in any legal proceedings which, in management’s opinion, could have a material effect on the consolidated financial position of the Company. Affordable Housing and Certain Other Equity Method Investments The Company invests in affordable housing projects throughout its market area as a means of supporting local communities. The Company receives tax credits related to these investments. For qualifying affordable housing projects, the Company recognizes the liability for future contribution commitments at the date of investment in the entity. The Company may also provide construction financing to these and other similar projects; however, permanent financing is generally obtained by the projects from independent third parties upon completion of construction. Any unfunded portion of these lending commitments is included above in loan commitments. In certain circumstances, the Company may participate in the permanent financing through a nonprofit third party. The Company’s maximum exposure to losses relative to investments in the entities is generally limited to the sum of the investments, future funding commitments and any related loans to the entity. Loans to these entities are underwritten in substantially the same manner as the Company’s other loans and are generally secured. The Company has investments in and future funding commitments related to small business investment companies ("SBICs") and certain other equity method investments. The risk exposure relating to such commitments is generally limited to the amount of investments and future funding commitments made. The Company generally does not lend to these entities. The following table summarizes affordable housing and other equity investments. ($ in thousands) Balance Sheet Location December 31, 2025 December 31, 2024 Investments in affordable housing projects: Carrying amount Other assets $ 135,992 $ 20,432 Amount of future funding commitments included in carrying amount Other liabilities $ 110,856 $ 15,752 SBIC and certain other equity method investments: Carrying amount Other assets $ 36,524 $ 27,210 Amount of future funding commitments not included in carrying amount NA $ 16,054 $ 14,930 During the year ended December 31, 2025, the Company recognized proportional amortization expense of $ 1.0 million, which is included within "Income tax expense" on the consolidated statements of income. During 2024, and 2023, these amounts were de minimis. Additionally, during the years ended December 31, 2025, 2024, and 2023, the Company recognized tax credits of $ 1.1 million, $ 0.6 million and $ 0.6 million, respectively, which was included within income tax expense on the consolidated statements of income. Note 13. Derivatives and Hedging Activities In the normal course of business, the Company is exposed to certain risks arising from both its business operations and economic conditions. As an element of its risk management strategies, the Company may enter into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. To accommodate customers, the Company may enter into interest rate swaps with certain commercial loan customers, with offsetting positions to dealers under a back-to-back swap program. At December 31, 2025, the Company's derivative financial instruments consist entirely of customer back-to-back interest rate swaps which are not designated as hedges. Under this program, the Company executes interest rate swaps with commercial banking customers to facilitate their risk management strategies. Those interest rate swaps 101 Table of Contents are simultaneously hedged by offsetting derivatives that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate derivatives associated with this program are not designated as hedging instruments, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings. The Company's derivative instruments are carried at fair value and included in "Other assets" for derivatives with positive fair values and "Other liabilities" for derivatives with negative fair values on the consolidated balance sheets. The table below presents the fair value of Company’s derivative financial instruments as of the dates indicated. As of December 31, 2025 As of December 31, 2024 Fair Value Fair Value ($ in thousands) Notional Amount Derivative Assets Derivative Liabilities Notional Amount Derivative Assets Derivative Liabilities Derivatives not designated as hedging instruments: Customer interest rate contracts $ 185,422 $ 3,418 $ — $ 36,526 $ 301 $ — Offsetting counterparty interest rate contracts $ 185,422 — 3,445 $ 36,526 — 302 Total derivatives not designated as hedging instruments $ 3,418 $ 3,445 $ 301 $ 302 The table below presents the gains and losses recognized in income related to derivative financial instruments that are not designated as hedging instruments. Gains and losses on interest rate swap not designated as hedges are included in "Other income, net" on the consolidated statements of income for the date indicated. (Losses) Gains ($ in thousands) Year Ended December 31, 2025 Year Ended December 31, 2024 Customer interest rate swaps and counterparty offsets $ ( 27 ) $ 53 Total $ ( 27 ) $ 53 The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of December 31, 2025 and December 31, 2024. The Company’s interest rate swaps are subject to master netting arrangements between the Company and its counterparties, however, the Company has not made a policy election to offset its derivative positions. The interest rate swaps with borrowers are cross collateralized with the underlying loan and, therefore, there is no posted collateral. Interest rate swap agreements with third-party counterparties contain provisions that require the Company to post collateral if the derivative exposure exceeds a threshold amount and receive collateral for agreements in a net asset position. 