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Item 2. Management’s Discussion and Analysis

2026-08-06 compared with 2026-05-07 · 196 added, 114 removed, 237 unchanged (57% of the section changed)

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

Highlights of the results for the first quarter of 2026 are presented below.

Highlights of the results for the second quarter and year to date period of 2026 are presented below.

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

Overview and Highlights for the Three Months Ended March 31, 2026

We earned net income of $46.7 million, or $1.13 diluted EPS, during the first quarter of 2026 compared to net income of $36.4 million, or $0.88 diluted EPS, for the first quarter of 2025.

Our increased earnings was driven by a $14.3 million increase in net interest income in the first quarter of 2026 from the like quarter, resulting primarily by a combination of higher yield on interest earning assets and a lower cost of funds, both of which were driven by the overall interest rate environment throughout the past year.

• Net interest income for the first quarter of 2026 was $107.1 million, a 15.4% increase from the $92.8 million recorded in the first quarter of 2025.

Overview and Highlights for the Three Months Ended June 30, 2026

We earned net income of $50.5 million, or $1.22 diluted EPS, during the second quarter of 2026 compared to net income of $38.6 million, or $0.93 diluted EPS, for the second quarter of 2025 (the "like quarter").

Our increased earnings was driven by a $14.6 million increase in net interest income over the like quarter, resulting primarily from a combination of higher yield on interest earning assets and a lower cost of funds, both of which were driven by the overall interest rate environment throughout the past year.

• Net interest income for the second quarter of 2026 was $111.3 million, a 15.1% increase from the $96.7 million recorded in the like quarter.

There was a shift in the mix of interest-earning assets between periods, with average loans growing $708.9 million, while average taxable securities contracted $313.3 million and short-term investments contracted $61.1 million.

• Net interest margin ("NIM") increased 42 basis points to 3.67% in the first quarter of 2026 from 3.25% in the first quarter of 2025 as a result of the higher average balance of loans, yields on securities and lower cost of funds, notably money market deposits.

• Net interest margin ("NIM") increased 39 basis points to 3.71% in the second quarter of 2026 from 3.32% in the like quarter as a result of the higher average balance of loans, improved yields on securities and lower cost of funds, notably money market deposits.

• We remained well-capitalized by all regulatory standards.

Risk-based capital ratios contracted slightly during the quarter with a total common equity Tier 1 ratio of 14.13%, Tier 1 risk-based capital ratio of 14.87% and total risk-based capital ratio of 16.12% at March 31, 2026, all down from March 31, 2025.

• The provision for credit losses for the first quarter of 2026 was $3.1 million, driven by loan growth and $1.4 million of net charge-offs.

• Noninterest income for the quarter ended March 31, 2026 totaled $15.2 million, reflecting an increase from the $13.0 million for the comparable prior year period, primarily from a $0.9 million increase in SBA loan sale gains and a $0.7 million increase in Other income.

• Noninterest expense of $60.2 million increased $2.3 million, or 4.0%, for the quarter ended March 31, 2026 from the prior year.

Risk-based capital ratios contracted slightly during the quarter with a total common equity Tier 1 ratio of 14.09%, Tier 1 risk-based capital ratio of 14.81% and total risk-based capital ratio of 16.06% at June 30, 2026, all down from June 30, 2025.

• The provision for credit losses for the second quarter of 2026 was $1.2 million, compared to $1.0 million of net charge-offs.

• Noninterest income for the quarter ended June 30, 2026 totaled $16.0 million, reflecting an increase from the $14.3 million for the like quarter, primarily from a $1.0 million increase in Other income, net.

• Noninterest expense of $62.8 million increased $3.8 million, or 6.5%, from the like quarter.

The increase is attributable to a $3.3 million increase in Total personnel expenses and a $1.0 million increase in Other operating expenses.

Total assets were $12.9 billion at March 31, 2026, a 2.2% increase from December 31, 2025.

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

Overview and Highlights for the Six Months Ended June 30, 2026

We earned net income of $97.2 million, or $2.35 diluted EPS, during the six months ended June 30, 2026 compared to net income of $75.0 million, or $1.81 diluted EPS, for the six months ended June 30, 2025 (the "like period").

Net interest income increased $28.9 million during the six months ended June 30, 2026 as compared to the like period, driving our increased earnings.

This was primarily the result of higher yields on interest earning assets and a lower cost of funds, both of which were driven by this past year's overall interest rate environment.

• Net interest income for the six months ended June 30, 2026 was $218.4 million, a 15.2% increase from the $189.5 million recorded for the like period.

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

• NIM increased 41 basis points to 3.69% for the six months ended June 30, 2026 from 3.28% for the like period as a result of the higher average balances on loans, yields on loans and securities and lower cost of funds, particularly money market deposits.

• For the six months ended June 30, 2026, the Company recorded $4.3 million in provision for credit losses as compared to $3.3 million for the like period.

The lower provision in the like period was significantly impacted by the $5.5 million release of provision related to Hurricane Helene (the release represented a benefit of $4.2 million after-taxes or $0.10 per diluted share).

The provision for credit losses in 2026 was impacted by loan growth in 2026 and net charge off activity of $2.4 million.

