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What changed in FIRST BANCORP /NC/'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of FIRST BANCORP /NC/'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+314 added−336 removedSource: 10-K (2026-02-25) vs 10-K (2025-02-26)

Top changes in FIRST BANCORP /NC/'s 2025 10-K

314 paragraphs added · 336 removed · 267 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

55 edited+4 added−7 removed139 unchanged
Biggest changeFor this protection, each insured bank pays a quarterly statutory assessment and is subject to the rules and regulations of the FDIC. The FDIC insurance premium is based on an institution’s total assets minus its Tier 1 capital, and premiums are determined based on its capital, supervisory ratings, and other factors.
Biggest changeThe FDIC insurance premium is based on an institution’s total assets minus its Tier 1 capital, and premiums are determined based on its capital, supervisory ratings, and other factors. Premium rates generally may increase if the DIF is strained due to the cost of bank failures and the number of troubled banks.
All lending authorities are based on the borrower’s total credit exposure, which is an aggregate of the Bank’s lending relationship with the borrower either directly or indirectly through loan guarantees or other borrowing entities related to the borrower through ownership or other control relationship. 6 Table of Contents We continually monitor our loan portfolio to identify areas of concern and to enable us to take corrective action.
All lending authorities are based on the borrower’s total credit exposure, which is an aggregate of the Bank’s lending relationship with the borrower either directly or indirectly through loan guarantees or other borrowing entities related to the borrower through ownership or other control relationship(s). 6 Table of Contents We continually monitor our loan portfolio to identify areas of concern and to enable us to take corrective action.
The Company was incorporated in North Carolina on December 8, 1983 for the purpose of acquiring 100% of the outstanding common stock of the Bank through a stock-for-stock exchange. The Bank began banking operations in 1935 as the Bank of Montgomery, named for the county in which it operated.
The Company was incorporated in North Carolina on December 8, 1983 for the purpose of acquiring 100% of the outstanding common stock of the Bank through a stock-for-stock exchange. The Bank began banking operations in 1935 as the Bank of Montgomery, named for the county in which it originally operated.
All requests for extensions of credit in excess of any individual lending officer's authority are reviewed by one of our regional credit officers, who can approve loans up to their respective lending authority of $10 million.
All requests for extensions of credit in excess of any individual lending officer's authority are reviewed by one of our regional credit officers, who can approve loans up to their respective lending authority of $10 million to $15 million.
The substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted, although enactment of the proposed legislation could impact the regulatory structure under which we operate and may significantly increase costs, impede the efficiency of internal business processes, require an increase in regulatory capital, require modifications to business strategy, and limit the ability to pursue business opportunities in an efficient manner, or otherwise adversely affect our operations and financial condition. 17 Table of Contents Available Information We maintain a corporate internet site at www.LocalFirstBank.com, which contains a link within the “Investor Relations” section of the site to each of our filings with the SEC, including our annual reports on Form 10-K, as well as our quarterly reports on Form 10-Q, our current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act.
The substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted, although enactment of future legislation or the issuance of new regulations could impact the regulatory structure under which we operate and may significantly increase costs, impede the efficiency of internal business processes, require an increase in regulatory capital, require modifications to business strategy, and limit the ability to pursue business opportunities in an efficient manner, or otherwise adversely affect our operations and financial condition. 17 Table of Contents Available Information We maintain a corporate internet site at www.LocalFirstBank.com, which contains a link within the “Investor Relations” section of the site to each of our filings with the SEC, including our annual reports on Form 10-K, as well as our quarterly reports on Form 10-Q, our current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act.
Our branches and facilities are located in small- to medium-sized communities and in larger metropolitan areas with economies based primarily on a variety of industries, including services and manufacturing. Our branch footprint includes larger North Carolina cities, including Charlotte, Raleigh (Triangle region), Greensboro/Winston-Salem (Triad region), Asheville and Wilmington, and larger South Carolina cities including Greenville, Columbia and Charleston.
Our branches and facilities are located in small- to medium-sized communities and in larger metropolitan areas with economies based primarily on a variety of industries, including services and manufacturing. Our branch footprint includes larger North Carolina cities, including Charlotte, Raleigh (Triangle region), Greensboro/Winston-Salem/High Point (Triad region), Asheville and Wilmington, and larger South Carolina cities including Greenville, Columbia and Charleston.
The Federal Reserve has also issued a policy statement expressing the view that although no specific regulations restrict dividend payments by bank holding companies other than state corporate laws, a bank holding company should not pay cash dividends unless its earnings for the past year are sufficient to cover both the cash dividends 13 Table of Contents and a prospective rate of earnings retention that is consistent with the bank holding company's capital needs, asset quality, and overall financial condition.
The Federal Reserve has also issued a policy statement expressing the view that although no specific regulations restrict dividend payments by bank holding companies other than state corporate laws, a bank holding company should not pay cash dividends unless its earnings for the past year are sufficient to cover both the cash dividends and a prospective rate of earnings retention that is consistent with the bank holding company's capital needs, asset quality, and overall financial condition.
The Dodd-Frank Act and its related regulations significantly changed the bank regulatory structure and affects the lending, deposit, investment, trading, and operating activities of banks and bank holding companies, including the Bank and the Company. Some of the provisions of the Dodd-Frank Act that impact the Company's and the Bank's business and operations are summarized below. Corporate Governance.
The Dodd-Frank Act and its related regulations significantly changed the bank regulatory structure and affect the lending, deposit, investment, trading, and operating activities of banks and bank holding companies, including the Bank and the Company. Some of the provisions of the Dodd-Frank Act that impact the Company's and the Bank's business and operations are summarized below. Corporate Governance.
In 1985, its name was changed to First Bank and in September 2013, the Company and the Bank moved their headquarters and main offices to Southern Pines, North Carolina. As of December 31, 2024, the Bank had two wholly-owned subsidiaries, Magnolia Financial and First Troy SPE, LLC.
In 1985, its name was changed to First Bank and in September 2013, the Company and the Bank moved their headquarters and main offices to Southern Pines, North Carolina. As of December 31, 2025, the Bank had two wholly-owned subsidiaries, Magnolia Financial and First Troy SPE, LLC.
Regulatory authorities have imposed cease and desist orders and civil money penalties against institutions found to be violating these obligations. The AML, which amended the BSA, is intended to be a comprehensive reform and modernization of the United States bank secrecy and anti-money laundering laws.
Regulatory authorities have imposed cease and desist orders and civil money penalties against institutions found to be violating these obligations. The AML, which amended the BSA, was intended to be a comprehensive reform and modernization of the United States bank secrecy and anti-money laundering laws.
We provide commercial business loans, commercial and residential real estate construction and mortgage loans, revolving lines of credit, letters of credit, and loans for personal uses, home improvement, and automobiles. Commercial real estate loans include loans secured by owner-occupied and non-owner occupied commercial buildings for improved commercial, office, retail, and warehouse and shopping center space.
We provide commercial business loans, commercial and residential real estate construction and mortgage loans, revolving lines of credit, letters of credit, and loans for personal uses, such as home improvement, and automobiles. Commercial real estate loans include loans secured by owner-occupied and non-owner occupied commercial buildings for improved commercial, office, retail, and warehouse and shopping center space.
These new cybersecurity disclosure rules also require the disclosure of material cybersecurity incidents in a Form 8-K, generally within four days of determining an incident is material. Refer to Item 1A, “Risk Factors,” and Item 1C, "Cybersecurity," for additional disclosures related to cybersecurity.
These cybersecurity disclosure rules also require the disclosure of material cybersecurity incidents in a Form 8-K, generally within four business days of determining an incident is material. Refer to Item 1A, “Risk Factors,” and Item 1C, "Cybersecurity," for additional disclosures related to cybersecurity.
Most of our business activity is with customers located within the markets where we have banking operations. The following table presents our total lending exposure in the counties with the largest percentage of our loan portfolio as of December 31, 2024 and 2023.
Most of our business activity is with customers located within the markets where we have banking operations. The following table presents our total lending exposure in the counties with the largest percentage of our loan portfolio as of December 31, 2025 and 2024.
A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations and address rebuilding network capabilities and restoring data if 15 Table of Contents the institution or its critical service providers fall victim to this type of cyber-attack. The Company has multiple information security programs that reflect the requirements of this guidance.
A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations and address rebuilding network capabilities and restoring data if the institution or its critical service providers fall victim to this type of cyber-attack. The Company has multiple information security programs that reflect the requirements of this guidance.
ALCO generally meets at least quarterly and reviews investment activity, portfolio composition, portfolio tenure, and other elements as necessary to assess the overall position of the securities portfolio and risk of the portfolio relative to the overall balance sheet.
The Investment Committee generally meets at least quarterly and reviews investment activity, portfolio composition, portfolio tenure, and other elements as necessary to assess the overall position of the securities portfolio and risk of the portfolio relative to the overall balance sheet.
Our primary loan markets were previously presented in the Loan Concentrations section above. The following table presents the counties with the largest share of our deposit base as of December 31, 2024 and 2023.
Our primary loan markets were previously presented in the Loan Concentrations section above. The following table presents the counties with the largest share of our deposit base as of December 31, 2025 and 2024.
Competition may further intensify as additional companies (both banks and non-banks) enter the markets where we conduct business, competitors combine to present more formidable challengers, and we enter mature markets consistent with our expansion strategy. 9 Table of Contents Human Capital Resources At First Bank, we consider our associates to be one of our competitive advantages, and continued investment in human capital is a top priority for us.
Competition may further intensify as additional companies (both banks and non-banks) enter the markets where we conduct business, competitors combine to present more formidable challengers, and we enter mature markets consistent with our expansion strategy. 9 Table of Contents Human Capital Resources At First Bank, we consider our associates to be our primary competitive advantage, and continued investment in human capital is a top priority for us.
These standards cover, among other things, internal controls, information systems and internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, such other operational and managerial standards as the agency determines to be appropriate, and standards for asset quality, earnings, regulatory capital and liquidity.
These standards cover, among other things, internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, such other operational and managerial standards as the applicable regulator determines to be appropriate, and standards for asset quality, earnings, regulatory capital and liquidity.
Based upon the terms of the special assessment, the Bank was not required to pay at the increased assessment rate. Legislative and Regulatory Guidance and Developments Regulatory Capital Requirement under Basel III. The Company and the Bank are subject to the Basel III regulatory capital rules that became fully phased-in as of January 1, 2019.
Based upon the terms of the special assessment, the Bank was not required to pay at the increased assessment rate. 14 Table of Contents Legislative and Regulatory Guidance and Developments Regulatory Capital Requirement under Basel III. The Company and the Bank are subject to the Basel III regulatory capital rules that became fully phased-in as of January 1, 2019.
We also are authorized by our Board to invest a portion of our securities portfolio in high quality corporate bonds, with the amount of such bonds not to exceed 15% of the entire securities portfolio.
We also are authorized to invest a portion of our securities portfolio in high quality corporate bonds, with the amount of such bonds not to exceed 15% of the entire securities portfolio.
For example, with certain exceptions, neither the Company nor the Bank may condition an extension of credit to a customer on either a requirement that the customer obtain additional services provided by the Company or the Bank, or an agreement by the customer to refrain from obtaining other services from a competitor. 11 Table of Contents Support of Bank Subsidiaries .
For example, with certain exceptions, neither the Company nor the Bank may condition an extension of credit to a customer on either a requirement that the customer obtain additional services provided by the Company or the Bank, or an agreement by the customer to refrain from obtaining other services from a competitor. Support of Bank Subsidiaries .
No other market area (as defined by county) comprises more than 5% of our deposit base at either period presented. 2024 2023 Moore County, North Carolina 9.2 % 10.8 % Buncombe County, North Carolina 7.2 % 7.2 % Guilford County, North Carolina 4.8 % 5.0 % We experience strong competition in all aspects of the businesses in which we engage, including both making loans and attracting deposits, from both bank and non-bank competitors.
No other market area (as defined by county) comprises more than 5% of our deposit base at either period presented. 2025 2024 Moore County, North Carolina 9.0 % 9.2 % Buncombe County, North Carolina 7.3 % 7.2 % Guilford County, North Carolina 5.1 % 4.8 % We experience strong competition in all aspects of the businesses in which we engage, including both making loans and attracting deposits, from both bank and non-bank competitors.
Our principal activity is the ownership and operation of the Bank, a state-chartered bank with its headquarters in Southern Pines, North Carolina, through which we engage in a full range of banking activities. Our principal executive offices are located at 300 SW Broad St., Southern Pines, North Carolina 28387, and our telephone number is (910) 246-2500.
Our principal activity is the ownership and operation of the Bank, a state-chartered bank with its headquarters in Southern Pines, North Carolina, through which we engage in a full range of banking activities. Our principal executive offices are located at 205 SE Broad St., Southern Pines, North Carolina 28387, and our telephone number is (910) 246-2500.
The Bank is a member of the CDARS program, which gives our customers the ability to obtain FDIC insurance on deposits of up to $50 million, while continuing to work directly with their local First Bank deposit team. Brokered deposits are deposits obtained by utilizing an outside broker that is paid a fee.
The Bank is a member of the CDARS and ICS programs, which gives our customers the ability to obtain FDIC insurance on deposits of up to $50 million, while continuing to work directly with their local First Bank deposit team. Brokered deposits are deposits obtained by utilizing an outside broker that is paid a fee.
Banks are also subject to certain lending limits and restrictions on overdrafts to insiders. A violation of these restrictions may result in the assessment of substantial civil monetary penalties, regulatory enforcement actions, and other regulatory sanctions.
Banks are also subject to certain lending limits and restrictions on overdrafts to insiders. A violation of these restrictions may 12 Table of Contents result in the assessment of substantial civil monetary penalties, regulatory enforcement actions, and other regulatory sanctions.
Federal banking regulations applicable to all depository financial institutions that, among other things, provide federal bank regulatory agencies with powers to prevent unsafe and unsound banking practices, restrict preferential loans by banks to their “insiders," require banks to keep information on loans to major shareholders and executive officers, and bar certain director and officer interlocks between financial institutions.
Federal banking regulations applicable to all depository financial institutions provide federal bank regulatory agencies with powers to prevent unsafe and unsound banking practices, restrict preferential loans by banks to their “insiders," require banks to keep information on loans to major shareholders and executive officers, and bar certain director and officer interlocks between financial institutions.
Magnolia Financial is a business financing company that offers accounts receivable financing and factoring, inventory financing, and purchase order financing throughout the southeastern United States. First Troy SPE, LLC is a holding entity for certain foreclosed properties.
Magnolia Financial is a business financing company that offers accounts receivable financing and factoring, inventory financing, and purchase order financing throughout the southeastern United States. First Troy SPE, LLC is a holding entity for certain foreclosed real estate.
In addition, reports of all purchases, sales, issuer calls, net profits or losses and market appreciation or depreciation of the securities portfolio are reviewed by the Board. Once a quarter, our interest rate risk exposure is evaluated by ALCO and a summary report is presented to the Board.
In addition, reports of all purchases, sales, issuer calls, net profits or losses and market appreciation or depreciation of the securities portfolio are reviewed by the Board. Once a quarter, our interest rate risk exposure is evaluated by the Bank’s Asset Liability Committee ("ALCO") and a summary report is presented to the Board.
This means that the Company is required to commit, as necessary, capital and resources to support the Bank, including at times when the Company may not be in a financial position to provide such resources or when it may not be in the Company’s or its shareholders’ best interests to do so.
This means that the Company is required to 11 Table of Contents commit, as necessary, capital and resources to support the Bank, including at times when the Company may not be in a financial position to provide such resources or when it may not be in the Company’s or its shareholders’ best interests to do so.
Failure to comply with these sanctions could have serious legal and reputational consequences, including causing applicable 16 Table of Contents bank regulatory authorities not to approve merger or acquisition transactions when regulatory approval is required or to prohibit such transactions even if approval is not required. Community Reinvestment Act.
Failure to comply with these sanctions could have serious legal and reputational consequences, including causing applicable bank regulatory authorities not to approve merger or acquisition transactions when regulatory approval is required or to prohibit such transactions even if approval is not required. Community Reinvestment Act.
A bank holding company's ability to pay dividends may also be restricted if a subsidiary bank becomes under-capitalized. These various regulatory policies may affect the Company's and the Bank's ability to pay dividends or otherwise engage in capital distributions. Dodd-Frank Act General.
A bank holding company's ability to pay dividends may also be restricted if a subsidiary bank becomes under-capitalized. These various regulatory policies may affect the Company's and the Bank's ability to pay dividends or otherwise engage in capital distributions. 13 Table of Contents Dodd-Frank Act General.
The program provides unlimited phone access for information, resources, and referrals and provides sessions with a counselor for the associate and their family members. Supervision and Regulation As a bank holding company, we are subject to supervision, examination, and regulation by the Federal Reserve and the Commissioner.
The program provides unlimited phone access for information, resources, and referrals and provides sessions with a counselor for the associate and their family members. 10 Table of Contents Supervision and Regulation As a bank holding company, we are subject to supervision, examination, and regulation by the Federal Reserve and the Commissioner.
Accordingly, the Bank's premiums may increase from time to time if the FDIC needs to increase assessments in order to replenish the fund and restore the DIF reserve ratio to 1.35%. 14 Table of Contents In December 2023, the FDIC approved a final rule implementing a special assessment to replenish the DIF reserve ratio.
Accordingly, the Bank's premiums may increase from time to time if the FDIC needs to increase assessments in order to replenish the fund and restore the DIF reserve ratio to 1.35%. In December 2023, the FDIC approved a final rule implementing a special assessment to replenish the DIF reserve ratio.
Market Area and Competition We are a community-oriented commercial bank offering a wide variety of financial services to meet the needs of the communities we serve. As of December 31, 2024, we conducted business from 113 branches, with 100 branch offices located across North Carolina and 13 branches in South Carolina.
Market Area and Competition We are a community-oriented commercial bank offering a wide variety of financial services to meet the needs of our customers and communities. As of December 31, 2025, we conducted business from 113 branches, with 100 branch offices located across North Carolina and 13 branches in South Carolina.
The Company’s benefits programs also include an Employee Assistance Program which provides all associates a comprehensive and personalized process to meet their individual needs and support them through issues they may 10 Table of Contents be facing.
The Company’s benefits programs also include an Employee Assistance Program which provides all associates a comprehensive and personalized process to meet their individual needs and support them through issues they may be facing.
In addition, the Executive Loan Committee reviews and approves loans to executive officers, directors, and their affiliates and recommends those loans to the Board for its approval. Our legal lending limit to any one borrower is approximately $213.6 million.
In addition, the Executive Loan Committee reviews and approves loans to executive officers, directors, and their affiliates and recommends those loans to the Board for its approval. Our legal lending limit to any one borrower is approximately $223.5 million.
As of December 31, 2024, the largest categories of CRE loans as a percentage of total loans were retail at approximately 14%, followed by office, of which non owner-occupied was approximately 6% and owner-occupied was approximately 3%, commercial at approximately 7% and warehouse at approximately 6%. These CRE categories are within management's guidelines as a percent of total capital.
As of December 31, 2025, the largest categories of CRE loans as a percentage of total loans were retail at approximately 13%, followed by office, of which non owner-occupied was approximately 6% and owner-occupied was approximately 3%, commercial at approximately 6% and warehouse at approximately 6%. These CRE categories are within management's guidelines as a percent of total capital.