102 Table of Contents Gross Amounts of Recognized Assets Gross Amounts Offset in the Consolidated Balance Sheet Net Amounts of Assets presented in the Consolidated Balance Sheets Gross Amounts Not Offset in the Consolidated Balance Sheets ($ in thousands) Financial Instruments Cash Collateral Received Net Amount Interest rate swaps As of December 31, 2025 $ 3,418 $ — $ 3,418 $ — $ — $ 3,418 As of December 31, 2024 $ 301 $ — $ 301 $ — $ — $ 301 Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Consolidated Balance Sheets Net Amounts of Liabilities presented in the Consolidated Balance Sheets Gross Amounts Not Offset in the Consolidated Balance Sheets ($ in thousands) Financial Instruments Cash Collateral Posted Net Amount Interest rate swaps As of December 31, 2025 $ 3,445 $ — $ 3,445 $ — $ 3,512 $ ( 67 ) As of December 31, 2024 $ 302 $ — $ 302 $ — $ 150 $ 152 The commitments to originate residential mortgage loans and forward loan sales commitments are freestanding derivative instruments which were immaterial at December 31, 2025 and December 31, 2024. Credit-risk-related Contingent Features The Company's agreements with its derivative counterparties contain a provision where if either party defaults on any of its indebtedness, then it could also be declared in default on its derivative obligations. The agreements with derivative counterparties also include provisions that if not met, could result in the Company being declared in default on its derivative obligations, including if repayment of the underlying indebtedness is accelerated by the lender due to the Company's default on the indebtedness. The Company has provisions in its derivative counterparty agreement providing that if the Company fails to maintain its status as a well-capitalized institution or is subject to a prompt corrective action directive, the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements. The Company manages its credit exposure on derivative transactions by entering into a bilateral credit support agreement with each non-customer counterparty. The credit support agreement requires collateralization of exposure beyond specified minimum threshold amounts. As of December 31, 2025 and December 31, 2024, respectively, the fair value of derivatives in a net liability position, including accrued interest, was $ 3.4 million and $ 302 thousand. As of December 31, 2025 and December 31, 2024, respectively, the Company has minimum collateral posting thresholds with its derivative counterparty and has posted collateral of $ 3.5 million and $ 150 thousand. Note 14. Fair Value of Financial Instruments Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal and most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair value: Level 1: Quoted prices (unadjusted) of identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. 103 Table of Contents The following table summarizes the Company’s financial instruments that were measured at fair value on a recurring and nonrecurring basis at December 31, 2025. Description of Financial Instruments ($ in thousands) Fair Value at December 31, 2025 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Recurring Securities available for sale: U.S. Treasury securities $ 168,095 $ — $ 168,095 $ — Government-sponsored enterprise securities 1,758 — 1,758 — Mortgage-backed securities 1,860,357 — 1,859,690 667 Corporate bonds 18,346 — 17,346 1,000 Total available for sale securities $ 2,048,556 $ — $ 2,046,889 $ 1,667 Derivative financial assets $ 3,418 $ — $ 3,418 $ — Presold mortgages in process of settlement $ 7,790 $ — $ 7,790 $ — Derivative financial liabilities $ 3,445 $ — $ 3,445 $ — Nonrecurring Individually evaluated loans $ 9,659 $ — $ — $ 9,659 Foreclosed real estate $ 168 $ — $ — $ 168 The following table summarizes the Company’s financial instruments that were measured at fair value on a recurring and nonrecurring basis at December 31, 2024. Description of Financial Instruments ($ in thousands) Fair Value at December 31, 2024 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Recurring Securities available for sale: U.S. Treasury securities $ 120,581 $ — $ 120,581 $ — Government-sponsored enterprise securities 9,614 — 9,614 — Mortgage-backed securities 1,897,175 — 1,896,469 706 Corporate bonds 15,692 — 13,942 1,750 Total available for sale securities $ 2,043,062 $ — $ 2,040,606 $ 2,456 Derivative financial assets $ 301 $ — $ 301 $ — Presold Mortgages in process of settlement $ 5,942 $ — $ 5,942 $ — Derivative financial liabilities $ 302 $ — $ 302 $ — Nonrecurring Individually evaluated loans $ 879 $ — $ — $ 879 The following is a description of the valuation methodologies used for instruments measured at fair value. Securities Available for Sale — When quoted market prices are available in an active market, the securities are classified as Level 1 in the valuation hierarchy. If quoted market prices are not available, but fair values can be estimated by observing quoted prices of securities with similar characteristics, the securities are classified as Level 2 on the valuation hierarchy. Most of the fair values for the Company’s Level 2 securities are determined by the Company's third-party bond accounting provider