First Bank(FBNC) - 2025 Q2 - Quarterly Report

Part I. Financial Information Item 1 - Financial Statements (unaudited) This section presents First Bancorp's unaudited consolidated financial statements, including Balance Sheets, Statements of Income, Comprehensive Income (Loss), Shareholders' Equity, and Cash Flows, with detailed notes on organization, accounting policies, and financial instruments Consolidated Balance Sheets | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change ($ thousands) | Change (%) | | :-------------------------------- | :------------------------------ | :------------------------------- | :---------------------- | :--------- | | Total assets | 12,608,265 | 12,147,694 | 460,571 | 3.79% | | Total cash and cash equivalents | 711,286 | 507,507 | 203,779 | 40.15% | | Net loans | 8,105,105 | 7,972,104 | 133,001 | 1.67% | | Total deposits | 10,830,380 | 10,530,525 | 299,855 | 2.85% | | Total liabilities | 11,052,085 | 10,702,083 | 350,002 | 3.27% | | Total shareholders' equity | 1,556,180 | 1,445,611 | 110,569 | 7.65% | Consolidated Statements of Income | Metric | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | Change ($ thousands) | Change (%) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | :---------------------- | :--------- | | Total interest income | 136,741 | 128,822 | 7,919 | 6.15% | | Total interest expense | 40,065 | 47,707 | (7,642) | -16.02% | | Net interest income | 96,676 | 81,115 | 15,561 | 19.18% | | Provision for credit losses | 2,212 | 541 | 1,671 | 308.87% | | Total noninterest income | 14,341 | 14,601 | (260) | -1.78% | | Total noninterest expenses | 58,983 | 58,291 | 692 | 1.19% | | Net income | 38,566 | 28,712 | 9,854 | 34.30% | | Basic EPS | 0.93 | 0.70 | 0.23 | 32.86% | | Diluted EPS | 0.93 | 0.70 | 0.23 | 32.86% | | Metric | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | Change ($ thousands) | Change (%) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | :---------------------- | :--------- | | Total interest income | 269,401 | 255,436 | 13,965 | 5.47% | | Total interest expense | 79,842 | 95,047 | (15,205) | -16.00% | | Net interest income | 189,559 | 160,389 | 29,170 | 18.19% | | Provision for credit losses | 3,328 | 1,741 | 1,587 | 91.15% | | Total noninterest income | 27,243 | 27,497 | (254) | -0.92% | | Total noninterest expenses | 116,876 | 117,478 | (602) | -0.51% | | Net income | 74,972 | 53,984 | 20,988 | 38.88% | | Basic EPS | 1.81 | 1.31 | 0.50 | 38.17% | | Diluted EPS | 1.81 | 1.31 | 0.50 | 38.17% | Consolidated Statements of Comprehensive Income (Loss) | Metric | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | Change ($ thousands) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | :---------------------- | | Net income | 38,566 | 28,712 | 9,854 | | Other comprehensive income (loss) | 17,110 | 6,782 | 10,328 | | Comprehensive income (loss) | 55,676 | 35,494 | 20,182 | | Metric | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | Change ($ thousands) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | :---------------------- | | Net income | 74,972 | 53,984 | 20,988 | | Other comprehensive income (loss) | 52,511 | (7,161) | 59,672 | | Comprehensive income (loss) | 127,483 | 46,823 | 80,660 | Consolidated Statements of Shareholders' Equity | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change ($ thousands) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | :---------------------- | | Total shareholders' equity | 1,556,180 | 1,445,611 | 110,569 | | Retained earnings | 812,657 | 756,327 | 56,330 | | Accumulated other comprehensive income (loss) | (229,518) | (282,029) | 52,511 | - For the six months ended June 30, 2025, the company declared cash dividends of $0.45 per common share, totaling $18.642 million; stock repurchases amounted to $0.992 million[20] Consolidated Statements of Cash Flows | Cash Flow Activity | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | Change ($ thousands) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | :---------------------- | | Net cash provided by (used in) operating activities | 98,307 | 67,630 | 30,677 | | Net cash provided by (used in) investing activities | (175,353) | 403,343 | (578,696) | | Net cash provided by (used in) financing activities | 280,825 | (100,416) | 381,241 | | Increase (decrease) in cash and cash equivalents | 203,779 | 370,557 | (166,778) | | Cash and cash equivalents, end of period | 711,286 | 608,412 | 102,874 | - Cash paid for interest decreased by $14.612 million (15.49%) from $94.342 million in H1 2024 to $79.730 million in H1 