We are proud to offer a comprehensive benefits package that includes medical, dental, vision and life insurance, paid time-off, 401(k) profit-sharing plan participation and an employee stock purchase plan. In 2024, the Company’s 401(k) plan matched 100% of each employee’s elective deferral amount, up to the first 4% of their contribution.
We are proud to offer a comprehensive benefits package that includes medical, dental, vision and life insurance, paid time-off, 401(k) profit-sharing plan participation and an employee stock purchase plan. In 2025, the Company’s 401(k) plan matched 100% of each employee’s elective deferral amount, up to 6% of their compensation.
The rule materially revises the current CRA framework, including the assessment areas in which a bank is evaluated to include activities associated with online and mobile banking, the tests used to evaluate the bank in its assessment areas, new methods of calculating credit for lending, investment and service activities, and additional data collection and reporting requirements.
The rule would have materially revised the current CRA framework, including the assessment areas in which a bank is evaluated to include activities associated with online and mobile 16 Table of Contents banking, the tests used to evaluate the bank in its assessment areas, new methods of calculating credit for lending, investment and service activities, and additional data collection and reporting requirements.
In June 2010, the federal bank regulatory agencies issued comprehensive final guidance on incentive compensation policies intended to ensure that the incentive compensation policies of financial institutions are not detrimental to the safety and soundness of such institutions by encouraging excessive risk-taking.
The federal bank regulatory agencies comprehensive guidance on incentive compensation policies are intended to ensure that the incentive compensation policies of financial institutions are not detrimental to the safety and soundness of such institutions by encouraging excessive risk-taking.
Item 1. Business General Description The Company is the fourth largest bank holding company headquartered in North Carolina. At December 31, 2024, the Company had total consolidated assets of $12.1 billion, total loans of $8.1 billion, total deposits of $10.5 billion, and shareholders’ equity of $1.4 billion.
Item 1. Business General Description The Company is the fourth largest commercial bank holding company headquartered in North Carolina. At December 31, 2025, the Company had total consolidated assets of $12.7 billion, total loans of $8.7 billion, total deposits of $10.7 billion, and shareholders’ equity of $1.7 billion.
Our workforce consists of approximately 73% females and 18% minorities. Of our officer population, 73% are female or minorities, while our executive management team consists of 27% female or minority executives. In 2020, we formed a Diversity Council, which is chaired by our CEO and meets regularly.
Our workforce consists of approximately 72% females and 19% minorities. Of our officer population, 73% are female or minorities, while our senior management team consists of 29% female or minority executives. In 2020, we formed a Diversity Council, which is chaired by our CEO and meets regularly.
For loans in excess of this amount, the Chief Executive Officer, the President and the Chief Credit Officer have joint authority to approve loans up to the in-house limit of $150 million. The Board, generally through its Executive Loan Committee, approves loans in excess of the in-house limit.
For loans in excess of this amount, the Bank's Chief Executive Officer, the Company's President and the Bank's Chief Credit Officer have joint authority to approve loans up to $125 million. The Board, generally through its Executive Loan Committee, approves loans in excess of $125 million.
In July, 2023, the SEC adopted new cybersecurity disclosure rules for public companies that require disclosure regarding cybersecurity risk management (including the role of the Board in overseeing cybersecurity risks, management’s role and expertise in assessing and managing cybersecurity risks, and processes for assessing, identifying and managing cybersecurity risks) in annual reports.
The SEC cybersecurity disclosure rules for public companies require disclosures regarding cybersecurity risk management (including the role of the Board in overseeing cybersecurity risks, management’s role and expertise in assessing and managing cybersecurity risks, and processes for assessing, identifying and managing cybersecurity risks) in annual reports.
These percentages represent the geographic location of the customer, which may or may not also be the location of the loan collateral. 2024 2023 Wake County, North Carolina 9.7 % 10.1 % New Hanover County, North Carolina 8.9 % 8.1 % Mecklenburg County, North Carolina 7.8 % 7.6 % Buncombe County, North Carolina 5.2 % 5.3 % Guilford County, North Carolina 4.9 % 5.0 % No other market (as defined by county) had total loans outstanding in excess of 5% of the total portfolio at either period presented.
These percentages represent the geographic location of the customer, which may or may not also be the location of the loan collateral. 2025 2024 Wake County, North Carolina 9.4 % 9.7 % New Hanover County, North Carolina 9.5 % 8.9 % Mecklenburg County, North Carolina 8.2 % 7.8 % Buncombe County, North Carolina 5.0 % 5.2 % Guilford County, North Carolina 4.9 % 4.9 % No other county had total loans outstanding in excess of 5% of the total portfolio at either period presented.
As of December 31, 2024, we had 1,345 full-time and 51 part-time associates, all of whom are employed by the Bank and the majority of whom are located in North Carolina and South Carolina.
As of December 31, 2025, we had 1,332 full-time and 42 part-time associates, all of whom are employed by the Bank and the majority of whom are located in North Carolina and South Carolina.
Digital Asset Regulation Although the federal banking agencies have not developed formal regulations governing the digital asset activities of banking organizations, the supervisory framework dictates that, in order to effectively identify and manage digital asset-related risks and obtain supervisory non-objection to the proposed engagement in digital asset activities, banking organizations must implement appropriate risk management practices, including with respect to board and management oversight, policies and procedures, risk assessments, internal controls and monitoring.
The existing supervisory framework dictates that, in order to effectively identify and manage digital asset-related risks and obtain supervisory non-objection to the proposed engagement in digital asset activities, banking organizations must implement appropriate risk management practices, including with respect to board and management oversight, policies and procedures, risk assessments, internal controls and monitoring.
Failure to comply with consumer protection requirements may also result in failure to obtain any required regulatory approval for merger or acquisition transactions we may wish to pursue. Community Reinvestment.
Failure to comply with these laws and regulations may subject the Bank to various penalties. Failure to comply with consumer protection requirements may also result in failure to obtain any required regulatory approval for merger or acquisition transactions we may wish to pursue. Community Reinvestment.
In November 2021, the federal banking regulators adopted a regulation that, among other things, requires a banking organization to notify its primary federal regulators as soon as possible and within 36 hours after identifying a “computer-security incident” that the banking organization believes in good faith is reasonably likely to materially disrupt or degrade its business or operations in a manner that would, among other things, jeopardize the viability of its operations, result in customers being unable to access their deposit and other accounts, result in a material loss of revenue, profit or stock price, or pose a threat to the financial stability of the U.S.
If, however, we fail to observe the regulatory guidance in the future, we could be subject to various regulatory sanctions, including financial penalties. 15 Table of Contents A banking organization is required to notify its primary federal regulators as soon as possible and within 36 hours after identifying a “computer-security incident” that the banking organization believes in good faith is reasonably likely to materially disrupt or degrade its business or operations in a manner that would, among other things, jeopardize the viability of its operations, result in customers being unable to access their deposit and other accounts, result in a material loss of revenue, profit or stock price, or pose a threat to the financial stability of the U.S.
We may purchase non-rated municipal bonds only if the issues of bonds are located in our general market area and we determine these bonds have a credit risk no greater than the minimum ratings referred to above.
Securities rated below Moody’s BAA or Standard and Poor’s BBB generally will not be purchased. We may purchase non-rated municipal bonds only if the issues of bonds are located in our general market area and we determine these bonds have a credit risk no greater than the minimum ratings referred to above.
The rules also allow for an upward adjustment of no more than $0.01 to an issuer’s debit card interchange fee if the issuer develops and implements policies and procedures reasonably designed to achieve certain fraud-prevention standards. FDIC Insurance As an FDIC insured depository institution, the Bank's deposits are insured up to applicable limits by the DIF which is generally $250,000.
The rules also allow for an upward adjustment of no more than $0.01 to an issuer’s debit card interchange fee if the issuer develops and implements policies and procedures reasonably designed to achieve certain fraud prevention standards.
Our Chief Investment Officer implements the investment policy, monitors the investment portfolio, recommends portfolio strategies, and reports to the Bank’s Asset Liability Committee ("ALCO"), which also has oversight of the Bank's investment activities.
Our Chief Investment Officer implements the investment policy, monitors the investment portfolio, recommends portfolio strategies, and reports to the Bank’s Investment Committee.
In some cases, a bank's failure to comply with the CRA or the filing of CRA protests by interested parties during applicable comment periods can result in the denial or delay of such transactions. 12 Table of Contents Insider Credit Transactions.
In some cases, a bank's failure to comply with the CRA or the filing of CRA protests by interested parties during applicable comment periods can result in the denial of approval or delay of such transactions. Insider Credit Transactions. Banks are subject to certain restrictions on extensions of credit to executive officers, directors, principal shareholders, and their related interests.
The rule is expected to result in a significant increase in the thresholds for large banks to receive “Outstanding” ratings in the future. Most of the provisions become applicable on January 1, 2026. Reporting of the collected data will not be required until 2027. Incentive Compensation.
The rule would have resulted in a significant increase in the thresholds for large banks to receive “Outstanding” ratings in the future. Most of the provisions of the rule were scheduled to become applicable on January 1, 2026. Reporting of the collected data would be required in 2027. The 2023 rule was preliminarily enjoined in March 2024, following legal challenge.
The Dodd-Frank Act made banks with $10 billion or more in total assets responsible for increasing the DIF reserve ratio from 1.15% to 1.35% if necessary.
In addition, if a bank experiences financial distress, operates in an unsafe or unsound manner, or is subject to a regulatory agreement or order, its deposit premiums may increase. The Dodd-Frank Act made banks with $10 billion or more in total assets responsible for increasing the DIF reserve ratio from 1.15% to 1.35% if necessary.
Removed
We generally do not buy loan participations or portions of national credits, but we may acquire balances subject to participation agreements through acquisition. The total of loan participations purchased at December 31, 2024 was nominal.
Added
In 2025, we established a loan participation initiative to engage with regional and national commercial borrowers within the Bank’s footprint and nearby jurisdictions. The total of loan participations as of December 31, 2025 was nominal.
Removed
Securities rated below Moody’s BAA or Standard and Poor’s BBB generally will not be purchased. Securities rated below a single-A rating are periodically reviewed for creditworthiness.
Added
FDIC Insurance As an FDIC insured depository institution, the Bank's deposits are insured up to applicable limits by the DIF which is generally $250,000. For this protection, each insured bank pays a quarterly statutory assessment and is subject to the rules and regulations of the FDIC.
Removed
The Company will pay a 2% non-elective employer contribution to each associate based on 2024 eligible 401(k) compensation to make up the difference from the 6% that the Company historically matched.
Added
In July 2025, the Federal Reserve, the OCC and the FDIC proposed to rescind the 2023 rule and replace it with the prior CRA regulations. The Federal Reserve continues to apply the 1995 CRA regulations. Incentive Compensation.
Removed
In recent years, examination and enforcement by federal and state banking agencies for non-compliance with consumer protection laws and regulations have increased and become more intense. Failure to comply with these laws and regulations may subject the Bank to various penalties.
Added
Digital Asset Regulation Although the federal banking and securities agencies are in the process of considering regulations governing the digital asset activities of banking organizations, it is not expected that such regulations will be issued until the third quarter of 2026.
Removed
Banks are subject to certain restrictions on extensions of credit to executive officers, directors, principal shareholders, and their related interests.
Removed
Premium rates generally may increase if the DIF is strained due to the cost of bank failures and the number of troubled banks. In addition, if a bank experiences financial distress, operates in an unsafe or unsound manner, or is subject to a regulatory agreement or order, its deposit premiums may increase.
Removed
If, however, we fail to observe the regulatory guidance in the future, we could be subject to various regulatory sanctions, including financial penalties.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

50 edited+11 added−25 removed79 unchanged
Biggest changeWe might be required to raise additional capital in the future, but that capital may not be available or may not be available on terms acceptable to us when it is needed. We are required to maintain adequate capital levels to support our operations.
Biggest changeStates have been actively passing new privacy laws, and this trend is likely to continue such that the privacy and security laws and regulations that may apply to us will continue to grow and change. 22 Table of Contents We might be required to raise additional capital in the future, but that capital may not be available or may not be available on terms acceptable to us when it is needed.
While we believe these policies and procedures help to mitigate risk, and our vendors are not the sole source of service, the failure of an external vendor to perform in accordance with applicable contractual arrangements or the service level agreements 21 Table of Contents could be disruptive to our operations, which could have a material adverse impact on our business and its financial condition and results of operations.
While we believe these policies and procedures help to mitigate risk, and our vendors are not the sole source of service, the failure of an external vendor to perform in accordance with applicable contractual arrangements or the service level agreements could be disruptive to our operations, which could have a material adverse impact on our business and its financial condition and results of 21 Table of Contents operations.
Subject to applicable NASDAQ rules, our Board generally has the authority, without action by or vote of the shareholders, to issue all or part of any authorized but unissued shares of stock for any corporate purpose, including issuances of equity-based incentives under or outside of our equity compensation plans, issuances of equity in business combination transactions, and issuances of equity to raise additional capital to support growth or to otherwise strengthen our balance sheet.
Subject to applicable NASDAQ rules, our Board generally has the authority, without action by or vote of the shareholders, to issue all or part of any authorized but unissued shares of stock for any corporate purpose, including issuances of equity-based incentives under or outside of our Capital compensation plans, issuances of equity in business combination transactions, and issuances of equity to raise additional capital to support growth or to otherwise strengthen our balance sheet.
CRE values continue to fluctuate and the outlook for CRE remains dependent on the broader economic environment and, specifically, how major subsectors respond to ongoing economic and behavioral developments. Some economic indicators suggest that CRE prices remain high relative to fundamentals and US market delinquency rates are elevated. Credit performance over is susceptible to economic and market forces.
CRE values continue to fluctuate and the outlook for CRE remains dependent on the broader economic environment and, specifically, how major subsectors respond to ongoing economic and behavioral developments. Some economic indicators suggest that CRE prices remain high relative to fundamentals and US market delinquency rates are elevated. Credit performance is susceptible to economic and market forces.
If we fail to receive the appropriate regulatory approvals, we will not be able to consummate acquisitions that we believe are in our best interests; • Difficulty in estimating the value of target companies or assets and in evaluating credit, operations, management, and market risks associated with those companies or assets; • Payment of a premium over book and market values that may dilute our tangible book value and earnings per share in the short and long term; • Potential exposure to unknown or contingent liabilities of the target company, including, without limitation, liabilities for regulatory and compliance issues; • Exposure to potential asset quality issues of the target company; • Difficulties, inefficiencies or cost overruns associated with the integration of the operations, personnel, technologies, services, and products of acquired companies with ours.
If we fail to receive the appropriate regulatory approvals, we will not be able to consummate acquisitions that we believe are in our best interests; • Difficulty in estimating the value of target companies or assets and in evaluating credit, operations, management, and market risks associated with those companies or assets; • Payment of a premium over tangible book and market values that may dilute our tangible book value and earnings per share in the short and long term; • Potential exposure to unknown or contingent liabilities of the target company, including, without limitation, liabilities for regulatory and compliance issues and from potential litigation; • Exposure to potential asset quality issues of the target company; • Difficulties, inefficiencies or cost overruns associated with the integration of the operations, personnel, technologies, services, and products of acquired companies with ours.
We may be adversely affected by risks associated with potential and completed acquisitions. As part of our growth strategy, we regularly evaluate merger and acquisition opportunities and conduct due diligence activities related to possible transactions with other financial institutions and financial services companies.
We may be adversely affected by risks associated with potential or completed acquisitions. As part of our growth strategy, we regularly evaluate merger and acquisition opportunities and conduct due diligence activities related to possible transactions with other financial institutions and financial services companies.
Any issuance of additional shares of stock or equity derivative securities will dilute the percentage ownership interest of our shareholders and may dilute the book value per share of our common stock. We may make future acquisitions, which could dilute current shareholders’ stock ownership and expose us to additional risks.
Any issuance of additional shares of stock or equity derivative securities will dilute the percentage ownership interest of our shareholders and may dilute the tangible book value per share of our common stock. We may make future acquisitions, which could dilute current shareholders’ stock ownership and expose us to additional risks.
We offer a variety of loan products, including residential mortgage, consumer, construction, and commercial loans, with a majority of our portfolio consisting of commercial and industrial loans and commercial loans secured by commercial real estate. Most of our commercial business and commercial real estate loans are made to small business or middle-market customers.
We offer a variety of loan products, including residential mortgage, consumer, construction, and commercial loans, with a majority of our portfolio consisting of commercial and industrial loans and commercial loans secured by commercial real estate. Most of our commercial business and CRE loans are made to small business or middle-market customers.
Goodwill represents the amount of consideration exchanged over the fair value of net assets we acquired in the purchase of another business. We review goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate the carrying value of the asset might be impaired. At December 31, 2024, our goodwill totaled $478.8 million.
Goodwill represents the amount of consideration exchanged over the fair value of net assets we acquired in the purchase of another business. We review goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate the carrying value of the asset might be impaired. At December 31, 2025, our goodwill totaled $478.8 million.
Additionally, we face substantial competition in all areas of our operations from a variety of different competitors, both within and beyond our principal markets, many of which are larger and may have more financial resources. Such competitors primarily include national, regional, and internet banks within the various markets in which we operate.
Additionally, we face substantial competition in all areas of our operations from a variety of different competitors, both within and beyond our principal markets, many of which are larger and may have more financial resources. Such competitors primarily include national, regional, and online banks within the various markets in which we operate.
Banks, securities firms, and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting), and merchant banking. Many of our competitors have fewer regulatory constraints and may have lower cost structures.
Banks, securities firms, and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting), and merchant banking. Many of our non-bank competitors have fewer regulatory constraints and may have lower cost structures.
Although not necessarily expected in 2025, if the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore earnings, would generally be adversely affected.
Although not necessarily expected in 2026, if the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore earnings, would generally be adversely affected.
Such transactions could have a material effect on our operating results and financial condition, including short- and long-term liquidity, and could require us to issue a significant number of 27 Table of Contents shares of common stock or other securities and/or to use a substantial amount of cash, other liquid assets, and/or incur debt.
Such transactions could have a material effect on our operating results and financial condition, including short- and long-term liquidity, and could require us to issue a significant number of shares of common stock or other securities and/or to use a substantial amount of cash, other liquid assets, and/or incur debt.
Item 1A. Risk Factors In addition to other information contained in this Report that may affect us, the risk factors described below, as well as any cautionary language in this Report, provide examples of risks, uncertainties, and events that could have a material adverse effect on our business, including our operating results and financial condition.
Item 1A. Risk Factors In addition to other information contained in this Report that may affect us, the risk factors summarized below, as well as any cautionary language in this Report, provide examples of the most significant risks, uncertainties, and events that could have a material adverse effect on our business, including our operating results and financial condition.
The unexpected loss of services of one or more of our key personnel could have a material adverse impact on our business because of their skills, knowledge of our markets, years of industry experience, and/or the difficulty of promptly finding qualified replacement personnel.
The unexpected loss of services of one or more of our key personnel could have a material adverse impact on our business because of their skills, knowledge of our markets, years of industry experience, and/or the difficulty of promptly finding 24 Table of Contents qualified replacement personnel.