using matrix pricing. Matrix pricing is a mathematical technique widely used in the industry to value debt securities without relying exclusively on 104 Table of Contents quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities. For the Company, Level 2 securities include US Treasury securities, mortgage-backed securities, commercial mortgage-backed obligations, government-sponsored enterprise securities, and corporate bonds. In cases where Level 1 or Level 2 inputs are not available, securities may be classified within Level 3 of the hierarchy. The Company reviews the pricing methodologies utilized by the bond accounting provider to ensure the fair value determination is consistent with the applicable accounting guidance and that the investments are properly classified in the fair value hierarchy. Presold Mortgages in Process of Settlemen t - The fair value is based on the committed price that an investor has agreed to pay for the loan which is considered a Level 2 input. Derivative financial assets and liabilities - The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. These are considered a Level 2 input. Individually evaluated loans — Fair values for individually evaluated loans are measured on a non-recurring basis and are based on the underlying collateral values securing the loans, adjusted for estimated selling costs, or the net present value of the cash flows expected to be received for such loans. Collateral may be in the form of real estate or business assets including equipment, inventory and accounts receivable. The vast majority of the collateral is real estate. The value of real estate collateral is generally determined by third-party appraisers using an income or market valuation approach based on an appraisal conducted by an independent, licensed third party appraiser (Level 3). The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable borrower’s financial statements if not considered significant. Likewise, values for inventory and accounts receivable collateral are based on borrower financial statement balances or aging reports on a discounted basis as appropriate (Level 3). Appraisals used in this analysis are generally obtained at least annually based on when the loans first became impaired, and thus the appraisals are not necessarily as of the period ends presented. Any fair value adjustments are recorded in the period incurred as provision for credit losses on the consolidated statements of income. Foreclosed real estate – Foreclosed real estate, consisting of properties obtained through foreclosure or in satisfaction of loans, is reported at the lower of cost or fair value. Fair value is measured on a non-recurring basis and is based upon independent market prices or current appraisals that are generally prepared using an income or market valuation approach and conducted by an independent, licensed third party appraiser, adjusted for estimated selling costs (Level 3). Appraisals used in this analysis are generally obtained at least annually based on when the assets were acquired, and thus the appraisals are not necessarily as of the period ends presented. At the time of foreclosure, any excess of the loan balance over the fair value of the real estate held as collateral is treated as a charge against the allowance for loan losses. For any real estate valuations subsequent to foreclosure, any excess of the real estate recorded value over the fair value of the real estate is treated as a foreclosed real estate write-down on the consolidated statements of income. There were no significant changes in the reported amount of Level 3 assets and liabilities measured at fair value on either a recurring or a nonrecurring basis as of December 31, 2025. 105 Table of Contents The carrying amounts and estimated fair values of financial instruments not carried at fair value as of December 31, 2025 and 2024 are as follows: December 31, 2025 December 31, 2024 ($ in thousands) Level in Fair Value Hierarchy Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value Cash and due from banks, noninterest-bearing Level 1 $ 146,759 $ 146,759 $ 78,596 $ 78,596 Due from banks, interest-bearing Level 1 162,836 162,836 428,911 428,911 Securities held to maturity Level 2 513,099 448,452 519,998 428,571 Total loans, net of allowance Level 3 8,598,838 8,259,890 7,972,104 7,514,505 SBA servicing asset Level 3 1,747 2,963 2,604 3,746 Demand deposits, money market and savings Level 1 9,944,779 9,944,779 9,593,557 9,593,557 Time deposits Level 2 803,642 801,150 936,968 933,523 Borrowings Level 2 74,569 69,421 91,876 81,216 Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no highly liquid market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial assets or liabilities include net premises and equipment, intangible and other assets such as deferred income taxes, prepaid expense accounts, income taxes currently payable, and other various accrued expenses. In addition, the income tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates. Note 15. Stock-Based Compensation The Company recorded total stock-based compensation expense of $ 3.4 million, $ 4.3 million, and $ 4.6 million for the years ended December 31, 2025, 2024, and 2023, respectively, which is included in "Total personnel expense" on the accompanying consolidated statements of income. The Company recognized income tax benefits related to stock-based compensation expense in its income statement of $ 0.8 million, $ 1.0 million, and $ 1.1 million for the years ended December 