2025[25] - Cash paid for income taxes decreased by $5.546 million (38.56%) from $14.382 million in H1 2024 to $8.836 million in H1 2025[25] Notes to Consolidated Financial Statements Note 1. Organization and Basis of Presentation - The consolidated financial statements include First Bancorp, its wholly-owned subsidiary First Bank, and First Bank's subsidiaries Magnolia Financial, Inc. and First Troy SPE, LLC, with SBA Complete, Inc. becoming inactive in Q2 2024[28][29] - The company did not adopt any new accounting standards in the first six months of 2025, with ASU 2023-09 (Income Tax Disclosures) and ASU 2024-03 (Expense Disaggregation Disclosures) pending adoption and no significant impact expected[33][34][35][36] Note 2. Securities | Security Type | Amortized Cost (June 30, 2025) ($ thousands) | Fair Value (June 30, 2025) ($ thousands) | Unrealized Losses (June 30, 2025) ($ thousands) | | :-------------------------- | :----------------------------- | :------------------------- | :-------------------------------- | | Securities available for sale | 2,443,724 | 2,144,831 | (303,483) | | Securities held to maturity | 516,405 | 431,420 | (84,987) | | Total unrealized loss position | 2,960,129 | 2,576,251 | (388,470) | - As of June 30, 2025, 548 out of 589 securities were in an unrealized loss position, primarily due to interest rate factors rather than credit quality concerns, with no intent to sell before recovery of amortized cost[41][42] - No sales of investment securities occurred during the three and six months ended June 30, 2025, contrasting with $142.7 million (Q2 2024) and $148.0 million (H1 2024) in proceeds from sales of securities and Visa Class B shares, which generated net losses of $0.2 million and $1.2 million, respectively, in the comparable 2024 periods[46][47] Note 3. Loans, Allowance for Credit Losses, and Asset Quality Information | Loan Category | June 30, 2025 (Amount in thousands) | June 30, 2025 (Percentage) | December 31, 2024 (Amount in thousands) | December 31, 2024 (Percentage) | | :------------------------------------ | :---------------------------------- | :------------------------- | :------------------------------------ | :------------------------- | | Commercial and industrial | 911,227 | 11% | 919,690 | 11% | | Construction, development & other land loans | 633,529 | 8% | 647,167 | 8% | | Commercial real estate - owner occupied | 1,254,596 | 15% | 1,248,812 | 16% | | Commercial real estate - non owner occupied | 2,758,629 | 34% | 2,625,554 | 33% | | Multi-family real estate | 509,419 | 6% | 506,407 | 6% | | Residential 1-4 family real estate | 1,731,397 | 21% | 1,729,322 | 21% | | Home equity loans/lines of credit | 355,876 | 4% | 345,883 | 4% | | Consumer loans | 70,137 | 1% | 70,653 | 1% | | Total loans | 8,225,650 | 100% | 8,094,676 | 100% | | Nonperforming Asset (NPA) | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :-------------------------------- | :------------------------------ | :------------------------------- | | Nonaccrual loans | 34,625 | 31,779 | | Foreclosed properties | 1,218 | 4,965 | | Total nonperforming assets | 35,843 | 36,744 | | Allowance for Credit Losses (ACL) Activity | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :----------------------------------------- | :------------------------------------ | :------------------------------------ | | Beginning balance | 122,572 | 109,853 | | Charge-offs | (5,874) | (4,772) | | Recoveries | 1,379 | 1,727 | | Provisions / (Reversals) | 2,468 | 3,250 | | Ending balance | 120,545 | 110,058 | - Loans to borrowers in areas impacted by Hurricane Helene totaled $703 million as of June 30, 2025, a decrease from $755 million at the time of the storm, with an ACL of $7.5 million contributing 10 basis points to the overall ACL as a percent of total loans (1.47%)[75] Note 4. Goodwill, Other Intangible Assets and Servicing Assets | Intangible Asset | Net Amount (June 30, 2025) ($ thousands) | Net Amount (December 31, 2024) ($ thousands) | | :------------------------- | :---------------------------------- | :------------------------------------ | | Customer lists | 53 | 213 | | Core deposit intangibles | 19,867 | 22,691 | | Total amortizable intangible assets | 19,920 | 22,904 | | Goodwill | 478,750 | 478,750 | - Amortization expense for intangible assets was $1.5 million for Q2 2025 (vs. $1.7 million in Q2 2024) and $3.0 million for H1 2025 (vs. $3.4 million in H1 2024), with no goodwill impairment identified in 2025[80][81] - SBA guaranteed servicing fee income was $0.7 million for Q2 2025 (vs. $0.8 million