In particular, interest rates are highly sensitive to many factors that are beyond our control, including global, domestic and local economic conditions and the policies of various governmental and regulatory agencies and, specifically, the Federal Reserve. Throughout 2022 and 2023, the FOMC raised the target range for the federal funds rate on eleven separate occasions.
In particular, interest rates are highly sensitive to many factors that are beyond our control, including global, domestic and local economic conditions and the policies of various governmental and regulatory agencies and, specifically, the Federal Reserve. Throughout 2022 and 2023, the FOMC raised the target range for the federal funds rate.
It remains uncertain whether then FOMC will further decrease the federal funds rate to attain a monetary policy appropriate to keep inflation at normalized levels, leave the rate at its current level for a lengthy period of time or if it will resume increasing the target range.
It remains uncertain whether then FOMC will further decrease the federal funds rate to attain a monetary policy appropriate to keep inflation at normalized levels, leave the rate at its current level for a lengthy period of time or if it will instead increase the target range.
We also may rely on representations of clients and 26 Table of Contents counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors.
We also may rely on representations of clients and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors.
Lending generally involves various degrees of risk pending on the facts and circumstances of the loan and borrower. If general economic conditions in the market areas in which we operate negatively impact this customer sector, our results of operations and financial condition may be adversely affected.
Lending generally involves various degrees of risk depending on the facts and circumstances of the loan and borrower. If general economic conditions in the market areas in which we operate negatively impact our customers, our results of operations and financial condition may be adversely affected.
Negative public opinion regarding our Company and the financial services industry in general, could damage our reputation and adversely impact our earnings. Reputation risk, or the risk to our business, earnings, and capital from negative public opinion regarding our Company and the financial services industry in general, is inherent in our business.
Reputation risk, or the risk to our business, earnings, and capital from negative public opinion regarding our Company and the financial services industry in general, is inherent in our business.
Our ability to compete successfully depends on a number of factors, including, among other things: • the ability to develop, maintain, and build upon long-term customer relationships based on top quality service, high ethical standards, and safe, sound assets; • the ability to expand our market position; • the scope, relevance, and pricing of products and services offered to meet customer needs and demands; • the rate at which we introduce new products and services relative to our competitors; • customer satisfaction with our level of service; and • industry and general economic trends.
Our ability to compete successfully depends on a number of factors, including, among other things: • our ability to develop, maintain, and build upon long-term customer relationships based on top quality service, high ethical standards, and safe, sound assets; • our ability to expand our market position; • the scope, relevance, and pricing of products and services offered to meet customer needs and demands; • the rate at which we introduce new products and services relative to our competitors; • customer satisfaction with our level of service; • industry and general economic trends; and • the ability to keep pace with technological change and to invest in technological improvements to meet customer demand and create operational efficiencies.
In addition, we cannot guarantee that any costs and liabilities incurred in relation to an attack or incident will be covered by our existing insurance policies or that applicable insurance will be available to us in the future on economically reasonable terms or at all. We rely heavily on communications and information systems to conduct our business.
In addition, we cannot guarantee that any costs and liabilities incurred in relation to an attack or incident will be covered by our existing insurance policies or that applicable insurance will be available to us in the future on economically reasonable terms or at all.
From time to time, we may implement new lines of business or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. We may invest significant time and resources in these efforts.
New lines of business or new products and services may subject us to additional risk. From time to time, we may implement new lines of business or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed.
Our daily operations depend on the operational effectiveness of our technology. Any failure, interruption, or breach in security of our computer systems or outside vendor technology could result in failures or disruptions in general ledger, deposit, loan, customer relationship management, and other systems leading to inaccurate financial records.
Any failure, interruption, or breach in security of our computer systems or outside vendor technology could result in failures or disruptions in general ledger, deposit, loan, customer relationship management, and other systems leading to inaccurate financial records.
Moreover, obtaining adequate funding to meet our deposit obligations may be more challenging during periods of elevated prevailing interest rates, such as the present period. Our ability to attract depositors during a time of actual or perceived distress or instability in the 20 Table of Contents marketplace may be limited.
Moreover, obtaining adequate funding to meet our deposit obligations may be more challenging during periods of elevated prevailing interest rates, such as the present period. Our ability to attract depositors during a time of actual or perceived distress or instability in the marketplace may be limited. Further, interest rates paid for borrowings generally exceed the interest rates paid on deposits.
Further, interest rates paid for borrowings generally exceed the interest rates paid on deposits. This spread may be exacerbated by higher prevailing interest rates. In addition, because our AFS investment securities lose value when interest rates rise, after-tax proceeds resulting from the sale of such assets may be diminished during periods when interest rates are elevated.
This spread may be exacerbated by higher prevailing interest rates. In addition, because our AFS investment securities lose value when interest rates rise, after-tax proceeds resulting from the sale of such assets 20 Table of Contents may be diminished during periods when interest rates are elevated.
Any inability to prevent security breaches or computer viruses could also cause existing customers to lose confidence in the Bank’s systems and could adversely affect its reputation and its ability to generate deposits. We rely on certain external vendors. We are reliant upon certain external vendors to provide products and services necessary to maintain our day-to-day operations.
Any inability to prevent security breaches or computer viruses could also cause existing customers to lose confidence in the Bank’s systems and could adversely affect its reputation and its ability to generate deposits. We rely on certain external vendors.
Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved and price and profitability targets may not prove feasible.
We may invest significant time and resources in these efforts. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved and price and profitability targets may not prove feasible.
We attempt to limit exposure to this risk by monitoring carefully the amount of loans in specific industries and by exercising prudent lending practices. However, the risk that substantial credit losses could result in reduced earnings or losses cannot be eliminated. Our ACL may not be adequate to cover actual losses.
Risk of loan defaults is unavoidable in the banking industry. We attempt to limit exposure to this risk by monitoring carefully the amount of loans in specific industries and by exercising prudent lending practices. However, the risk that substantial credit losses could result in reduced earnings or losses cannot be eliminated.
CECL requires that credit deterioration is reflected in the income statement in the period of origination or acquisition of a loan, with changes in expected credit losses due to further credit deterioration or improvement reflected in the periods in which the expectation changes.
Our ACL may not be adequate to cover actual losses. CECL requires that estimated credit losses are reflected in the income statement in the period of origination or acquisition of a loan, with changes in expected credit losses due to further credit deterioration or improvement reflected in the periods in which the expectation changes.
For additional information regarding uninsured deposits and liquidity, see Deposits and Liquidity sections of 2024 MD&A Item 7 following. Cybersecurity incidents or other disruptions of communications or information systems could disrupt business operations, result in the loss of critical and confidential information, and adversely impact our reputation and results of operations.
For additional information regarding uninsured deposits and liquidity, see Deposits and Liquidity sections of 2025 MD&A Item 7 following. A failure in or breach of our operational or security systems, or those of our vendors, could disrupt business operations, result in the loss of critical and confidential information, and adversely impact our reputation and results of operations.
While we have recorded no impairment charges since we initially recorded the goodwill, there can be no assurance that our future evaluations of goodwill will not result in findings of impairment and related write-downs, which may have a material adverse effect on our financial condition and results of operations.
While we have recorded no impairment charges since we initially recorded the goodwill, there can be no assurance that our future evaluations of goodwill will not result in findings of impairment and related write-downs, which may have a material adverse effect on our financial condition and results of operations. 25 Table of Contents We are subject to losses due to errors, omissions, or fraudulent behavior by our employees, clients, counterparties, or other third parties.
Failure to perform in any of these areas could significantly weaken our competitive position, which could adversely affect our growth and profitability, which, in turn, could have a material adverse effect on our financial condition and results of operations.
Failure to perform in any of these areas could significantly weaken our competitive position, which could adversely affect our growth and profitability, which, in turn, could have a material adverse effect on our financial condition and results of operations. 23 Table of Contents Negative public opinion regarding our Company and the financial services industry in general, could damage our reputation and adversely impact our earnings.
We outsource the processing of our core data system, as well as other systems such as online banking, to third party vendors. Accordingly, our operations are exposed to risk that these vendors will not perform in accordance with applicable contractual arrangements or service level agreements.
We are reliant upon certain external vendors to provide products and services necessary to facilitate our day-to-day operations, including core data processing and other systems such as online banking. Accordingly, our operations are exposed to risk that these vendors will not perform in accordance with applicable contractual arrangements or service level agreements.
We seek merger and acquisition partners that are culturally similar, have experienced management, and possess either significant market presence or have potential for improved profitability through financial management, economies of scale, or expanded services. 25 Table of Contents Acquiring other financial institutions, financial services companies, or branches involves potential adverse impact to our financial results and various other risks commonly associated with acquisitions, including, among other things: • Incurring time and expense associated with identifying and evaluating potential acquisitions and negotiating potential transactions, and with integrating acquired businesses, resulting in the diversion of resources from the operation of our existing businesses; • Acquisitions may also be subject to various regulatory approvals.
Acquiring other financial institutions, financial services companies, or branches involves potential adverse impact to our financial results and various other risks commonly associated with acquisitions, including, among other things: • Incurring time and expense associated with identifying and evaluating potential acquisitions and negotiating potential transactions, and with integrating acquired businesses, resulting in the diversion of resources from the operation of our existing businesses; • Acquisitions typically are subject to various regulatory approvals.
The Bank is subject to extensive regulation and supervision by the Commissioner and the Federal Reserve. This regulation and supervision is intended primarily to enhance the safe and sound operation of the Bank and for the protection of the DIF and our depositors and borrowers, rather than for holders of our equity securities and creditors.
This regulation, examination, and supervision is intended primarily to enhance the safe and sound operation of the Bank and for the protection of the DIF and our depositors and borrowers, rather than for holders of our equity securities and creditors. In the past, our business has been materially affected by these regulations and our compliance with these regulations is costly.
Consumers can also complete transactions such as paying bills and/or transferring funds directly without the assistance of banks. The process of eliminating banks as intermediaries, known as “disintermediation,” could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those 23 Table of Contents deposits.
The process of eliminating banks as intermediaries, known as “disintermediation,” could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits.
Economic weakness or persistent inflation could lead to decreased business and consumer confidence and weaker-than-anticipated spending, thereby leading to possible adverse impacts to our business including asset quality, deposit levels, loan demand and results of operations. We also face credit risk arising from economic and geopolitical conditions, among other forms of risk.
Economic forecasts include a mix of positive and negative factors concerning unemployment, inflation, real estate values and other components. Economic weakness, increased unemployment, or persistent inflation could lead to decreased business and consumer confidence and weaker-than-anticipated spending, thereby leading to possible adverse impacts to our business including asset quality, deposit levels, loan demand and results of operations.
Further, the deterioration of borrowers' businesses may hinder their ability to repay their loans with the Company, which could have a material adverse effect on our financial condition and results of operations. Risk of loan defaults is unavoidable in the banking industry.
Further, the deterioration of borrowers' businesses (from a variety of factors including, but not limited to: tariff impact, government policy change, change in end customer behavior, etc.) may hinder their ability to repay their loans with the Company, which could have a material adverse effect on our financial condition and results of operations.
In the future, we might need to raise additional capital to support growth, absorb loan losses, or meet more stringent capital requirements. Our ability to raise additional capital will depend on conditions in the capital markets at that time, which are outside our control, and on our financial performance.
Our ability to raise additional capital will depend on conditions in the capital markets at that time, which are outside our control, and on our financial performance. Accordingly, we cannot be certain of our ability to raise additional capital in the future if needed or on terms acceptable to us.
Our business is dependent on our employees as well as third-party service providers to process a large number of increasingly complex transactions.
We are exposed to many types of operational risk, including the risk of fraud by employees and third parties, clerical recordkeeping errors, and transactional errors. Our business is dependent on our employees as well as third-party service providers to process a large number of increasingly complex transactions.
These systems have been designed to manage operational risk at appropriate, cost-effective levels. Procedures exist that are designed to ensure that policies relating to conduct, ethics, and business practices are followed.
These systems have been designed to manage operational risk at appropriate, cost-effective levels. Procedures exist that are designed to ensure that policies relating to conduct, ethics, and business practices are followed. We continually monitor and improve our internal controls, data processing systems, and corporate-wide processes and procedures, but there can be no assurance that future losses will not occur.
Given the comparatively lower trading volume of our common stock relative to larger institutions, significant sales of our common stock or other volatility in our shares in the public market could cause the trading price of our common stock to decline or to be lower than it otherwise might be in the absence of those sales or perceptions.
Given the comparatively lower trading volume of our common stock relative to larger institutions, significant sales of our common stock or other volatility in our shares in the public market could cause the trading price of our common stock to decline or to be lower than it otherwise might be in the absence of those sales or perceptions. 26 Table of Contents We may issue additional shares of stock or equity derivative securities that will dilute the percentage ownership interest of existing shareholders and may dilute the book value per share of our common stock and adversely affect the terms on which we may obtain additional capital.
Additionally, if our third party vendors encounter difficulties or if we have difficulty in communicating with such third party, it will significantly affect our ability to adequately process and account for customer transactions, which would significantly affect our business operations.
Additionally, if our third party vendors encounter difficulties or if we have difficulty in communicating with such third parties, it will significantly affect our ability to adequately process and account for customer transactions, which would significantly affect our business operations, damage our reputation, result in a loss of customer business, result in a violation of privacy or other laws, and expose us to civil litigation, enforcement actions by governmental agencies, regulatory fine or other damages or losses, including those not covered by insurance.
Accordingly, we cannot be certain of our ability to raise additional capital in the future if needed or on terms acceptable to us. If we cannot raise additional capital when needed, our ability to conduct our business could be materially impaired. Consumers may decide not to use banks or specifically our Company to complete their financial transactions.
If we cannot raise additional capital when needed, our ability to conduct our business could be materially impaired. Consumers may decide not to use banks or specifically our Company to complete their financial transactions. The banking industry is highly competitive. Technology and other changes are allowing parties to complete financial transactions through alternative methods that historically have involved banks.
If our internal controls fail to work as expected, we could experience significant losses.
In the normal course of business, we process large volumes of transactions involving millions of dollars. If our internal controls fail to work as expected, we could experience significant losses.
Technology and other changes are allowing parties to complete financial transactions through alternative methods that historically have involved banks. For example, consumers can now maintain funds that would have historically been held as bank deposits in brokerage accounts, mutual funds, or general-purpose reloadable prepaid cards.
For example, consumers can now maintain funds that would have historically been held as bank deposits in brokerage accounts, mutual funds, or general-purpose reloadable prepaid cards, or digital assets such as stablecoins, rather than in bank deposit accounts. Consumers can also complete transactions such as paying bills and/or transferring funds directly without the assistance of banks.
In the past, our business has been materially affected by these regulations. This trend is likely to continue in the future. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on operations, the classification of our assets, and the determination of the level of ACL.
Laws and regulations applicable to the banking industry change frequently and may continue to change, and we cannot predict the effects of any such changes. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on operations, the classification of our assets, and the determination of the level of ACL.
Beginning in September 2024, the FOMC began to lower the target range for the federal funds rate. As of December 31, 2024, the target range was 4.25% to 4.50%. In January 2025, the FOMC maintained the target range for the federal funds rate.
Throughout 2022 and 2023, the FOMC raised the target range for the federal funds rate. During 2024 and 2025, the FOMC lowered the target range for the federal funds rate. As of December 31, 2025, the target range was 3.50% to 3.75%.
As a result, negotiations may take place and future mergers or acquisitions involving cash, debt, or equity securities may occur at any time.
As a result, negotiations may take place and future mergers or acquisitions involving cash, debt, or equity securities may occur at any time. We seek merger and acquisition partners that are culturally similar, have experienced management, and possess either significant market presence or have potential for improved profitability through financial management, economies of scale, or expanded services.
Removed
Although economic forecasts vary, the FOMC has indicated an expectation of two 25 basis point rate cuts during 2025. Some economists are projecting that, due to changes in fiscal and economic policies, including tariffs, US economic activity may slow or decrease in 2025.
Added
During 2024 and 2025, the FOMC lowered the target range for the federal funds rate. As of December 31, 2025, the target range was 3.50% to 3.75%. Although economic forecasts vary, the FOMC has indicated an expectation of one 25 basis point rate cut during 2026.
Removed
In January 2022, due to elevated levels of inflation and corresponding pressure to raise interest rates, the Federal Reserve announced after several periods of historically low federal funds rates and yields on Treasury notes that it would be slowing the pace of its bond purchasing and increasing the target range for the federal funds rate over time.
Added
We also face credit risk arising from economic and geopolitical conditions, among other forms of risk, that our customers will not repay their loans.
Removed
Therefore, the FOMC increased the target range eleven times throughout 2022 and 2023. In the latter months of 2024, due to lower, more consistent inflation levels, the Federal Reserve lowered its federal funds target rate by 100 basis points. As of 19 Table of Contents December 31, 2024, the target range for the federal funds rate was 4.25% - 4.50%.
Added
Additionally, other interest rates may not move in a consistent manner with the federal 19 Table of Contents funds rate.
Removed
Information security risks for financial institutions continue to increase in part because of new technologies, the increased use of the internet and telecommunications technologies (including mobile devices and cloud computing) to conduct financial and other business transactions, political activism, and the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, terrorists and others.
Added
As a financial institution, our operations rely heavily on the secure data processing, storage and transmission of confidential and other information to conduct our business. Our daily operations depend on the operational effectiveness of our technology.
Removed
We rely on computer systems, hardware, software, technology infrastructure and online sites and networks for both internal and external operations that are critical to our business. Operational risk related to cyberattacks is increasing as cyberattacks evolve and have a greater and more pervasive economic impact.
Added
Our vendors could also be the source of an attack on, or breach of, our operational systems. Any failures, interruptions, or security breaches, or any perception that our security measures are deficient, could negatively impact our operations.
Removed
In addition to cyberattacks or other security breaches involving the theft of sensitive and confidential information, hackers have engaged in attacks against financial institutions designed to disrupt key business services, such as customer-facing web sites. Critical infrastructure sectors, including financial services, increasingly have been the targets of cyberattacks, including attacks emanating from foreign countries.
Added
We are subject to extensive regulation, which could have an adverse effect on our operations. The Bank is subject to extensive regulation, examination, and supervision by various federal and state regulatory agencies, including the Commissioner and the Federal Reserve.
Removed
Cyberattacks involving financial institutions, including distributed denial of service attacks designed to disrupt external customer-facing services, nation state cyberattacks and ransomware attacks designed to deny organizations access to key internal resources or systems or other critical data, as well as targeted social engineering and phishing email and text message attacks designed to allow unauthorized persons to obtain access to an institution’s information systems and data or that of its customers, are becoming more common and increasingly sophisticated.
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Should we fail to comply with our regulatory requirements, federal and state regulators could impose restrictions on our activities, which could materially and adversely affect our operations and financial condition. This trend is likely to continue in the future.
Removed
Further, threat actors are increasingly seeking to target vulnerabilities in software systems (including bugs, vulnerabilities in third-party systems or software and technical misconfigurations in hardware and software) and weak authentication controls used by large numbers of banking organizations in order to conduct malicious cyber activities. These types of attacks have resulted in increased supply chain and third-party risk.
Added
Changes in the regulations that apply to us, or changes in our compliance with regulations, could have a material impact on our operations. We are subject to complex and ever-changing laws and regulations governing the privacy and security of personal information concerning our customers, prospective, current, and former customers, and employees.