31, 2025, 2024, and 2023, respectively. At December 31, 2025, the sole equity-based compensation plan for the Company is the First Bancorp 2024 Equity Plan (the "Equity Plan"), which was approved by shareholders on May 31, 2024. As of December 31, 2025, the Equity Plan had 1,826,655 shares remaining available for grant. The Equity Plan is intended to serve as a means to attract, retain, and motivate key employees and directors and to associate the interests of the Equity Plan's participants with those of the Company and its shareholders. The Equity Plan allows for both grants of stock options and other types of equity-based compensation, including stock appreciation rights, restricted and unrestricted stock, restricted performance stock, and performance units. For the last several years, the only equity-based compensation granted by the Company has been shares of restricted stock, as it relates to employees, and unrestricted stock as it relates to non-employee directors. Recent restricted stock awards to employees typically include service-related vesting conditions only. Compensation expense for these grants is recorded over the requisite service periods. Upon forfeiture, any previously recognized compensation cost is reversed. Upon a change in control (as defined in the Equity Plan), unless the awards remain outstanding or substitute equivalent awards are provided, the awards become immediately vested. 106 Table of Contents Certain of the Company’s equity grants contain terms that provide for a graded vesting schedule whereby portions of the award vest in increments over the requisite service period. The Company recognizes compensation expense for awards with graded vesting schedules on a straight-line basis over the requisite service period for each incremental award. Compensation expense is based on the estimated number of stock awards that will ultimately vest. Over the past five years, there have been relatively few forfeitures, and therefore the Company assumes that all awards granted with service conditions will vest. The Company recognizes forfeitures as they occur. In addition to employee equity awards, the Company's practice is to grant unrestricted common shares to each non-employee director (currently nine in total) in June of each year. The grants were valued at approximately $ 37,500 in 2025, $ 37,500 in 2024 and $ 37,500 in 2023. Compensation expense associated with these director awards is fully recognized by the date of the award since there are no vesting conditions. The following tables presents information regarding the activity during 2025, 2024 and 2023 related to the Company’s share grant to non-employee directors: For the year ended December 31, Date of grant Fair market value of common share Common shares granted Number of non-employee directors Common shares granted per non-employee director Grant expense 2025 June 2, 2025 $ 40.63 8,307 9 923 $ 337,500 2024 May 31, 2024 $ 31.55 15,457 13 1,189 $ 487,500 2023 June 1, 2023 $ 30.69 17,094 14 1,221 $ 525,000 The expense associated with director grants is classified as "Other operating expense" in the consolidated statements of income. The following table presents information regarding the activity during 2023, 2024, and 2025 related to the Company’s outstanding restricted stock awards: Long-Term Restricted Stock Awards Shares Weighted-Average Grant-Date Fair Value Nonvested at January 1, 2023 223,012 $ 36.14 Granted during the period 143,380 37.08 Vested during the period ( 74,310 ) 29.43 Forfeited or expired during the period ( 791 ) 37.88 Nonvested at December 31, 2023 291,291 36.14 Granted during the period 67,900 38.14 Vested during the period ( 119,906 ) 41.72 Forfeited or expired during the period ( 2,334 ) 42.84 Nonvested at December 31, 2024 236,951 36.43 Granted during the period 91,723 42.06 Vested during the period ( 116,726 ) 37.81 Forfeited or expired during the period ( 5,324 ) 41.40 Nonvested at December 31, 2025 206,624 $ 38.08 The total fair value of shares vested during 2025, 2024 and 2023 was $ 4.4 million, $ 5.0 million and $ 2.2 million, respectively. Total unrecognized compensation expense as of December 31, 2025 amounted to $ 3.6 million with a weighted average remaining term of 2.1 years. For the nonvested awards that were outstanding at December 31, 2025, the Company expects to record $ 1.8 million in compensation expense in the next twelve months. 107 Table of Contents As discussed in Note 2, in conjunction with the GrandSouth acquisition, GrandSouth common stock options outstanding at January 1, 2023 became fully vested under the change in control provisions in the GrandSouth option plans and were converted into replacement options to acquire 0.91 shares of the Company's common stock. The Company issues new shares of common stock when options are exercised. No options were granted in 2025. Stock option activity and related information is presented below as of and for the periods indicated: Options Outstanding Number of Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (years) Aggregate Intrinsic Value (thousands) Balance at January 1, 2023 — $ — Replacement options issued in conjunction with acquisition of GrandSouth 542,345 $ 20.14 Exercised during the period ( 236,760 ) $ 19.09 Forfeited or expired during the period — $ — Balance at December 31, 2023 305,585 $ 20.95 Exercised during the period ( 194,884 ) 21.70 Forfeited or expired during the period — — Balance at December 31, 2024 110,701 19.63 Exercised during the period ( 91,483 ) 19.79 Forfeited or expired during the period — — Outstanding at December 31, 2025 19,218 $ 18.89 4.16 $ 613 Exercisable at December 31, 2025 19,218 $ 18.89 4.16 $ 613 The fair value of the replacement options issued in conjunction with the GrandSouth acquisition as of January 1, 2023 was measured using the Black-Scholes option pricing model. The following table illustrates the assumptions for the Black-Scholes model used in determining the fair value of options granted during the year ended December 31, 2023: Fair value per option, weighted average $ 24.85 Expected life (years) 1.4 - 4.7 Expected stock price volatility, weighted average 46.39 % Expected dividend yield 2.05 % Risk-free interest rate, weighted average 4.18 % Expected forfeiture rate 0.00 % The expected life is based on historical exercises and forfeitures experience of the grantees. The volatility is based on historical price volatility. The risk-free interest rate is based on a U.S. Treasury instrument with a life that is similar to the expected life of the option grant. At December 31, 2025, the Company had no unrecognized compensation expense related to stock options. All unexercised options expire ten years after the applicable original grant dates under the GrandSouth stock option plan. Note 16. Shareholders’ Equity Rabbi Trust Obligations With the acquisition of Carolina Bank in March 2017, the Company assumed a deferred compensation plan structured as a Rabbi Trust for certain members of Carolina Bank’s board of directors that is fully funded by Company common stock. Subsequent to the acquisition, payments have been made to plan participants and the related asset and liability were both $ 0.9 million at December 31, 2025 and $ 1.1 million at December 31, 2024, respectively, and are presented as components of shareholders’ equity. 108 Table of Contents Stock Repurchases Pursuant to authorizations by the Company's Board, the Company from time to time has repurchased shares of common stock in private transactions and in open-market purchases. On January 30, 2024, the Board authorized the repurchase of up to $ 40.0 million of the Company’s common stock. Any such repurchases would be made pursuant to a plan approved by and containing provisions about the timing, purchase prices and quantities purchased determined by management in its discretion. During the year ended December 31, 2025, 24,849 shares were repurchased. During the year ended December 31, 2024, the Company did not make any such purchases. As of December 31, 2025, The Company has remaining authorization to purchase up to $ 39.0 million of outstanding stock under the program. Note 17. Earnings Per Share The following is a reconciliation of the income (numerator) and shares (denominator) used in computing Basic and Diluted EPS: For Years Ended December 31, 2025 2024 2023 ($ in thousands except per share amounts) Income Shares Per Share Amount Income Shares Per Share Amount Income Shares Per Share Amount Basic EPS: Net income $ 111,048 $ 76,215 $ 104,131 Less: income allocated to participating securities ( 620 ) ( 391 ) ( 685 ) Basic EPS per common share $ 110,428 41,196,459 $ 2.68 $ 75,824 41,021,475 $ 1.85 $ 103,446 40,746,772 $ 2.54 Diluted EPS: Net income $ 111,048 41,196,459 $ 76,215 41,021,475 $ 104,131 40,746,772 Effect of Dilutive Securities — 256,788 — 305,741 — 418,062 Diluted EPS per common share $ 111,048 41,453,247 $ 2.68 $ 76,215 41,327,216 $ 1.84 $ 104,131 41,164,834 $ 2.53 For the years ended December 31, 2025, December 31, 2024 and December 31, 2023 , there were no options that were anti-dilutive. Note 18. Accumulated Other Comprehensive Income (Loss) The components of AOCI for the Company for the periods shown were as follows: ($ in thousands) December 31, 2025 December 31, 2024 December 31, 2023 Unrealized loss on securities available for sale $ ( 194,122 ) $ ( 368,055 ) $ ( 400,720 ) Tax effect 44,826 85,941 92,767 Net unrealized loss on securities available for sale ( 149,296 ) ( 282,114 ) ( 307,953 ) Postretirement plans (liability) asset ( 102 ) 111 ( 100 ) Tax effect 23 ( 26 ) 23 Net postretirement plans (liability) asset ( 79 ) 85 ( 77 ) Total accumulated other comprehensive (loss) income $ ( 149,375 ) $ ( 282,029 ) $ ( 308,030 ) 109 Table of Contents The following table discloses the changes in AOCI for the years ended December 31, 2025, 2024, and 2023 (all amounts are net of tax). ($ in thousands) Unrealized Gain (Loss) on Securities Available for Sale Postretirement Plans (Liability) Asset Total Beginning balance at January 1, 2023 $ ( 342,017 ) $ 42 $ ( 341,975 ) Other comprehensive (loss) income before reclassifications 34,064 ( 466 ) 33,598 Amounts reclassified from accumulated other comprehensive income — 347 347 Net current-period other comprehensive (loss) income 34,064 ( 119 ) 33,945 Ending balance at December 31, 2023 ( 307,953 ) ( 77 ) ( 308,030 ) Other comprehensive income (loss) before reclassifications ( 3,273 ) 85 ( 3,188 ) Amounts reclassified from accumulated other comprehensive income 29,112 77 29,189 Net current-period other comprehensive income (loss) 25,839 162 26,001 Ending balance at December 31, 2024 ( 282,114 ) 85 ( 282,029 ) Other comprehensive income (loss) before reclassifications 77,699 ( 79 ) 77,620 Amounts reclassified from accumulated other comprehensive income 55,119 ( 85 ) 55,034 Net current-period other comprehensive income (loss) 132,818 ( 164 ) 132,654 Ending balance at December 31, 2025 $ ( 149,296 ) $ ( 79 ) $ ( 149,375 ) Amounts reclassified