in Q2 2024) and $1.4 million for H1 2025 (vs. $1.5 million in H1 2024), with the net balance of SBA servicing assets at $2.029 million as of June 30, 2025[83][84] Note 5. Borrowings | Borrowing Type | Balance (June 30, 2025) ($ thousands) | Interest Rate (June 30, 2025) | Balance (December 31, 2024) ($ thousands) | Interest Rate (December 31, 2024) | | :-------------------------- | :--------------------------------- | :---------------------------- | :----------------------------------- | :---------------------------- | | FHLB Principal Reducing Credit | 778 | 0.00% to 1.00% fixed | 802 | 0.00% to 1.00% fixed | | Trust Preferred Securities | 77,024 | 5.95% to 7.29% adjustable | 77,024 | 6.01% to 7.61% adjustable | | Subordinated Debentures | 18,000 | 4.38% fixed (until 11/15/25) | 18,000 | 4.38% fixed (until 11/15/25) | | Total borrowings (net of discount) | 92,237 | 6.09% (weighted average) | 91,876 | 6.22% (weighted average) | Note 6. Leases - The company leases 13 bank branch offices (land and buildings) and 10 branch offices (land only), along with other office space, all as operating leases with maturity dates ranging from April 2026 to May 2076, including extension options[87] | Lease Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :----------------------------------- | :------------------------------ | :------------------------------- | | Right-of-use assets | 14,000 | 13,800 | | Lease liabilities | 14,900 | 14,600 | | Weighted average remaining life of lease term | 20.7 years | 21.2 years | | Weighted average discount rates | 3.40% | 3.34% | | Total operating lease expenses (H1) | 1,300 | 1,200 | Note 7. Fair Value of Financial Instruments - The company categorizes financial instruments measured at fair value into Level 1 (quoted prices in active markets), Level 2 (significant other observable inputs), and Level 3 (significant unobservable inputs)[93][94] | Financial Instrument (Recurring) | Fair Value (June 30, 2025) ($ thousands) | Level 1 ($ thousands) | Level 2 ($ thousands) | Level 3 ($ thousands) | | :----------------------------------- | :------------------------------------ | :----------------------- | :----------------------- | :----------------------- | | Securities available for sale | 2,144,831 | 0 | 2,142,396 | 2,435 | | Derivative financial assets | 2,714 | 0 | 2,714 | 0 | | Presold mortgages in process of settlement | 8,928 | 0 | 8,928 | 0 | | Derivative financial liabilities | 2,752 | 0 | 2,752 | 0 | | Financial Instrument (Nonrecurring) | Fair Value (June 30, 2025) ($ thousands) | Level 1 ($ thousands) | Level 2 ($ thousands) | Level 3 ($ thousands) | | :------------------------------------ | :------------------------------------ | :----------------------- | :----------------------- | :----------------------- | | Individually evaluated loans | 5,649 | 0 | 0 | 5,649 | - Valuation methodologies include matrix pricing for most Level 2 securities and discounted cash flow or asset approach for individually evaluated (Level 3) loans, primarily based on real estate collateral appraisals[96][97][100] Note 8. Stock-Based Compensation | Metric | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | | Stock-based compensation expense | 1,100 | 900 | | Income tax benefits | 246 | 218 | | Metric | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | | Stock-based compensation expense | 2,100 | 1,600 | | Income tax benefits | 484 | 371 | - As of June 30, 2025, the First Bancorp 2024 Equity Plan had 1,831,944 shares available for grant, granting restricted stock to employees and unrestricted stock to non-employee directors[105][106][108] - Total unrecognized compensation expense for restricted stock awards was $4.5 million at June 30, 2025, with a weighted average remaining term of 2.5 years[109] Note 9. Earnings Per Share | EPS Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | | Basic EPS | 0.93 | 0.70 | | Diluted EPS | 0.93 | 0.70 | | Weighted average common shares outstanding (Basic) | 41,168,260 | 40,879,684 | | Weighted average common shares outstanding (Diluted) | 41,441,393 | 41,262,091 | | EPS Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | | Basic EPS | 1.81 | 1.31 | | Diluted EPS | 1.81 | 1.31 | | Weighted average common shares outstanding (Basic) | 41,149,623 | 40,861,775 | | Weighted average common shares outstanding (Diluted) | 41,424,063 | 41,256,081 | Note 10. Accumulated Other Comprehensive Income (Loss) | Component of AOCI | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :----------------------------------- | :------------------------------ | :------------------------------- | | Net unrealized loss on securities available for sale | (229,603) | (282,114) | | Net postretirement plans asset (liability) | 85 | 85 | | Total accumulated other comprehensive income (loss) | (229,518) | (282,029) | - For the six months ended June 30, 2025, net current period other comprehensive income was $52.511 million, a significant improvement from a loss of ($7.161) million in the prior year period[112] Note 11. Revenue from Contracts with Customers | Noninterest Income Category | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | | Noninterest income (in-scope of ASC 606) | 9,825 | 9,580 | | Noninterest income (out-of-scope of ASC 606) | 4,516 | 5,021 | | Total noninterest income | 14,341 | 14,601 | | Noninterest Income Category | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | | Noninterest income (in-scope of ASC 606) | 19,452 | 19,187 | | Noninterest income (out-of-scope of ASC 606) | 7,791 | 8,310 | | Total noninterest income | 27,243 | 27,497 | Note 12. Segment Reporting - First Bancorp operates as a single operating segment focused on banking operations, including loan and deposit products and financial advice, with management assessing performance and allocating resources based on pre-tax net income[115][117] Note 13. Subsequent Events - In Q3 2025, the company executed a securities loss earnback transaction, selling $194.3 million of AFS securities at a $27.9 million loss and reinvesting $167.4 million in AFS securities bearing 4.79%[120] Item 2 – Management's Discussion and Analysis of Consolidated Results of Operations and Financial Condition This section provides management's perspective on the company's financial performance and condition for the three and six months ended June 30, 2025, highlighting key drivers of net income, balance sheet changes, and critical accounting estimates Overview and Highlights | Metric | Q2 2025 | Q2 2024 | Change (%) | | :----------------------------------- | :------ | :------ | :--------- | | Net income ($ millions) | $38.6 | $28.7 | 34.5% | | Diluted EPS | $0.93 | $0.70 | 32.9% | | Adjusted net income ($ millions) | $35.9 | N/A | N/A | | Adjusted diluted EPS | $0.87 | N/A | N/A | | Net interest income ($ millions) | $96.7 | $81.1 | 19.2% | | Net interest margin (NIM) | 3.32% | 2.84% | +48 bps | | Total assets ($ billions) | $12.6 | N/A | 3.8% (vs. Dec 31, 2024) | | Total loans ($ billions) | $8.2 | N/A | 1.6% (vs. Dec 31, 2024) | | Total deposits ($ billions) | $10.8 | N/A | 2.85% (vs. Dec 31, 2024) | | Nonperforming assets to total assets | 0.28% | N/A | -2 bps (vs. Dec 31, 2024) | | On-balance sheet liquidity ratio | 20.0% | N/A | +2.4% (vs. Dec 31, 2024) | - The increase in net interest income was driven by a lower cost of funds and higher yields on interest-earning assets, partly due to Federal Reserve rate cuts in late 2024 and the securities loss-earnback transaction[122][125][126][127] - Capital ratios remained strong, with Common Equity Tier 1 ratio at 14.64%, Tier 1 risk-based capital ratio at 15.45%, and total risk-based capital ratio at 16.90% as of June 30, 2025, all increasing from June 30, 2024[125] Critical Accounting Estimates - The most subjective accounting areas are the determination of the Allowance for Credit Losses (ACL) and Allowance for Unfunded Commitments, as well as business combinations, related fair value measurements, and goodwill determination[131] Current Accounting Matters - Refer to Note 1 of the consolidated financial statements for information on recently announced or adopted accounting standards[133] Results of Operations Net Interest Income - Net interest income for Q2 2025 increased by $15.6 million (19.2%) to $96.7 million, driven by higher yields on interest-earning assets and lower cost of funds; for H1 2025, net interest income increased by $29.2 million (18.2%) to $189.6 million[136][144] - Net Interest Margin (NIM) improved by 48 basis points to 3.32% in Q2 2025 (from 2.84% in Q2 2024) and to 3.29% in H1 2025 (from 2.81% in H1 2024), influenced by Federal Reserve rate cuts in late 2024, increased loan yields, and the securities loss-earnback transaction[139][141][144][145][152] - Average interest-earning assets increased by $216.6 million (1.9%) in Q2 2025 YoY, with average loans and taxable securities growing by $116.8 million and $105.7 million, respectively; average loan volumes for H1 2025 were $60.6 million higher than H1 2024[137][152] - The cost of interest-bearing deposits decreased by 40 basis points in Q2 2025 YoY, primarily due to a $3.0 million decrease in Other time deposits and a $2.5 million decrease in Money market deposits; interest expense on borrowings decreased by $1.3 million in Q2 2025 YoY, largely due to the payoff of Federal Reserve Bank Term Funding Program borrowings[138][145] Provision for Credit Losses | Metric | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | | Provision for credit losses | 2,200 | 500 | | Provision for loan losses (incl. Hurricane Helene reversal) | 1,100 | 1,500 | | Provision for unfunded commitments | 1,100 | (900) | | Metric | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | | Provision for credit losses | 3,300 | 1,700 | | Provision for unfunded commitments | 900 | (1,500) | - The Q2 2025 provision for loan losses included a $3.5 million reversal specifically attributed to Hurricane Helene; for H1 2025, the provision for credit losses was significantly impacted by loan growth and $4.5 million in net charge-offs, partially offset by a $5.5 million reduction in the incremental provision related to Hurricane Helene[129][158] - The incremental reserve related to Hurricane Helene added 0.10% to the ACL as of June 30, 2025, for approximately $703 million of loans in the impacted path[160] Noninterest Income | Noninterest Income Category | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | | Total noninterest income | 14,341 | 14,601 | | SBA loan sale gains | 151 | 1,336 | | Other service charges and fees - other | 4,007 | 2,955 | | Noninterest Income Category | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | | Total noninterest income | 27,243 | 27,497 | | SBA loan sale gains | 203 | 2,231 | | Other income, net | 809 | 1,570 | | Other service charges and fees - other | 7,563 | 6,211 | | Securities losses, net | 0 | (1,161) | - Noninterest income for Q2 2025 decreased slightly by $0.26 million YoY, primarily due to a $1.2 million decrease in SBA loan sale gains, partially offset by a $1.1 million increase in other service charges; for H1 2025, noninterest income decreased by $0.254 million YoY, mainly from lower SBA loan sale gains and other income, partially offset by increased service charges and the absence of securities losses seen in H1 2024[162] Noninterest Expenses | Noninterest Expense Category | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | | Total noninterest expenses | 58,983 | 58,291 | | Total personnel expense | 35,192 | 34,512 | | Noninterest Expense Category | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | | Total noninterest expenses | 116,876 | 117,478 | | Total personnel expense | 69,948 | 68,423 | | FDIC insurance costs | 2,822 | 3,657 | | Professional fees | 2,474 | 3,215 | - Total noninterest expenses increased by $0.7 million (1.2%) in Q2 2025 YoY, primarily due to a $0.7 million increase in total personnel costs; for H1 2025, total noninterest expenses decreased by $0.6 million YoY, driven by $0.8 million lower FDIC insurance costs and $0.7 million lower professional fees, partially offset by a $1.5 million increase in personnel costs[165][166] Income Taxes | Metric | Three Months Ended June 30, 2025 ($ millions) | Three Months Ended June 30, 2024 ($ millions) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | | Income tax expense | $11.3 | $8.2 | | Effective tax rate | 22.6% | 22.2% | | Metric | Six Months Ended June 30, 2025 ($ millions) | Six Months Ended June 30, 2024 ($ millions) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | | Income tax expense | $21.6 | $14.7 | | Effective tax rate | 22.4% | 21.4% | Financial Condition Total Assets and Loans - Total assets increased by $460.6 million (3.8%) to $12.6 billion at June 30, 2025, primarily due to higher interest-bearing cash, AFS securities, and loans[170] - Total loans increased by $131.0 million (1.6%) to $8.2 billion at June 30, 2025, with the loan portfolio mix remaining stable and no notable concentrations in geographies or industries, including office or hospitality categories[171] Investment Securities - Total investment securities increased by $98.2 million to $2.7 billion at June 30, 2025, with the company purchasing $137.0 million in investment securities during H1 2025 and no sales[172] - The unrealized loss on AFS securities totaled $298.9 million at June 30, 2025, determined to be temporary and primarily due to interest rate factors, not credit quality concerns[174][175] Deposits - Total deposits increased by $299.9 million (2.8%) to $10.8 billion at June 30, 2025, driven by organic growth in noninterest-bearing checking and money market accounts[175][176] | Deposit Type | June 30, 2025 ($ thousands) | Percentage | December 31, 2024 ($ thousands) | Percentage | | :----------------------------------- | :------------------------------ | :--------- | :------------------------------- | :--------- | | Noninterest-bearing checking accounts | 3,542,626 | 33% | 3,367,624 | 32% | | Interest-bearing checking accounts | 1,443,010 | 13% | 1,398,395 | 13% | | Money market accounts | 4,446,485 | 41% | 4,285,405 | 41% | | Savings accounts | 536,247 | 5% | 542,133 | 5% | | Other time deposits | 514,865 | 5% | 566,514 | 5% | | Time deposits >$250,000 | 337,382 | 3% | 360,854 | 4% | | Total customer deposits | 10,820,615 | 100% | 10,520,925 | 100% | | Brokered deposits | 9,765 | 0% | 9,600 | 0% | | Total deposits | 10,830,380 | 100% | 10,530,525 | 100% | - As of June 30, 2025, 59.7% ($6.5 billion) of total deposits were estimated insured, and an additional $707.0 million were collateralized, bringing the total insured or collateralized deposits to approximately 66.3%[177] Nonperforming Assets | NPA Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :----------------------------------- | :------------------------------ | :------------------------------- | | Total nonperforming assets | 35,843 | 36,744 | | Nonaccrual loans | 34,625 | 31,779 | | Foreclosed real estate | 1,218 | 4,965 | | Nonperforming loans to total loans | 0.42% | 0.39% | | Nonperforming assets to total assets | 0.28% | 0.30% | | Allowance for credit losses to nonperforming loans | 348.14% | 385.70% | - Total NPAs decreased to $35.8 million at June 30, 2025, primarily due to a $3.7 million decrease in foreclosed real estate, partially offset by a $2.8 million increase in nonaccrual loans[178] - Commercial and industrial loans represent the largest category of nonaccrual loans ($10.6 million, or 30.6%), followed by Commercial real estate - owner occupied ($10.0 million, or 28.9%); nonaccrual SBA loans totaled $17.6 million, with $7.3 million guaranteed by the SBA[179] Allowance for Credit Losses, Allowance for Unfunded Commitments, and Loan Loss Experience | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :----------------------------------- | :------------------------------ | :------------------------------- | | Allowance for credit losses (ACL) | 120,545 | 122,572 | | Net charge-offs (H1) | (4,495) | (6,032) | | Net charge-offs as a percent of average loans (annualized) | 0.11% | 0.07% | | ACL as a percent of loans | 1.47% | 1.51% | | Allowance for unfunded commitments | 9,900 | 9,100 | - The ACL decreased to $120.5 million at June 30, 2025, largely due to releases of $3.5 million (Q2) and $5.5 million (H1) of credit reserves related to Hurricane Helene; the ACL as a percent of loans was 1.47%, with 10 basis points attributable to Hurricane Helene[181][182] - The allowance for unfunded commitments increased to $9.9 million at June 30, 2025, driven by an increase in available lines of credit, partially offset by a reduction in reserve rates[185] Liquidity, Commitments, and Contingencies - The company's on-balance sheet liquidity ratio was 20.0% at June 30, 2025 (up from 17.6% at Dec 31, 2024); total liquidity ratio, including $2.3 billion in available lines of credit, was 36.1%[187] - Available borrowing capacity includes a $1.3 billion FHLB line of credit, $265.0 million in federal funds lines of credit, and an approximately $761.1 million Federal Reserve discount window line of credit[192] Off-Balance Sheet Arrangements and Derivative Financial Instruments - The company has no significant off-balance sheet arrangements other than letters of credit and repayment guarantees for trust preferred securities and subordinated debentures[189] - Derivative financial instruments consist entirely of customer back-to-back interest rate swaps, which are not designated as hedges, with changes in fair value recognized directly in earnings[191] Capital Resources | Capital Ratio | June 30, 2025 | December 31, 2024 | Minimum Required | | :----------------------------------- | :------------ | :---------------- | :--------------- | | Common equity Tier 1 ratio | 14.64% | 14.35% | 7.00% | | Tier I capital ratio | 15.45% | 15.17% | 8.50% | | Total risk-based capital ratio | 16.90% | 16.63% | 10.50% | | Tier 1 capital to quarterly average total assets (Leverage ratio) | 11.23% | 11.15% | 4.00% | - The company was well-capitalized at June 30, 2025, with all capital ratios increasing from year-end 2024 due to retained earnings and shifts to lower risk-weighted assets[195] | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :----------------------------------- | :------------------------------ | :------------------------------- | | Tangible Common Equity (TCE) | 1,070,523 | 957,951 | | Tangible Assets | 12,122,608 | 11,660,034 | | TCE divided by Tangible Assets | 8.83% | 8.22% | Stock Repurchase Plans - The Board of Directors authorized a $40 million common stock repurchase plan in January 2024, renewed in January 2025; as of June 30, 2025, $39.0 million remained available under the program, with no repurchases made during Q2 2025[198][199] Item 3 – Quantitative and Qualitative Disclosures About Market Risk This section details the company's exposure to market risk, primarily interest rate risk, and the methodologies used to monitor and manage these risks, including earnings and economic value simulation analyses Market Risk - The company's market risk primarily stems from interest rate risk inherent in lending and deposit-taking activities, with no trading assets or activities[200] Interest Rate Risk - Interest rate risk is the most significant market risk, affecting net interest income due to mismatches in asset and liability repricing characteristics, with the company aiming to maximize net interest income while minimizing adverse impacts from interest rate changes[201][203] - Interest rate risk is monitored using earnings simulation modeling and economic value simulation (net present value estimation) to measure changes across various hypothetical interest rate scenarios[204] Earnings Simulation Analysis - As of June 30, 2025, the company's net interest income sensitivity indicated an asset-sensitive position over a one-year period, with immediate parallel rate shifts resulting in a 4.7% increase in a +200 bps scenario and a 3.9% decrease in a -200 bps scenario[208] Economic Value Simulation - As of June 30, 2025, the company's Economic Value of Equity (EVE) generally declines in rising rate scenarios (-3.2% in +100 bps, -10.5% in +200 bps) and improves in falling rate scenarios (+3.1% in -100 bps, +2.7% in -200 bps), driven by the composition of fixed-rate loans and mortgage-backed securities versus variable-rate deposits[211] Inflation - Changes in interest rates generally affect the company's financial condition more than inflation, which primarily impacts operating costs, and the company reviews pricing and costs to mitigate its effects[214][215] Item 4 – Controls and Procedures Management, including the CEO and CFO, assessed the effectiveness of the company's disclosure controls and procedures as of June 30, 2025, concluding they were effective, with no material changes to internal control over financial reporting occurring during the period - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025, ensuring timely disclosure decisions for material information[216] - No material changes to internal control over financial reporting occurred during or subsequent to the period covered by the report[216] Part II. Other Information Item 1 – Legal Proceedings The company is not involved in any pending legal proceedings that management believes are material to its consolidated financial position, with reserves established for probable and determinable losses - No material legal proceedings are pending or threatened against the company or its subsidiaries[217] Item 1A – Risk Factors There are no material changes to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K - No material changes to the risk factors from the 2024 Annual Report on Form 10-K[218] Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds This section refers to the Stock Repurchase Plans discussed in Management's Discussion and Analysis - Information regarding issuer purchases of equity securities is incorporated by reference from the Stock Repurchase Plans section of Management's Discussion and Analysis[219] Item 5 - Other Information No Section 16 reporting persons (directors and certain officers) maintained, adopted, modified, or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1(c) arrangement during the quarter ended June 30, 2025 - No Section 16 reporting persons engaged in Rule 10b5-1 trading arrangements or non-Rule 10b5-1(c) arrangements during Q2 2025[220][221] Item 6 – Exhibits This section lists all exhibits filed with the report, including articles of incorporation, bylaws, stock certificates, officer certifications, and XBRL financial information - Exhibits include Articles of Incorporation, Amended and Restated Bylaws, Form of Common Stock Certificate, CEO and CFO certifications (Sections 302(a) and 906 of Sarbanes-Oxley Act), and XBRL financial information[224]