• Noninterest income for the six months ended June 30, 2026 totaled $31.2 million, an increase of $4.0 million, from the like period primarily related to the $1.7 million increase in Other income, net and the $1.2 million increase in SBA loan sale gains.

• Noninterest expense increased $6.1 million to $123.0 million for the six months ended June 30, 2026 as compared to the like period, primarily driven by a $5.0 million increase in Personnel expenses and a $1.7 million increase in Other operating expenses.

Total assets were $13.0 billion at June 30, 2026, a 2.9% increase from December 31, 2025.

The increase was driven primarily by deposit growth generating investable funds that were deployed into loans and interest-bearing cash.

The primary balance sheet changes are presented below.

• Total cash and cash equivalents amounted to $598.0 million at March 31, 2026, representing a $288.4 million increase from December 31, 2025.

• Total cash and cash equivalents amounted to $550.3 million at June 30, 2026, representing a $240.7 million increase from December 31, 2025.

Interest-bearing cash increased $259.1 million and was partially offset by an $18.3 million decrease in noninterest-bearing cash.

• AFS securities increased $69.0 million, or 3.4%, during the three months ended March 31, 2026.

• Total loans amounted to $8.8 billion at March 31, 2026, reflecting an increase of $71.4 million, or 0.8%, from December 31, 2025.

• Total deposits were $11.0 billion at March 31, 2026, an increase of $264.1 million, or 2.46%, from December 31, 2025.

Deposit growth during the period was split between noninterest-bearing deposits, which increased $109.6 million, and interest-bearing deposits, which increased $154.4 million.

• Credit quality continued to be strong at March 31, 2026, with NPAs of 0.32% of total assets as of March 31, 2026, up 2 basis points from 0.30% at December 31, 2025.

• Our on-balance sheet liquidity ratio was 16.7% at March 31, 2026.

• AFS securities decreased $109.5 million, or 5.3%, during the six months ended June 30, 2026.

• Total loans amounted to $9.0 billion at June 30, 2026, reflecting an increase of $266.3 million, or 3.1%, from December 31, 2025.

• Total deposits were $11.1 billion at June 30, 2026, an increase of $336.4 million, or 3.13%, from December 31, 2025.

Deposit growth during the period arose from both noninterest-bearing deposits, which increased $110.6 million, and interest-bearing deposits, which increased $225.9 million.

• Credit quality continued to be strong at June 30, 2026, with NPAs of 0.34% of total assets as of June 30, 2026, up 4 basis points from 0.30% at December 31, 2025.

• Our on-balance sheet liquidity ratio was 15.7% at June 30, 2026.

Available off-balance sheet sources totaled $2.4 billion at quarter end, resulting in a total liquidity ratio of 32.8%.

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Net interest spread refers to the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

NIM refers to net interest income divided by average interest-earning assets and is influenced by the level and relative mix of interest-earning assets and interest-bearing liabilities.

NIM refers to net interest income divided by average interest-earning assets and is influenced by the level and relative mix of interest-earning

assets and interest-bearing liabilities.

Net interest income is also influenced by external factors such as local economic conditions, competition for loans and deposits, and market interest rates.

Net Interest Income for the Three Months Ended March 31, 2026

Net interest income for the first quarter of 2026 amounted to $107.1 million, an increase of $14.3 million, or 15.4%, from the $92.8 million recorded in the first quarter of 2025.

Net Interest Income for the Three Months Ended June 30, 2026

Net interest income for the second quarter of 2026 amounted to $111.3 million, an increase of $14.6 million, or 15.1%, from the $96.7 million recorded in the second quarter of 2025.

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

For the first quarter of 2026, average interest-earning assets increased $256.3 million, or 2.2%, from the comparable period of the prior year, with average loans growing $674.3 million, while average securities and short term investments declined by $191.1 million and $226.9 million respectively.

The cost of interest bearing deposits decreased 25 basis points from the first quarter of 2025, with the biggest decrease coming from the cost of Money market deposits, which decreased 38 basis points and the cost of Time deposits > $250,000, which decreased 29 basis points.

These changes resulted in the 42 basis point improvement in our NIM (see discussion below) from the like quarter to 3.67% for the first quarter of 2026.

The following table presents an analysis of net interest income for the first quarter of 2026 and 2025:

For the second quarter of 2026, average interest-earning assets increased $330.4 million, or 2.8%, from the comparable period of the prior year, with average loans growing $708.9 million, while average securities and short term investments declined by $317.5 million and $61.1 million respectively.

The cost of interest bearing deposits decreased 20 basis points from the second quarter of 2025, with the biggest decrease coming from the cost of Money market deposits, which decreased 33 basis points and the cost of Time deposits > $250,000, which decreased 22 basis points.

These changes resulted in the 39 basis point improvement in our NIM (see discussion below) from the like quarter to 3.71% for the second quarter of 2026.

The following table presents an analysis of net interest income for the second quarter of 2026 and 2025:

Average Balances and Net Interest Income Analysis

Three Months Ended March 31,

Three Months Ended June 30,

($ in thousands) Average

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(1) Average loans include nonaccruing loans, the effect of which is to lower the average rate shown.

(2) Includes accretion of discount on acquired loans of $1.1 million and $1.8 million for three months ended March 31, 2026 and 2025, respectively.

(2) Includes accretion of discount on acquired loans of $1.1 million and $1.5 million for three months ended June 30, 2026 and 2025, respectively.