from AOCI for unrealized gain (loss) on AFS securities represent realized securities gains or losses, net of tax effects. Amounts reclassified from AOCI for postretirement plans asset (liability) represent amortization of amounts included in AOCI, net of taxes, and are recorded in the "Other operating expenses" line item of the consolidated statements of income. Note 19. Regulatory Restrictions The Company is regulated by the Federal Reserve and is subject to securities registration and public reporting regulations of the Securities and Exchange Commission. The Bank is regulated by the Federal Reserve and the North Carolina Commissioner of Banks. The primary source of funds for the payment of dividends by the Company is dividends received from its subsidiary, the Bank. The Bank, as a North Carolina banking corporation, may declare dividends so long as such dividends do not reduce its capital below its applicable required capital (typically, the level of capital required to be deemed “adequately capitalized”). As of December 31, 2025, approximately $ 1.1 billion of the Company’s investment in the Bank was restricted as to transfer to the Company without obtaining prior regulatory approval. There was no average reserve balance requirement under the requirements of the Federal Reserve at December 31, 2025. The Company and the Bank must comply with regulatory capital requirements established by the Federal Reserve. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s and Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. 110 Table of Contents The Company’s and the Bank’s respective regulatory capital ratios as of December 31, 2025 and 2024, along with the minimum amounts required for capital adequacy purposes and to be well capitalized under prompt corrective action in effect at such times are presented below. There are no conditions or events since year-end that management believes have changed the Company’s or the Bank's classification. Actual Fully Phased-In Regulatory Guidelines Minimum To Be Well Capitalized Under Current Prompt Corrective Action Provisions ($ in thousands) Amount Ratio Amount Ratio Amount Ratio (must equal or exceed) (must equal or exceed) As of December 31, 2025 Common Equity Tier I Capital Ratio Company $ 1,319,899 14.10 % $ 655,116 7.00 % N/A N/A Bank $ 1,373,033 14.69 % $ 654,306 7.00 % $ 607,570 6.50 % Total Capital Ratio Company $ 1,508,594 16.12 % $ 982,675 10.50 % N/A N/A Bank $ 1,490,092 15.94 % $ 981,461 10.50 % $ 934,725 10.00 % Tier I Capital Ratio Company $ 1,391,392 14.87 % $ 795,498 8.50 % N/A N/A Bank $ 1,373,033 14.69 % $ 794,514 8.50 % $ 747,778 8.00 % Leverage Ratio Company $ 1,391,392 11.21 % $ 496,292 4.00 % N/A N/A Bank $ 1,373,033 11.08 % $ 495,836 4.00 % $ 619,796 5.00 % As of December 31, 2024 Common Equity Tier I Capital Ratio Company $ 1,239,980 14.35 % $ 604,868 7.00 % N/A N/A Bank $ 1,315,671 15.23 % $ 604,708 7.00 % $ 561,514 6.50 % Total Capital Ratio Company $ 1,437,050 16.63 % $ 907,338 10.50 % N/A N/A Bank $ 1,423,966 16.48 % $ 907,260 10.50 % $ 864,057 10.00 % Tier I Capital Ratio Company $ 1,311,128 15.17 % $ 734,647 8.50 % N/A N/A Bank $ 1,315,671 15.23 % $ 734,288 8.50 % $ 691,094 8.00 % Leverage Ratio Company $ 1,311,128 11.15 % $ 470,360 4.00 % N/A N/A Bank $ 1,315,671 11.19 % $ 470,302 4.00 % $ 587,878 5.00 % Note 20. Revenue from Contracts with Customers All of the Company’s revenues that are in the scope of the " Revenue from Contracts with Customers" accounting standard (“ASC 606”) are recognized within noninterest income. The following table presents the Company’s 111 Table of Contents sources of noninterest income for years ended December 31, 2025, 2024, and 2023. Items outside the scope of ASC 606 are noted as such. For the Years Ended December 31, ($ in thousands) 2025 2024 2023 Noninterest income in-scope of ASC 606: Service charges on deposit accounts $ 16,237 $ 16,620 $ 16,800 Other service charges and fees: Bankcard Interchange income, net 9,464 9,306 9,319 Other service charges and fees 7,483 6,945 6,405 Commissions from sales of financial products 6,274 5,270 5,503 Portion of other income in-scope of ASC 606 — 312 1,803 Noninterest income (in-scope of ASC 606) 39,458 38,453 39,830 Noninterest income (out-of-scope of ASC 606) ( 47,393 ) ( 20,554 ) 17,475 Total noninterest income $ ( 7,935 ) $ 17,899 $ 57,305 A description of the Company’s revenue streams accounted for under ASC 606 is detailed below. Service charges on deposit accounts: The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Overdraft fees are recognized at the point in time that the overdraft occurs. Maintenance and activity fees include account maintenance fees and transaction-based fees. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of the month, representing the period over which the Company satisfies the performance obligation. Transaction-based fees, which include services such as ATM usage fees, stop payment charges, statement rendering, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Service charges on deposits are withdrawn from the customer’s account balance. Substantially all of these revenues are recognized at the point in time the services are provided. Other service charges and fees: The Company earns interchange income on its customers’ debit and credit card usage and earns fees from other services utilized by its customers. "Bankcard interchange income" is primarily comprised of interchange fees earned whenever the Company’s debit and credit cards are processed through card payment networks such as MasterCard. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. Interchange fees are offset with interchange expenses and are presented on a net basis. "Other service charges and fees" includes revenue from processing wire transfers, bill pay service, cashier’s checks, ATM surcharge fees, and other services. The Company’s performance obligation for fees, exchange, and other service charges are largely satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month. Substantially all of these revenues are recognized at the point in time the services are provided, with some recognized in the following month. Commissions from the sale of financial products: The Company earns commissions from the sale of wealth management products. Wealth management income primarily consists of commissions received on financial product sales, such as annuities. The Company’s performance obligation is generally satisfied upon the issuance of the financial product. Shortly after the policy is issued, the carrier remits the commission payment to the Company, and the Company recognizes the revenue. The Company also earns some fees from asset management, which is billed quarterly and due upon billing for services rendered in the most recent period, for which the performance obligation has been satisfied. Substantially all of these revenues are recognized at the point in time that the services are provided. Most contracts with customers are cancellable by either party without penalty or they are short-term in nature, with a contract duration of less than one year. Accordingly, most revenue deferred for the reporting period ended December 31, 2025 is expected to be earned within one year . The Company has made no significant judgments in applying the revenue guidance prescribed in ASC 606 that affect the determination of the amount and timing of revenue from the above-described contracts with customers. 112 Table of Contents Note 21. Supplementary Income Statement Information Components of other noninterest income or noninterest expense exceeding 1% of total revenue for any of the years ended December 31, 2025, 2024, and 2023 are as follows: ($ in thousands) 2025 2024 2023 Total revenue threshold (1%) $ 5,493 $ 5,371 $ 5,462 Noninterest income: Bankcard Interchange income, net 9,464 9,306 9,319 Noninterest expense: Other operating expenses – software costs 8,096 7,691 8,717 Other operating expenses – data processing expense 9,767 8,916 8,733 Other operating expenses – FDIC insurance expense 6,449 6,559 6,982 Note 22. Segment Reporting The Company is a bank holding company, whose principal activity is the ownership and management the Bank, its wholly-owned subsidiary. As a community focused financial institution, substantially all of the Company’s operations involve the delivery of loan and deposit products or the provision of financial advice to customers. Management makes operating decisions and assesses performance based on an ongoing review of these banking operations, which constitute the Company’s only operating segment for financial reporting purposes. The accounting policies of the banking operations segment are the same as those described in the Summary of Significant Accounting Policies. The measure of segment assets is reported on the balance sheet as total consolidated assets. The role of chief operating decision maker is comprised of the executive leadership team to include the Company's Chief Executive Officer, the Bank's Chief Executive Officer, the Company's President, the Company's Chief Financial Officer, and the Company's Chief Operating Officer. The chief operating decision makers use pre-tax net income to allocate resources in the annual budget and forecasting process. The chief operating decision makers consider budget-to-actual variances on a monthly basis for profit measures when making decisions about allocating capital and personnel to the operating segment. The chief operating decision makers use the Consolidated Statements of Income and Consolidated Balance Sheets to ascertain measures or performance such as revenue, profit or loss, significant expenses and assets. Depreciation expense amounted to $ 6.8 million, $ 7.8 million, and $ 7.8 million for the years ended December 31, 2025, 2024, and 2023, respectively. Depreciation expense is recorded in Occupancy and equipment expense on the Consolidated Statements of Income. 113 Table of Contents Note 23. Condensed Parent Company Information Condensed financial data for the Company (parent company only) follows: CONDENSED BALANCE SHEETS As of December 31, ($ in thousands) 2025 2024 Assets Cash on deposit with bank subsidiary $ 6,730 $ 24,005 Investment in subsidiaries 1,709,627 1,523,626 Premises and equipment 7 7 Other assets 21,678 521 Total assets $ 1,738,042 $ 1,548,159 Liabilities and shareholders’ equity Subordinated debt $ — $ 17,602 Trust preferred securities 73,816 73,472 Other liabilities 10,058 11,474 Total liabilities 83,874 102,548 Shareholders’ equity 1,654,168 1,445,611 Total liabilities and shareholders’ equity $ 1,738,042 $ 1,548,159 CONDENSED STATEMENTS OF INCOME Year Ended December 31, ($ in thousands) 2025 2024 2023 Interest income $ 123 $ 123 $ 116 Dividends from subsidiaries 67,500 70,000 32,700 Total income 67,623 70,123 32,816 Interest expense 6,465 7,766 7,945 Other expenses 2,384 2,153 2,057 Total expense 8,849 9,919 10,002 Income before income taxes and equity in undistributed income of subsidiaries 58,774 60,204 22,814 Income tax benefit ( 1,837 ) ( 2,057 ) ( 2,076 ) Income before equity in undistributed income of subsidiaries 60,611 62,261 24,890 Equity in undistributed income of subsidiaries 50,437 13,954 79,241 Net income $ 111,048 $ 76,215 $ 104,131 114 Table of Contents CONDENSED STATEMENTS OF CASH FLOWS Year Ended December 31, ($ in thousands) 2025 2024 2023 Operating Activities: Net income $ 111,048 $ 76,215 $ 104,131 Equity in undistributed earnings of subsidiaries ( 50,437 ) ( 13,954 ) ( 79,241 ) (Increase) decrease in other assets ( 21,154 ) ( 143 ) ( 604 ) Increase (decrease) in other liabilities ( 1,109 ) 1,140 1,741 Net cash provided by operating activities 38,348 63,258 26,027 Investing Activities: Net cash received in acquisitions — — 4,123 Net cash provided by investing activities — — 4,123 Financing Activities: Repayment of subordinated debentures ( 18,000 ) ( 10,000 ) — Payment of common stock cash dividends ( 37,284 ) ( 36,253 ) ( 34,940 ) Repurchases of common stock ( 991 ) — — Proceeds from stock option exercises 1,491 4,094 4,519 Cash paid for shares withheld for payroll taxes on stock based compensation ( 839 ) ( 1,691 ) ( 743 ) Net cash used in financing activities ( 55,623 ) ( 43,850 ) ( 31,164 ) Net increase (decrease) in cash ( 17,275 ) 19,408 ( 1,014 ) Cash, beginning of year 24,005 4,597 5,611 Cash, end of year $ 6,730 $ 24,005 $ 4,597 115 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Shareholders and the Board of Directors of First Bancorp Southern Pines, North Carolina Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheet of First Bancorp (the "Company") as of December 31, 2025, the related consolidated statements of income, comprehensive income (loss), shareholders’ equity, and cash flows for the year ended December 31, 2025, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO. Basis for Opinions The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audit of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. 116 Table of Contents Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Allowance and Provision for Credit Losses on Loans – Qualitative Adjustments to the Expected Credit Loss Rate As described in Notes 1 and 4 to the consolidated financial statements, the Allowance for Credit Losses (“ACL”) is an estimate that is deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial assets. For collectively evaluated loans, the Discounted Cash Flow (“DCF”) method is used for substantially all pools. In determining the proper level of default rates and loss given default, management has determined that the loss experience of the Company provides the best basis for its assessment of expected credit losses. It therefore utilizes its own historical credit loss experience by each loan segment over an economic cycle. Management also considers forward-looking information in estimating expected credit losses. Management considers the need to qualitatively adjust expected credit losses for information not already captured in the loss estimation process. These qualitative adjustments consider a range of maximum and minimum loss rates and can either increase or decrease the quantitative model estimation. Each period the Company considers qualitative adjustments that are relevant within the qualitative framework. This includes weighting and risk scoring among the qualitative adjustments within the qualitative framework. We identified the auditing of the weighting and risk scoring of the qualitative adjustments as a critical audit matter because of the significant auditor judgment applied and significant audit effort required to evaluate the subjective and complex judgments made by management. The primary procedures we performed to address this critical audit matter included: Testing the design and operating effectiveness of internal controls over: • Management’s evaluation of the relevance and reliability of data used in determination of the qualitative adjustments. • Management’s methodology for qualitative adjustments and judgments in risk scoring and weighting qualitative adjustments to the ACL estimate • Management’s significant assumptions, judgments, and conclusions reached in determining the qualitative adjustments. Substantively testing management’s qualitative adjustments, which included: • Evaluating the reasonableness of management’s methodology related to determining the qualitative adjustments. 117 Table of Contents • Evaluating the reasonableness of management’s significant assumptions, judgments, and conclusions reached in determining the qualitative adjustments. • Evaluating the relevance and reliability of data used by management in determining the qualitative adjustments. • Testing the completeness and accuracy of data inputs to the CECL model which affects the accuracy of calculations of qualitative adjustments. /s/ Crowe LLP We have served as the Company's auditor since 2025. Fort Lauderdale, Florida February 25, 2026 118 Table of Contents Report of Independent Registered Public Accounting Firm Shareholders and Board of Directors First Bancorp Southern Pines, North Carolina Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of First Bancorp (the “Company”) as of December 31, 2024, the related consolidated statements of income, comprehensive income (loss), shareholders’ equity, and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ BDO USA, P.C. We have served as the Company's auditor from 2019 to 2024. Philadelphia, Pennsylvania February 26, 2025 119 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures None.