Removed
Because the methods of cyberattacks change frequently or, in some cases, are not recognized until launch, we are not able to anticipate or implement effective preventive measures against all possible security breaches and the probability of a successful attack cannot be predicted.
Added
These federal and state laws and regulations govern our obligations in the event of a security breach, breach of personal information, computer-security incident, and similar events.
Removed
Although we employ detection and response mechanisms designed to contain and mitigate security incidents, early detection may be thwarted by persistent sophisticated attacks and malware designed to avoid detection.
Added
We are required to maintain adequate capital levels to support our operations. In the future, we might need to raise additional capital to support growth, absorb loan losses, or meet more stringent capital requirements.
Removed
Our inability to prevent, detect, and respond to cyberattacks may lead to reputational damage, litigation with third parties, and increased cybersecurity protection and remediation costs, which in turn could materially adversely affect our results of operations. In the normal course of business, we process large volumes of transactions involving millions of dollars.
Added
To the extent that other banks offer products or services that facilitate the minting or issuance of stablecoins backed by customer deposits, customers may convert bank deposits into stablecoins, which could accelerate deposit outflows, increase deposit volatility and heighten liquidity risk, particularly during periods of market stress.
Removed
We continually monitor and improve our internal controls, data 22 Table of Contents processing systems, and corporate-wide processes and procedures, but there can be no assurance that future losses will not occur. We are subject to extensive regulation, which could have an adverse effect on our operations.
Removed
Changes in the regulations that apply to us, or changes in our compliance with regulations, could have a material impact on our operations. The BSA, the Patriot Act, and other laws and regulations require financial institutions, among other duties, to institute and maintain effective anti-money laundering programs and file suspicious activity and currency transaction reports as appropriate.
Removed
The FINCEN, established by the Treasury to administer the BSA, is authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the individual federal banking regulators, as well as with the U.S. Department of Justice, Drug Enforcement Administration, and Internal Revenue Service.
Removed
There is also increased scrutiny of compliance with the rules enforced by the OFAC. Federal and state bank regulators also focus on compliance with BSA and AML regulations.
Removed
If our policies, procedures, and systems are deemed deficient or the policies, procedures, and systems of the financial institutions that we have already acquired or may acquire in the future are deficient, we would be subject to liability, including fines and regulatory actions such as restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including our acquisition plans, which would negatively impact our business, financial condition, and results of operations.
Removed
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing also could have serious reputational consequences for us. Federal and state fair lending laws and regulations, such as the Equal Credit Opportunity Act and the Fair Housing Act, impose nondiscriminatory lending requirements on financial institutions.
Removed
The Department of Justice, the CFPB, and other federal and state agencies are responsible for enforcing these laws and regulations. Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation.
Removed
A successful challenge to our performance under the fair lending laws and regulations could adversely impact our CRA rating and result in a wide variety of sanctions, including the required payment of damages and civil money penalties, injunctive relief, imposition of restrictions on or delays in approving merger and acquisition activity, and restrictions on expansion activity, which could negatively impact our reputation, business, financial condition, and results of operations.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAs one of the elements of the Company’s overall enterprise-wide risk management approach, our Information Security Program is focused on the following key areas: • Security Operation and Governance: The Board has delegated to senior management responsibility for the Information Security Program which is managed through the IT Steering Committee, which maintains alignment and appropriate insight regarding information security activities. • Collaborative Approach: The Company has implemented a cross-functional approach to identifying, preventing and mitigating cybersecurity threats and incidents, while also implementing controls and procedures that provide for the prompt escalation of certain cybersecurity incidents so that decisions regarding the public disclosure and reporting of such incidents can be made by management in a timely manner. • Security Competencies: The Information Security department oversees a program of security competencies and tools designed to protect the confidentiality, integrity, and availability of our data.
Biggest changeAs one of the elements of the Company’s overall enterprise-wide risk management approach, our Information Security Program is focused on the following key areas: • Security Operation and Governance: The Board has delegated to senior management responsibility for the Information Security Program which is managed through the IT Steering Committee, which maintains alignment and appropriate insight regarding information security activities. 27 Table of Contents • Collaborative Approach: The Company has implemented a cross-functional approach to identifying, preventing and mitigating cybersecurity threats and incidents, while also implementing controls and procedures that provide for the prompt escalation of certain cybersecurity incidents so that decisions regarding the public disclosure and reporting of such incidents can be made by management in a timely manner. • Security Competencies: The Information Security department oversees a program of security competencies and tools designed to protect the confidentiality, integrity, and availability of our data.
The process provides awareness and collaboration 28 Table of Contents across internal teams including, but not limited to, Information Technology, Information Security and Business Continuity. In addition to ongoing monitoring of select vendors, a review is conducted on new or significantly changed third parties, applications, and technology to ensure that systems and third parties meet certain baseline requirements.
The process provides awareness and collaboration across internal teams including, but not limited to, Information Technology, Information Security and Business Continuity. In addition to ongoing monitoring of select vendors, a review is conducted on new or significantly changed third parties, applications, and technology to ensure that systems and third parties meet certain baseline requirements.
Through ongoing communications with these teams, the COO, Information Security, and Risk Management teams monitor the prevention, detection, mitigation and remediation of cybersecurity threats and incidents in real time, and report such threats and incidents to the Corporate Crisis Management Team and ultimately the Board when appropriate.
Through ongoing communications with these teams, the COO, Information Security, and Risk Management teams monitor the prevention, detection, mitigation and remediation of cybersecurity threats and incidents in real time, and report such threats and incidents to the Corporate Crisis 28 Table of Contents Management Team and ultimately the Board when appropriate.
With regard to the possible impact of future cybersecurity threats or incidents, see Item 1A, Risk Factors - Risks Related to Out Business .
With regard to the possible impact of future cybersecurity threats or incidents, see Item 1A, Risk Factors - Risks Related to Our Business .
A multi-step approach is applied to identify, report and remediate these vulnerabilities, and the Company adjusts its information security policies, standards, processes and practices as necessary based on the information provided by these assessments. The results of key assessments are reported in summary to the Board annually.
A multi-step approach is applied to identify, report and remediate these vulnerabilities, and the Company adjusts its information security policies, standards, processes and practices as necessary based on the information provided by these assessments. The results of key assessments are reported in summary to the Board on an ongoing basis.
We believe our Board and management, including the Chief Operating Officer, have the appropriate expertise, background, and depth of experience to manage risks arising from cybersecurity threats, including applicable knowledge gained through industry experience, internal and external training, and periodic discussions with consultants and peers with applicable knowledge and expertise.
We believe our Board and management, including the COO, have the appropriate expertise, background, and depth of experience to manage risks arising from cybersecurity threats, including applicable knowledge gained through industry experience, internal and external training, and periodic discussions with consultants and peers with applicable knowledge and expertise.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe Company owned all of its bank branch premises except 13 branch offices for which the 29 Table of Contents land and buildings are leased and nine branch offices for which the land is leased but the building is owned. The Bank also leases several other office locations for administrative functions.
Biggest changeThe Company owned all of its bank branch premises except 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 Bank also leases several other office locations for administrative functions. There are no options to purchase or lease additional properties.
The Bank’s operational departments, including accounting functions, information technology operations, loan operations, and deposit operations, are primarily housed in buildings in Greensboro, North Carolina; Dunn, North Carolina; Fletcher, North Carolina; and Troy, North Carolina, which are owned by the Bank. At December 31, 2024, the Company operated 113 bank branches.
The Bank’s operational departments, including accounting functions, information technology operations, loan operations, and deposit operations, are primarily housed in buildings in Greensboro, North Carolina; Dunn, North Carolina; Fletcher, North Carolina; and Troy, North Carolina, which are owned by the Bank. At December 31, 2025, the Company operated 113 bank branches.
There are no options to purchase or lease additional properties. The Company considers its facilities adequate to meet current needs and believes that lease renewals or replacement properties can be acquired as necessary to meet future needs.
The Company considers its facilities adequate to meet current needs and believes that lease renewals or replacement properties can be acquired as necessary to meet future needs.
Item 2. Properties The main offices of the Company and the Bank are located in a building in Southern Pines, North Carolina that is owned by the Bank. The building houses corporate, accounting, and administrative facilities.
Item 2. Properties The main office of the Company and Bank is located in Southern Pines, North Carolina and is owned by the Bank.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeFor each quarter in 2024, we declared a cash dividend of $0.22 per common share. For the foreseeable future, it is our current intention to continue to pay regular cash dividends on a quarterly basis. However, our ability to pay future cash dividends can be restricted or eliminated by regulatory authorities.
Biggest changeFor the first quarter in 2025, we declared a cash dividend of $0.22 . For each quarter thereafter in 2025, we declared a cash dividend of $0.23 per common share. For the foreseeable future, it is our current intention to continue to pay regular cash dividends on a quarterly basis.
BMI Banks Industry Group Index, as constructed by S & P Global (reflecting performance in broad market banking industry stocks). The graph and table assume that $100 was invested on December 31, 2019 in each of the Company’s common stock, the Russell 2000 Index, and the S&P U.S. BMI Banks Industry Group Index, and that all dividends were reinvested.
BMI Banks Industry Group Index, as constructed by S & P Global (reflecting performance in broad market banking industry stocks). The graph and table assume that $100 was invested on December 31, 2020 in each of the Company’s common stock, the Russell 2000 Index, and the S&P U.S. BMI Banks Industry Group Index, and that all dividends were reinvested.
Issuer Purchases of Equity Securities Beginning in January 2024 and continuing through 2025, the Board of Directors of the Company has authorized the repurchase of up to $40 million in shares of the Company’s common stock in private transactions and open market purchases.
Issuer Purchases of Equity Securities Beginning in January 2024, the Board of the Company has authorized the repurchase of up to $40 million in shares of the Company’s common stock in private transactions and open market purchases.
As of February 21, 2025, there were approximately 3,490 shareholders of record and another approximately 21,528 shareholders whose stock is held in “street name.” The tables in Item 7 under "Selected Financial Information" section also include information regarding cash dividends declared per share of common stock for the periods presented.
As of February 19, 2026, there were approximately 3,381 shareholders of record and another approximately 24,403 shareholders whose stock is held in “street name.” The tables in Item 7 under "Selected Financial Information" section also include information regarding cash dividends declared per share of common stock for the periods presented.
Total return index numerical values used in this example are for illustrative purposes only.
Total return index numerical values used in this example are for illustrative purposes only. 30 Table of Contents
No repurchases of any shares of the Company's common stock were made in 2024 or in 2025 through the date of this Annual Report in Form 10-K. 30 Table of Contents Performance Graph The performance graph shown below compares the Company’s cumulative total return to shareholders for the five-year period commencing December 31, 2019 and ending December 31, 2024, with the cumulative total return of the Russell 2000 Index (reflecting overall stock market performance of small-capitalization companies), and the S&P U.S.
Performance Graph The performance graph shown below compares the Company’s cumulative total return to shareholders for the five-year period commencing December 31, 2020 and ending December 31, 2025, with the cumulative total return of the Russell 2000 Index (reflecting overall stock market performance of small-capitalization companies), and the S&P U.S.
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.
Any such repurchases would be made pursuant to a plan approved by and containing provisions about the timing, purchase prices and quantities 29 Table of Contents 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.
First Bancorp Comparison of Five-Year Total Return Performances (1) Five Years Ended December 31, 2024 Total Return Index Values (1) December 31, 2019 2020 2021 2022 2023 2024 First Bancorp $ 100.00 $ 87.28 $ 120.15 $ 115.15 $ 102.20 $ 124.28 Russell 2000 Index 100.00 119.96 137.74 109.59 128.14 142.93 S&P US BMI Banks Industry Group Index $ 100.00 $ 87.24 $ 118.61 $ 98.38 $ 107.32 $ 143.68 _____________ (1) Total return indices were provided from an independent source, S&P Global Market Intelligence, New York, New York, and assume initial investment of $100 on December 31, 2019, reinvestment of dividends, and changes in market values.
First Bancorp Comparison of Five-Year Total Return Performances (1) Five Years Ended December 31, 2025 Total Return Index Values (1) December 31, 2020 2021 2022 2023 2024 2025 First Bancorp $ 100.00 $ 137.66 $ 131.93 $ 117.09 $ 142.38 $ 167.71 Russell 2000 Index 100.00 114.82 91.35 106.82 119.14 134.40 S&P US BMI Banks Industry Group Index $ 100.00 $ 135.97 $ 112.77 $ 123.02 $ 164.70 $ 211.47 _____________ (1) Total return indices were provided from an independent source, S&P Global Market Intelligence, New York, New York, and assume initial investment of $100 on December 31, 2020, reinvestment of dividends, and changes in market values.
Securities authorized for issuance under equity compensation plans Refer to “Additional Information Regarding the Registrant’s Equity Compensation Plans” in Item 12.
However, our ability to pay future cash dividends can be restricted or eliminated by regulatory authorities. Securities authorized for issuance under equity compensation plans Refer to “Additional Information Regarding the Registrant’s Equity Compensation Plans” in Item 12.
Added
As of December 31, 2025, The Company had remaining authorization to purchase up to $39.0 million of outstanding stock under the program. On January 27, 2026, the Board reauthorized the repurchase of up to $40 million in shares of the Company's common stock through January 27, 2027.
Added
No repurchases of any shares of the Company's common stock were made in 2026 through the date of this Annual Report in Form 10-K.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeRate Assets Loans (1) (2) $ 8,046,681 $ 441,181 5.48 % $ 7,902,628 $ 418,853 5.30 % $ 6,293,319 $ 278,188 4.42 % Taxable securities 2,608,494 47,510 1.82 % 2,920,040 52,276 1.79 % 3,059,683 53,536 1.75 % Non-taxable securities 291,520 4,466 1.53 % 296,287 4,485 1.51 % 296,803 4,387 1.48 % Short-term investments, primarily interest-bearing cash 561,886 26,083 4.64 % 314,537 13,330 4.24 % 339,437 5,007 1.48 % Total interest-earning assets 11,508,581 519,240 4.51 % 11,433,492 488,944 4.28 % 9,989,242 341,118 3.41 % Cash and due from banks 84,997 93,182 104,374 Premises and equipment 147,916 151,980 135,163 Other assets 393,001 354,379 327,993 Total assets $ 12,134,495 $ 12,033,033 $ 10,556,772 Liabilities and Equity Interest-bearing checking $ 1,395,856 $ 9,910 0.71 % $ 1,457,272 $ 6,192 0.42 % $ 1,545,573 $ 1,219 0.08 % Money market deposits 4,039,999 126,531 3.13 % 3,355,992 78,643 2.34 % 2,515,897 5,610 0.22 % Savings deposits 564,473 1,209 0.21 % 668,730 1,024 0.15 % 739,681 459 0.06 % Other time deposits 666,868 20,429 3.06 % 737,330 19,023 2.58 % 551,852 2,541 0.46 % Time deposits >$250,000 373,851 14,006 3.75 % 343,669 9,984 2.90 % 287,194 1,520 0.53 % Total interest-bearing deposits 7,041,047 172,085 2.44 % 6,562,993 114,866 1.75 % 5,640,197 11,349 0.20 % Short-term borrowings 137,692 7,116 5.17 % 374,254 19,289 5.15 % 52,273 1,828 3.50 % Long-term borrowings 95,275 7,766 8.15 % 99,858 7,946 7.96 % 65,531 2,926 4.46 % Total interest-bearing liabilities 7,274,014 186,967 2.57 % 7,037,105 142,101 2.02 % 5,758,001 16,103 0.28 % Noninterest-bearing checking 3,367,035 3,613,973 3,643,330 Total sources of funds 10,641,049 1.76 % 10,651,078 1.33 % 9,401,331 0.17 % Other liabilities 76,985 88,870 58,056 Shareholders’ equity 1,416,461 1,293,085 1,097,385 Total liabilities and shareholders’ equity $ 12,134,495 $ 12,033,033 $ 10,556,772 Net yield on interest-earning assets and net interest income $ 332,273 2.89 % $ 346,843 3.03 % $ 325,015 3.25 % Net yield on interest-earning assets and net interest income – tax-equivalent (3) $ 335,256 2.91 % $ 349,537 3.06 % $ 327,795 3.28 % Interest rate spread 1.94 % 2.26 % 3.13 % Average prime rate 8.31 % 8.20 % 4.86 % (1) Average loans include nonaccruing loans, the effect of which is to lower the average rate shown.
Biggest changeRate Assets Loans (1) (2) $ 8,283,246 $ 462,306 5.58 % $ 8,046,681 $ 441,181 5.48 % $ 7,902,628 $ 418,853 5.30 % Taxable securities 2,632,412 68,055 2.59 % 2,608,494 47,510 1.82 % 2,920,040 52,276 1.79 % Non-taxable securities 287,298 4,461 1.55 % 291,520 4,466 1.53 % 296,287 4,485 1.51 % Short-term investments, primarily interest-bearing cash 496,404 22,413 4.52 % 561,886 26,083 4.64 % 314,537 13,330 4.24 % Total interest-earning assets 11,699,360 557,235 4.76 % 11,508,581 519,240 4.51 % 11,433,492 488,944 4.28 % Cash and due from banks 146,136 84,997 93,182 Premises and equipment 141,884 147,916 151,980 Other assets 524,650 393,001 354,379 Total assets $ 12,512,030 $ 12,134,495 $ 12,033,033 Liabilities and Equity Interest-bearing checking $ 1,412,605 $ 9,443 0.67 % $ 1,395,856 $ 9,910 0.71 % $ 1,457,272 $ 6,192 0.42 % Money market deposits 4,437,314 119,158 2.69 % 4,039,999 126,531 3.13 % 3,355,992 78,643 2.34 % Savings deposits 535,863 1,009 0.19 % 564,473 1,209 0.21 % 668,730 1,024 0.15 % Other time deposits 527,357 12,406 2.35 % 666,868 20,429 3.06 % 737,330 19,023 2.58 % Time deposits >$250,000 332,895 10,502 3.15 % 373,851 14,006 3.75 % 343,669 9,984 2.90 % Total interest-bearing deposits 7,246,034 152,518 2.10 % 7,041,047 172,085 2.44 % 6,562,993 114,866 1.75 % Short-term borrowings — — — % 137,692 7,116 5.17 % 374,254 19,289 5.15 % Long-term borrowings 89,889 6,470 7.20 % 95,275 7,766 8.15 % 99,858 7,946 7.96 % Total interest-bearing liabilities 7,335,923 158,988 2.17 % 7,274,014 186,967 2.57 % 7,037,105 142,101 2.02 % Noninterest-bearing checking 3,506,429 3,367,035 3,613,973 Total sources of funds 10,842,352 1.47 % 10,641,049 1.76 % 10,651,078 1.33 % Other liabilities 119,805 76,985 88,870 Shareholders’ equity 1,549,873 1,416,461 1,293,085 Total liabilities and shareholders’ equity $ 12,512,030 $ 12,134,495 $ 12,033,033 Net yield on interest-earning assets and net interest income $ 398,247 3.40 % $ 332,273 2.89 % $ 346,843 3.03 % Net yield on interest-earning assets and net interest income – tax-equivalent (3) $ 399,636 3.42 % $ 335,256 2.93 % $ 349,537 3.06 % Interest rate spread 2.59 % 1.94 % 2.26 % Average prime rate 7.37 % 8.31 % 8.20 % (1) Average loans include nonaccruing loans, the effect of which is to lower the average rate shown.