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

Overall, as demonstrated in the table above, the growth in earning assets, a shift in the mix of those earning assets from lower-yielding assets to higher-yielding assets, increased yield on assets and a decrease in the cost of liabilities drove the expansion in NIM and net interest income.

• Net interest income for the first quarter of 2026 was $107.1 million, an increase of $14.3 million from the like quarter.

Overall, as demonstrated in the table above, the growth in earning assets, a shift to higher-yielding assets, increased yield on assets and a decrease in the cost of liabilities drove the expansion in NIM and net interest income.

• Net interest income for the second quarter of 2026 was $111.3 million, an increase of $14.6 million from the like quarter.

The increase in net interest income was primarily driven by our focused efforts to increase interest-earning assets, to improve the mix of earning assets and to manage deposit costs after the rate cuts by the Federal Reserve between September and December of 2024, which saw the federal funds rate fall 50 basis points and additional rate cuts totaling 75 basis points in the second half of 2025.

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

• The Company’s NIM for the first quarter of 2026 was 3.67%, an increase of 42 basis points from the like quarter.

Within interest-earning assets, the 2025 securities loss-earnback transactions referenced above resulted in an increase of 46 basis points on the yield on total securities as compared to the like quarter.

• The Company’s NIM for the second quarter of 2026 was 3.71%, an increase of 39 basis points from the like quarter.

Within interest-earning assets, the 2025 securities loss-earnback transactions resulted in an increase of 30 basis points on the yield on total securities as compared to the like quarter.

In addition, loan yields increased 14 basis points to 5.67%.

Following the rate cuts by the Federal Reserve in late 2024 and the second half of 2025, the rate on interest-bearing deposits fell 25 basis points from the like quarter.

• Average interest-bearing assets increased $256.3 million for the three months ended March 31, 2026, including a shift in interest-bearing assets from lower-yielding assets to higher-yielding assets.

Average loans for the three months ended March 31, 2026 were $674.3 million higher than the same period in 2025.

In addition, interest rates on loans increased 6 basis points to 5.58% for the first quarter of 2026, collectively resulting in an increase of $10.3 million in interest income on loans.

• Average securities for the three months ended March 31, 2026 contracted $191.1 million from the like quarter, but the yields on securities increased 0.46% to 2.74% for the first quarter of 2026, resulting in an increase in interest income on securities of $2.0 million.

• Average short-term investments for the three months ended March 31, 2026 contracted $226.9 million from the same period in 2025 and yields fell 0.06% to 4.36%, resulting in a $2.5 million decrease in interest income on short-term investments.

• Due to the impact of the aforementioned Federal Reserve rate cuts in 2024 and 2025 and the resulting decreased market rates partially offset by higher average balances, deposit interest expense for the three months ended March 31, 2026 decreased $4.1 million compared to the same period in 2025.

Following the rate cuts by the Federal Reserve in the second half of 2025, the rate on interest-bearing deposits fell 20 basis points from the like quarter.

• Average interest-earning assets increased $330.4 million for the three months ended June 30, 2026, including a shift to higher-yielding assets.

Average loans for the three months ended June 30, 2026 were $708.9 million higher than the same period in 2025.

In addition, interest rates on loans increased 14 basis points to 5.67% for the second quarter of 2026, collectively resulting in an increase of $12.9 million in interest income on loans.

• Average securities for the three months ended June 30, 2026 contracted $317.5 million from the like quarter, but the yields on securities increased 0.30% to 2.70% for the second quarter of 2026, resulting in an increase in interest income on securities of $0.1 million.

• Average short-term investments for the three months ended June 30, 2026 contracted $61.1 million from the same period in 2025 and yields fell 0.64% to 3.99%, resulting in a $1.4 million decrease in interest income on short-term investments.

• Due to the impact of the aforementioned Federal Reserve rate cuts in 2024 and 2025 and the resulting decreased market rates partially offset by higher average balances, deposit interest expense for the three months ended June 30, 2026 decreased $2.6 million compared to the same period in 2025.

Average interest-bearing deposit balances increased $192.7 million while rates on those deposits decreased 20 basis points as compared to the like quarter.

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We believe that analysis of NIM-T/E is useful and appropriate because it allows a comparison of net interest income in different periods without taking into account the different mix of taxable versus non-taxable loans and investments that may have existed during those periods.The following is a reconciliation of reported net interest income to tax-equivalent net interest income and the resulting NIM to NIM-T/E.

For the Three Months Ended March 31,

For the Three Months Ended June 30,

($ in thousands) 2026 2025

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Net interest margin, tax-equivalent 3.73 % 3.32 %

Net Interest Income for the Six Months Ended June 30, 2026

Net interest income for the six months ended June 30, 2026 amounted to $218.4 million, an increase of $28.9 million, or 15.2%, from the $189.5 million recorded in the six months ended June 30, 2025.

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

Similar to the impact during the three months ended June 30, 2026, the increase in net interest income for the six months ended June 30, 2026 was also driven by lower cost of funds, and increased yields on interest-earning assets.

Our NIM increased to 3.69% for the six months ended June 30, 2026 from 3.28% for the six months ended June 30, 2025.

The following table presents an analysis of net interest income for the six months ended June 30, 2026 and 2025.

Average Balances and Net Interest Income Analysis

Six Months Ended June 30,

($ in thousands) Average

Volume Interest

or Paid Average

Volume Interest

or Paid Average

Loans (1) (2) $ 8,839,477 $ 246,592 5.62 % $ 8,147,750 $ 223,418 5.52 %

Taxable securities 2,412,948 34,481 2.86 % 2,663,390 32,381 2.43 %

Non-taxable securities 284,176 2,230 1.57 % 288,373 2,232 1.55 %

Short-term investments, primarily interest-bearing cash 361,123 7,402 4.13 % 504,652 11,324 4.52 %

Total interest-earning assets 11,897,724 $ 290,705 4.92 % 11,604,165 269,355 4.67 %

Cash and due from banks 141,622 143,469

Premises and equipment 139,474 142,574

Other assets 677,771 453,023

Total assets $ 12,856,591 $ 12,343,231

Interest bearing checking $ 1,418,681 $ 4,462 0.63 % $ 1,433,066 $ 4,923 0.69 %

Money market deposits 4,616,502 54,785 2.39 % 4,348,277 59,126 2.74 %

Savings deposits 520,429 491 0.19 % 538,973 493 0.18 %

Other time deposits 491,071 5,609 2.30 % 546,377 6,441 2.38 %

Time deposits >$250,000 309,327 4,511 2.94 % 349,028 5,541 3.20 %

Total interest-bearing deposits 7,356,010 69,858 1.92 % 7,215,721 76,524 2.14 %

Short-term borrowings 751 2 0.66 % 822 3 0.86 %

Long-term borrowings 73,904 2,463 6.72 % 91,259 3,315 7.32 %

Total interest-bearing liabilities 7,430,665 72,323 1.96 % 7,307,802 79,842 2.20 %

Noninterest bearing checking 3,556,662 3,449,013

Other liabilities 173,640 87,032

Shareholders’ equity 1,695,624 1,499,384

Total liabilities and

shareholders’ equity $ 12,856,591 $ 12,343,231

Net yield on interest-earning assets and net interest income $ 218,382 3.69 % $ 189,513 3.28 %

Net yield on interest-earning assets and net interest income – tax-equivalent (3) $ 219,327 3.71 % $ 190,161 3.30 %

Interest rate spread 2.96 % 2.47 %

Average prime rate 6.75 % 7.50 %

(1) Average loans include nonaccruing loans, the effect of which is to lower the average rate shown.

(2) Includes accretion of discount on acquired loans of $2.1 million and $3.2 million for six months ended June 30, 2026 and 2025, respectively.

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

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

• During the second half of 2025, the Federal Reserve decreased the fed funds rate a total of 75 basis points.

The average prime rate was 6.75% for the six months ended June 30, 2026, compared to 7.50% for the prior year period.

During 2025 and 2026, the yield curve has been positively sloping beyond three years, although longer term treasury rates are still fairly close to fed funds rates.

• Average loan volumes for the six months ended June 30, 2026 were $691.7 million higher than the same period in 2025 due to organic loan growth.

In addition, interest rates on loans increased 10 basis points to 5.62% for the six months ended June 30, 2026, collectively resulting in an increase in loan interest income of $23.2 million.

• Due to lower market rates partially offset by an overall growth of deposits, interest expense on deposits for the six months ended June 30, 2026 decreased $6.7 million compared to the same period in 2025.

Average total interest-bearing deposit balances increased $140.3 million while rates on those deposits decreased 22 basis points as compared to the prior year period.

Within this population, average balances on Money market deposits increased $268.2 million while rates on those accounts decreased 35 basis points as compared to the prior year, resulting in a $4.3 million decrease in interest expense.

Average balances on Time deposits >$250,000 decreased $39.7 million and rates on these accounts decreased 26 basis points as compared to the prior year, collectively resulting in a $1.0 million decrease in interest expense.

• Interest expense on borrowings decreased $0.9 million for the six months ended June 30, 2026 as compared to the same period in 2025 due to the $17.4 million decrease in the average volume of borrowings between periods, coupled with a 60 basis point decrease in the rates on total borrowings.

We repaid fixed rate subordinated debentures in the fourth quarter of 2025.

The remaining borrowings are floating rate and therefore have lower interest rates in the current interest rate environment.

• Collectively, these changes resulted in an increase of 41 basis points in NIM.

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

For the Six Months Ended June 30,

($ in thousands) 2026 2025

Net interest income, as reported $ 218,382 $ 189,513

Tax-equivalent adjustment 945 648

Net interest income, tax-equivalent $ 219,327 $ 190,161

Net interest margin, as reported 3.69 % 3.28 %

Net interest margin, tax-equivalent 3.71 % 3.30 %

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

Presented in the table below is the amount of accretion which increased net interest income in each time period presented.

For the Three Months Ended March 31,

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

($ in thousands) 2026 2025 2026 2025

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

At March 31, 2026 and 2025, unaccreted loan discounts on purchased loans amounted to $7.7 million and $13.3 million, respectively.

At June 30, 2026 and 2025, unaccreted loan discounts on purchased loans amounted to $6.6 million and $11.8 million, respectively.