Generally, the level of loan discount accretion will decline each year after an acquisition due to the natural reduction in the outstanding balance of acquired loans. Alternately, levels of accretion will increase as a result of acquisitions and related additions to loan discounts on acquired portfolios which are accreted to income as experienced in 2023 with the GrandSouth acquisition.
Generally, the level of loan discount accretion will decline each year after an acquisition due to the natural reduction in the outstanding balance of acquired loans. Alternately, levels of accretion will increase as a result of future acquisitions and related additions to loan discounts on acquired portfolios which are accreted to income as experienced since 2023 with the GrandSouth acquisition.
These loans are underwritten and monitored to manage the associated risks. The Company has determined that there is no concentration of credit risk associated with its lending policies or practices. 45 Table of Contents Most of our business activity is with customers located within the markets where we have banking operations.
These loans are underwritten and monitored to manage the associated risks. The Company has determined that there is no concentration of credit risk associated with its lending policies or practices. 43 Table of Contents Most of our business activity is with customers located within the markets where we have banking operations.
In addition, bank regulatory authorities, as part of their periodic examination of the 48 Table of Contents Bank, may require adjustments to the provision for loan losses in future periods if, in their opinion, the results of their review warrant such additions. The following table sets forth the allocation of the ACL by loan category at the dates indicated.
In addition, bank regulatory authorities, as part of their periodic examination of the Bank, may require adjustments to the provision for loan losses in future periods if, in their opinion, the results of their review warrant such additions. 46 Table of Contents The following table sets forth the allocation of the ACL by loan category at the dates indicated.
This discussion may contain forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly from those anticipated in forward-looking statements as a result of various factors. Overview and 2024 Highlights The Company is a bank holding company headquartered in Southern Pines, North Carolina.
This discussion may contain forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly from those anticipated in forward-looking statements as a result of various factors. Overview and 2025 Highlights The Company is a bank holding company headquartered in Southern Pines, North Carolina.
Such a shift in mix is beneficial for us, as non-time deposit accounts generally carry lower interest rates compared to time deposits and we are able to reprice these deposit categories as market rates move over time. Approximately 97% of our time deposits mature within one year.
Such a shift in mix is beneficial for us, as non-time deposit accounts generally carry lower interest rates compared to time deposits and we are able to reprice these deposit categories as market rates move over time. Approximately 98% of our time deposits mature within one year.
We have identified the determination of our ACL and related Allowance for Unfunded Commitments, as well as business combinations, related fair value measurements and goodwill determination to be the accounting areas that require the most subjective or complex judgments, estimates, and assumptions, and where changes in those judgments, estimates, and assumptions (based on new or additional information, changes in the economic climate and/or market interest rates, etc.) could have a significant effect on our financial statements.
We have identified the determination of our ACL and related Allowance for Unfunded Commitments, as well as business combinations, related fair value measurements and goodwill determination to be the accounting areas that require the most subjective or complex judgments, estimates, and assumptions, and where changes in those judgments, estimates, and assumptions (based on new or additional information, changes in the economic climate and/or market interest rates, etc.) could have a significant effect on 32 Table of Contents our financial statements.
During 2024 there were no triggers warranting interim impairment assessments and for the 2024 annual assessment, we concluded that it was more likely than not that the fair value exceeded its carrying value. At December 31, 2024, we had $478.8 million of goodwill.
During 2025 there were no triggers warranting interim impairment assessments and for the 2025 annual assessment, we concluded that it was more likely than not that the fair value exceeded its carrying value. At December 31, 2025, we had $478.8 million of goodwill.
We also maintain available lines of credit from the FHLB and the Federal Reserve, as well as federal funds lines from several correspondent banks which are summarized below. At December 31, 2024, the Company had several sources of readily available borrowing capacity as described above in the Borrowings section.
We also maintain available lines of credit from the FHLB and the Federal Reserve, as well as federal funds lines from several correspondent banks which are summarized below. At December 31, 2025, the Company had several sources of readily available borrowing capacity as described above in the Borrowings section.
At December 31, 2024, 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.
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.
The provision recorded in each period represents the amount required such that the total ACL reflects the current estimate of life of loan credit losses in the loan portfolio and the allowance for unfunded commitments 40 Table of Contents reflects the current expected losses on unfunded loan commitments that are expected to result in outstanding loan balances.
The provision recorded in each period represents the amount required such that the total ACL reflects 39 Table of Contents the current estimate of life of loan credit losses in the loan portfolio and the allowance for unfunded commitments reflects the current expected losses on unfunded loan commitments that are expected to result in outstanding loan balances.
Recent Accounting Standards and Pronouncements For information relating to recent accounting standards and pronouncements, see Note 1 to our consolidated financial statements entitled “Summary of Significant Accounting Policies.” RESULTS OF OPERATIONS The following discussion reviews the results of operations and key drivers to change in the results of 2024 as compared to 2023.
Recent Accounting Standards and Pronouncements For information relating to recent accounting standards and pronouncements, see Note 1 to our consolidated financial statements entitled “Summary of Significant Accounting Policies.” RESULTS OF OPERATIONS The following discussion reviews the results of operations and key drivers to change in the results of 2025 as compared to 2024.
As of December 31, 2024, approximately $1.1 billion of the Company’s investment in the Bank is restricted as to transfer to the Company without obtaining prior regulatory approval. Our regulatory capital ratios as of December 31, 2024, 2023 and 2022 are presented in the table below.
As of December 31, 2025, approximately $1.1 billion of the Company’s investment in the Bank is restricted as to transfer to the Company without obtaining prior regulatory approval. Our regulatory capital ratios as of December 31, 2025, 2024 and 2023 are presented in the table below.
Certain of the outstanding commitments and contingent liabilities, such as commitments to extend credit, are not reflected in the financial statements. Presented below is a summary of our contractual obligations and other commercial commitments outstanding as of December 31, 2024.
Certain of the outstanding commitments and contingent liabilities, such as commitments to extend credit, are not reflected in the financial statements. Presented below is a summary of our contractual obligations and other commercial commitments outstanding as of December 31, 2025.
For a description of our results of operations for 2023 as compared to 2022, refer to the "Overview and 2023 Highlights," Results of Operations," and "Analysis of Financial Condition and Changes in Financial Condition" sections of Item 7 in our 2023 Form 10-K.
For a description of our results of operations for 2024 as compared to 2023, refer to the "Overview and 2024 Highlights," Results of Operations," and "Analysis of Financial Condition and Changes in Financial Condition" sections of Item 7 in our 2024 Form 10-K.
The following tables provides a summary of the outstanding balances of the commercial real estate-owner occupied, commercial real estate-non owner occupied and multi-family real estate loan portfolio compositions at December 31, 2024 by geographic region.
The following tables provides a summary of the outstanding balances of the commercial real estate-owner occupied, commercial real estate-non owner occupied and multi-family real estate loan portfolio compositions at December 31, 2025 by geographic region.
Non-PCD loans acquired are generally estimated at fair value using a discounted cash flow approach with assumptions of discount rate, remaining life, prepayments, probability of default, and loss given default. The actual cash flows on these loans could differ materially from the fair value estimates.
Non-PCD loans acquired are generally estimated at fair value using a discounted cash flow approach with assumptions of discount rate, remaining life, prepayments, probability of default, and loss given default. The actual 34 Table of Contents cash flows on these loans could differ materially from the fair value estimates.
Therefore, our exposure to credit risk is significantly affected by changes in the economy within our markets. Approximately 88% of our loan portfolio is secured by real estate and is therefore susceptible to changes in real estate valuations.
Therefore, our exposure to credit risk is significantly affected by changes in the economy within our markets. Approximately 87% of our loan portfolio is secured by real estate and is therefore susceptible to changes in real estate valuations.
All of this line was available at both December 31, 2024 and December 31, 2023. Refer to Note 9 to the consolidated financial statements for additional discussion of our borrowings.
All of this line was available at both December 31, 2025 and December 31, 2024. Refer to Note 9 to the consolidated financial statements for additional discussion of our borrowings.
Interest earned includes recognized net loan fees, including late fees, prepayment fees, and deferred loan (cost)/fee amortization, in the amounts of $(1.1) million , $0.5 million, and $3.1 million for 2024, 2023, and 2022, respectively. (2) Includes accretion of discount on acquired loans of $8.9 million, $11.5 million, and $5.6 million in 2024, 2023, and 2022, respectively.
Interest earned includes recognized net loan fees, including late fees, prepayment fees, and deferred loan (cost)/fee amortization in the amounts of $(0.8) million , $(1.1) million, and $0.5 million for 2025, 2024, and 2023, respectively. (2) Includes accretion of discount on acquired loans of $6.1 million, $8.9 million, and $11.5 million in 2025, 2024, and 2023, respectively.
The methodology is based on a loss rate approach that starts with the probability of funding based on historical experience. Similar to the methodology discussed above 34 Table of Contents related to the loans receivable portfolio, adjustments are made to the historical losses for current conditions and reasonable and supportable forecasts.
The methodology is based on a loss rate approach that starts with the probability of funding based on historical experience. Similar to the methodology discussed above related to the loans receivable portfolio, adjustments are made to the historical losses for current conditions and reasonable and supportable forecasts.
Average Balances and Net Interest Income Analysis Year Ended December 31, 2024 2023 2022 ($ in thousands) Average Volume Interest Earned or Paid Avg. Rate Average Volume Interest Earned or Paid Avg. Rate Average Volume Interest Earned or Paid Avg.
Average Balances and Net Interest Income Analysis Year Ended December 31, 2025 2024 2023 ($ in thousands) Average Volume Interest Earned or Paid Avg. Rate Average Volume Interest Earned or Paid Avg. Rate Average Volume Interest Earned or Paid Avg.
The table below presents maturities of time deposits which are individually greater than the FDIC insurance limit of $250,000 as of December 31, 2024.
The table below presents maturities of time deposits which are individually greater than the FDIC insurance limit of $250,000 as of December 31, 2025.
Finally, fluctuations in the amount of AOCI, generally driven by market interest rate changes resulting in increases or decreases in unrealized gains/losses on AFS securities, can have a significant impact on total equity.
Finally, fluctuations in the 53 Table of Contents amount of AOCI, generally driven by market interest rate changes resulting in increases or decreases in unrealized gains/losses on AFS securities, can have a significant impact on total equity.
The two basic components that typically have the largest impact on our shareholders’ equity are net income, which increases shareholders’ equity, and dividends declared, which decreases shareholders’ equity. Additionally, any stock issuances can significantly increase shareholders’ equity, including those associated 55 Table of Contents with acquisitions such as in 2023, and any stock repurchases reduce shareholders’ equity.
The two basic components that typically have the largest impact on our shareholders’ equity are net income, which increases shareholders’ equity, and dividends declared, which decreases shareholders’ equity. Additionally, any stock issuances can significantly increase shareholders’ equity, including those associated with acquisitions such as in 2023, and any stock repurchases reduce shareholders’ equity.
At December 31, 2024, the Company had several sources of readily available borrowing capacity: • An existing borrowing capacity with the FHLB of approximately $1.4 billion which can be structured as either short-term or long-term borrowings, depending on the particular funding or liquidity need, and is secured by a blanket lien on most of our real estate loan portfolio, select investment securities, and our FHLB stock (of which $0.8 million and $280.9 million were outstanding at December 31, 2024 and December 31, 2023, respectively). • Federal funds lines with several correspondent banks totaling $265.0 million which provide for overnight unsecured federal funds purchased (of which none were outstanding at December 31, 2024 and December 31, 2023); and, • A line of credit with the Federal Reserve through its discount window borrowing program of approximately $767.4 million which is secured by a blanket lien on a portion of our commercial and consumer loan portfolio (excluding real estate loans) and specific investment securities.
At December 31, 2025, the Company had several sources of readily available borrowing capacity: • Borrowing capacity with the FHLB of approximately $1.4 billion which can be structured as either short-term or long-term borrowings, depending on the particular funding or liquidity need, and is secured by a blanket lien on most of our real estate loan portfolio, select investment securities, and our FHLB stock (of which $0.8 million were outstanding at December 31, 2025 and December 31, 2024). • Federal funds lines with several correspondent banks totaling $265.0 million which provide for overnight unsecured federal funds purchased (of which none were outstanding at December 31, 2025 and December 31, 2024); and, • A line of credit with the Federal Reserve through its discount window borrowing program of approximately $763.8 million which is secured by a blanket lien on a portion of our commercial and consumer loan portfolio (excluding real estate loans) and specific investment securities.
Goodwill arising from business combinations represents the excess of the purchase price over the sum of the estimated fair values of the tangible and identifiable intangible assets acquired less the estimated fair 35 Table of Contents value of the liabilities assumed.
Goodwill arising from business combinations represents the excess of the purchase price over the sum of the estimated fair values of the tangible and identifiable intangible assets acquired less the estimated fair value of the liabilities assumed.
The remaining $510.8 million in HTM securities were comprised almost entirely of highly-rated municipal bonds issued by state and local governments throughout the nation. We have no significant concentration of bond holdings from one state or local government entity, with the single largest exposure to any one entity being $8.9 million.
The remaining $506.4 million in HTM securities were comprised almost entirely of highly-rated municipal bonds issued by state and local governments throughout the nation. We have no significant concentration of bond holdings from one state or local government entity, with the single largest exposure to any one entity being $9.3 million.
We have grown organically as well as through strategic acquisitions as discussed previously in "Recent Developments and Acquisitions". 2024 Financial Highlights: • Return on average assets was 0.63% for the year ended December 31, 2024, as compared to 0.87% for the prior year.
We have grown organically as well as through strategic acquisitions as discussed previously in "Recent Developments and Acquisitions". 2025 Financial Highlights: • Return on average assets was 0.89% for the year ended December 31, 2025, as compared to 0.63% for the prior year.
Yields on tax-exempt investments have been adjusted to a taxable equivalent basis using a 23.35% tax rate. Nearly all of our $1.9 billion in AFS mortgage-backed securities at December 31, 2024 were issued by the FHLMC, FNMA, GNMA, or the SBA, each of which is a government agency or a GSE and guarantees the repayment of the securities.
Yields on tax-exempt investments have been adjusted to a taxable equivalent basis using a 23.05% tax rate. Nearly all of our $1.9 billion in AFS mortgage-backed securities at December 31, 2025 were issued by the FHLMC, FNMA, GNMA, or the SBA, each of which is a GSE and guarantees the repayment of the securities.
Additional discussion of the CECL method and our asset quality and credit metrics, which impact our provision for credit losses, is provided in the "Nonperforming Assets" and "Allowance for Credit Losses and Loan Loss Experience" sections following. Noninterest Income Our noninterest income amounted to $17.9 million in 2024, $57.3 million in 2023, and $67.8 million in 2022.
Additional discussion of the CECL method and our asset quality and credit metrics, which impact our provision for credit losses, is provided in the "Nonperforming Assets" and "Allowance for Credit Losses and Loan Loss Experience" sections following. Noninterest Income Our noninterest income amounted to $7.9 million in 2025, $17.9 million in 2024, and $57.3 million in 2023.
Business section, we do not have concentrations geographically or by CRE category. Nonperforming Assets NPAs include nonaccrual loans, modifications to borrowers in financial distress, loans past due 90 or more days and still accruing interest, foreclosed real estate and, prior to the adoption of ASU 2022-02, accruing TDRs.
Business section, we do not have concentrations geographically or by CRE category. Nonperforming Assets NPAs include nonaccrual loans, loans past due 90 days or more and still accruing interest, foreclosed real estate and, prior to the adoption of ASU 2022-02, accruing TDRs.
See additional discussion under "Recent Developments and Acquisitions" in Item 1. 58 Table of Contents
See additional discussion under "Recent Developments and Acquisitions" in Item 1. 56 Table of Contents
The following is a reconciliation of reported net interest income to tax- 36 Table of Contents equivalent net interest income and the resulting NIM as reported and on a tax-equivalent basis.
The following is a reconciliation of reported net interest income to tax-equivalent net interest income and the resulting NIM as reported and on a tax-equivalent basis.
On an individual account basis, there was a total of $185.0 million which was in excess of $250,000. This assessment of time deposit accounts does not evaluate total deposit relationships, account ownership types or other factors for determining the actual uninsured balances by customer.
On an individual account basis, there was a total of $159.9 million which was in excess of $250,000. This presentation of time deposit accounts does not evaluate total deposit relationships, account ownership types or other factors for determining the actual uninsured balances by customer.
The provision for loan losses was $18.8 million in 2024 and $19.8 million in 2023. The amount of provision recorded in each period was the amount required such that the total ACL reflected the appropriate balance as determined under the CECL model.
The provision for loan losses was $9.6 million in 2025 and $18.8 million in 2024. The amount of provision recorded in each period was the amount required such that the total ACL reflected the appropriate balance as determined under the CECL model.
For internal purposes, we evaluate our NIM on a tax-equivalent basis by adding the tax benefit realized from tax-exempt loans and securities to reported interest income, then dividing by total average earning assets.
For internal purposes, we evaluate our NIM on a tax-equivalent basis, which is a non-GAAP financial measure, by adding the tax benefit realized from tax-exempt loans and securities to reported interest income, then dividing by total average earning assets.
The decreased noninterest income for the year ended December 31, 2024 as compared to the same period in 2023 is a result of "Securities losses, net" in 2024 and lower "Other income, net," partially offset by increased "SBA loan sale gains." Details of the more significant components of noninterest income are presented in the table below.
The decreased noninterest income for the year ended December 31, 2025 as compared to the same period in 2024 is a result of increased "Securities losses, net," partially offset by increased "Other gains, net." Details of the more significant components of noninterest income are presented in the table below.
Our total nonperforming loans to total loans was 0.52% at December 31, 2024, while our total NPA ratio was 0.39% at that date. Additional discussion of the credit quality classification status of our loans is contained in Note 4 to our consolidated financial statements.
Our total nonperforming loans to total loans was 0.42% at December 31, 2025, while our total NPA ratio was 0.30% at that date. Additional discussion of the credit quality classification status of our loans is contained in Note 4 to our consolidated financial statements.
Performing special mention loans, which are still accruing interest, totaled $37.1 million and $44.1 million as of December 31, 2024 and 2023, respectively. In addition, loans that are in the risk category of "classified" which are still accruing interest totaled $34.0 million at December 31, 2024 and $22.0 million at December 31, 2023.
Performing special mention loans, which are still accruing interest, totaled $29.3 million and $37.1 million as of December 31, 2025 and 2024, respectively. In addition, loans that are in the risk category of "classified" which are still accruing interest totaled $22.2 million at December 31, 2025 and $34.0 million at December 31, 2024.
We provide diversified financial services primarily though the Bank, our principal subsidiary, including commercial and consumer banking services, mortgage lending, SBA lending, accounts receivable financing, and investment advisory services. As of December 31, 2024, the Bank had a 113 branch network in North Carolina and South Carolina and 1,371 full-time equivalent employees.
We provide diversified financial services primarily though the Bank, our principal subsidiary, including commercial and consumer banking services, mortgage lending, SBA lending, accounts receivable financing, and investment advisory services. As of December 31, 2025, the Bank had 113 branches in North Carolina and South Carolina and 1,353 full-time equivalent employees.