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

In addition to the loan discount accretion recorded on acquired loans, we recorded accretion on the discounts associated with the retained unguaranteed portions of SBA loans for which the guaranteed portion was sold in the secondary market.

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

At March 31, 2026 and 2025, the unaccreted loan discounts on SBA loans amounted to $2.1 million and $2.5 million, respectively.

Provision for Credit Losses

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Refer also to “Critical Accounting Estimates” in Item 7 of the 2025 Annual Report on Form 10-K filed with the SEC for more information.

The provision for credit losses was $3.1 million and $1.1 million for the three months ended March 31, 2026 and 2025, respectively.

The first quarter of 2026 included a provision for loan losses of $2.6 million and a provision for unfunded commitments expense of $0.5 million.

The first quarter of 2025 included a provision for loan losses of $1.4 million and a provision for unfunded commitments reversal of $0.3 million.

In the like quarter, the provision for loan losses included the $2.0 million release of the allowance specifically attributed to Hurricane Helene.

The provision for credit losses was $1.2 million and $2.2 million for the three months ended June 30, 2026 and 2025, respectively, and $4.3 million and $3.3 million for the six months ended June 30, 2026 and 2025, respectively.

The second quarter of 2026 included a provision for loan losses of $1.1 million and a provision for unfunded commitments expense of $22 thousand.

The second quarter of 2025 included a provision for loan losses of $1.1 million and a provision for unfunded commitments of $1.1 million.

In the like quarter, the provision for loan losses included a $3.5 million release of the allowance specifically attributed to Hurricane Helene.

The six months ended June 30, 2026 included a provision for loan losses of $3.7 million and a provision for unfunded commitments expense of $0.6 million.

The six months ended June 30, 2025 included a provision for loan losses of $2.5 million and a provision for unfunded commitments of $0.9 million.

In the six months ended June 30, 2025, the provision for loan losses included a $5.5 million release of the allowance specifically attributed to Hurricane Helene.

Additional discussion of the CECL method and our asset quality and credit metrics, which impact our provision for credit losses, is provided in the "Nonperforming Assets" and "Allowance for Credit Losses, Allowance for Unfunded Commitments, and Loan Loss Experience" sections following.

Noninterest Income

Total noninterest income for the three months ended March 31, 2026 was $15.2 million, a 17.2% increase from the $13.0 million recorded for the three months ended March 31, 2025.

As compared to the first quarter of 2025, SBA loan sale gains increased $0.9 million and Other Income, net increased $0.7 million.

Total noninterest income for the three months ended June 30, 2026 was $16.0 million, a 12.2% increase from the $14.3 million recorded for the three months ended June 30, 2025.

As compared to the second quarter of 2025, Other Income, net increased $1.0 million and Other service charges, commissions and fees decreased $0.6 million.

For the six months ended June 30, 2026 and 2025, total noninterest income was $31.2 million and $27.2 million, respectively.

For the year to date periods, a $1.7 million increase in Other income, net coupled with a $1.2 million increase in SBA loan sale gains account for a majority of the change.

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

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

($ in thousands) 2026 2025 2026 2025

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SBA loan sale gains

529 151 1,432 203

Bank-owned life insurance income 1,358 1,221 2,698 2,449

Securities losses, net — —

Other income, net 1,589 636 2,467 768

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Noninterest Expenses

Total noninterest expenses totaled $60.2 million and $57.9 million for the three months ended March 31, 2026 and 2025, respectively, increasing $2.3 million, or 4.0%.

This was primarily attributable to a $1.7 million increase in Total personnel expense and a $0.8 million increase in Software licenses and other software costs.

Total noninterest expenses totaled $62.8 million and $58.9 million for the three months ended June 30, 2026 and 2025, respectively, increasing $3.8 million, or 6.5%.

This was primarily attributable to a $3.3 million increase in Total personnel expense primarily due to the timing of annual raises in the second quarter each year and a $0.4 million increase in Professional fees.

Total noninterest expenses totaled $123.0 million and $116.8 million for the six months ended June 30, 2026 and 2025, respectively, increasing $6.1 million, or 5.3%.

This was primarily attributable to a $5.0 million increase in Total personnel expense also primarily due to annual raises and a $1.1 million increase in Software licenses and other software costs, partially offset by a $0.5 million decrease in Intangibles amortization expense.

The following table presents the primary components of noninterest expenses.

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

($ in thousands) 2026 2025 2026 2025

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Total noninterest expense $ 62,761 $ 58,924 $ 122,979 $ 116,835

We recorded income tax expense of $12.3 million and $10.4 million for the three months ended March 31, 2026 and 2025, respectively, resulting in effective tax rates of 20.9% and 22.2%.

We recorded income tax expense of $12.9 million and $11.3 million for the three months ended June 30, 2026 and 2025, respectively, resulting in effective tax rates of 20.3% and 22.6%.

For the six months ended June 30, 2026 and 2025, we recorded tax expense of $25.2 million and $21.6 million, resulting in effective tax rates of 20.6% and 22.4%, respectively.

FINANCIAL CONDITION

Total assets at March 31, 2026 amounted to $12.9 billion, a $279.4 million, or 2.2%, increase from December 31, 2025 and was primarily related to higher interest-bearing cash and loans, partially offset by a contraction in the balance of AFS securities.

Total loans at March 31, 2026 were $8.8 billion, an increase of $71.4 million, or 0.8%, from December 31, 2025.

The mix of our loan portfolio remained relatively unchanged from December 31, 2025 to March 31, 2026.

Total assets at June 30, 2026 amounted to $13.0 billion, a $373.3 million, or 2.9%, increase from December 31, 2025 and was primarily related to higher loans and interest-bearing cash, partially offset by a contraction in the balance of AFS securities.

Total loans at June 30, 2026 were $9.0 billion, an increase of $266.3 million, or 3.1%, from December 31, 2025.

The mix of our loan portfolio remained relatively unchanged from December 31, 2025 to June 30, 2026.

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

At March 31, 2026, we had no notable concentrations in geographies or industries, including in office or hospitality categories.

The Company's

exposure to non-owner occupied commercial office loans represented approximately 6.5% of the total portfolio at March 31, 2026, with the largest loan being $33.0 million and the average outstanding loan balance being $1.4 million.

Non-owner occupied office loans were generally in non-metro markets and the 10 largest loans in this category represented less than 2% of the total loan portfolio at March 31, 2026.

Total investment securities were $2.5 billion at March 31, 2026, a decrease of $70.6 million from December 31, 2025, driven by prepayments and maturities.

The composition of our investment portfolio remained substantially the same at March 31, 2026 as at December 31, 2025.

The unrealized loss on AFS securities totaled $197.7 million at March 31, 2026.

At June 30, 2026, we had no notable concentrations in geographies or industries, including in office or hospitality categories.

The Company's exposure to non-owner occupied commercial office loans represented approximately 6.2% of the total portfolio at June 30, 2026, with the largest loan being $33.0 million and the average outstanding loan balance being $1.4 million.

Non-owner occupied office loans were generally in non-metro markets and the 10 largest loans in this category represented less than 2% of the total loan portfolio at June 30, 2026.

Total investment securities were $2.4 billion at June 30, 2026, a decrease of $112.9 million from December 31, 2025, as we did not reinvest all proceeds from prepayments and maturities.

The composition of our investment portfolio remained substantially the same at June 30, 2026 as at December 31, 2025.

The unrealized loss on AFS securities totaled $204.5 million at June 30, 2026.

Refer to Note 2 to the consolidated financial statements for additional detailed information regarding our mix of investments and the unrealized losses for each category.

We evaluated the unrealized losses on individual securities at March 31, 2026 and determined them to be of a temporary nature due primarily to interest rate factors and not credit quality concerns.

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

Total deposits amounted to $11.0 billion at March 31, 2026, an increase of $264.1 million, or 2.5%, from December 31, 2025.

Total deposits amounted to $11.1 billion at June 30, 2026, an increase of $336.4 million, or 3.1%, from December 31, 2025.

The majority of the increase was attributable to growth in Noninterest-bearing checking accounts of $110.6 million and growth in Money market accounts of $244.4 million.

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

March 31, 2026 December 31, 2025

June 30, 2026 December 31, 2025

($ in thousands) Amount Percentage Amount Percentage

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Total deposits $ 11,084,867 100 % $ 10,748,421 100 %

As of March 31, 2026, the estimated insured deposits totaled $6.5 billion, or 59.0% of total deposits, while approximately $4.5 billion of the Company's total deposits were uninsured.

In addition, deposits totaling $723.8 million at March 31, 2026 were collateralized by investment securities such that approximately 65.6% of our total deposits were insured or collateralized at that date.

As of June 30, 2026, the estimated insured deposits totaled $6.5 billion, or 58.9% of total deposits, while approximately $4.6 billion of the Company's total deposits were uninsured.

In addition, deposits totaling $748.7 million at June 30, 2026 were collateralized by investment securities such that approximately 65.7% of our total deposits were insured or collateralized at that date.

Nonperforming Assets

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($ in thousands)

March 31, 2026 December 31, 2025

June 30, 2026 December 31, 2025

Nonperforming assets

Nonaccrual loans $ 44,283 $ 36,315

Accruing loans >90 days past due — —

Accruing loans 90 days or more past due — —

Total nonperforming loans 44,283 36,315

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Allowance for credit losses to nonperforming loans 282.04 % 340.30 %

As shown in the table above, total NPAs at March 31, 2026 were $41.8 million, with the increase from year end primarily arising from the $4.7 million increase in Nonaccrual loans, partially offset by the $0.7 million decrease in Foreclosed real estate.

As shown in the table above, total NPAs at June 30, 2026 were $44.9 million, with the increase from year end primarily arising from the $8.0 million increase in Nonaccrual loans, partially offset by the $0.8 million decrease in Foreclosed real estate.

Commercial real estate - owner occupied is the largest category of nonaccrual loans, at $14.3 million, or 32.2%, followed by Residential 1-4 family real estate at $9.3 million, or 20.9%, and Commercial and industrial at $8.7 million, or 19.6%.

Included in various loan categories are nonaccrual SBA loans totaling $15.4 million at March 31, 2026, or 37.6% of total nonaccrual loans, and which include $8.1 million in guarantees from the SBA.

As reflected in Note 3 to the accompanying consolidated financial statements, total classified loans increased 12.7% to $66.0 million at March 31, 2026 compared to $58.5 million at December 31, 2025.