Included in this total are private-label commerical mortgage-backed securities of $0.7 million. Mortgage-backed securities vary in their repayment in correlation with the underlying pools of mortgage loans. At December 31, 2024, we held $520.0 million in securities classified as HTM, which are carried at amortized cost.
Included in this total are private-label commercial mortgage-backed securities of $0.7 million. Mortgage-backed securities vary in their repayment in correlation with the underlying pools of mortgage loans. At December 31, 2025, we held $513.1 million in securities classified as HTM, which are carried at amortized cost.
When a loan no longer shares similar risk characteristics with its segment, the loan is evaluated on an individual basis applying a DCF or asset approach for collateral-dependent loans.
The ACL is calculated using collectively evaluated pools for loans with similar risk characteristics applying the DCF method. When a loan no longer shares similar risk characteristics with its segment, the loan is evaluated on an individual basis applying a DCF or asset approach for collateral-dependent loans.
In 2024, the most significant factors that impacted our shareholders' equity were (1) $76.2 million net income reported for 2024, which increased equity, (2) common stock dividends declared of $36.3 million, which reduced equity; and (3) $26.0 million increase in equity related to changes in AOCI driven by lower unrealized losses on AFS securities.
In 2025, the most significant factors that impacted our shareholders' equity were (1) $111.0 million net income reported for 2025, which increased equity, (2) common stock dividends declared of $37.7 million, which reduced equity; and (3) $132.7 million increase in equity related to changes in AOCI driven by lower unrealized losses on AFS securities.
At December 31, 2024, our leverage ratio was 11.15% compared to the regulatory well capitalized bank-level threshold of 4.00% and our total risk-based capital ratio was 16.63% compared to the 10.50% regulatory well capitalized threshold.
At December 31, 2025, our leverage ratio was 11.21% compared to the regulatory well capitalized bank-level threshold of 4.00% and our total risk-based capital ratio was 16.12% compared to the 10.50% regulatory well capitalized threshold.
Year ended December 31, ($ in thousands) 2024 2023 2022 Interest income – increased by accretion of loan discount on acquired loans $ 8,938 $ 11,507 $ 5,621 Total interest income impact 8,938 11,507 5,621 Interest expense – (increased) reduced by (discount accretion) premium amortization of deposits (826) (3,101) 593 Interest expense – increased by discount accretion of borrowings (767) (842) (254) Total net interest expense impact (1,593) (3,943) 339 Impact on net interest income $ 7,345 $ 7,564 $ 5,960 The most significant component of the purchase accounting adjustments in each year was loan discount accretion on purchased loans.
Year ended December 31, ($ in thousands) 2025 2024 2023 Interest income – increased by accretion of loan discount on acquired loans $ 6,128 $ 8,938 $ 11,507 Total interest income impact 6,128 8,938 11,507 Interest expense – (increased) reduced by (discount accretion) premium amortization of deposits (344) (826) (3,101) Interest expense – increased by discount accretion of borrowings (743) (767) (842) Total net interest expense impact (1,087) (1,593) (3,943) Impact on net interest income $ 5,041 $ 7,345 $ 7,564 The most significant component of the purchase accounting adjustments in each year was loan discount accretion on purchased loans.
See Note 1 to our consolidated financial statements for a discussion of recent rule proposals and changes. 57 Table of Contents Selected Financial Information Year Ended December 31, ($ in thousands, except per share data) 2024 2023 2022 2021 2020 Income Statement Data Interest income $ 519,240 $ 488,944 $ 341,118 $ 255,918 $ 237,684 Interest expense 186,967 142,101 16,103 9,523 19,562 Net interest income 332,273 346,843 325,015 246,395 218,122 Provision for credit losses 16,448 17,813 12,400 15,031 35,039 Net interest income after provision 315,825 329,030 312,615 231,364 183,083 Noninterest income 17,899 57,305 67,824 73,611 81,346 Noninterest expense 235,607 254,379 195,220 184,656 161,298 Income before income taxes 98,117 131,956 185,219 120,319 103,131 Income tax expense 21,902 27,825 38,283 24,675 21,654 Net income 76,215 104,131 146,936 95,644 81,477 Per Common Share Data Earnings per common share – basic $ 1.85 $ 2.54 $ 4.12 $ 3.19 $ 2.81 Earnings per common share – diluted 1.84 2.53 4.12 3.19 2.81 Cash dividends declared 0.88 0.88 0.88 0.80 0.72 Market Price High 49.20 43.24 49.00 50.92 40.00 Low 29.79 26.48 32.90 32.47 17.32 Close 43.97 37.01 42.84 45.72 33.83 Stated book value – common 34.96 33.38 28.89 34.54 31.26 Common shares outstanding at year end 41,347,418 41,109,987 35,704,154 35,629,177 28,579,335 Selected Balance Sheet Data (at year end) Total assets $ 12,147,694 $ 12,114,942 $ 10,625,049 $ 10,508,901 $ 7,289,751 Loans 8,094,676 8,150,102 6,665,145 6,081,715 4,731,315 Allowance for credit losses (122,572) (109,853) 90,967 78,789 52,388 Intangible assets 501,654 508,257 372,933 376,618 248,850 Deposits 10,530,525 10,031,599 9,227,529 9,124,629 6,273,596 Borrowings 91,876 630,158 287,507 67,386 61,829 Total shareholders’ equity 1,445,611 1,372,380 1,031,596 1,230,575 893,421 Selected Average Balances Total assets 12,134,495 12,033,033 10,556,772 8,495,645 6,765,998 Loans 8,046,681 7,902,628 6,293,319 5,018,391 4,702,743 Earning assets 11,508,581 11,433,492 9,989,242 7,871,319 6,160,100 Deposits 10,408,082 10,176,966 9,283,527 7,401,910 5,644,290 Interest-bearing liabilities 7,274,014 7,037,105 5,758,001 4,736,343 3,897,912 Total shareholders’ equity 1,416,461 1,293,085 1,097,385 969,775 874,532 Ratios Return on average assets 0.63 % 0.87 % 1.39 % 1.13 % 1.20 % Return on average common equity 5.38 % 8.05 % 13.40 % 9.86 % 9.32 % Total risk-based capital ratio 16.63 % 15.54 % 15.09 % 14.67 % 15.37 % Net interest margin (taxable-equivalent basis) 2.91 % 3.06 % 3.28 % 3.16 % 3.56 % Loans to deposits at year end 76.87 % 81.24 % 72.23 % 66.65 % 75.42 % Allowance for loan losses to total loans 1.51 % 1.35 % 1.36 % 1.30 % 1.11 % Nonperforming assets to total assets at year end 0.39 % 0.37 % 0.36 % 0.50 % 0.64 % Net (charge-offs) recoveries to average total loans (0.07 %) (0.08 %) (0.01 %) (0.05 %) (0.09 %) Note - During both 2023 and 2021, the Company completed significant acquisitions impacting the comparisons for each of those years.
See Note 1 to our consolidated financial statements for a discussion of recent rule proposals and changes. 55 Table of Contents Selected Financial Information Year Ended December 31, ($ in thousands, except per share data) 2025 2024 2023 2022 2021 Income Statement Data Interest income $ 557,235 $ 519,240 $ 488,944 $ 341,118 $ 255,918 Interest expense 158,988 186,967 142,101 16,103 9,523 Net interest income 398,247 332,273 346,843 325,015 246,395 Provision for credit losses 11,502 16,448 17,813 12,400 15,031 Net interest income after provision 386,745 315,825 329,030 312,615 231,364 Noninterest income (7,935) 17,899 57,305 67,824 73,611 Noninterest expense 239,310 235,607 254,379 195,220 184,656 Income before income taxes 139,500 98,117 131,956 185,219 120,319 Income tax expense 28,452 21,902 27,825 38,283 24,675 Net income 111,048 76,215 104,131 146,936 95,644 Per Common Share Data Earnings per common share – basic $ 2.68 $ 1.85 $ 2.54 $ 4.12 $ 3.19 Earnings per common share – diluted 2.68 1.84 2.53 4.12 3.19 Cash dividends declared 0.91 0.88 0.88 0.88 0.80 Market Price High 55.55 49.20 43.24 49.00 50.92 Low 36.02 29.79 26.48 32.90 32.47 Close 50.79 43.97 37.01 42.84 45.72 Stated book value – common 39.89 34.96 33.38 28.89 34.54 Common shares outstanding at year end 41,466,227 41,347,418 41,109,987 35,704,154 35,629,177 Selected Balance Sheet Data (at year end) Total assets $ 12,668,339 $ 12,147,694 $ 12,114,942 $ 10,625,049 $ 10,508,901 Loans 8,722,419 8,094,676 8,150,102 6,665,145 6,081,715 Allowance for credit losses (123,581) (122,572) (109,853) 90,967 78,789 Intangible assets 495,982 501,654 508,257 372,933 376,618 Deposits 10,748,421 10,530,525 10,031,599 9,227,529 9,124,629 Borrowings 74,569 91,876 630,158 287,507 67,386 Total shareholders’ equity 1,654,168 1,445,611 1,372,380 1,031,596 1,230,575 Selected Average Balances Total assets 12,512,030 12,134,495 12,033,033 10,556,772 8,495,645 Loans 8,283,246 8,046,681 7,902,628 6,293,319 5,018,391 Earning assets 11,699,360 11,508,581 11,433,492 9,989,242 7,871,319 Deposits 10,752,463 10,408,082 10,176,966 9,283,527 7,401,910 Interest-bearing liabilities 7,335,923 7,274,014 7,037,105 5,758,001 4,736,343 Total shareholders’ equity 1,549,873 1,416,461 1,293,085 1,097,385 969,775 Ratios Return on average assets 0.89 % 0.63 % 0.87 % 1.39 % 1.13 % Return on average common equity 7.16 % 5.38 % 8.05 % 13.40 % 9.86 % Total risk-based capital ratio 16.12 % 16.63 % 15.54 % 15.09 % 14.67 % Net interest margin 3.40 % 2.89 % 3.03 % 3.25 % 3.13 % Net interest margin (taxable-equivalent basis) 3.42 % 2.93 % 3.06 % 3.28 % 3.16 % Loans to deposits at year end 81.15 % 76.87 % 81.24 % 72.23 % 66.65 % Allowance for loan losses to total loans 1.42 % 1.51 % 1.35 % 1.36 % 1.30 % Nonperforming assets to total assets at year end 0.30 % 0.30 % 0.27 % 0.36 % 0.50 % Net (charge-offs) recoveries to average total loans (0.10 %) (0.07 %) (0.08 %) (0.01 %) (0.05 %) Note - During both 2023 and 2021, the Company completed significant acquisitions impacting the comparisons for each of those years.
Liquidity is evaluated as both on-balance sheet (primarily cash and cash-equivalents, unpledged securities, and other marketable assets) and off-balance sheet (readily available lines of credit or other funding sources). Our overall on-balance sheet liquidity ratio was 17.6% at December 31, 2024. Our total liquidity ratio, including the $2.4 billion in available lines of credit, was 34.9% as of that date.
Liquidity is evaluated as both on-balance sheet (primarily cash and cash-equivalents, unpledged securities, and other marketable assets) and off-balance sheet (readily available lines of credit or other funding sources). Our overall on-balance sheet liquidity ratio was 14.9% at December 31, 2025. Our total liquidity ratio, including the $2.5 billion in available lines of credit, was 32.8% as of that date.
The higher effective tax rate for 2024 was attributable primarily to incremental state tax-related expense related to prior years, changes in state tax income apportionment, and the negative impact of decreasing deferred tax assets related to the North Carolina corporate income tax reduction effective January 1, 2025 and for future years.
The effective tax rate for 2024 included incremental state tax-related expense related to prior years, changes in state tax income apportionment, and the negative impact of 41 Table of Contents decreasing deferred tax assets related to the North Carolina corporate income tax reduction effective January 1, 2025 and for future years.
Allocation of the Allowance for Credit Losses As of December 31, ($ in thousands) 2024 % of Loan Category 2023 % of Loan Category 2022 % of Loan Category 2021 % of Loan Category 2020 % of Loan Category Commercial and industrial $ 19,474 2.12 % $ 21,227 2.34 % $ 17,718 2.76 % $ 16,249 2.50 % $ 11,316 1.45 % Construction, development & other land loans 9,314 1.44 % 13,940 1.40 % 15,128 1.62 % 16,519 1.99 % 5,355 0.94 % Commercial real estate - owner occupied 19,380 1.55 % 18,218 1.45 % 14,972 1.44 % 12,317 1.24 % 10,608 1.41 % Commercial real estate - non owner occupied 27,768 1.06 % 24,916 0.99 % 22,780 1.07 % 16,789 0.93 % 11,465 1.05 % Multi-family real estate 5,476 1.08 % 3,825 0.91 % 2,957 0.84 % 1,236 0.32 % 1,530 0.77 % Residential 1-4 family real estate 33,552 1.94 % 21,396 1.31 % 11,354 0.95 % 8,686 0.85 % 8,048 0.83 % Home equity loans/lines of credit 4,111 1.19 % 3,339 1.00 % 3,158 0.98 % 4,337 1.31 % 2,375 0.78 % Consumer loans 3,497 4.95 % 2,992 4.37 % 2,900 4.78 % 2,656 4.64 % 1,478 2.74 % Total allocated 122,572 109,853 90,967 78,789 52,175 Unallocated — n/a — n/a — n/a — n/a 213 n/a Total $ 122,572 1.51 % $ 109,853 1.35 % $ 90,967 1.36 % $ 78,789 1.30 % $ 52,388 1.11 % Note: "% of Loan Category" represents the ACL as a percent of the respective total loan categories presented previously in the Loan Portfolio Composition table. n/a - not applicable 49 Table of Contents For the years indicated, the following table summarized our net loss experience by loan category and key ratios demonstrating the asset quality trends over the most recent five years.
Allocation of the Allowance for Credit Losses As of December 31, ($ in thousands) 2025 % of Loan Category 2024 % of Loan Category 2023 % of Loan Category 2022 % of Loan Category 2021 % of Loan Category Commercial and industrial $ 20,044 1.92 % $ 19,474 2.12 % $ 21,227 2.34 % $ 17,718 2.76 % $ 16,249 2.50 % Construction, development & other land loans 11,465 1.52 % 9,314 1.44 % 13,940 1.40 % 15,128 1.62 % 16,519 1.99 % Commercial real estate - owner occupied 20,298 1.50 % 19,380 1.55 % 18,218 1.45 % 14,972 1.44 % 12,317 1.24 % Commercial real estate - non owner occupied 25,017 0.88 % 27,768 1.06 % 24,916 0.99 % 22,780 1.07 % 16,789 0.93 % Multi-family real estate 5,205 0.97 % 5,476 1.08 % 3,825 0.91 % 2,957 0.84 % 1,236 0.32 % Residential 1-4 family real estate 34,068 1.96 % 33,552 1.94 % 21,396 1.31 % 11,354 0.95 % 8,686 0.85 % Home equity loans/lines of credit 3,519 0.92 % 4,111 1.19 % 3,339 1.00 % 3,158 0.98 % 4,337 1.31 % Consumer loans 3,965 5.88 % 3,497 4.95 % 2,992 4.37 % 2,900 4.78 % 2,656 4.64 % Total $ 123,581 1.42 % $ 122,572 1.51 % $ 109,853 1.35 % $ 90,967 1.36 % $ 78,789 1.30 % Note: "% of Loan Category" represents the ACL as a percent of the respective total loan categories presented previously in the Loan Portfolio Composition table. 47 Table of Contents For the years indicated, the following table summarized the net loss experience by loan category and key ratios demonstrating the asset quality trends over the most recent five years.
When coupled with deposits collateralized by investment securities with balances totaling $690.5 million and $820.9 million as of December 31, 2024 and December 31, 2023, respectively, approximately 67.6% and 71.5% of our total deposits were insured or collateralized as December 31, 2024 and December 31, 2023, respectively. We do not take deposits through foreign offices.
When coupled with deposits collateralized by investment securities with balances totaling $730.4 million and $690.5 million as of December 31, 2025 and December 31, 2024, respectively, approximately 67.0% and 67.6% of our total deposits were insured or collateralized at December 31, 2025 and December 31, 2024, respectively. We do not take deposits through foreign offices.
At December 31, 2024 and 2023, unaccreted loan discount on purchased loans amounted to $15.1 million and $24.0 million, respectively. The GrandSouth acquired portfolio comprises the majority of the remaining unaccreted loan discount at December 31, 2024. 38 Table of Contents The following table presents the major components of the net interest income and NIM.
At December 31, 2025 and 2024, unaccreted loan discount on purchased loans amounted to $8.8 million and $15.1 million, respectively. The GrandSouth acquired portfolio comprised the majority of the remaining unaccreted loan discount at December 31, 2025. 37 Table of Contents The following table presents the major components of net interest income and NIM.
As shown in Note 4 to the consolidated financial statements, our accruing past due loans (30 or more days) totaled $38.0 million at December 31, 2024, with the majority (52.8%) being in the residential 1-4 family real estate category.
As shown in Note 4 to the consolidated financial statements, our accruing past due loans (30 or more days) totaled $18.5 million at December 31, 2025, with the majority (55.4%) being in the Residential 1-4 family real estate category.
Loan Ratios, Loss and Recovery Experience As of December 31, ($ in thousands) 2024 2023 2022 2021 2020 Loans outstanding at end of year $ 8,094,676 $ 8,150,102 $ 6,665,145 $ 6,081,715 $ 4,731,315 Average amount of loans outstanding 8,046,681 7,902,628 6,293,280 5,018,391 4,702,743 Allowance for credit losses, at end of year 122,572 109,853 90,967 78,789 52,388 Net loan (charge-offs) recoveries Commercial and industrial $ (4,915) $ (6,965) $ (1,763) $ (1,978) $ (4,863) Construction, development & other land loans 150 250 480 703 1,501 Commercial real estate - owner occupied (187) 321 477 (212) (335) Commercial real estate - non owner occupied (355) 502 432 (1,562) (24) Multi-family real estate — 13 11 12 12 Residential 1-4 family real estate 292 373 17 488 276 Home equity loans/lines of credit 270 (211) 557 178 (37) Consumer loans (1,287) (757) (633) (309) (579) Total net charge-offs $ (6,032) $ (6,474) $ (422) $ (2,680) $ (4,049) Average loans Commercial and industrial $ 877,989 $ 865,043 $ 619,480 $ 700,557 $ 707,976 Construction, development & other land loans 810,564 1,053,422 857,880 619,928 615,717 Commercial real estate - owner occupied 1,239,411 1,224,284 1,012,275 812,764 776,166 Commercial real estate - non owner occupied 2,552,146 2,464,389 1,968,944 1,322,685 1,012,182 Multi-family real estate 466,588 402,814 357,491 256,396 193,415 Residential 1-4 family real estate 1,696,449 1,482,941 1,091,788 951,573 1,028,334 Home equity loans/lines of credit 331,995 341,778 326,592 300,291 316,593 Consumer loans 71,539 67,957 58,830 54,197 52,360 Total average loans $ 8,046,681 $ 7,902,628 $ 6,293,280 $ 5,018,391 $ 4,702,743 Ratios Allowance for credit losses as a percent of loans at end of year 1.51 % 1.35 % 1.36 % 1.30 % 1.11 % Allowance for credit losses as a multiple of net charge-offs 20.32 16.97 215.56 29.40 12.94 Provision for loan losses as a percent of net charge-offs 310.86 % 305.07 % 2,985.78 % 358.62% 865.37% Recoveries of loans previously charged-off as a percent of loans charged-off 37.08 % 36.37 % 90.55 % 64.75 % 52.38 % Total net charge-offs as a percent of average loans (0.07 %) (0.08 %) (0.01 %) (0.05 %) (0.09 %) Net (charge-offs) recoveries by loan category as a percent of average loans: Commercial and industrial (0.56 %) (0.81 %) (0.28 %) (0.28 %) (0.69 %) Construction, development & other land loans 0.02 % 0.02 % 0.06 % 0.11 % 0.24 % Commercial real estate - owner occupied (0.02 %) 0.03 % 0.05 % (0.03 %) (0.04 %) Commercial real estate - non owner occupied (0.01 %) 0.02 % 0.02 % (0.12 %) — % Multi-family real estate — % — % — % — % 0.01 % Residential 1-4 family real estate 0.02 % 0.03 % — % 0.05 % 0.03 % Home equity loans/lines of credit 0.08 % (0.06 %) 0.17 % 0.06 % (0.01 %) Consumer loans (1.80 %) (1.11 %) (1.08 %) (0.57 %) (1.11 %) 50 Table of Contents Securities Our securities portfolio and the breakout of AFS and HTM securities is presented in the following table.
Loan Ratios, Loss and Recovery Experience As of December 31, ($ in thousands) 2025 2024 2023 2022 2021 Loans outstanding at end of year $ 8,722,419 $ 8,094,676 $ 8,150,102 $ 6,665,145 $ 6,081,715 Average amount of loans outstanding 8,283,246 8,046,681 7,902,628 6,293,280 5,018,391 Allowance for credit losses, at end of year 123,581 122,572 109,853 90,967 78,789 Net loan (charge-offs) recoveries Commercial and industrial $ (5,724) $ (4,915) $ (6,965) $ (1,763) $ (1,978) Construction, development & other land loans 168 150 250 480 703 Commercial real estate - owner occupied (1,182) (187) 321 477 (212) Commercial real estate - non owner occupied (900) (355) 502 432 (1,562) Multi-family real estate — — 13 11 12 Residential 1-4 family real estate 320 292 373 17 488 Home equity loans/lines of credit 14 270 (211) 557 178 Consumer loans (1,251) (1,287) (757) (633) (309) Total net charge-offs $ (8,555) $ (6,032) $ (6,474) $ (422) $ (2,680) Average loans Commercial and industrial $ 928,407 $ 877,989 $ 865,043 $ 619,480 $ 700,557 Construction, development & other land loans 671,208 810,564 1,053,422 857,880 619,928 Commercial real estate - owner occupied 1,281,633 1,239,411 1,224,284 1,012,275 812,764 Commercial real estate - non owner occupied 2,732,414 2,552,146 2,464,389 1,968,944 1,322,685 Multi-family real estate 518,659 466,588 402,814 357,491 256,396 Residential 1-4 family real estate 1,724,566 1,696,449 1,482,941 1,091,788 951,573 Home equity loans/lines of credit 357,299 331,995 341,778 326,592 300,291 Consumer loans 69,060 71,539 67,957 58,830 54,197 Total average loans $ 8,283,246 $ 8,046,681 $ 7,902,628 $ 6,293,280 $ 5,018,391 Ratios Allowance for credit losses as a percent of loans at end of year 1.42 % 1.51 % 1.35 % 1.36 % 1.30 % Allowance for credit losses as a multiple of net charge-offs 14.45 20.32 16.97 215.56 29.40 Provision for loan losses as a percent of net charge-offs 111.79 % 310.86 % 305.07 % 2,985.78 % 358.62 % Recoveries of loans previously charged-off as a percent of loans charged-off 26.43 % 37.08 % 36.37 % 90.55 % 64.75 % Total net charge-offs as a percent of average loans (0.10 %) (0.07 %) (0.08 %) (0.01 %) (0.05 %) Net (charge-offs) recoveries by loan category as a percent of average loans: Commercial and industrial (0.62 %) (0.56 %) (0.81 %) (0.28 %) (0.28 %) Construction, development & other land loans 0.03 % 0.02 % 0.02 % 0.06 % 0.11 % Commercial real estate - owner occupied (0.09 %) (0.02 %) 0.03 % 0.05 % (0.03 %) Commercial real estate - non owner occupied (0.03 %) (0.01 %) 0.02 % 0.02 % (0.12 %) Multi-family real estate — % — % — % — % — % Residential 1-4 family real estate 0.02 % 0.02 % 0.03 % — % 0.05 % Home equity loans/lines of credit — % 0.08 % (0.06 %) 0.17 % 0.06 % Consumer loans (1.81 %) (1.80 %) (1.11 %) (1.08 %) (0.57 %) 48 Table of Contents Securities Our securities portfolio and the breakout of AFS and HTM securities is presented in the following table.
For example, inflationary pressures and recessionary concerns leading to macroeconomic economic deterioration, higher unemployment and declines in real estate and other asset valuations could affect our loss experience and assumptions utilized in our model.
Actual losses incurred may differ materially from our estimates. For example, inflationary pressures and recessionary concerns leading to macroeconomic economic deterioration, higher unemployment and declines in real estate and other asset valuations could affect our loss experience and assumptions utilized in our model.
Deposit Composition As of December 31, 2024 2023 2022 2021 2020 ($ in thousands) Amount % of Total Amount % of Total Amount % of Total Amount % of Total Amount % of Total Noninterest-bearing checking accounts $ 3,367,624 32 % $ 3,379,876 34 % $ 3,566,003 39 % $ 3,348,622 37 % $ 2,210,012 35 % Interest-bearing checking accounts 1,398,395 13 % 1,411,142 14 % 1,514,166 16 % 1,593,231 17 % 1,172,022 19 % Money market accounts 4,285,405 41 % 3,653,506 36 % 2,416,146 26 % 2,562,283 28 % 1,581,364 25 % Savings accounts 542,133 5 % 608,380 6 % 728,641 8 % 708,054 8 % 519,266 8 % Other time deposits 566,514 5 % 610,887 6 % 464,343 5 % 547,669 6 % 415,269 7 % Time deposits >$250,000 360,854 4 % 355,209 4 % 276,319 3 % 357,355 4 % 355,441 6 % Total customer deposits 10,520,925 100 % 10,019,000 100 % 8,965,618 97 % 9,117,214 100 % 6,253,374 100 % Brokered Deposits 9,600 — % 12,599 — % 261,911 3 % 7,415 — % 20,222 — % Total deposits $ 10,530,525 100 % $ 10,031,599 100 % $ 9,227,529 100 % $ 9,124,629 100 % $ 6,273,596 100 % While our customer deposits have remained fairly stable, there continues to be competition for deposits by both in-market and out-of-market competitors.
Deposit Composition As of December 31, 2025 2024 2023 2022 2021 ($ in thousands) Amount % of Total Amount % of Total Amount % of Total Amount % of Total Amount % of Total Noninterest-bearing checking accounts $ 3,486,985 32 % $ 3,367,624 32 % $ 3,379,876 34 % $ 3,566,003 39 % $ 3,348,622 37 % Interest-bearing checking accounts 1,420,795 13 % 1,398,395 13 % 1,411,142 14 % 1,514,166 16 % 1,593,231 17 % Money market accounts 4,510,356 42 % 4,285,405 41 % 3,653,506 36 % 2,416,146 26 % 2,562,283 28 % Savings accounts 526,643 5 % 542,133 5 % 608,380 6 % 728,641 8 % 708,054 8 % Other time deposits 493,282 5 % 566,514 5 % 610,887 6 % 464,343 5 % 547,669 6 % Time deposits >$250,000 305,473 3 % 360,854 4 % 355,209 4 % 276,319 3 % 357,355 4 % Total customer deposits 10,743,534 100 % 10,520,925 100 % 10,019,000 100 % 8,965,618 97 % 9,117,214 100 % Brokered Deposits 4,887 — % 9,600 — % 12,599 — % 261,911 3 % 7,415 — % Total deposits $ 10,748,421 100 % $ 10,530,525 100 % $ 10,031,599 100 % $ 9,227,529 100 % $ 9,124,629 100 % While our customer deposits have remained fairly stable, there continues to be competition for deposits by both in-market and out-of-market competitors.
Loan Portfolio Composition As of December 31, 2024 2023 2022 2021 2020 ($ in thousands) Amount % of Total Loans Amount % of Total Loans Amount % of Total Loans Amount % of Total Loans Amount % of Total Loans Commercial and industrial $ 919,690 11 % $ 905,862 11 % $ 641,941 9 % $ 648,997 11 % $ 782,549 17 % Construction, development & other land loans 647,167 8 % 992,980 12 % 934,176 14 % 828,549 13 % 570,672 12 % Commercial real estate - owner occupied 1,248,812 16 % 1,259,022 16 % 1,036,270 16 % 991,775 16 % 754,570 16 % Commercial real estate - non owner occupied 2,625,554 33 % 2,528,060 31 % 2,123,811 32 % 1,813,849 31 % 1,096,781 23 % Multi-family real estate 506,407 6 % 421,376 5 % 350,180 5 % 389,113 6 % 197,852 4 % Residential 1-4 family real estate 1,729,322 21 % 1,639,469 20 % 1,195,785 18 % 1,021,966 17 % 972,378 21 % Home equity loans/lines of credit 345,883 4 % 335,068 4 % 323,726 5 % 331,932 5 % 306,256 6 % Consumer loans 70,653 1 % 68,443 1 % 60,659 1 % 57,238 1 % 53,955 1 % Loans, gross 8,093,488 100 % 8,150,280 100 % 6,666,548 100 % 6,083,419 100 % 4,735,013 100 % Unamortized net deferred loan (fees) costs 1,188 (178) (1,403) (1,704) (3,698) Total loans $ 8,094,676 $ 8,150,102 $ 6,665,145 $ 6,081,715 $ 4,731,315 The majority of our loan portfolio over the years has been real estate mortgage loans, including commercial and residential mortgages.
Loan Portfolio Composition As of December 31, 2025 2024 2023 2022 2021 ($ in thousands) Amount % of Total Loans Amount % of Total Loans Amount % of Total Loans Amount % of Total Loans Amount % of Total Loans Commercial and industrial $ 1,046,438 12 % $ 919,690 11 % $ 905,862 11 % $ 641,941 9 % $ 648,997 11 % Construction, development & other land loans 753,199 9 % 647,167 8 % 992,980 12 % 934,176 14 % 828,549 13 % Commercial real estate - owner occupied 1,353,912 15 % 1,248,812 16 % 1,259,022 16 % 1,036,270 16 % 991,775 16 % Commercial real estate - non owner occupied 2,843,555 33 % 2,625,554 33 % 2,528,060 31 % 2,123,811 32 % 1,813,849 31 % Multi-family real estate 537,015 6 % 506,407 6 % 421,376 5 % 350,180 5 % 389,113 6 % Residential 1-4 family real estate 1,736,453 20 % 1,729,322 21 % 1,639,469 20 % 1,195,785 18 % 1,021,966 17 % Home equity loans/lines of credit 383,652 4 % 345,883 4 % 335,068 4 % 323,726 5 % 331,932 5 % Consumer loans 67,458 1 % 70,653 1 % 68,443 1 % 60,659 1 % 57,238 1 % Loans, gross 8,721,682 100 % 8,093,488 100 % 8,150,280 100 % 6,666,548 100 % 6,083,419 100 % Unamortized net deferred loan (fees) costs 737 1,188 (178) (1,403) (1,704) Total loans $ 8,722,419 $ 8,094,676 $ 8,150,102 $ 6,665,145 $ 6,081,715 The majority of our loan portfolio over the years has been real estate mortgage loans, including commercial and residential mortgages.
"Commercial and industrial" is the largest category of nonaccrual loans, at $9.8 million, or 30.9% of total nonaccrual loans, followed by "Residential 1-4 family real estate" at $9.5 million, or 29.9% of total nonaccrual loans and "Commercial real estate - owner occupied" at $9.4 million, or 29.5% of total nonaccrual loans.
"Commercial real estate - owner occupied" is the largest category of nonaccrual loans, at $13.5 million, or 37.1% of total nonaccrual loans, followed by "Commercial and industrial" at $9.1 million, or 25.1% of total nonaccrual loans, and "Residential 1-4 family real estate" at $5.9 million, or 16.3% of total nonaccrual loans.
These securities had fair values that were lower than their carrying values by $91.4 million at December 31, 2024. Approximately $9.2 million of the HTM securities were mortgage-backed securities that have been issued by either the FHLMC or FNMA.
These securities had fair values that were lower than their carrying values by $64.6 million at December 31, 2025. Approximately $6.7 million of the HTM securities were mortgage-backed securities that have been issued by either the FHLMC or FNMA.
As of December 31, 2024, SBA loans accounted for approximately $15.5 million of our nonaccrual loans, or 11.4%, of the total SBA portfolio, and carried guarantees from the SBA totaling $7.4 million. This is compared to $18.2 million, or 12.7%, of the SBA portfolio at December 31, 2023.
As of December 31, 2025, SBA loans accounted for approximately $14.8 million of our nonaccrual loans, or 9.1%, of the total SBA portfolio, and carried guarantees from the SBA totaling $7.3 million. This is compared to $15.5 million, or 11.4%, of the SBA portfolio at December 31, 2024.
As of December 31, 2024 and December 31, 2023, the estimated uninsured deposits we held totaled approximately $4.1 billion and $3.7 billion, respectively. As of December 31, 2024 and December 31, 2023, respectively, our insured were $6.4 billion, or 61.0% of total deposits, and $6.3 billion or 63.3% of total deposits.
As of December 31, 2025 and December 31, 2024, the estimated uninsured deposits we held totaled approximately $4.3 billion and $4.1 billion, respectively. As of December 31, 2025 and December 31, 2024, respectively, our insured deposits were estimated to be $6.5 billion, or 60.2% of total deposits, and $6.4 billion or 61.0% of total deposits.
Risk-Based and Leverage Capital Ratios As of December 31, ($ in thousands) 2024 2023 2022 Risk-Based and Leverage Capital Common Equity Tier I capital: Shareholders’ equity $ 1,445,611 $ 1,372,380 $ 1,031,596 Intangible assets, net of deferred tax liability (487,660) (493,383) (363,202) Accumulated other comprehensive income adjustments 282,029 308,030 341,975 Total Common Equity Tier I capital 1,239,980 1,187,027 1,010,369 Add: Trust preferred securities eligible for Tier I capital treatment 71,148 70,807 63,589 Total Tier I leverage capital 1,311,128 1,257,834 1,073,958 Tier II capital: Add: Allowable allowance for credit losses and unfunded commitments 108,320 112,491 97,126 Add: Subordinated debentures eligible for Tier II capital treatment 17,602 27,177 — Tier II capital additions 125,922 139,668 97,126 Total capital $ 1,437,050 $ 1,397,502 $ 1,171,084 Total risk weighted assets $ 8,642,315 $ 8,991,087 $ 7,762,894 Adjusted fourth quarter average tangible assets $ 11,756,111 $ 11,532,812 $ 10,215,571 Risk-based and Leverage capital ratios: Common equity Tier I capital to Tier I risk adjusted assets 14.35 % 13.20 % 13.02 % Tier I capital to Tier I risk adjusted assets 15.17 % 13.99 % 13.83 % Total risk-based capital to Tier II risk-adjusted assets 16.63 % 15.54 % 15.09 % Tier I leverage capital to adjusted fourth quarter average assets 11.15 % 10.91 % 10.51 % Our goal is to maintain our capital ratios at levels at least 200 basis points higher than the regulatory “well capitalized” thresholds set for banks.
Risk-Based and Leverage Capital Ratios As of December 31, ($ in thousands) 2025 2024 2023 Risk-Based and Leverage Capital Common Equity Tier I capital: Shareholders’ equity $ 1,654,168 $ 1,445,611 $ 1,372,380 Intangible assets, net of deferred tax liability (483,644) (487,660) (493,383) Accumulated other comprehensive income adjustments 149,375 282,029 308,030 Total Common Equity Tier I capital 1,319,899 1,239,980 1,187,027 Add: Trust preferred securities eligible for Tier I capital treatment 71,493 71,148 70,807 Total Tier I leverage capital 1,391,392 1,311,128 1,257,834 Tier II capital: Add: Allowable allowance for credit losses and unfunded commitments 117,202 108,320 112,491 Add: Subordinated debentures eligible for Tier II capital treatment — 17,602 27,177 Tier II capital additions 117,202 125,922 139,668 Total capital $ 1,508,594 $ 1,437,050 $ 1,397,502 Total risk weighted assets $ 9,358,794 $ 8,642,315 $ 8,991,087 Adjusted fourth quarter average tangible assets $ 12,407,330 $ 11,756,111 $ 11,532,812 Risk-based and Leverage capital ratios: Common equity Tier I capital to Tier I risk adjusted assets 14.10 % 14.35 % 13.20 % Tier I capital to Tier I risk adjusted assets 14.87 % 15.17 % 13.99 % Total risk-based capital to Tier II risk-adjusted assets 16.12 % 16.63 % 15.54 % Tier I leverage capital to adjusted fourth quarter average assets 11.21 % 11.15 % 10.91 % Our goal is to maintain our capital ratios at levels at least 200 basis points higher than the regulatory “well capitalized” thresholds set for banks.
Our borrowings outstanding as of the dates presented were as follows: ($ in thousands) December 31, 2024 December 31, 2023 FHLB advances $ 802 $ 280,851 FRB borrowings — 249,000 Trust preferred capital issuances 77,324 77,324 Subordinated debentures 18,000 28,000 96,126 635,175 Unamortized discounts on acquired borrowings (4,250) (5,017) $ 91,876 $ 630,158 As noted in the table above, at December 31, 2024, we had $77.3 million of borrowings structured as trust preferred capital securities which qualify as Tier I capital for regulatory capital adequacy requirements.
Our borrowings outstanding as of the dates presented were as follows: ($ in thousands) December 31, 2025 December 31, 2024 FHLB advances $ 753 $ 802 Trust preferred capital issuances 77,324 77,324 Subordinated debentures — 18,000 78,077 96,126 Unamortized discounts on acquired borrowings (3,508) (4,250) $ 74,569 $ 91,876 As noted in the table above, at December 31, 2025, we had $77.3 million of borrowings structured as trust preferred capital securities which qualify as Tier I capital for regulatory capital adequacy requirements.
In addition, we have long-term debt in the form of trust preferred securities and subordinated debentures and have the availability to borrow from the FHLB or FRB. 53 Table of Contents Total borrowings at December 31, 2024 decreased $538.3 million from the prior year end.
In addition, we have long-term debt in the form of trust preferred securities and have the availability to borrow from the FHLB or FRB. Total borrowings at December 31, 2025 decreased $17.3 million from the prior year end. During the year, the Company redeemed $18.0 million of subordinated debentures.
Except for construction, land development, and other land loans, the majority of our real estate loans are personal and commercial loans where cash flow from the borrower’s occupation or business is the primary repayment source, with the real estate pledged providing a secondary repayment source.
Except for construction, land development, and other land loans, the majority of our real estate loans are primarily supported by cash flows from the borrower’s occupation or business, with the real estate pledged providing a secondary repayment source.
The increase in available lines of credit during 2024 54 Table of Contents was a result of the redemption of FHLB advances along with additional loan and security collateral being transferred to the FHLB and the Federal Reserve to enhance the levels of off-balance sheet liquidity.
The increase in available lines of credit during 2025 52 Table of Contents was a result of additional loan and security collateral being transferred to the FHLB to enhance the levels of off-balance sheet liquidity.
($ in thousands) Year ended December 31, 2024 2023 2022 Net interest income, as reported $ 332,273 $ 346,843 $ 325,015 Tax-equivalent adjustment 2,983 2,694 2,780 Net interest income, tax-equivalent $ 335,256 $ 349,537 $ 327,795 Net interest margin, as reported 2.89 % 3.03 % 3.25 % Net interest margin, tax-equivalent 2.91 % 3.06 % 3.28 % Our total cost of deposits has been more impacted by the FOMC's changes in short term rates than the yield on our interest-earning assets.
($ in thousands) Year ended December 31, 2025 2024 2023 Net interest income, as reported $ 398,247 $ 332,273 $ 346,843 Tax-equivalent adjustment 1,389 2,983 2,694 Net interest income, tax-equivalent $ 399,636 $ 335,256 $ 349,537 Net interest margin, as reported 3.40 % 2.89 % 3.03 % Net interest margin, tax-equivalent 3.42 % 2.93 % 3.06 % Our total cost of deposits has been more impacted by the FOMC's changes in short term rates than the yield on our interest-earning assets.
The 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”).
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”).
Changes in the level of provision each year are generally related to fluctuations in the level of available credit lines and updated loss drivers. Within the portions of Western North and South Carolina that were significantly impacted by Hurricane Helene, the Company identified borrowers with approximately $744 million of loans outstanding as of December 31, 2024.
Changes in the level of provision each year are generally related to fluctuations in the level of available credit lines and updated loss drivers. 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.
Loans totaled $8.1 billion at December 31, 2024. • Credit quality continued to be strong with the NPA to total assets ratio at 0.39% as of December 31, 2024, as compared to 0.37% at December 31, 2023.
Loans totaled $8.7 billion at December 31, 2025. • Credit quality continued to be strong with the NPA to total assets ratio at 0.30% as of December 31, 2025, consistent with December 31, 2024.
We believe that the Bank can meet its contractual cash obligations and existing commitments from normal operations. Capital Resources and Shareholders’ Equity Shareholders’ equity at December 31, 2024 amounted to $1.4 billion, a $73.2 million, or 5.3%, incre ase from December 31, 2023.
We believe that the Bank can meet its contractual cash obligations and existing commitments from normal operations. Capital Resources and Shareholders’ Equity Shareholders’ equity at December 31, 2025 amounted to $1.7 billion, a $208.6 million, or 14.4%, increase from December 31, 2024.
As a matter of policy, we generally place all loans that are past due 90 or more days on nonaccrual basis. There were no accruing loans that were past due 90 or more days at December 31, 2024 and December 31, 2023.
As a matter of policy, we generally place all loans that are past due 90 or more days on nonaccrual basis. There were no accruing loans that were past due 90 days or more at December 31, 2025 and December 31, 2024. 44 Table of Contents The following table summarizes our NPAs at the dates indicated.
Nonperforming Assets As of December 31, ($ in thousands) 2024 2023 2022 2021 2020 Nonperforming assets Nonaccrual loans $ 31,779 $ 32,208 $ 28,514 $ 34,696 $ 35,076 Modifications to borrowers in financial distress 10,173 11,719 — — — TDRs - accruing — — 9,121 13,866 9,497 Accruing loans >90 days past due — — — 1,004 — Total nonperforming loans 41,952 43,927 37,635 49,566 44,573 Foreclosed real estate 4,965 862 658 3,071 2,424 Total nonperforming assets $ 46,917 $ 44,789 $ 38,293 $ 52,637 $ 46,997 Allowance for credit losses $ 122,572 $ 109,853 $ 90,967 $ 78,789 $ 52,388 Total Loans 8,094,676 8,150,102 6,665,145 6,081,715 4,731,315 Asset Quality Ratios Nonaccrual loans to total loans 0.39 % 0.40 % 0.43 % 0.57 % 0.74 % Nonperforming loans to total loans 0.52 % 0.54 % 0.56 % 0.82 % 0.94 % Nonperforming assets to total loans and foreclosed real estate 0.58 % 0.55 % 0.57 % 0.87 % 0.99 % Nonperforming assets to total assets 0.39 % 0.37 % 0.36 % 0.50 % 0.64 % Allowance for credit losses to total loans 1.51 % 1.35 % 1.36 % 1.30 % 1.11 % Allowance for credit losses to nonaccrual loans 385.70 % 341.07 % 319.03 % 227.08 % 149.36 % Allowance for credit losses to nonperforming loans 292.17 % 250.08 % 241.71 % 158.96 % 117.53 % Our asset quality continues to be strong as demonstrated by stable or improving trends in all ratios as presented in the table above.
Nonperforming Assets As of December 31, ($ in thousands) 2025 2024 2023 2022 2021 Nonperforming assets Nonaccrual loans $ 36,315 $ 31,779 $ 32,208 $ 28,514 $ 34,696 TDRs - accruing — — — 9,121 13,866 Accruing loans >90 days past due — — — — 1,004 Total nonperforming loans 36,315 31,779 32,208 37,635 49,566 Foreclosed real estate 1,425 4,965 862 658 3,071 Total nonperforming assets $ 37,740 $ 36,744 $ 33,070 $ 38,293 $ 52,637 Allowance for credit losses $ 123,581 $ 122,572 $ 109,853 $ 90,967 $ 78,789 Total Loans 8,722,419 8,094,676 8,150,102 6,665,145 6,081,715 Asset Quality Ratios Nonaccrual loans to total loans 0.42 % 0.39 % 0.40 % 0.43 % 0.57 % Nonperforming loans to total loans 0.42 % 0.39 % 0.40 % 0.56 % 0.82 % Nonperforming assets to total loans and foreclosed real estate 0.43 % 0.45 % 0.41 % 0.57 % 0.87 % Nonperforming assets to total assets 0.30 % 0.30 % 0.27 % 0.36 % 0.50 % Allowance for credit losses to total loans 1.42 % 1.51 % 1.35 % 1.36 % 1.30 % Allowance for credit losses to nonaccrual loans 340.30 % 385.70 % 341.07 % 319.03 % 227.08 % Allowance for credit losses to nonperforming loans 340.30 % 385.70 % 341.07 % 241.71 % 158.96 % Our asset quality continues to be strong as demonstrated by stable or improving trends in all ratios as presented in the table above.
The following table reconciles common equity to tangible common equity and provides the calculation of the TCE ratio: ($ in thousands) December 31, 2024 December 31, 2023 Reconciliation of Common Equity to TCE Total shareholders' common equity $ 1,445,611 $ 1,372,380 Less: Goodwill and other intangibles (487,660) (493,211) Tangible common equity $ 957,951 $ 879,169 Reconciliation of Total Assets to Tangible Assets Total assets $ 12,147,694 $ 12,114,942 Less: Goodwill and other intangibles (487,660) (493,211) Tangible assets $ 11,660,034 $ 11,621,731 TCE divided by Tangible Assets 8.22 % 7.56 % See “Supervision and Regulation” under “Business” in Item 1. and Note 19 to the consolidated financial statements for discussion of other matters that may affect our capital resources.
The following table reconciles common equity to tangible common equity and provides the calculation of the TCE ratio: ($ in thousands) December 31, 2025 December 31, 2024 Reconciliation of Common Equity to TCE Total shareholders' common equity $ 1,654,168 $ 1,445,611 Less: Goodwill and other intangibles (483,644) (487,660) Tangible common equity $ 1,170,524 $ 957,951 Reconciliation of Total Assets to Tangible Assets Total assets $ 12,668,339 $ 12,147,694 Less: Goodwill and other intangibles (483,644) (487,660) Tangible assets $ 12,184,695 $ 11,660,034 TCE divided by Tangible Assets 9.61 % 8.22 % See “Supervision and Regulation” under “Business” in Item 1. and Note 19 to the consolidated financial statements for discussion of other matters that may affect our capital resources.
Higher rates on interest-bearing liabilities were partially offset by higher rates on interest-earning assets and higher earning asset volumes. • For 2024, higher market rates contributed to an additional $14.6 million of loan interest income while higher loan volume resulted in a $7.8 million increase in interest income.
Higher rates and volumes on interest-bearing assets and lower rates on interest-bearing liabilities were partially offset by higher money market volume. • For 2025, higher loan volume resulted in a $13.2 million increase in interest income while increased market rates contributed to an additional $7.9 million of loan interest income.
We also have a portfolio of SBA loans that have been made on a nationwide basis. The diversity of the economic bases of our market areas has historically provided a stable lending environment. 43 Table of Contents Total loans amounted to $8.1 billion at December 31, 2024, a decrease of $55.4 million, or 0.7%, from December 31, 2023.
We also have a portfolio of SBA loans that have been made on a more dispersed geographic basis. The diversity of the economic bases of our market areas has historically provided a stable lending environment. Total loans amounted to $8.7 billion at December 31, 2025, an increase of $627.7 million, or 7.8%, from December 31, 2024.
The increase in capital levels in 2024 was related to the growth in net income, reduction in risk weighted assets, and improvements in our AOCI unrealized losses on AFS securities, partially offset by the redemption of $10 million of subordinated debentures. 56 Table of Contents In addition to regulatory capital ratios, we also closely monitor our ratio of TCE to tangible assets, which is a non-GAAP financial measure.
The decrease in regulatory capital ratios in 2025 was related to the increase in risk weighted assets and the redemption of $18 million of subordinated debentures, partially offset by retained net income. 54 Table of Contents In addition to regulatory capital ratios, we also closely monitor our ratio of TCE to tangible assets, which is a non-GAAP financial measure.
A mix of positive and negative economic indicators remained present at the end of 2024 and there continues to be some uncertainty in economic conditions, and as such, we could be subject to ongoing risks, which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations.
However, a combination of positive and negative economic indicators persisted throughout 2025 and there continues to be some uncertainty in economic conditions and outlook. As such, we could be exposed to ongoing risks, which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations.
We subscribe to a third-party service which provides quarterly macroeconomic scenarios for the United States economy. For 2024, we continue to utilize the baseline forecast, which incorporates an equal probability of the United States economy performing better or worse than the projection.
For 2025, we continue to utilize the baseline forecast, which incorporates an equal probability of the United States economy performing better or worse than the projection.
The target federal funds rate peaked at 5.50% in July 2023 and remained there until beginning to decrease in September 2024, falling a total of 100 basis points by the end of 2024, helping to increase our NIM (tax-equivalent) to 3.07% in the fourth quarter of 2024 .
The target federal funds rate began 2024 at 5.50% and remained there until September 2024, when it was reduced a total of 100 basis points by the end of 2024, helping to increase our NIM to 3.05% in the fourth quarter of 2024.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeEconomic values are calculated based on discounted cash flow analysis. The net economic value of equity is the economic value of all assets minus the economic value of all liabilities. The change in net economic value over different rate environments is an indication of the longer-term earnings capability of the balance sheet.
Biggest changeEconomic Value Simulation Economic value simulation is used to calculate the estimated fair value of assets and liabilities over different interest rate environments. Economic values are calculated based on discounted cash flow analysis. The net economic value of equity is the economic value of all assets minus the economic value of all liabilities.
Because these assumptions are inherently uncertain, actual results may differ from simulated results. 59 Table of Contents Different interest rate scenarios and yield curves are used to measure the sensitivity of earnings to changing interest rates in both a "shocked" instantaneous parallel move and a "steepening" move of rates.
Because these assumptions are inherently uncertain, actual results may differ from simulated results. 57 Table of Contents Different interest rate scenarios and yield curves are used to measure the sensitivity of earnings to changing interest rates in both a "shocked" instantaneous parallel move and a "steepening" move of rates.
Percentage change in Net Interest Income (1) Change in Interest Rates (in basis points) December 31, 2024 December 31, 2023 + 400 2.3% (6.1)% + 300 2.8% (4.8)% + 200 3.3% (3.5)% + 100 4.3% (1.6)% - 100 (0.1)% (3.6)% - 200 (0.8)% (4.0)% - 300 (1.4)% (3.8)% - 400 (2.3)% (4.3)% (1) - The percentage change represents the projected net interest income for 12 months on a static balance sheet in a stable rate environment as compared to the projected net interest income in the various rate scenarios with immediate and parallel shocks applied to the yield curve.
Percentage change in Net Interest Income (1) Change in Interest Rates (in basis points) December 31, 2025 December 31, 2024 + 400 6.3% 2.3% + 300 5.7% 2.8% + 200 4.6% 3.3% + 100 3.5% 4.3% - 100 (2.1)% (0.1)% - 200 (4.0)% (0.8)% - 300 (5.2)% (1.4)% - 400 (7.6)% (2.3)% (1) - The percentage change represents the projected net interest income for 12 months on a static balance sheet in a stable rate environment as compared to the projected net interest income in the various rate scenarios with immediate and parallel shocks applied to the yield curve.
Percentage change in Economic Value of Equity (1) Change in Interest Rates (in basis points) December 31, 2024 December 31, 2023 + 400 (3.0)% (7.8)% + 300 (2.0)% (6.0)% + 200 (1.3)% (4.3)% + 100 0.2% (1.4)% - 100 (1.2)% 0.2% - 200 (5.1)% (2.7)% - 300 (11.8)% (8.5)% - 400 (21.0)% (18.6)% (1) - The percentage change represents our economic value of equity in a stable rate environment as compared to the economic value of equity in the various rate scenarios with immediate and parallel shocks applied to the yield curve.
Percentage change in Economic Value of Equity (1) Change in Interest Rates (in basis points) December 31, 2025 December 31, 2024 + 400 (4.2)% (3.0)% + 300 (2.7)% (2.0)% + 200 (1.6)% (1.3)% + 100 (0.1)% 0.2% - 100 (1.5)% (1.2)% - 200 (5.3)% (5.1)% - 300 (11.0)% (11.8)% - 400 (21.0)% (21.0)% (1) - The percentage change represents our economic value of equity in a stable rate environment as compared to the economic value of equity in the various rate scenarios with immediate and parallel shocks applied to the yield curve.
We review pricing of our products and services, as well as our controllable operating and labor costs in light of current and expected costs due to inflation, to mitigate the inflationary impact on financial performance to the extent possible. 62 Table of Contents
We review pricing of our products and services, as well as our controllable operating and labor costs in light of current and expected costs due to inflation, to mitigate the inflationary impact on financial performance to the extent possible. 59 Table of Contents
A sudden and substantial change in interest rates will generally impact our earnings adversely because the interest rates of the underlying assets and liabilities do not change at the same speed, to the same extent or on the same basis.
A sudden and substantial change in interest rates may adversely impact our earnings because the interest rates of the underlying assets and liabilities do not change at the same speed, to the same extent or on the same basis.
The same assumptions are used in the economic value simulation as in the earnings simulation. The economic value simulation uses instantaneous rate shocks to the balance sheet and assumes a static average life of deposits in all interest rate scenarios. The following table presents the estimated change in net economic value for the specified change levels presented.
The economic value simulation uses instantaneous rate shocks to the balance sheet and assumes a static average life of deposits in all interest rate scenarios. The following table presents the estimated change in net economic value for the specified change levels presented.
Refer also to the discussion above under Earnings Simulation Analysis. 61 Table of Contents Impact of Inflation and Changing Prices Our financial statements included in Item 8 “Financial Statements and Supplementary Data” of this Report have been prepared in accordance with GAAP, which requires the financial position and operating results to be measured principally in terms of historic dollars without considering the change in the relative purchasing power of money over time due to inflation.
Impact of Inflation and Changing Prices Our financial statements included in Item 8 “Financial Statements and Supplementary Data” of this Report have been prepared in accordance with GAAP, which requires the financial position and operating results to be measured principally in terms of historic dollars without considering the change in the relative purchasing power of money over time due to inflation.
As evidenced by our results for 2024, the Company has reacted quickly to interest rate cuts by the FOMC and thus reduced the Company's total cost of deposits, thereby increasing net interest income.
As evidenced by our results for 2024 and 2025, the Company has reacted quickly to interest rate cuts by the FOMC and thus reduced the Company's total cost of deposits, thereby increasing net interest income. As of December 31, 2025, assuming no change in the shape of the yield curve, the Company is reflecting an asset sensitive position.
Further, the interest rate simulation models do not take into consideration growth, changes in balance sheet mix or composition, or other strategies that management would employee in either a rising or a falling rate scenario. 60 Table of Contents Economic Value Simulation Economic value simulation is used to calculate the estimated fair value of assets and liabilities over different interest rate environments.
As previously noted, these assumptions are inherently uncertain, and actual results may differ from simulated results. Further, the interest rate simulation models do not take into consideration growth, changes in balance sheet mix or composition, or other strategies that management would employee in either a rising or a falling rate scenario.
Portions of the Company's deposits are also nearing their modeled floor rates and therefore reflect a negative projected change in value.
As of December 31, 2025, the Company's EVE variability has remained relatively consistent across rate levels compared to 2024. Portions of the Company's deposits are nearing their modeled floor rates and therefore reflect a negative projected change in value for the more pronounced rate declines. Refer also to the discussion above under Earnings Simulation Analysis.
As of December 31, 2024, assuming no change in the shape of the yield curve, the Company is reflecting an asset sensitive position, with relatively smaller changes in the declining scenarios, particularly -100 and -200 basis points. The shape of the yield curve also has a significant impact on the earnings of financial institutions, including the Company.
Given the decline in the short term rates from December 31, 2024 to December 31, 2025, the declining rate scenarios for the current year reflect the impact of deposit accounts approaching or reaching minimum rate levels. The shape of the yield curve also has a significant impact on the earnings of financial institutions, including the Company.
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With the FOMC increasing the target federal funds rate in 2022 and 2023, for December 31, 2023 the Company's sensitivity position was such that in the short-term it was projected that net interest income would likely fall in both a rising and falling rate environment.
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Further, during the last four months of 2025, the FOMC again decreased short term rates another 75 basis points with a target federal funds rate of 3.50%-3.75% at December 31, 2025.
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As of December 31, 2024 we expect net interest income to remain relatively stable in a plus 200 basis points or minus 200 basis point interest rate curve parallel shift scenario.
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The change in net economic value over different rate environments is an indication of the longer-term earnings capability of the 58 Table of Contents balance sheet. The same assumptions are used in the economic value simulation as in the earnings simulation.
Removed
As previously noted, these assumptions are inherently uncertain, and actual results may differ from simulated results.
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As of December 31, 2024, the Company's EVE exposure to rising rates has improved at all levels and exposure to declining rates has depreciated slightly as the short term rates have fallen about 100 basis points during the last four months of 2024.
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The improvement in EVE under a rising rate environment is driven by repositioning of the Company's assets to be less negatively impacted by rising rates, generally through an increase in variable rate assets.
Removed
The decline in EVE under some of the declining rate environments is driven by the actual decline in rates during the year as well as repayment of wholesale borrowings through more stable deposits which are modeled to show more fluctuation in EVE, but which are a preferred funding source.

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