The increase resulted primarily from increases in Commercial real estate - non owner occupied loans of $3.6 million, Residential 1-4 family real estate of $1.7 million and Commercial real estate - owner occupied loans of $1.2 million.

Special mention loans decreased 3.64% to $28.3 million at March 31, 2026 compared to $29.3 million at December 31, 2025.

The majority of the decrease was attributable to a decrease in Construction, development & other land loans of $4.2 million, partially offset by an increase in Commercial real estate - owner occupied loans of $3.3 million.

Included in various loan categories are nonaccrual SBA loans totaling $15.5 million at June 30, 2026, or 35.0% of total nonaccrual loans, and which include $9.1 million in guarantees from the SBA.

As reflected in Note 3 to the accompanying consolidated financial statements, total classified loans increased 8.9% to $63.7 million at June 30, 2026 compared to $58.5 million at December 31, 2025.

The increase resulted primarily from increases in Commercial real estate - non owner occupied loans of $2.6 million and Commercial and industrial loans of $1.2 million.

Special mention loans decreased 16.99% to $24.4 million at June 30, 2026 compared to $29.3 million at December 31, 2025.

The majority of the decrease was attributable to a decrease in Construction, development & other land loans of $3.3 million and Commercial real estate - owner occupied loans of $0.9 million.

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

The total allowance for credit losses amounted to $124.7 million at March 31, 2026 compared to $123.6 million at December 31, 2025.

The overall ACL as a percent of total loans was 1.42% at both period ends.

The total allowance for credit losses amounted to $124.9 million at June 30, 2026 compared to $123.6 million at December 31, 2025.

The overall ACL as a percent of total loans was 1.39% and 1.42% at June 30, 2026 and December 31, 2025, respectively.

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

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.

The Company continues to evaluate the commercial loan portfolio and adjusted risk ratings and nonaccrual status as applicable.

Therefore, for those relationships, for March 31, 2026, the normal reserving process was applied.

For December 31, 2025 and June 30, 2026, no incremental reserves were maintained on the commercial loan portfolio as those relationships had been reviewed, risk ratings adjusted and nonaccrual status updated.

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

For the potentially impacted consumer loans, the Company applied increased reserve rates based upon severe economic factors to the approximately $253 million of loans (primarily Residential 1-4 family real estate) in the most impacted path of Hurricane Helene.

This compares to consumer and commercial loans totaling $268 million at December 31, 2025.

Due to the potential exposure from Hurricane Helene, the ACL on these impacted consumer loans was $1.9 million as of March 31, 2026 and December 31, 2025, adding 2 basis points to the overall ACL as a percent of total loans at both period ends.

This compares to consumer loans totaling $268 million at December 31, 2025.

Due to the potential exposure from Hurricane Helene, the ACL on these impacted consumer loans was $1.9 million as of June 30, 2026 and December 31, 2025, adding 2 basis points to the overall ACL as a percent of total loans at both period ends.

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

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For the periods indicated, the following table summarizes our balances of loans outstanding, average loans outstanding, ACL, charge-offs and recoveries, and key ratios:

($ in thousands) Three Months Ended March 31, 2026 Twelve Months Ended December 31, 2025 Three Months Ended March 31, 2025

($ in thousands) Six Months Ended June 30, 2026 Twelve Months Ended December 31, 2025 Six Months Ended June 30, 2025

Loans outstanding at end of period $ 8,988,748 $ 8,722,419 $ 8,225,650

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The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.

The allowance for unfunded commitments of $11.5 million and $11.0 million at March 31, 2026 and December 31, 2025, respectively, is classified on the consolidated balance sheets within "Other liabilities." The increase in the level of the allowance between periods was driven by an increase in balances of available lines of credit during the three months ended March 31, 2026.

The allowance for unfunded commitments of $11.6 million and $11.0 million at June 30, 2026 and December 31, 2025, respectively, is classified on the consolidated balance sheets within "Other liabilities." The increase in the level of the allowance between periods was driven by an increase in balances of available lines of credit, partially offset by lower reserve rates during the six months ended June 30, 2026.

Liquidity, Commitments, and Contingencies

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also maintain available lines of credit from the FHLB and the Federal Reserve, as well as federal funds lines from several correspondent banks which are summarized below.

At March 31, 2026, the Company had the following sources of readily available borrowing capacity:

At June 30, 2026, the Company had the following sources of readily available borrowing capacity:

• A $1.4 billion line of credit with the FHLB that can be structured as either short-term or long-term borrowings, depending on the particular funding or liquidity needs.

As of March 31, 2026, 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 $8.9 million.

Outstanding borrowings on the line totaled $0.7 million and $0.8 million at March 31, 2026 and December 31, 2025, respectively;

As of June 30, 2026, the line of credit is secured by a blanket lien on portions of the Company's real estate loan portfolio totaling approximately $7.0 billion and the Company's FHLB stock totaling $8.9 million.

Outstanding borrowings on the line totaled $0.7 million and $0.8 million at June 30, 2026 and December 31, 2025, respectively;

• Federal funds lines of credit with correspondent banks totaling $285.0 million allow the Company to purchase federal funds on an overnight, unsecured basis.

No borrowings were outstanding at March 31, 2026 or December 31, 2025;

• A line of credit of approximately $815.8 million through the Federal Reserve's discount window borrowing program, which was secured at March 31, 2026 by a blanket lien on a portion of the Company’s commercial and consumer loan portfolios (excluding those secured by real estate collateral) totaling approximately $386.8 million and specific investment securities with a carrying value of $643.0 million.

No borrowings were outstanding at March 31, 2026 or December 31, 2025.

Our overall on-balance sheet liquidity ratio was 16.7% at March 31, 2026 compared to 14.9% at December 31, 2025.

No borrowings were outstanding at June 30, 2026 or December 31, 2025;

• A line of credit of approximately $756.4 million through the Federal Reserve's discount window borrowing program, which was secured at June 30, 2026 by a blanket lien on a portion of the Company’s commercial and consumer loan portfolios (excluding those secured by real estate collateral) totaling approximately $321.1 million and specific investment securities with a carrying value of $616.3 million.

No borrowings were outstanding at June 30, 2026 or December 31, 2025.

Our overall on-balance sheet liquidity ratio was 15.7% at June 30, 2026 compared to 14.9% at December 31, 2025.

We define our liquidity ratio as net liquid assets (cash, unpledged securities and other marketable assets) as a percentage of our net liabilities (unpledged deposits and borrowings).

Our total liquidity ratio, including the $2.5 billion in available lines of credit, was 34.0% as of March 31, 2026.

Our total liquidity ratio, including the $2.4 billion in available lines of credit, was 32.8% as of June 30, 2026.

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

As of March 31, 2026, our brokered deposits availability was $1.9 billion per our internal policy.

As of June 30, 2026, our brokered deposits availability was $1.9 billion per our internal policy.

The amount and timing of our contractual obligations and commercial commitments have not changed materially since December 31, 2025, the detail of w hich is presented in the "Contractual Obligations and Other Commercial Commitments" table of our 2025 Annual Report on Form 10-K.

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However, we maintain a program whereby we enter into interest rate swaps with certain commercial loan customers, with offsetting positions to dealers under a back-to-back swap program.

At March 31, 2026, the Company's derivative financial instruments consisted entirely of customer back-to-back interest rate swaps which are not designated as hedges.

At June 30, 2026, the Company's derivative financial instruments consisted entirely of customer back-to-back interest rate swaps which are not designated as hedges.

Under this program, the Company executes interest rate swaps with commercial banking customers to facilitate their risk management strategies.

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

At March 31, 2026, as shown in the table below, we were well-capitalized.

The capital ratios at March 31, 2026 remained materially consistent with the 2025 year end ratios.

At June 30, 2026, as shown in the table below, we were well-capitalized.

The capital ratios at June 30, 2026 remained materially consistent with the 2025 year end ratios.

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

March 31, 2026 December 31, 2025 Minimum required

June 30, 2026 December 31, 2025 Minimum required

Risk-based capital ratios:

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

At March 31, 2026, the Bank exceeded the minimum ratios established by the regulatory authorities.

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

TCE divided by tangible assets excludes the effect of goodwill and other intangible assets, net of related taxes from the GAAP basis total shareholders’ common equity and GAAP basis total assets.

At June 30, 2026, the Bank exceeded the minimum ratios established by the regulatory authorities.

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

The TCE ratio excludes the effect of goodwill and other intangible assets, net of related taxes from the GAAP basis total shareholders’ common equity and GAAP basis total assets.

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

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

The TCE ratio was 9.63% at March 31, 2026 compared to 9.61% at December 31, 2025.

The TCE ratio was 9.83% at June 30, 2026 compared to 9.61% at December 31, 2025.

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

($ in thousands) March 31, 2026 December 31, 2025

($ in thousands) June 30, 2026 December 31, 2025

Reconciliation of Common Equity to TCE

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Tangible assets $ 12,559,942 $ 12,184,695

TCE divided by Tangible Assets 9.63 % 9.61 %

TCE ratio 9.83 % 9.61 %

Stock Repurchase Plans

The following table discloses shares of our common stock repurchased during the three months ended March 31, 2026.

The following table discloses shares of our common stock repurchased during the three months ended June 30, 2026.

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

January 1, 2026 to January 31, 2026 — $ — — $ 40,000,000

February 1, 2026 to February 28, 2026 — $ — — $ 40,000,000

March 1, 2026 to March 31, 2026 93,127 $ 55.24 93,127 $ 34,855,489

April 1, 2026 to April 30, 2026 — $ — — $ 34,885,489

May 1, 2026 to May 31, 2026 36,298 $ 58.47 36,298 $ 32,763,290

June 1, 2026 to June 30, 2026 — $ — — $ 32,763,290

Total 36,298 $ 58.47 36,298 $ 32,763,290

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Any such repurchases would be made pursuant to a plan approved by and containing provisions about the timing, purchase prices and quantities purchased determined by management in its discretion.

During the quarter ended March 31, 2026, 93,127 shares were repurchased at an average price per share of $55.24.

As of March 31, 2026, the Company had remaining authorization to purchase up to $34.9 million of outstanding stock under the program.

During the quarter ended June 30, 2026, a total of 36,298 shares were repurchased at an average price per share of $58.47.

As of June 30, 2026, the Company had remaining authorization to purchase up to $32.8 million of outstanding stock under the program.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis