UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2020~~March 31, 2021

Commission File Number 0-15572

FIRST BANCORP

(Exact Name of Registrant as Specified in its Charter)

North Carolina

56-1421916

(State or Other Jurisdiction of Incorporation or Organization)

(I.R.S. Employer Identification Number)

300 SW Broad St.,

Southern Pines

North Carolina

28387

(Address of Principal Executive Offices)

(Zip Code)

(Registrant's telephone number, including area code)

(910)

246-2500

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered:
Common Stock, No Par Value	FBNC	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-Accelerated Filer

☐

Smaller Reporting Company

☐

Emerging ~~growth company~~Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

The number of shares of the registrant's Common Stock outstanding on ~~October 31, 2020~~April 30, 2021 was ~~28,630,058.~~28,489,474.

INDEX

FIRST BANCORP AND SUBSIDIARIES


			Page

Part I. Financial Information

Item 1 - Financial Statements
Consolidated Balance Sheets - ~~September~~ ~~30, 2020~~March 31, 2021 and December 31, ~~2019~~2020			4
Consolidated Statements of Income - For the Three ~~and~~ ~~Nine~~Months Ended ~~September~~ ~~30,~~March 31, 2021 and 2020 ~~and 2019~~			5
Consolidated Statements of Comprehensive Income - For the Three ~~and~~ ~~Nine~~Months Ended S ~~eptember~~ ~~30,~~March 31, 2021 and 2020 ~~and 2019~~			6
Consolidated Statements of Shareholders’ Equity - For the Three ~~and~~ ~~Nine~~Months Ended S ~~eptember~~ ~~30,~~March 31, 2021 and 2020 ~~and 2019~~			7
Consolidated Statements of Cash Flows - For the ~~Nine~~Three Months Ended ~~September~~ ~~30,~~March 31, 2021 and 2020 ~~and 2019~~			98
Notes to Consolidated Financial Statements			109
Item 2 – Management’s Discussion and Analysis of Consolidated Results of Operations and Financial Condition			40
Item 3 – Quantitative and Qualitative Disclosures About Market Risk			6154
Item 4 – Controls and Procedures			6356

Part II. Other Information

Item 1 – Legal Proceedings			6356
Item 1A – Risk Factors			6356
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds			6456
Item 6 – Exhibits			6658
Signatures			6759

Page 2

Index

FORWARD-LOOKING STATEMENTS

Part I of this report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995, which statements are inherently subject to risks and uncertainties. Forward-looking statements are statements that include projections, predictions, expectations or beliefs about future events or results or otherwise are not statements of historical fact. Further, forward-looking statements are intended to speak only as of the date made. Such statements are often characterized by the use of qualifying words (and their derivatives) such as “expect,” “believe,” “estimate,” “plan,” “project,” or other statements concerning our opinions or judgment about future events. Our actual results may differ materially from those anticipated in any forward-looking statements, as they will depend on many factors about which we are unsure, including many factors which are beyond our control. Factors that could influence the accuracy of such forward-looking statements include, but are not limited to, the financial success or changing strategies of our customers, our level of success in integrating acquisitions, actions of government regulators, the level of market interest rates, and general economic conditions, including the impact of the current pandemic. For additional information about factors that could affect the matters discussed in this paragraph, see the “Risk Factors” section of our ~~2019~~2020 Annual Report on Form 10-K and Item 1A of Part II of this report.

Page 3

Index

Part I. Financial Information

Item 1 - Financial Statements

First Bancorp and Subsidiaries

Consolidated Balance Sheets


($ in thousands)	($ in thousands)	September 30, 2020 (unaudited)		December 31, 2019	($ in thousands)	March 31, 2021 (unaudited)		December 31, 2020
ASSETS	ASSETS				ASSETS
Cash and due from banks, noninterest-bearing	Cash and due from banks, noninterest-bearing	$	92,465	64,519	Cash and due from banks, noninterest-bearing	$	71,206	93,724
Due from banks, interest-bearing	Due from banks, interest-bearing	304,731		166,783	Due from banks, interest-bearing	458,860		273,566
Total cash and cash equivalents	Total cash and cash equivalents	397,196		231,302	Total cash and cash equivalents	530,066		367,290

Securities available for sale	Securities available for sale	1,168,706		821,945	Securities available for sale	1,821,697		1,453,132
Securities held to maturity (fair values of $112,114 and $68,333)		110,200		67,932
Securities held to maturity (fair values of $195,424 and $170,734)					Securities held to maturity (fair values of $195,424 and $170,734)	198,843		167,551

Presold mortgages in process of settlement		34,028		19,712
Presold mortgages in process of settlement at fair value					Presold mortgages in process of settlement at fair value	31,869		42,271
SBA Loans held for sale	SBA Loans held for sale	15,012		0	SBA Loans held for sale	7,002		6,077

Loans	Loans	4,813,736		4,453,466	Loans	4,624,054		4,731,315
Allowance for loan losses		(49,226)		(21,398)
Allowance for credit losses on loans					Allowance for credit losses on loans	(65,849)		(52,388)
Net loans	Net loans	4,764,510		4,432,068	Net loans	4,558,205		4,678,927

Premises and equipment	Premises and equipment	118,568		114,859	Premises and equipment	123,271		120,502
Operating right-of-use lease assets	Operating right-of-use lease assets	18,400		19,669	Operating right-of-use lease assets	16,899		17,514
Accrued interest receivable	Accrued interest receivable	19,646		16,648	Accrued interest receivable	18,652		20,272
Goodwill	Goodwill	240,972		234,368	Goodwill	239,272		239,272
Other intangible assets	Other intangible assets	14,517		17,217	Other intangible assets	14,606		15,366
Foreclosed properties	Foreclosed properties	2,741		3,873	Foreclosed properties	1,811		2,424
Bank-owned life insurance	Bank-owned life insurance	106,345		104,441	Bank-owned life insurance	107,594		106,974
Other assets	Other assets	53,427		59,605	Other assets	66,607		52,179
Total assets	Total assets	$	7,064,268	6,143,639	Total assets	$	7,736,394	7,289,751

LIABILITIES	LIABILITIES				LIABILITIES
Deposits: Noninterest bearing checking accounts	Deposits: Noninterest bearing checking accounts	$	2,121,354	1,515,977	Deposits: Noninterest bearing checking accounts	$	2,430,198	2,210,012
Interest bearing checking accounts	Interest bearing checking accounts	1,102,343		912,784	Interest bearing checking accounts	1,258,500		1,172,022
Money market accounts	Money market accounts	1,524,710		1,173,107	Money market accounts	1,721,230		1,581,364
Savings accounts	Savings accounts	492,946		424,415	Savings accounts	567,715		519,266
Time deposits of $100,000 or more	Time deposits of $100,000 or more	586,408		649,947	Time deposits of $100,000 or more	535,519		564,365
Other time deposits	Other time deposits	232,465		255,125	Other time deposits	220,325		226,567
Total deposits	Total deposits	6,060,226		4,931,355	Total deposits	6,733,487		6,273,596
Borrowings	Borrowings	61,816		300,671	Borrowings	61,342		61,829
Accrued interest payable	Accrued interest payable	1,305		2,154	Accrued interest payable	741		904
Operating lease liabilities	Operating lease liabilities	18,716		19,855	Operating lease liabilities	17,354		17,868
Other liabilities	Other liabilities	41,387		37,203	Other liabilities	46,617		42,133
Total liabilities	Total liabilities	6,183,450		5,291,238	Total liabilities	6,859,541		6,396,330

Commitments and contingencies	Commitments and contingencies				Commitments and contingencies	0		0

SHAREHOLDERS’ EQUITY	SHAREHOLDERS’ EQUITY				SHAREHOLDERS’ EQUITY
Preferred stock, no par value per share. Authorized: 5,000,000 shares	Preferred stock, no par value per share. Authorized: 5,000,000 shares				Preferred stock, no par value per share. Authorized: 5,000,000 shares
Issued & outstanding: none and none	Issued & outstanding: none and none	0		0	Issued & outstanding: none and none	0		0
Common stock, no par value per share. Authorized: 40,000,000 shares	Common stock, no par value per share. Authorized: 40,000,000 shares				Common stock, no par value per share. Authorized: 40,000,000 shares
Issued & outstanding: 28,687,832 and 29,601,264 shares		403,351		429,514
Issued & outstanding: 28,489,474 and 28,579,335 shares					Issued & outstanding: 28,489,474 and 28,579,335 shares	397,094		400,582
Retained earnings	Retained earnings	459,988		417,764	Retained earnings	483,944		478,489
Stock in rabbi trust assumed in acquisition	Stock in rabbi trust assumed in acquisition	(2,230)		(2,587)	Stock in rabbi trust assumed in acquisition	(2,256)		(2,243)
Rabbi trust obligation	Rabbi trust obligation	2,230		2,587	Rabbi trust obligation	2,256		2,243
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	17,479		5,123	Accumulated other comprehensive income (loss)	(4,185)		14,350
Total shareholders’ equity	Total shareholders’ equity	880,818		852,401	Total shareholders’ equity	876,853		893,421
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	7,064,268	6,143,639	Total liabilities and shareholders’ equity	$	7,736,394	7,289,751

See accompanying notes to unaudited consolidated financial statements.

Page 4

Index

First Bancorp and Subsidiaries

Consolidated Statements of Income


($ in thousands, except share data-unaudited)	($ in thousands, except share data-unaudited)	Three Months Ended September 30,			Nine Months Ended September 30,		($ in thousands, except share data-unaudited)	Three Months Ended March 31,
		2020		2019	2020	2019		2021		2020
INTEREST INCOME	INTEREST INCOME						INTEREST INCOME
Interest and fees on loans	Interest and fees on loans	$	52,739	55,142	160,000	164,754	Interest and fees on loans	$	51,073	55,297
Interest on investment securities:	Interest on investment securities:						Interest on investment securities:
Taxable interest income	Taxable interest income	4,958		5,130	15,203	14,859	Taxable interest income	5,913		5,474
Tax-exempt interest income	Tax-exempt interest income	189		212	470	820	Tax-exempt interest income	323		164
Other, principally overnight investments	Other, principally overnight investments	802		1,898	2,688	6,705	Other, principally overnight investments	700		1,098
Total interest income	Total interest income	58,688		62,382	178,361	187,138	Total interest income	58,009		62,033

INTEREST EXPENSE	INTEREST EXPENSE						INTEREST EXPENSE
Savings, checking and money market accounts	Savings, checking and money market accounts	1,440		2,560	5,132	6,904	Savings, checking and money market accounts	1,314		2,359
Time deposits of $100,000 or more	Time deposits of $100,000 or more	1,747		3,519	6,994	10,219	Time deposits of $100,000 or more	858		2,924
Other time deposits	Other time deposits	346		518	1,254	1,375	Other time deposits	216		490
Borrowings	Borrowings	422		2,007	2,865	7,092	Borrowings	383		1,501
Total interest expense	Total interest expense	3,955		8,604	16,245	25,590	Total interest expense	2,771		7,274

Net interest income	Net interest income	54,733		53,778	162,116	161,548	Net interest income	55,238		54,759
Provision for loan losses		6,120		(1,105)	31,008	(913)
Net interest income after provision for loan losses		48,613		54,883	131,108	162,461

Provision for credit losses							Provision for credit losses	0		5,590
Net interest income after provision for credit losses							Net interest income after provision for credit losses	55,238		49,169
NONINTEREST INCOME	NONINTEREST INCOME						NONINTEREST INCOME
Service charges on deposit accounts	Service charges on deposit accounts	2,567		3,388	8,193	9,543	Service charges on deposit accounts	2,733		3,337
Other service charges, commissions and fees	Other service charges, commissions and fees	6,190		5,067	14,883	14,623	Other service charges, commissions and fees	5,522		4,069
Fees from presold mortgage loans	Fees from presold mortgage loans	4,864		1,275	9,725	2,677	Fees from presold mortgage loans	4,544		1,841
Commissions from sales of insurance and financial products	Commissions from sales of insurance and financial products	2,357		2,203	6,515	6,436	Commissions from sales of insurance and financial products	2,190		2,068
SBA consulting fees	SBA consulting fees	1,956		663	6,722	2,847	SBA consulting fees	2,764		1,027
SBA loan sale gains	SBA loan sale gains	2,929		1,917	5,541	7,048	SBA loan sale gains	2,330		647
Bank-owned life insurance income	Bank-owned life insurance income	633		651	1,904	1,928	Bank-owned life insurance income	620		642
Securities gains (losses), net		0		97	8,024	97

Other gains (losses), net	Other gains (losses), net	(44)		(105)	(157)	(331)	Other gains (losses), net	(34)		74
Total noninterest income	Total noninterest income	21,452		15,156	61,350	44,868	Total noninterest income	20,669		13,705

NONINTEREST EXPENSES	NONINTEREST EXPENSES						NONINTEREST EXPENSES
Salaries expense	Salaries expense	22,127		19,833	62,843	58,530	Salaries expense	20,131		20,110
Employee benefits expense	Employee benefits expense	3,918		4,144	12,312	13,150	Employee benefits expense	4,574		4,547
Total personnel expense	Total personnel expense	26,045		23,977	75,155	71,680	Total personnel expense	24,705		24,657
Occupancy expense	Occupancy expense	2,856		2,786	8,538	8,269	Occupancy expense	2,904		2,958
Equipment related expenses	Equipment related expenses	1,049		1,231	3,214	3,783	Equipment related expenses	1,045		1,145
Merger and acquisition expenses		0		0	0	213

Intangibles amortization expense	Intangibles amortization expense	928		1,163	2,961	3,737	Intangibles amortization expense	897		1,055
Foreclosed property losses, net	Foreclosed property losses, net	90		273	284	899	Foreclosed property losses, net	157		159
Other operating expenses	Other operating expenses	9,471		9,016	29,264	28,723	Other operating expenses	10,357		10,102
Total noninterest expenses	Total noninterest expenses	40,439		38,446	119,416	117,304	Total noninterest expenses	40,065		40,076

Income before income taxes	Income before income taxes	29,626		31,593	73,042	90,025	Income before income taxes	35,842		22,798
Income tax expense	Income tax expense	6,329		6,574	15,213	18,862	Income tax expense	7,648		4,618

Net income	Net income	$	23,297	25,019	57,829	71,163	Net income	$	28,194	18,180

Earnings per common share:	Earnings per common share:						Earnings per common share:
Basic	Basic	$	0.81	0.84	1.99	2.39	Basic	$	0.99	0.62
Diluted	Diluted	0.81		0.84	1.99	2.39	Diluted	0.99		0.62

Dividends declared per common share	Dividends declared per common share	$	0.18	0.12	0.54	0.36	Dividends declared per common share	$	0.20	0.18

Weighted average common shares outstanding:	Weighted average common shares outstanding:						Weighted average common shares outstanding:
Basic	Basic	28,857,111		29,542,001	28,962,576	29,585,383	Basic	28,357,809		29,230,788
Diluted	Diluted	28,940,018		29,684,105	29,102,953	29,759,459	Diluted	28,537,853		29,399,114

See accompanying notes to unaudited consolidated financial statements.

Page 5

Index

First Bancorp and Subsidiaries

Consolidated Statements of Comprehensive Income


($ in thousands-unaudited)	($ in thousands-unaudited)	Three Months Ended September 30,			Nine Months Ended September 30,		($ in thousands-unaudited)	Three Months Ended March 31,
		2020		2019	2020	2019		2021		2020
Net income	Net income	$	23,297	25,019	57,829	71,163	Net income	$	28,194	18,180
Other comprehensive income (loss):	Other comprehensive income (loss):						Other comprehensive income (loss):
Unrealized gains (losses) on securities available for sale:	Unrealized gains (losses) on securities available for sale:						Unrealized gains (losses) on securities available for sale:
Unrealized holding gains (losses) arising during the period, pretax	Unrealized holding gains (losses) arising during the period, pretax	19		2,210	23,556	19,814	Unrealized holding gains (losses) arising during the period, pretax	(24,235)		20,765
Tax (expense) benefit	Tax (expense) benefit	(4)		(508)	(5,413)	(4,602)	Tax (expense) benefit	5,569		(4,772)
Reclassification to realized (gains) losses		0		(97)	(8,024)	(97)
Tax expense (benefit)		0		22	1,844	22

Postretirement Plans:	Postretirement Plans:						Postretirement Plans:
Amortization of unrecognized net actuarial loss	Amortization of unrecognized net actuarial loss	153		155	511	611	Amortization of unrecognized net actuarial loss	171		178
Tax benefit	Tax benefit	(35)		(36)	(118)	(153)	Tax benefit	(40)		(41)
Other comprehensive income (loss)	Other comprehensive income (loss)	133		1,746	12,356	15,595	Other comprehensive income (loss)	(18,535)		16,130
Comprehensive income	Comprehensive income	$	23,430	26,765	70,185	86,758	Comprehensive income	$	9,659	34,310

See accompanying notes to unaudited consolidated financial statements.

Page 6

Index

First Bancorp and Subsidiaries

Consolidated Statements of Shareholders’ Equity


($ in thousands, except share data - unaudited)	($ in thousands, except share data - unaudited)	Common Stock			Retained Earnings		Stock in Rabbi Trust Assumed in Acquisition	Rabbi Trust Obligation		Accumulated Other Comprehensive Income (Loss)	Total Shareholders’ Equity	($ in thousands, except share data - unaudited)	Common Stock				Retained Earnings		Stock in Rabbi Trust Assumed in Acquisition		Rabbi Trust Obligation		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity
		Shares	Amount						Shares				Amount
Three Months Ended September 30, 2019
Balances, July 1, 2019		29,717	$	432,533		380,748		(2,866)		2,866	1,888			815,169
Three Months Ended March 31, 2020												Three Months Ended March 31, 2020
Balances, January 1, 2020												Balances, January 1, 2020	29,601		$	429,514		417,764		(2,587)		2,587		5,123		852,401
Net income	Net income				25,019						25,019	Net income					18,180								18,180
Cash dividends declared ($0.12 per common share)					(3,555)						(3,555)
Change in Rabbi Trust Obligation							289	(289)			0
Equity issued related to acquisition earnout		0	0								0
Cash dividends declared ($0.18 per common share)												Cash dividends declared ($0.18 per common share)					(5,235)								(5,235)
Change in Rabbi Trust obligation												Change in Rabbi Trust obligation							(15)		15				0

Stock repurchases	Stock repurchases	(100)	(3,476)								(3,476)	Stock repurchases	(576)		(20,000)										(20,000)
Stock option exercises		0	0								0

Stock-based compensation												Stock-based compensation	16		722										722
Other comprehensive income (loss)												Other comprehensive income (loss)											16,130		16,130
Balances, March 31, 2020												Balances, March 31, 2020	29,041		$	410,236	430,709		(2,602)		2,602		21,253		862,198

Three Months Ended March 31, 2021												Three Months Ended March 31, 2021
Balances, January 1, 2021												Balances, January 1, 2021	28,579		$	400,582	478,489		(2,243)		2,243		14,350		893,421
Adoption of new accounting standard												Adoption of new accounting standard					(17,051)								(17,051)
Net income												Net income					28,194								28,194
Cash dividends declared ($0.20 per common share)												Cash dividends declared ($0.20 per common share)					(5,688)								(5,688)
Change in Rabbi Trust obligation												Change in Rabbi Trust obligation							(13)		13				0

Stock repurchases												Stock repurchases	(107)		(4,036)										(4,036)
Stock withheld for payment of taxes	Stock withheld for payment of taxes	(12)	(467)								(467)	Stock withheld for payment of taxes	(3)		(103)										(103)
Stock-based compensation	Stock-based compensation	0	546								546	Stock-based compensation	20		651										651
Other comprehensive income (loss)	Other comprehensive income (loss)									1,746	1,746	Other comprehensive income (loss)											(18,535)		(18,535)
Balances, September 30, 2019		29,605	$	429,136	402,212		(2,577)	2,577		3,634	834,982

Three Months Ended September 30, 2020
Balances, July 1, 2020		28,977	$	408,699	441,846		(2,217)	2,217		17,346	867,891
Net income					23,297						23,297
Cash dividends declared ($0.18 per common share)					(5,155)						(5,155)
Change in Rabbi Trust Obligation							(13)	13			0
Equity issued related to acquisition		24	494								494
Stock repurchases		(306)	(6,269)								(6,269)

Stock withheld for payment of taxes		(7)	(178)								(178)
Stock-based compensation		0	605								605
Other comprehensive income (loss)										133	133
Balances, September 30, 2020		28,688	$	403,351	459,988		(2,230)	2,230		17,479	880,818
Balances, March 31, 2021												Balances, March 31, 2021	28,489		$	397,094	483,944		(2,256)		2,256		(4,185)		876,853

See accompanying notes to unaudited consolidated financial statements.

Page 7

~~Index~~

($ in thousands, except share data - unaudited) Common Stock Retained
Earnings Stock in
Rabbi
Trust
Assumed
in
Acquisition Rabbi
Trust
Obligation Accumulated
Other
Comprehensive
Income
(Loss) Total
Shareholders’
Equity
Shares Amount
Nine Months Ended September 30, 2019
Balances, January 1, 2019 29,725 $ 434,453 341,738 (3,235) 3,235 (11,961) 764,230
Net income 71,163 71,163
Cash dividends declared ($0.36 per common share) (10,689) (10,689)
Change in Rabbi Trust Obligation 658 (658) 0
Equity issued related to acquisition earnout 78 3,070 3,070
Stock repurchases (282) (10,000) (10,000)
Stock option exercises 9 129 129
Stock withheld for payment of taxes (15) (558) (558)
Stock-based compensation 90 2,042 2,042
Other comprehensive income (loss) 15,595 15,595
Balances, September 30, 2019 29,605 $ 429,136 402,212 (2,577) 2,577 3,634 834,982
Nine Months Ended September 30, 2020
Balances, January 1, 2020 29,601 429,514 417,764 (2,587) 2,587 5,123 852,401
Net income 57,829 57,829
Cash dividends declared ($0.54 per common share) (15,605) (15,605)
Change in Rabbi Trust Obligation 357 (357) 0
Equity issued related to acquisition 24 494 494
Stock repurchases (986) (28,701) (28,701)
Stock withheld for payment of taxes (7) (178) (178)
Stock-based compensation 56 2,222 2,222
Other comprehensive income (loss) 12,356 12,356
Balances, September 30, 2020 28,688 $ 403,351 459,988 (2,230) 2,230 17,479 880,818

~~See accompanying notes to unaudited consolidated financial statements.~~

~~Page 8~~

Index

First Bancorp and Subsidiaries

Consolidated Statements of Cash Flows


($ in thousands-unaudited)	($ in thousands-unaudited)	Nine Months Ended September 30,			($ in thousands-unaudited)	Three Months Ended March 31,
		2020		2019		2021		2020
Cash Flows From Operating Activities	Cash Flows From Operating Activities				Cash Flows From Operating Activities
Net income	Net income	$	57,829	71,163	Net income	$	28,194	18,180
Reconciliation of net income to net cash provided by operating activities:	Reconciliation of net income to net cash provided by operating activities:				Reconciliation of net income to net cash provided by operating activities:
Provision (reversal) for loan losses		31,008		(913)
Provision for credit losses					Provision for credit losses	0		5,590
Net security premium amortization	Net security premium amortization	2,832		1,827	Net security premium amortization	2,876		804
Loan discount accretion	Loan discount accretion	(4,789)		(4,473)	Loan discount accretion	(1,341)		(1,841)
Other purchase accounting accretion and amortization, net	Other purchase accounting accretion and amortization, net	55		(16)	Other purchase accounting accretion and amortization, net	29		14
Foreclosed property losses and write-downs, net	Foreclosed property losses and write-downs, net	284		899	Foreclosed property losses and write-downs, net	157		159
Gains on securities available for sale		(8,024)		(97)

Other losses	Other losses	157		331	Other losses	34		(74)
Increase (decrease) in net deferred loan costs		7,380		(261)
Increase in net deferred loan fees					Increase in net deferred loan fees	2,845		320
Bank-owned life insurance income					Bank-owned life insurance income	(620)		(642)
Depreciation of premises and equipment	Depreciation of premises and equipment	4,392		4,326	Depreciation of premises and equipment	1,448		1,563
Amortization of operating lease right-of-use assets	Amortization of operating lease right-of-use assets	1,522		1,372	Amortization of operating lease right-of-use assets	517		496
Repayments of lease obligations	Repayments of lease obligations	(1,392)		(1,250)	Repayments of lease obligations	(416)		(452)
Stock-based compensation expense	Stock-based compensation expense	2,013		1,748	Stock-based compensation expense	397		513
Amortization of intangible assets	Amortization of intangible assets	2,961		3,737	Amortization of intangible assets	897		1,055
Amortization of SBA servicing assets	Amortization of SBA servicing assets	1,231		975	Amortization of SBA servicing assets	470		918
Fees/gains from sale of presold mortgages and SBA loans	Fees/gains from sale of presold mortgages and SBA loans	(15,266)		(9,725)	Fees/gains from sale of presold mortgages and SBA loans	(6,874)		(2,488)
Origination of presold mortgage loans in process of settlement	Origination of presold mortgage loans in process of settlement	(294,270)		(108,723)	Origination of presold mortgage loans in process of settlement	(112,592)		(48,143)
Proceeds from sales of presold mortgage loans in process of settlement	Proceeds from sales of presold mortgage loans in process of settlement	290,657		99,606	Proceeds from sales of presold mortgage loans in process of settlement	127,346		54,764
Origination of SBA loans for sale	Origination of SBA loans for sale	(117,412)		(125,982)	Origination of SBA loans for sale	(37,359)		(36,081)
Proceeds from sales of SBA loans	Proceeds from sales of SBA loans	82,998		101,349	Proceeds from sales of SBA loans	32,467		16,031
Increase in accrued interest receivable		(2,998)		(293)
Decrease in accrued interest receivable					Decrease in accrued interest receivable	1,620		881
Increase in other assets	Increase in other assets	(7,454)		(4,061)	Increase in other assets	(5,242)		(1,096)
(Decrease) increase in accrued interest payable		(849)		193
Increase in net deferred income tax asset					Increase in net deferred income tax asset	(4,596)		(63)
Decrease in accrued interest payable					Decrease in accrued interest payable	(163)		(54)
Increase in other liabilities	Increase in other liabilities	1,180		1,690	Increase in other liabilities	639		3,318
Net cash provided by operating activities	Net cash provided by operating activities	34,045		33,422	Net cash provided by operating activities	30,733		13,672
Cash Flows From Investing Activities	Cash Flows From Investing Activities				Cash Flows From Investing Activities
Purchases of securities available for sale	Purchases of securities available for sale	(701,201)		(339,030)	Purchases of securities available for sale	(475,960)		(9,423)
Purchases of securities held to maturity	Purchases of securities held to maturity	(69,899)		0	Purchases of securities held to maturity	(37,438)		(3,624)
Proceeds from maturities/issuer calls of securities available for sale	Proceeds from maturities/issuer calls of securities available for sale	156,108		114,003	Proceeds from maturities/issuer calls of securities available for sale	80,650		45,037
Proceeds from maturities/issuer calls of securities held to maturity	Proceeds from maturities/issuer calls of securities held to maturity	26,989		26,316	Proceeds from maturities/issuer calls of securities held to maturity	5,780		10,075
Proceeds from sales of securities available for sale		219,697		39,797
Redemptions of FRB and FHLB stock, net		9,853		4,088
Net increase in loans		(327,496)		(116,664)

Redemptions (purchases) of FRB and FHLB stock, net					Redemptions (purchases) of FRB and FHLB stock, net	1,836		(4,572)
Net decrease (increase) in loans					Net decrease (increase) in loans	110,212		(95,680)
Proceeds from sales of foreclosed properties	Proceeds from sales of foreclosed properties	1,880		4,628	Proceeds from sales of foreclosed properties	1,183		889
Purchases of premises and equipment	Purchases of premises and equipment	(8,983)		(2,714)	Purchases of premises and equipment	(4,534)		(1,321)
Proceeds from sales of premises and equipment	Proceeds from sales of premises and equipment	189		1,148	Proceeds from sales of premises and equipment	218		189
Net cash paid in acquisition		(9,559)		0

Net cash used by investing activities	Net cash used by investing activities	(702,422)		(268,428)	Net cash used by investing activities	(318,053)		(58,430)
Cash Flows From Financing Activities	Cash Flows From Financing Activities				Cash Flows From Financing Activities
Net increase in deposits	Net increase in deposits	1,128,951		216,195	Net increase in deposits	459,906		113,664
Net decrease in short-term borrowings	Net decrease in short-term borrowings	(148,000)		(55,000)	Net decrease in short-term borrowings	0		(48,000)
Proceeds from long-term borrowings	Proceeds from long-term borrowings	150,000		0	Proceeds from long-term borrowings	0		150,000
Payments on long-term borrowings	Payments on long-term borrowings	(252,003)		(51,089)	Payments on long-term borrowings	(531)		(531)
Cash dividends paid – common stock	Cash dividends paid – common stock	(15,798)		(10,108)	Cash dividends paid – common stock	(5,140)		(5,328)
Repurchases of common stock	Repurchases of common stock	(28,701)		(10,000)	Repurchases of common stock	(4,036)		(20,000)
Proceeds from stock option exercises		0		129

Payment of taxes related to stock withheld	Payment of taxes related to stock withheld	(178)		(558)	Payment of taxes related to stock withheld	(103)		0
Net cash provided by financing activities	Net cash provided by financing activities	834,271		89,569	Net cash provided by financing activities	450,096		189,805
Increase (decrease) in cash and cash equivalents		165,894		(145,437)
Increase in cash and cash equivalents					Increase in cash and cash equivalents	162,776		145,047
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	231,302		462,898	Cash and cash equivalents, beginning of period	367,290		231,302
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	397,196	317,461	Cash and cash equivalents, end of period	$	530,066	376,349

Supplemental Disclosures of Cash Flow Information:	Supplemental Disclosures of Cash Flow Information:				Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for interest	Cash paid during the period for interest	$	17,094	25,397	Cash paid during the period for interest	$	2,934	7,328
Cash paid during the period for income taxes	Cash paid during the period for income taxes	21,302		20,106	Cash paid during the period for income taxes	9,585		20
Non-cash: Unrealized gain (loss) on securities available for sale, net of taxes		18,143		15,137
Non-cash: Unrealized (loss) gain on securities available for sale, net of taxes					Non-cash: Unrealized (loss) gain on securities available for sale, net of taxes	(18,666)		15,993
Non-cash: Foreclosed loans transferred to other real estate	Non-cash: Foreclosed loans transferred to other real estate	1,032		2,676	Non-cash: Foreclosed loans transferred to other real estate	727		662
Non-cash: Initial recognition of operating lease right-of-use assets and operating lease liabilities	Non-cash: Initial recognition of operating lease right-of-use assets and operating lease liabilities	253		19,406	Non-cash: Initial recognition of operating lease right-of-use assets and operating lease liabilities	444		0
Non-cash: Equity issued related to acquisitions		494		3,070
Non-cash: Loans acquired		14,633		0
Non-cash: Other assets acquired		451		0
Non-cash: Borrowings assumed		11,671		0

See accompanying notes to consolidated financial statements.

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First Bancorp and Subsidiaries

Notes to Consolidated Financial Statements


(unaudited)			For the Period Ended ~~September 30, 2020~~March 31, 2021

Note 1 - ~~Basis of Presentation and Risks and Uncertainties~~

Basis of Presentation

In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the consolidated financial position of the Company as of ~~September 30, 2020,~~March 31, 2021, the consolidated results of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ and the consolidated cash flows for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019. All~~2020. Any such adjustments were of a normal, recurring nature. Reference is made to the ~~2019~~2020 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) for a discussion of accounting policies and other relevant information with respect to the financial statements. The results of operations for the periods ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ are not necessarily indicative of the results to be expected for the full year. The Company has evaluated all subsequent events through the date the financial statements were issued.

~~Risks and Uncertainties~~

Recent Developments: COVID-19 - The ~~coronavirus (COVID-19)~~COVID-19 pandemic has ~~negatively impacted~~continued to impact our operations in 2021. We remain committed and focused on the ~~global economy, disrupted global supply chains~~health and ~~increased unemployment levels. The resulting temporary closure~~safety of ~~many businesses~~our team members, customers, and ~~the implementation of social distancing~~communities, and ~~sheltering-in-place policies have impacted and may~~we continue to ~~impact~~have a many ~~of the Company’s customers. While the full~~employees working remotely. The most significant effects of the pandemic ~~remain unknown, the Company is committed~~that we have continued to ~~supporting its customers, employees~~experience in 2021 have been lower loan demand (excluding PPP loans) and ~~communities during this difficult time. The Company~~high deposit growth, which has ~~provided hardship relief assistance to customers, including the consideration~~likely been impacted by stimulus payments and higher savings rates by our customers. Low interest rates have also resulted in high levels of ~~various~~mortgage loan ~~payment deferral and fee waiver options, and encouraged customers to reach out for assistance to support their individual circumstances.~~refinancings, which have increased our mortgage loan sales income, but have reduced our level of mortgage loans outstanding. Thus far, we have not experienced a meaningful increase in problem loans or charge-offs.

On ~~March~~December 27, 2020, the ~~Coronavirus~~Economic Aid ~~Relief, and Economic Security~~ Act ~~(CARES Act)~~ was signed byinto law, which included another round of Paycheck Protection Program (PPP) funding. The Company began originating the ~~President~~new round of PPP loans in January 2021. During the ~~United States. Certain provisions within the CARES Act encourage financial institutions to practice prudent efforts to work with borrowers impacted by COVID-19. Under these provisions, which~~first quarter of 2021, the Company ~~has applied, modifications deemed~~funded $111 million in PPP loans, while also processing $111 million in forgiveness payments related to ~~be COVID-19-related are not considered a troubled debt restructuring (“TDR”) if~~2020 PPP loan originations.

In response to the ~~loan was not more than 30 days past due as of December 31, 2019 and~~pandemic onset in 2020, the deferral was executed between March 1, 2020 and the earlier of 60 days after the date of termination of the COVID-19 national emergency or December 31, 2020. The banking regulators issued similar guidance, which also clarified that a COVID-19-related modification would not meet the requirements under accounting principles generally accepted in the United States of America to be a TDR if the borrower was current on payments at the time the underlying loan modification program was implemented and if the modification is considered to be short-term. The Company generally offered impacted borrowers loan payment deferrals of 90 days in duration. ~~As of June 30, 2020, the Company had deferred payments for 1,483 loans with an aggregate loan balance of $774 million. During the third quarter of 2020,~~Since that time, most of ~~these~~our borrowers have resumed ~~normal payments. However, some borrowers requested a second 90 day deferral, with certain~~payments and as of the borrowers resuming interest payments, but deferring scheduled principal payments. The deferred amounts are generally added by the Company to the payoff balance of the loan at maturity. As of September 30, 2020,March 31, 2021, the Company had remaining ~~payment~~pandemic-related loan deferrals ~~related~~of $5.9 million.

The extent to ~~207 loans with an aggregate loan balance~~which the COVID-19 pandemic has a further impact on our business, results of ~~$186 million. Approximately $158 million~~operations, and

financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, which

are highly uncertain and cannot be predicted, including the scope and duration of the ~~$186 million in deferrals were second deferrals~~COVID-19 pandemic and ~~for $100 million of the total deferrals, the borrower is scheduled to make interest payments with only principal being deferred.~~

~~Additionally, the Company is a lender for the Small Business Administration's (“SBA”) Paycheck Protection Program ("PPP"), a program under the CARES Act,~~actions taken by governmental authorities and other ~~SBA, Federal Reserve or United States Treasury programs that have been created~~third parties in response to the pandemic and may be a lender under such programs created in the future. These programs are new and their effects on the Company’s business remain uncertain. Through September 30, 2020, the Company had approved and funded 2,810 PPP loans totaling approximately $244.9 million.

In a period of economic contraction, elevated levels of loan losses and lost interest income may occur. The Company continues to accrue interest on loans modified in accordance with the CARES Act. To the extent those borrowers are unable to resume normal contractual payments, the Company could experience additional losses of principal and interest.

~~Page 10~~

COVID-19 pandemic.

~~Index~~

Note 2 – Accounting Policies

~~Accounting Standards:~~

Note 1 to the ~~2019~~2020 Annual Report on Form 10-K filed with the SEC contains a description of the accounting policies followed by the Company and a discussion of recent accounting pronouncements. The following paragraphs update that information as necessary.

SBA Loans Held for Sale - SBA Loans Held for Sale represent the guaranteed portion of SBA loans that the Company intends to sell in the near future. These loans are carried at the lower of cost or market as determined on an individual loan basis.

Accounting Standards Adopted in ~~2020~~2021

InOn January ~~2017,~~1, 2021, the ~~FASB amended the Goodwill and Other Intangibles topic of the~~Company adopted Accounting Standards Codification ~~to simplify~~("ASC") 326 ("CECL"), which replaced the ~~accounting for goodwill impairment for public business entities and other entities~~incurred loss methodology with an expected loss methodology that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. The amendment removes Step 2 of the goodwill impairment test. The amount of goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, notis referred to exceed the carrying amount of goodwill. The effective date and transition requirements for the technical corrections were effective for the Company on January 1, 2020 and the adoption of this amendment did not have a material effect on the Company's financial statements. The Company's policy is to test goodwill for impairment annually on October 31 or on an interim basis if an event triggering impairment may have occurred. During the period ended March 31, 2020, the economic turmoil and market volatility resulting from the COVID-19 crisis resulted in a substantial decrease in the Company's stock price and market capitalization. Management believed such decrease was a triggering indicator requiring an interim goodwill impairment quantitative analysis. The results of the March 31, 2020 determined that none of the Company's goodwill was impaired as of March 31, 2020. Due to lingering economic turmoil and market volatility, the Company updated this analysis qualitatively as of June 30, 2020 and quantitatively at September 30, 2020 and again determined that there was no impairment of its goodwill on either date. Management will continue to evaluate the economic conditions at future reporting periods for applicable changes.

In August 2018, the FASB amended the Fair Value Measurement Topic of the Accounting Standards Codification. The amendments remove, modify, and add certain fair value disclosure requirements based on the concepts in the FASB Concepts Statement, ~~Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements. The amendments were effective on January 1, 2020. These amendments did not have a material effect on the Company's financial statements.~~

In March 2019, the FASB issued guidance to address concerns companies had raised about an accounting exception they would lose when assessing the fair value of underlying assets under the leases standard and clarify that lessees and lessors are exempt from a certain interim disclosure requirement associated with adopting the new standard. The amendments were effective for the Company on January 1, 2020 and their adoption did not have a material effect on its financial statements.

~~Accounting Standards Pending Adoption~~

~~In June 2016, the FASB issued guidance to change the accounting for credit losses. The guidance requires an entity to utilize a new impairment model known~~ as the current expected credit loss ~~("CECL") model~~methodology. The measurement of expected credit losses under the CECL methodology is applicable to ~~estimate its lifetime "expected~~financial assets measured at amortized cost, including loan receivables and held to maturity debt securities. It also applies to off-balance sheet credit ~~losses" and record~~exposures, such as unfunded commitments to extend credit. In addition, CECL made changes to the accounting for available for sale debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on available for sale debt securities if management does not intend to sell and does not believe that ~~when deducted from~~it is more likely than not they will be required to sell.

The Company adopted CECL as of January 1, 2021 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. Results for reporting periods beginning after

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January 1, 2021 are presented under CECL while prior period amounts continue to be reported in accordance with previously applicable accounting standards (“Incurred Loss”). The transition adjustment of the adoption of CECL included an increase in the allowance for credit losses on loans of $14.6 million, which is presented as a reduction to loans outstanding, and an increase in the allowance for credit losses on unfunded loan commitments of $7.5 million, which is recorded within Other Liabilities. The adoption of CECL had an insignificant impact on the Company's held to maturity and available for sale securities portfolios. The Company recorded a net decrease to retained earnings of $17.1 million as of January 1, 2021 for the cumulative effect of adopting CECL, which reflects the transition adjustments noted above, net of the applicable deferred tax assets recorded. Federal banking regulatory agencies provided optional relief to delay the adverse regulatory capital impact of CECL at adoption. The Company did not elect the option.

The Company adopted CECL using the prospective transition approach for PCD assets that were previously classified as PCI under ASC 310-30. In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. The amortized cost basis of the PCD assets was adjusted to reflect the addition of $0.1 million of the allowance for credit losses. The remaining noncredit discount (based on the adjusted amortized cost basis) will be accreted into interest income at a rate that approximates the effective interest rate as of January 1, 2021.

With regard to PCD assets, because the Company elected to disaggregate the former PCI pools and no longer considers these pools to be the unit of account, contractually delinquent PCD loans will be reported as nonaccrual loans using the same criteria as other loans. Similarly, although management did not reassess whether modifications to individual acquired financial assets ~~presents~~accounted for in pools were TDRs as of the ~~net amount expected to~~date of adoption, PCD loans that are restructured and meet the definition of troubled debt restructurings after the adoption of CECL will be ~~collected~~reported as such.

Accrued interest for all financial instruments is included in a separate line on the ~~financial assets. In May 2019,~~face of the ~~FASB issued additional guidance~~Consolidated Balance Sheets. The Company elected not to ~~provide entities~~measure an allowance for credit losses for accrued interest receivable and instead elected to reverse interest income on loans or securities that are placed on nonaccrual status, which is generally when the instrument is 90 days past due, or earlier if the Company believes the collection of interest is doubtful. The Company has concluded that this policy results in the timely reversal of uncollectable interest.

The allowance for credit losses for the majority of loans was calculated using a discounted cash flow methodology applied at a loan level with ~~an option~~a one-year reasonable and supportable forecast period and a three-year straight-line reversion period. The Company elected to ~~irrevocably elect~~use, as a practical expedient, the fair value ~~option, applied on an instrument-by-instrument basis~~of collateral when determining the allowance for ~~eligible instruments, upon the adoption of the CECL model. The Company does not expect to elect this option. The CECL framework is expected to result in earlier recognition of~~ credit losses ~~and~~on loans for which repayment is expected to be ~~significantly influenced by~~provided substantially through the ~~composition, characteristics and quality~~operation or sale of the collateral when the borrower is experiencing financial difficulty (collateral-dependent loans).

The Company's ~~loan portfolio,~~CECL allowances will fluctuate over time due to macroeconomic conditions and forecasts as well as the ~~prevailing economic conditions~~size and ~~forecasts. Except as discussed below, the Company would have applied the new guidance through a cumulative-effect adjustment to retained earnings as of the~~

~~Page 11~~

~~Index~~

~~beginning~~composition of the year of adoption, which, for the Company, is January 1, 2020, with future adjustments to credit loss expectations recorded through the income statement as charges or credits to earnings. In the first quarter of 2020, in response to the COVID-19 pandemic, the CARES Act was enacted by the United States Congress and signed by the President. This CARES Act included an election to defer the implementation of CECL until the earlier of the cessation of the national emergency or December 31, 2020. The Company is prepared for CECL implementation but elected to defer its effective date, as permitted by the CARES Act, because of the challenges associated with developing a reliable forecast of losses that may result from the unprecedented COVID-19 pandemic. Upon the adoption of CECL, the Company expects its allowance for credit losses related to all financial assets will increase to approximately $40-$44 million as of January 1, 2020 compared to its allowance for loan ~~losses at December 31, 2019 of approximately $21 million. As noted above, this initial impact will be reflected as a cumulative-effect adjustment to retained earnings.~~portfolios.

In August 2018, the FASB amended the Compensation - Retirement Benefits – Defined Benefit Plans Topic of the Accounting Standards Codification to improve disclosure requirements for employers that sponsor defined benefit pension and other postretirement plans. The guidance ~~removes~~removed disclosures that ~~are~~were no longer considered cost-beneficial, ~~clarifies~~clarified the specific requirements of disclosures, and ~~adds~~added disclosure requirements identified as relevant. The amendments ~~are~~were effective for ~~fiscal years,~~the Company on January 1, 2021 and ~~interim periods within those fiscal years, beginning after December 15, 2020. Early~~the adoption ~~is permitted. The Company does~~of this amendment did not ~~expect these amendments to~~ have a material effect on its financial statements.

InSecurities- Debt securities that the Company has the positive intent and ability to hold to maturity are classified as “held to maturity” and carried at amortized cost. Debt securities not classified as held to maturity are classified as “available for sale” and carried at fair value, with unrealized holding gains and losses being reported as other comprehensive income or loss and reported as a separate component of shareholders’ equity.

Interest income includes amortization or purchase premiums or discounts. Premiums and discounts are generally amortized into income on a level yield basis, with premiums being amortized to the earliest call date and discounts being accreted to the stated maturity date. Gains and losses on sales of securities are recognized at the time of sale based upon the specific identification method.

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A debt security is placed on nonaccrual status at the time any principal or interest payments become 90 days delinquent. Interest accrued but not received for a security placed on nonaccrual is reversed against interest income.

Allowance for Credit Losses - Securities Held to Maturity - Since the adoption of ASC 326 (CECL), the Company measures expected credit losses on held to maturity debt securities on an individual security basis. Accrued interest receivable on held to maturity debt securities totaled $1.12 million at March ~~2020,~~31, 2021 and was excluded from the ~~FASB issued guidance~~estimate of credit losses.

The estimate of expected credit losses is primarily based on the ratings assigned to ~~provide temporary optional guidance to ease~~ the ~~potential burden in accounting for LIBOR reference rate reform. The amendments are effective as~~securities by debt rating agencies and the average of ~~March 12, 2020 through December 31, 2022.~~the annual historical loss rates associated with those ratings. The Company ~~does not expect these amendments~~then multiplies those loss rates, as adjusted for any modifications to reflect current conditions and reasonable and supportable forecasts as considered necessary, by the remaining lives of each individual security to arrive at a lifetime expected loss amount.

Virtually all of the mortgage-backed securities held by the Company are issued by government-sponsored corporations. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a ~~material effect~~long history of no credit losses. The state and local governments securities held by the Company are highly rating by major rating agencies. As a result, the allowance for credit losses on held to maturity securities was immaterial at March 31, 2021.

Allowance for Credit Losses - Securities Available for Sale - For available for sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or if it is more likely than not that it will be required to sell the security before recovery of the amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income with the establishment of an allowance under CECL compared to a direct write down of the security under Incurred Loss. For debt securities available for sale that do not meet the aforementioned criteria, the Company evaluates whether any decline in fair value is due to credit loss factors. In making this assessment, management considers any changes to the rating of the security by a rating agency and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

Changes in the allowance for credit losses under CECL are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectibility of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met. At March 31, 2021, there was 0 allowance for credit losses related to the available-for-sale portfolio.

Accrued interest receivable on available for sale debt securities totaled $3.34 million at March 31, 2021 and was excluded from the estimate of credit losses.

Loans - Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost. Amortized cost is the principal balance outstanding, net of purchase premiums and discounts and deferred fees and costs. Accrued interest receivable related to loans totaled $14.2 million at March 31, 2021 and was reported in accrued interest receivable on the consolidated balance sheets. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using methods that approximate a level yield without anticipating prepayments.

The accrual of interest is generally discontinued when a loan becomes 90 days past due and is not well collateralized and in the process of collection, or when management believes, after considering economic and business conditions and collection efforts, that the principal or interest will not be collectible in the normal course of business. Past due status is based on contractual terms of the loan. A loan is considered to be past due when a scheduled payment has not been received 30 days after the contractual due date.

All accrued interest is reversed against interest income when a loan is placed on nonaccrual status. Interest received on such loans is accounted for using the cost-recovery method, until qualifying for return to accrual. Under

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the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, there is a sustained period of repayment performance, and future payments are reasonably assured.

Purchased Credit Deteriorated (PCD) Loans - Upon adoption of CECL, loans that were designated as purchased credit impaired (PCI) loans under the previous accounting guidance were classified as PCD loans without reassessment. The amount of PCD loans was immaterial at each period end.

In future acquisitions, the Company may purchase loans, some of which have experienced more than insignificant credit deterioration since origination. In those cases, the Company will consider internal loan grades, delinquency status and other relevant factors in assessing whether purchased loans are PCD. PCD loans are recorded at the amount paid. An initial allowance for credit losses is determined using the same methodology as other loans held for investment, but with no impact to earnings. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The sum of the loan's purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent to initial recognition, PCD loans are subject to the same interest income recognition and impairment model as non-PCD loans, with changes to the allowance for loan losses recorded through provision expense.

Allowance for Credit Losses - Loans - The allowance for credit losses is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Estimated recoveries are considered for post-CECL adoption date charge-offs to the extend that they do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Accrued interest receivable is excluded from the estimate of credit losses.

The allowance for credit losses is measured on a collective pool basis when similar risk characteristics exist. Loans with similar risk characteristics are grouped into homogenous segments, or pools, for analysis. The Discounted Cash Flow (“DCF”) method is utilized for substantially all pools, with discounted cash flows computed for each loan in a pool based on its individual characteristics (e.g. maturity date, payment amount, interest rate, etc.), and the results are aggregated at the pool level. A probability of default and loss given default, as adjusted for recoveries (as noted above), are applied to the discounted cash flows for each pool, while considering prepayment and principal curtailment effects. The analysis produces a discounted expected cash flow total for each pool, which is then compared to the amortized cost of the pool to arrive at the expected credit loss.

In determining the proper level of default rates and loss given default, management has determined that the loss experience of the Company provides the best basis for its assessment of expected credit losses. It therefore utilized its own historical credit loss experience by each loan segment over an economic cycle, while excluding loss experience from certain acquired institutions (i.e., failed banks).

Management considers forward-looking information in estimating expected credit losses. For substantially all segments of collectively evaluated loans, the Company incorporates two or more macroeconomic drivers using a statistical regression modeling methodology. The Company subscribes to a third-party service which provides a quarterly macroeconomic baseline outlook and alternative scenarios for the United States economy. The baseline, along with the evaluation of alternative scenarios, is evaluated by management to determine the best estimate within the range of expected credit losses. The baseline forecast incorporates an equal probability of the United States economy performing better or worse than this projection. With the ongoing pandemic, along with periodic starts and stops to reopening the economy and the impact of government stimulus, the baseline and alternative scenarios have reflected a high degree of volatility in economic forecasts from month-to-month. The Company based it's adoption date allowance for credit loss adjustment primarily on the baseline forecast, which reflected ongoing threats to the economy, primarily arising from the pandemic. In reviewing the March 2021 forecasts, management noted the continued high degree of volatility of the forecasts. Given the uncertainty that the volatility is indicative of and the inherent imprecision of a forecast accurately projecting economic statistics during these unprecedented times, management elected to base its March 31, 2021 computation of the allowance for credit losses primarily on an alternative, more negative forecast, that management judged to more appropriately reflect the inherent risks to its loan portfolio. This more negative forecast's projections were materially consistent with the adoption-date forecast's projections under the baseline scenario.

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Management has also evaluated the appropriateness of the reasonable and supportable forecast scenarios utilized for each period and has made adjustments as needed. For the contractual term that extends beyond the reasonable and supportable forecast period, the Company reverts to the long term mean of historical factors over twelve quarters using a straight-line approach. The Company generally utilizes a four-quarter forecast and a twelve-quarter reversion period to the long-term average, which is then held static for the remainder of the forecast period.

Included in its systematic methodology to determine its ACL, Management considers the need to qualitatively adjust expected credit losses for information not already captured in the loss estimation process. These qualitative adjustments either increase or decrease the quantitative model estimation (i.e., formulaic model results). Each period the Company considers qualitative factors that are relevant within the qualitative framework that includes the following: 1) changes in lending policies, procedures, and strategies, 2) changes in the nature and volume of the portfolio, 3) staff experience, 4) changes in volume and trends in classified loans, delinquencies and nonaccrual loans, 5) concentration risk, 6) trends in underlying collateral value, 7) external factors, including competition and legal and regulatory factors, 8) changes in the quality of the Company's loan review system, and 9) economic conditions not already captured.

The Company has identified the following portfolio segments and calculates the allowance for credit losses for each using a discounted cash flow methodology at the loan level, with loss rates, prepayment assumptions and curtailment assumptions driven by each loan’s collateral type:

Commercial, financial, ~~statements.~~and agricultural - Risks to this loan category include industry concentration and the inability to monitor the condition of the collateral which often consists of inventory, accounts receivable and other non-real estate assets. Equipment and inventory obsolescence can also pose a risk. Declines in general economic conditions and other events can cause cash flows to fall to levels insufficient to service debt. Also included in this category for periods subsequent to March 31, 2020 are PPP loans, which are fully guaranteed by the SBA and thus have minimal risk.

~~Other accounting standards~~Real estate - construction, land development, & other land loans - Risks common to commercial construction loans are cost overruns, changes in market demand for property, inadequate long-term financing arrangements and declines in real estate values. Residential construction loans are susceptible to those same risks as well as those associated with residential mortgage loans (see below). Changes in market demand for property could lead to longer marketing times resulting in higher carrying costs, declining values, and higher interest rates.

Real estate - mortgage - residential (1-4 family) first - Residential mortgage loans are susceptible to weakening general economic conditions and increases in unemployment rates and declining real estate values.

Real estate - mortgage - home equity loans / lines of credit - Risks common to home equity loans and lines of credit are general economic conditions, including an increase in unemployment rates, and declining real estate values which reduce or eliminate the borrower’s home equity.

Real estate - mortgage - commercial and other - Loans in this category are susceptible to declines in occupancy rates, business failure and general economic conditions. Also, declines in real estate values and lack of suitable alternative use for the properties are risks for loans in this category.

Consumer loans - Risks common to these loans include regulatory risks, unemployment and changes in local economic conditions as well as the inability to monitor collateral consisting of personal property.

When management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

When the discounted cash flow method is used to determine the allowance for credit losses, management adjusts the effective interest rate used to discount expected cash flows to incorporate expected prepayments.

Determining the Contractual Term - Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower or the extension or

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renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.

Troubled Debt Restructurings (TDRs) - A loan for which the terms have been ~~issued or proposed~~modified resulting in a more than insignificant concession, and for which the borrower is experiencing financial difficulties, is generally considered to be a TDR. The allowance for credit loss on a TDR is measured using the same method as all other loans held for investment, except that the original interest rate is used to discount the expected cash flows, not the rate specified within the restructuring.

Allowance for Credit Losses - Unfunded Loan Commitments - Effective with the adoption of CECL, the Company estimates expected credit losses on commitments to extend credit over the contractual period in which the Company is exposed to credit risk on the underlying commitments, unless the obligation is unconditionally cancelable by the ~~FASB~~Company. The allowance for off-balance sheet credit exposures, which is reflected within "Other Liabilities," is adjusted for as an increase or ~~other standards-setting bodies are not~~decrease to the provision for credit losses. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to ~~have a material impact on~~be funded over its estimated life. The allowance is calculated using the ~~Company’s financial position, results~~same aggregate reserve rates calculated for the funded portion of ~~operations or cash flows.~~

~~See Note 1 regarding temporary provisions of~~loans at the ~~Coronavirus Aid Relief, and Economic Security Act (CARES Act) related to loans.~~

~~Note 3 – Reclassifications~~

~~Certain amounts reported in the periods ended September 30, 2019 may have been reclassified to conform~~portfolio level applied to the presentation for September 30, 2020. Any reclassifications had no effect on net income or shareholders’ equity for the periods presented, nor did they materially impact trends in financial information.amount of commitments expected to fund.

Note 43 – Stock-Based Compensation

The Company recorded total stock-based compensation expense of ~~$606,000~~$397,000 and ~~$546,000~~$513,000 for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $2,013,000 and $1,748,000 for the nine months ended September 30, 2020 and 2019, respectively, which includes the value of stock grants to directors as discussed below.~~respectively. The Company recognized ~~$139,000~~$91,000 and ~~$125,000~~$118,000 of income tax benefits related to stock-based compensation expense in the income statement for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $463,000 and $402,000 for the nine months ended September 30, 2020 and 2019,~~ respectively.

At ~~September 30, 2020,~~March 31, 2021, the sole equity-based compensation plan for the Company is the First Bancorp 2014 Equity Plan (the "Equity Plan"), which was approved by shareholders on May 8, 2014. As of ~~September 30, 2020,~~March 31, 2021, the Equity Plan had ~~576,614~~530,345 shares remaining available for grant.

The Equity Plan is intended to serve as a means to attract, retain and motivate key employees and directors and to associate the interests of the plans' participants with those of the Company and its shareholders. The Equity Plan allows for both grants of stock options and other types of equity-based compensation, including stock appreciation rights, restricted stock, restricted performance stock, unrestricted stock, and performance units.

Recent equity awards to employees have been made in the form of shares of restricted stock with service vesting conditions only. Compensation expense for these awards is recorded over the requisite service periods. Upon forfeiture, any previously recognized compensation cost is reversed. Upon a change in control (as defined in the Equity Plan), unless the awards remain outstanding or substitute equivalent awards are provided, the awards become immediately vested.

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~~Index~~

Certain of the Company’s equity grants contain terms that provide for a graded vesting schedule whereby portions of the award vest in increments over the requisite service period. The Company recognizes compensation expense for awards with graded vesting schedules on a straight-line basis over the requisite service period for each incremental award. Compensation expense is based on the estimated number of stock awards that will ultimately vest. Over the past five years, there have been insignificant amounts of forfeitures, and therefore the Company assumes that all awards granted with service conditions only will vest. The Company issues new shares of common stock when options are exercised.

In addition to employee equity awards, the Company's practice is to grant common shares, valued at approximately $32,000, to each non-employee director (currently 1110 in total) in June of each year. Compensation expense associated with these director awards is recognized on the date of award since there are no vesting conditions. On June 1, 2020, the Company granted 14,146 shares of common stock to non-employee directors (1,286 shares per director), at a fair market value of $24.87 per share, which was the closing price of the Company's common stock on that date, and resulted in $352,000 in expense. On June 1, 2019, the Company granted 9,030 shares of common stock to non-employee directors (903 shares per director), at a fair market value of $35.41 per share, which was the closing price of the Company's common stock on that date, and resulted in $320,000 in expense. The expense associated with director grants is classified as "other operating expense" in the Consolidated Statements of Income.

The following table presents information regarding the activity for the first ~~nine~~three months of ~~2020~~2021 related to the Company’s outstanding restricted stock:

Long-Term Restricted Stock
Number of Units Weighted-Average
Grant-Date Fair Value
Nonvested at January 1, 2020 159,366 $ 36.79
Granted during the period 41,966 28.58
Vested during the period (42,464) 33.13
Forfeited or expired during the period 0 0
Nonvested at September 30, 2020 158,868 $ 35.60

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	Long-Term Restricted Stock
	Number of Units	Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2021	172,105	$	33.80
Granted during the period	26,350	35.19
Vested during the period	(6,057)	36.35
Forfeited or expired during the period	(6,819)	37.32
Nonvested at March 31, 2021	185,579	$	33.79

Total unrecognized compensation expense as of ~~September 30, 2020~~March 31, 2021 amounted to ~~$2,428,000~~$2,576,000 with a weighted-average remaining term of ~~1.8~~2.0 years. For the nonvested awards that are outstanding at ~~September 30, 2020,~~March 31, 2021, the Company expects to record ~~$1,574,000~~$1,542,000 in compensation expense in the next twelve months, ~~$473,000~~$1,308,000 of which is expected to be recorded in the remaining ~~quarter~~quarters of ~~2020.~~

Prior to 2010, stock options were the primary form of stock-based compensation utilized by the Company. At September 30, 2020, there were 0 stock options outstanding. During the nine months ended September 30, 2020, there were 0 stock option exercises. During the nine months ended September 30, 2019, there were $129,000 in stock option exercises.2021.

Note 54 – Earnings Per Common Share

Basic Earnings Per Common Share is calculated by dividing net income, less income allocated to participating securities, by the weighted average number of common shares outstanding during the period, excluding unvested shares of restricted stock. For the Company, participating securities include unvested shares of restricted stock. Diluted Earnings Per Common Share is computed by assuming the issuance of common shares for all potentially dilutive common shares outstanding during the reporting period. For the periods presented, the Company’s potentially dilutive common stock issuances related to unvested shares of restricted stock and stock option grants under the Company’s equity-based plans, as well as contingently issuable shares.

In computing Diluted Earnings Per Common Share, adjustments are made to the computation of Basic Earnings Per Common shares, as follows. As it relates to unvested shares of restricted stock, the number of shares added to the denominator is equal to the total number of weighted average unvested shares outstanding. As it relates to stock options, it is assumed that all dilutive stock options are exercised during the reporting period at their respective exercise prices, with the proceeds from the exercises used by the Company to buy back stock in the open market at the average market price in effect during the reporting period. The difference between the number of shares assumed to be exercised and the number of shares bought back is included in the calculation of dilutive securities.

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~~Index~~

As it relates to contingently issuable shares, the number of shares that are included in the calculation of dilutive securities is based on the weighted average number of shares that would have been issuable if the end of the reporting period were the end of the contingency period. If any of the potentially dilutive common stock issuances have an anti-dilutive effect, the potentially dilutive common stock issuance is disregarded.

The following is a reconciliation of the numerators and denominators used in computing Basic and Diluted Earnings Per Common Share:


		For the Three Months Ended September 30,											For the Three Months Ended March 31,
		2020					2019						2021					2020
($ in thousands except per share amounts)	($ in thousands except per share amounts)	Per Share Amount		Shares (Denominator)	Per Share Amount		Income (Numerator)		Shares (Denominator)	Per Share Amount		($ in thousands except per share amounts)	Income (Numerator)		Shares (Denominator)	Per Share Amount		Income (Numerator)		Shares (Denominator)	Per Share Amount
Basic EPS:	Basic EPS:											Basic EPS:
Net income	Net income	$	23,297				$	25,019				Net income	$	28,194				$	18,180
Less: income allocated to participating securities	Less: income allocated to participating securities	(67)					(119)					Less: income allocated to participating securities	(178)					(81)
Basic EPS per common share	Basic EPS per common share	$	23,230	28,857,111	$	0.81	$	24,900	29,542,001	$	0.84	Basic EPS per common share	$	28,016	28,357,809	$	0.99	$	18,099	29,230,788	$	0.62

Diluted EPS:	Diluted EPS:											Diluted EPS:
Net income	Net income	$	23,297	28,857,111			$	25,019	29,542,001			Net income	$	28,194	28,357,809			$	18,180	29,230,788
Effect of Dilutive Securities	Effect of Dilutive Securities	0		82,907			0		142,104			Effect of Dilutive Securities	0		180,044			0		168,326
Diluted EPS per common share	Diluted EPS per common share	$	23,297	28,940,018	$	0.81	$	25,019	29,684,105	$	0.84	Diluted EPS per common share	$	28,194	28,537,853	$	0.99	$	18,180	29,399,114	$	0.62

For the Nine Months Ended September 30,
2020 2019
($ in thousands except per
share amounts) Income
(Numerator) Shares
(Denominator) Per Share
Amount Income
(Numerator) Shares
(Denominator) Per Share
Amount
Basic EPS:
Net income $ 57,829 $ 71,163
Less: income allocated to participating securities $ (279) $ (329)
Basic EPS per common share $ 57,550 28,962,576 $ 1.99 $ 70,834 29,585,383 $ 2.39
Diluted EPS:
Net income $ 57,829 28,962,576 $ 71,163 29,585,383
Effect of Dilutive Securities 0 140,377 0 174,076
Diluted EPS per common share $ 57,829 29,102,953 $ 1.99 $ 71,163 29,759,459 $ 2.39

~~There were 0 antidilutive options for any of the periods presented.~~

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~~Index~~

Note 65 – Securities

The book values and approximate fair values of investment securities at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 are summarized as follows:

($ in thousands) September 30, 2020 December 31, 2019
Amortized
Cost Fair
Value Unrealized Amortized
Cost Fair
Value Unrealized
Gains (Losses) Gains (Losses)
Securities available for sale:
Government-sponsored enterprise securities $ 75,016 75,653 637 0 20,000 20,009 17 (8)
Mortgage-backed securities 1,024,735 1,047,922 24,194 (1,007) 758,491 767,285 9,463 (669)
Corporate bonds 43,680 45,131 1,743 (292) 33,711 34,651 1,025 (85)
Total available for sale $ 1,143,431 1,168,706 26,574 (1,299) 812,202 821,945 10,505 (762)
Securities held to maturity:
Mortgage-backed securities $ 33,222 34,161 939 0 41,423 41,542 125 (6)
State and local governments 76,978 77,953 975 0 26,509 26,791 285 (3)
Total held to maturity $ 110,200 112,114 1,914 0 67,932 68,333 410 (9)

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($ in thousands)	March 31, 2021					December 31, 2020
	Amortized Cost		Fair Value	Unrealized		Amortized Cost	Fair Value	Unrealized
				Gains	(Losses)			Gains	(Losses)
Securities available for sale:
Government-sponsored enterprise securities	$	70,015	67,022	0	(2,993)	70,016	70,206	371	(181)
Mortgage-backed securities	1,711,809		1,709,811	17,167	(19,165)	1,318,998	1,337,706	20,832	(2,124)
Corporate bonds	43,660		44,864	1,414	(210)	43,670	45,220	1,760	(210)
Total available for sale	$	1,825,484	1,821,697	18,581	(22,368)	1,432,684	1,453,132	22,963	(2,515)

Securities held to maturity:
Mortgage-backed securities	$	26,977	27,999	1,022	0	29,959	30,900	941	0
State and local governments	171,866		167,425	410	(4,851)	137,592	139,834	2,407	(165)
Total held to maturity	$	198,843	195,424	1,432	(4,851)	167,551	170,734	3,348	(165)

All of the Company’s mortgage-backed securities were issued by government-sponsored corporations, except for private mortgage-backed securities with a fair value of ~~$1.0~~$0.9 million and ~~$1.1~~$1.0 million as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.

The following table presents information regarding securities with unrealized losses at ~~September 30, 2020:~~March 31, 2021:


($ in thousands)	($ in thousands)	Securities in an Unrealized Loss Position for Less than 12 Months			Securities in an Unrealized Loss Position for More than 12 Months		Total		($ in thousands)	Securities in an Unrealized Loss Position for Less than 12 Months			Securities in an Unrealized Loss Position for More than 12 Months		Total
		Fair Value		Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses		Fair Value		Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
Government-sponsored enterprise securities	Government-sponsored enterprise securities	$	0	0	0	0	0	0	Government-sponsored enterprise securities	$	67,022	2,993	0	0	67,022	2,993
Mortgage-backed securities	Mortgage-backed securities	212,533		816	6,639	191	219,172	1,007	Mortgage-backed securities	1,094,263		19,010	5,844	155	1,100,107	19,165
Corporate bonds	Corporate bonds	13,907		93	801	199	14,708	292	Corporate bonds	0		0	4,790	210	4,790	210
State and local governments	State and local governments	0		0	0	0	0	0	State and local governments	108,006		4,851	0	0	108,006	4,851
Total temporarily impaired securities		$	226,440	909	7,440	390	233,880	1,299
Total unrealized loss position									Total unrealized loss position	$	1,269,291	26,854	10,634	365	1,279,925	27,219

The following table presents information regarding securities with unrealized losses at December 31, ~~2019:~~2020:


($ in thousands)	($ in thousands)	Securities in an Unrealized Loss Position for Less than 12 Months			Securities in an Unrealized Loss Position for More than 12 Months		Total		($ in thousands)	Securities in an Unrealized Loss Position for Less than 12 Months			Securities in an Unrealized Loss Position for More than 12 Months		Total
		Fair Value		Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses		Fair Value		Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
Government-sponsored enterprise securities	Government-sponsored enterprise securities	$	4,992	8	0	0	4,992	8	Government-sponsored enterprise securities	$	29,812	181	0	0	29,812	181
Mortgage-backed securities	Mortgage-backed securities	77,274		293	50,851	382	128,125	675	Mortgage-backed securities	497,992		1,957	6,168	167	504,160	2,124
Corporate bonds	Corporate bonds	0		0	915	85	915	85	Corporate bonds	3,956		45	835	165	4,791	210
State and local governments	State and local governments	0		0	934	3	934	3	State and local governments	23,310		165	0	0	23,310	165
Total temporarily impaired securities		$	82,266	301	52,700	470	134,966	771
Total unrealized loss position									Total unrealized loss position	$	555,070	2,348	7,003	332	562,073	2,680

~~Page 15~~

~~Index~~

As of March 31, 2021 and December 31, 2020, the Company's security portfolio held 161 securities and 69 securities that were in an unrealized loss position, respectively. In the above tables, all of the securities that were in an unrealized loss position at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019 were~~2020 are bonds that the Company has determined

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are in a loss position due primarily to interest rate factors and not credit quality concerns. ~~The~~In arriving at this conclusion, the Company ~~evaluated~~reviewed third-party credit ratings and considered the ~~collectability~~severity of ~~each of these bonds and concluded that there was 0 other-than-temporary~~the impairment. The Company does not intend to sell these securities, and it is more likely than not that the Company will not be required to sell these securities before recovery of the amortized cost.

AsNaN impairment charges were recognized for any securities during the three months ended March 31, 2020. At adoption of ~~September 30, 2020~~CECL on January 1, 2021 and ~~December~~at March 31, ~~2019,~~2021, the ~~Company's security portfolio~~Company determined that expected credit losses associated with held 31to maturity debt securities ~~and 54~~was insignificant. See Note 2 for additional details on the adoption of CECL as it relates to the securities ~~respectively, that were in an unrealized loss position.~~portfolio.

The book values and approximate fair values of investment securities at ~~September 30, 2020,~~March 31, 2021, by contractual maturity, are summarized in the table below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.


		Securities Available for Sale			Securities Held to Maturity			Securities Available for Sale			Securities Held to Maturity
($ in thousands)	($ in thousands)	Amortized Cost		Fair Value	Amortized Cost	Fair Value	($ in thousands)	Amortized Cost		Fair Value	Amortized Cost	Fair Value
Securities	Securities						Securities
Due within one year	Due within one year	$	0	0	1,496	1,509	Due within one year	$	0	0	1,587	1,620
Due after one year but within five years	Due after one year but within five years	28,680		30,423	3,957	4,075	Due after one year but within five years	28,660		30,023	537	557
Due after five years but within ten years	Due after five years but within ten years	79,016		79,560	5,877	5,985	Due after five years but within ten years	74,015		71,578	5,355	5,389
Due after ten years	Due after ten years	11,000		10,801	65,648	66,384	Due after ten years	11,000		10,285	164,387	159,859
Mortgage-backed securities	Mortgage-backed securities	1,024,735		1,047,922	33,222	34,161	Mortgage-backed securities	1,711,809		1,709,811	26,977	27,999
Total securities	Total securities	$	1,143,431	1,168,706	110,200	112,114	Total securities	$	1,825,484	1,821,697	198,843	195,424

At ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 investment securities with carrying values of ~~$414,668,000~~$718,340,000 and ~~$260,826,000,~~$630,303,000, respectively, were pledged as collateral for public deposits.

In the first nine months of 2020, the Company received proceeds from sales of securities of $219,697,000 and recorded $8,024,000 in gains from the sales. The Company sold $39,797,000 securities in the first nine months of 2019, and recorded $97,000 in gains from the sales.

Included in “other assets” in the Consolidated Balance Sheets are ~~cost-method~~ investments in Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank of Richmond (“FRB”) stock totaling ~~$23,527,000~~$21,690,000 and ~~$33,380,000~~$23,526,000 at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. These investments do not have readily determinable fair values. The FHLB stock had a cost and fair value of $3,970,000 and $5,855,000 ~~and $15,789,000~~ at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively, and serves as part of the collateral for the Company’s line of credit with the FHLB and is also a requirement for membership in the FHLB system. The FRB stock had a cost and fair value of ~~$17,672,000~~$17,720,000 and ~~$17,591,000~~$17,671,000 at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively, and is a requirement for FRB member bank qualification. Periodically, both the FHLB and FRB recalculate the Company’s required level of holdings, and the Company either buys more stock or redeems a portion of the stock at cost. The Company determined that neither stock was impaired at either period end.

The Company owns 12,356 Class B shares of Visa, Inc. (“Visa”) stock that were received upon Visa’s initial public offering. These shares are expected to convert into Class A Visa shares subsequent to the settlement of certain litigation against Visa, to which the Company is not a party. The Class B shares have transfer restrictions, and the conversion rate into Class A shares is periodically adjusted as Visa settles litigation. The conversion rate at ~~September 30, 2020~~March 31, 2021 was approximately 1.62, which means the Company would receive approximately 20,051 Class A shares if the stock had converted on that date. This Class B stock does not have a readily determinable fair value and is carried at ~~zero.~~0. If a readily determinable fair value becomes available for the Class B shares, or upon the conversion to Class A shares, the Company will adjust the carrying value of the stock to its market value with a credit to earnings.

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Note 76 – Loans, Allowance for Credit Losses, and Asset Quality Information

The following is a summary of the major categories of total loans outstanding:


($ in thousands)	($ in thousands)	September 30, 2020				December 31, 2019				($ in thousands)	March 31, 2021				December 31, 2020
		Amount		Percentage		Amount		Percentage			Amount		Percentage		Amount		Percentage
All loans:	All loans:									All loans:

Commercial, financial, and agricultural	Commercial, financial, and agricultural	$	804,831	17	%	$	504,271	11	%	Commercial, financial, and agricultural	$	768,318	17	%	$	782,549	17	%
Real estate – construction, land development & other land loans	Real estate – construction, land development & other land loans	653,120		14	%	530,866		12	%	Real estate – construction, land development & other land loans	548,508		12	%	570,672		12	%
Real estate – mortgage – residential (1-4 family) first mortgages	Real estate – mortgage – residential (1-4 family) first mortgages	1,017,087		21	%	1,105,014		25	%	Real estate – mortgage – residential (1-4 family) first mortgages	916,169		20	%	972,378		21	%
Real estate – mortgage – home equity loans / lines of credit	Real estate – mortgage – home equity loans / lines of credit	310,326		6	%	337,922		8	%	Real estate – mortgage – home equity loans / lines of credit	294,611		6	%	306,256		6	%
Real estate – mortgage – commercial and other	Real estate – mortgage – commercial and other	1,983,622		41	%	1,917,280		43	%	Real estate – mortgage – commercial and other	2,049,507		44	%	2,049,203		43	%
Consumer loans	Consumer loans	50,189		1	%	56,172		1	%	Consumer loans	53,484		1	%	53,955		1	%
Subtotal	Subtotal	4,819,175		100	%	4,451,525		100	%	Subtotal	4,630,597		100	%	4,735,013		100	%
Unamortized net deferred loan costs (fees)	Unamortized net deferred loan costs (fees)	(5,439)				1,941				Unamortized net deferred loan costs (fees)	(6,543)				(3,698)
Total loans	Total loans	$	4,813,736			$	4,453,466			Total loans	$	4,624,054			$	4,731,315

Included ~~in the table above are PPP loans totaling $244.9 million that are~~ in the line item "Commercial, financial, and ~~agricultural."~~agricultural" in the table above are Paycheck Protection Program ("PPP") loans totaling $241.4 million and $240.5 million at March 31, 2021 and December 31, 2020, respectively. PPP loans are fully guaranteed by the SBA. Included in unamortized net deferred loan fees are ~~$7.6~~approximately $9.0 million and $6.0 million at March 31, 2021 and December 31, 2020, respectively, in unamortized net deferred loan fees associated with PPP loans. These fees are being amortized under the effective interest method over the terms of the loans. Accelerated amortization ~~will be~~is recorded in the periods in which principal amounts are forgiven in accordance with the terms of the program.

Also included in the table above are various non-PPP SBA loans, with additional information on these loans presented in the table below.


($ in thousands)	($ in thousands)	September 30, 2020		December 31, 2019	($ in thousands)	March 31, 2021		December 31, 2020
Guaranteed portions of non-PPP SBA loans included in table above	Guaranteed portions of non-PPP SBA loans included in table above	$	46,085	54,400	Guaranteed portions of non-PPP SBA loans included in table above	$	35,007	33,959
Unguaranteed portions of SBA Loans included in table above		134,953		110,782
Unguaranteed portions of non-PPP SBA loans included in table above					Unguaranteed portions of non-PPP SBA loans included in table above	133,917		135,703
Total non-PPP SBA loans included in the table above	Total non-PPP SBA loans included in the table above	$	181,038	165,182	Total non-PPP SBA loans included in the table above	$	168,924	169,662

Sold portions of SBA with servicing retained - not included in tables above		$	379,123	316,730
Sold portions of SBA loans with servicing retained - not included in tables above					Sold portions of SBA loans with servicing retained - not included in tables above	$	412,472	395,398

At ~~September 30, 2020~~both March 31, 2021 and December 31, ~~2019,~~2020, there was a remaining unaccreted discount on the retained portion of sold SBA loans amounting to ~~$7.1 million at both period ends.~~

The Company has several acquired loan portfolios as a result of merger and acquisition transactions. In these transactions, the Company recorded loans at their fair value as required by applicable accounting guidance. Included in these loan portfolios were purchased credit impaired (“PCI”) loans, which are loans for which it is probable at acquisition date that all contractually required payments will not be collected. The remaining loans were considered to be purchased non-impaired loans and their related fair value discount or premium is being recognized as an adjustment to yield over the remaining life of each loan.$7.3 million.

As of ~~September 30, 2020 and~~March 31, 2021, unamortized discounts on acquired loans totaled $8.2 million.

At December 31, ~~2019,~~2020, there were remaining accretable discounts of ~~$8.6~~$7.9 million, ~~and $11.1 million, respectively,~~ related to purchased non-impaired loans. The discounts are amortized as yield adjustments over the respective lives of the loans, so long as the loans perform.

~~Page 17~~

~~Index~~

~~The following table presents changes in~~ At December 31, 2020, the carrying value of ~~PCI loans.~~

PCI loans For the Nine Months Ended September 30, 2020 For the Nine Months Ended September 30, 2019
Balance at beginning of period $ 12,664 17,393
Change due to payments received and accretion (3,062) (3,694)
Change due to loan charge-offs (13) (11)
Transfers to foreclosed real estate 0 0
Other 27 110
Balance at end of period $ 9,616 13,798

purchased credit impaired (PCI) loans were $8.6 million.

The following table presents changes in the accretable yield for PCI ~~loans.~~loans for the three months ended March 31, 2020.

Accretable Yield for PCI loans For the Nine Months Ended September 30, 2020 For the Nine Months Ended September 30, 2019
Balance at beginning of period $ 4,149 4,750
Accretion (927) (1,050)
Reclassification from (to) nonaccretable difference 400 583
Other, net (481) 211
Balance at end of period $ 3,141 4,494

Page 18

Index


Accretable Yield for PCI loans			For the Three Months Ended March 31, 2020
Balance at beginning of period			4,149
Accretion			(567)
Reclassification from (to) nonaccretable difference			304
Other, net			(453)
Balance at end of period			3,433

During the first ~~nine~~three months of 2020, the Company received $446,000 in payments that exceeded the carrying amount of the related PCI loans, of which $352,000 was recognized as loan discount accretion income ~~$80,000 was recorded as additional loan interest income,~~ and $14,000 was recorded as a recovery. During the first nine months of 2019, the Company received $291,000 in payments that exceeded the carrying amount of the related PCI loans, of which $263,000 was recognized as loan discount accretion income and $28,000$80,000 was recorded as additional loan interest income.

Nonperforming assets are defined as nonaccrual loans, troubled debt restructured loans (TDRs), loans past due 90 or more days and still accruing interest, and foreclosed real estate. Nonperforming assets are summarized as follows.


($ in thousands)	($ in thousands)	September 30, 2020		December 31, 2019	($ in thousands)	March 31, 2021		December 31, 2020
Nonperforming assets	Nonperforming assets				Nonperforming assets
Nonaccrual loans	Nonaccrual loans	$	31,656	24,866	Nonaccrual loans	$	39,566	35,076
TDR's - accruing		9,896		9,053
TDRs - accruing					TDRs - accruing	8,601		9,497
Accruing loans > 90 days past due	Accruing loans > 90 days past due	0		0	Accruing loans > 90 days past due	0		0
Total nonperforming loans	Total nonperforming loans	41,552		33,919	Total nonperforming loans	48,167		44,573
Foreclosed real estate	Foreclosed real estate	2,741		3,873	Foreclosed real estate	1,811		2,424
Total nonperforming assets	Total nonperforming assets	$	44,293	37,792	Total nonperforming assets	$	49,978	46,997

Purchased credit impaired loans not included above (1)		$	9,616	12,664

~~(1) In the~~At both March 3, 2017 acquisition of Carolina Bank, and the October 1, 2017 acquisition of Asheville Savings Bank, the Company acquired $19.3 million and $9.9 million, respectively, in PCI loans in accordance with ASC 310-30 accounting guidance. These loans are excluded from nonperforming loans, including $0.8 million and $0.8 million in PCI loans at September 30, 202031, 2021 and December 31, ~~2019, respectively, that were contractually past due 90 days or more.~~

~~At September 30,~~ 2020, ~~and December 31, 2019,~~ the Company had ~~$1.8 million and $0.6~~$1.9 million in residential mortgage loans in process of foreclosure, respectively.

The following table is a summary of the Company’s nonaccrual loans by major ~~categories.~~categories for the periods indicated.


	CECL						Incurred Loss
($ in thousands)	March 31, 2021						December 31, 2020
	Nonaccrual Loans with No Allowance		Nonaccrual Loans with an Allowance		Total Nonaccrual Loans		Nonaccrual Loans
Commercial, financial, and agricultural	$	0	$	10,330	$	10,330	9,681
Real estate – construction, land development & other land loans	227		313		540		643
Real estate – mortgage – residential (1-4 family) first mortgages	2,444		3,763		6,207		6,048
Real estate – mortgage – home equity loans / lines of credit	378		1,298		1,676		1,333
Real estate – mortgage – commercial and other	7,521		13,133		20,654		17,191
Consumer loans	0		159		159		180
Total	$	10,570	$	28,996	$	39,566	35,076

Interest income recognized during the period on nonaccrual loans was immaterial.

Page 1819

Index

($ in thousands) September 30,
2020 December 31,
2019
Commercial, financial, and agricultural $ 8,473 5,518
Real estate – construction, land development & other land loans 872 1,067
Real estate – mortgage – residential (1-4 family) first mortgages 5,742 7,552
Real estate – mortgage – home equity loans / lines of credit 1,594 1,797
Real estate – mortgage – commercial and other 14,795 8,820
Consumer loans 180 112
Total $ 31,656 24,866
The following table represents the accrued interest receivables written off by reversing interest income during the three months ended March 31, 2021.


($ in thousands)	For the Three Months Ended March 31, 2021
Commercial, financial, and agricultural	$	64
Real estate – construction, land development & other land loans	0
Real estate – mortgage – residential (1-4 family) first mortgages	5
Real estate – mortgage – home equity loans / lines of credit	4
Real estate – mortgage – commercial and other	220
Consumer loans	0
Total	$	293

The following table presents an analysis of the payment status of the Company’s loans as of September 30, 2020. Due to the onset of the COVID-19 pandemic not occurring until late in the first quarter of 2020, as well as the Company's COVID-19 deferral program and the SBA's relief program, whereby the SBA is making six months of principal and interest payments on most SBA loans held in the Company's portfolio, the past due amounts below were not negatively impacted by the pandemic in a significant manner.March 31, 2021.

($ in thousands) Accruing
30-59
Days Past
Due Accruing
60-89
Days
Past
Due Accruing
90 Days
or More
Past
Due Nonaccrual
Loans Accruing
Current Total Loans
Receivable
Commercial, financial, and agricultural $ 629 116 0 8,473 795,437 804,655
Real estate – construction, land development & other land loans 41 0 0 872 652,057 652,970
Real estate – mortgage – residential (1-4 family) first mortgages 1,122 1,307 0 5,742 1,003,741 1,011,912
Real estate – mortgage – home equity loans / lines of credit 678 40 0 1,594 307,918 310,230
Real estate – mortgage – commercial and other 466 0 0 14,795 1,964,390 1,979,651
Consumer loans 113 37 0 180 49,811 50,141
Purchased credit impaired 0 13 799 0 8,804 9,616
Total $ 3,049 1,513 799 31,656 4,782,158 4,819,175
Unamortized net deferred loan costs (fees) (5,439)
Total loans $ 4,813,736

~~Page 19~~

~~Index~~


($ in thousands)	Accruing 30-59 Days Past Due		Accruing 60-89 Days Past Due	Accruing 90 Days or More Past Due	Nonaccrual Loans	Accruing Current	Total Loans Receivable
Commercial, financial, and agricultural	$	787	286	0	10,330	756,915	768,318
Real estate – construction, land development & other land loans	938		91	0	540	546,939	548,508
Real estate – mortgage – residential (1-4 family) first mortgages	6,257		80	0	6,207	903,625	916,169
Real estate – mortgage – home equity loans / lines of credit	487		0	0	1,676	292,448	294,611
Real estate – mortgage – commercial and other	628		1,352	0	20,654	2,026,873	2,049,507
Consumer loans	82		68	0	159	53,175	53,484
Total	$	9,179	1,877	0	39,566	4,579,975	4,630,597
Unamortized net deferred loan fees							(6,543)
Total loans							$	4,624,054

The following table presents an analysis of the payment status of the Company’s loans as of December 31, ~~2019.~~2020.


($ in thousands)	($ in thousands)	Accruing 30-59 Days Past Due		Accruing 60-89 Days Past Due	Accruing 90 Days or More Past Due	Nonaccrual Loans	Accruing Current	Total Loans Receivable		($ in thousands)	Accruing 30-59 Days Past Due		Accruing 60-89 Days Past Due	Accruing 90 Days or More Past Due	Nonaccrual Loans	Accruing Current	Total Loans Receivable
Commercial, financial, and agricultural	Commercial, financial, and agricultural	$	752	0	0	5,518	497,788	504,058		Commercial, financial, and agricultural	$	1,464	1,101	0	9,681	770,166	782,412
Real estate – construction, land development & other land loans	Real estate – construction, land development & other land loans	37		152	0	1,067	529,444	530,700		Real estate – construction, land development & other land loans	572		0	0	643	569,307	570,522
Real estate – mortgage – residential (1-4 family) first mortgages	Real estate – mortgage – residential (1-4 family) first mortgages	10,858		5,056	0	7,552	1,076,205	1,099,671		Real estate – mortgage – residential (1-4 family) first mortgages	10,146		869	0	6,048	951,088	968,151
Real estate – mortgage – home equity loans / lines of credit	Real estate – mortgage – home equity loans / lines of credit	770		300	0	1,797	334,832	337,699		Real estate – mortgage – home equity loans / lines of credit	1,088		42	0	1,333	303,693	306,156
Real estate – mortgage – commercial and other	Real estate – mortgage – commercial and other	4,257		0	0	8,820	1,897,573	1,910,650		Real estate – mortgage – commercial and other	2,540		3,111	0	17,191	2,022,422	2,045,264
Consumer loans	Consumer loans	344		137	0	112	55,490	56,083		Consumer loans	180		36	0	180	53,521	53,917
Purchased credit impaired	Purchased credit impaired	218		38	762	0	11,646	12,664		Purchased credit impaired	328		112	719	0	7,432	8,591
Total	Total	$	17,236	5,683	762	24,866	4,402,978	4,451,525		Total	$	16,318	5,271	719	35,076	4,677,629	4,735,013
Unamortized net deferred loan costs								1,941
Unamortized net deferred loan fees										Unamortized net deferred loan fees							(3,698)
Total loans	Total loans							$	4,453,466	Total loans							$	4,731,315

Page 20

Index

The following table presents an analysis of collateral-dependent loans of the Company as of March 31, 2021.


($ in thousands)	Residential Property		Business Assets	Land	Commercial Property	Other	Total Collateral-Dependent Loans
Commercial, financial, and agricultural	$	400	4,916	0	974	0	6,290
Real estate – construction, land development & other land loans	0		0	547	0	0	547
Real estate – mortgage – residential (1-4 family) first mortgages	3,434		0	0	0	0	3,434
Real estate – mortgage – home equity loans / lines of credit	378		0	0	0	0	378
Real estate – mortgage – commercial and other	0		0	4,664	14,956	0	19,620
Consumer loans	0		0	0	0	4	4
Total	$	4,212	4,916	5,211	15,930	4	30,273

The Company designates individually evaluated loans on nonaccrual with a net book balance of $250,000 or greater as collateral dependent loans, as well as other loans that management of the Company designates as having higher risk. Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the allowance for credit losses. Under CECL, for collateral dependent loans, the Company has adopted the practical expedient to measure the allowance for credit losses based on the fair value of collateral. The allowance for credit losses is calculated on an individual loan basis based on the shortfall between the fair value of the loan's collateral, which is adjusted for liquidation costs/discounts, and amortized cost. If the fair value of the collateral exceeds the amortized cost, no allowance is required.

The Company's policy is to obtain third-party appraisals on any significant pieces of collateral. For loans secured by real estate, the Company's policy is to write nonaccrual loans down to 90% of the appraised value, which considers estimated selling costs. For real estate collateral that is in industries that are undergoing heightened stress, such as hotel loans in the current environment, the Company often discounts the collateral values by an additional 10-25% due to additional discounts that are estimated to be incurred in a near-term sale. For non real-estate collateral secured loans, the Company generally writes nonaccrual loans down to 75% of the appraised value, which provides for selling costs and liquidity discounts that are usually incurred when disposing of non real-estate collateral. For reviewed loans that are not on nonaccrual basis, the Company assigns a specific allowance based on the parameters noted above.

The Company does not believe that there is significant over-coverage of collateral for any of the loan types noted above.

The following table presents the activity in the allowance for loan losses for all loans for the three ~~and nine~~ months ended ~~September 30, 2020.~~March 31, 2021 (under the CECL methodology).

($ in thousands) Commercial,
Financial,
and
Agricultural Real Estate
–
Construction,
Land
Development
& Other Land
Loans Real Estate
–
Residential
(1-4 Family)
First
Mortgages Real Estate
– Mortgage
– Home
Equity
Lines of
Credit Real Estate
– Mortgage
–
Commercial
and Other Consumer Loans Unallocated Total
As of and for the three months ended September 30, 2020
Beginning balance $ 5,989 5,677 8,339 2,359 18,755 1,223 0 42,342
Charge-offs (325) (6) (4) (23) 0 (310) 0 (668)
Recoveries 126 213 279 207 482 125 0 1,432
Provisions 2,986 388 82 (83) 2,369 308 70 6,120
Ending balance $ 8,776 6,272 8,696 2,460 21,606 1,346 70 49,226
As of and for the nine months ended September 30, 2020
Beginning balance $ 4,553 1,976 3,832 1,127 8,938 972 0 21,398
Charge-offs (4,256) (51) (478) (404) (545) (707) 0 (6,441)
Recoveries 603 856 594 373 584 251 0 3,261
Provisions 7,876 3,491 4,748 1,364 12,629 830 70 31,008
Ending balance $ 8,776 6,272 8,696 2,460 21,606 1,346 70 49,226
Ending balance as of September 30, 2020: Allowance for loan losses
Individually evaluated for impairment $ 1,814 56 820 0 1,624 0 0 4,314
Collectively evaluated for impairment $ 6,921 6,216 7,760 2,460 19,982 1,342 70 44,751
Purchased credit impaired $ 41 0 116 0 0 4 0 161
Loans receivable as of September 30, 2020
Ending balance – total $ 804,831 653,120 1,017,087 310,326 1,983,622 50,189 0 4,819,175
Unamortized net deferred loan fees (5,439)
Total loans $ 4,813,736
Ending balances as of September 30, 2020: Loans
Individually evaluated for impairment $ 7,001 853 9,657 319 16,349 0 0 34,179
Collectively evaluated for impairment $ 797,654 652,117 1,002,254 309,911 1,963,303 50,141 0 4,775,380
Purchased credit impaired $ 176 150 5,176 96 3,970 48 0 9,616


($ in thousands)	Commercial, Financial, and Agricultural		Real Estate – Construction, Land Development & Other Land Loans	Real Estate – Residential (1-4 Family) First Mortgages	Real Estate – Mortgage – Home Equity Lines of Credit	Real Estate – Mortgage – Commercial and Other	Consumer Loans	Unallocated	Total
As of and for the three months ended March 31, 2021

Beginning balance	$	11,316	5,355	8,048	2,375	23,603	1,478	213	52,388
Adjustment for implementation of CECL	3,067		6,140	2,584	2,580	(257)	674	(213)	14,575
Charge-offs	(1,438)		(66)	(38)	(131)	(510)	(134)	0	(2,317)
Recoveries	514		294	87	11	262	35	0	1,203
Provisions	147		(1,589)	(1,685)	(526)	3,409	244	0	0
Ending balance	$	13,606	10,134	8,996	4,309	26,507	2,297	0	65,849

Page 21

Index

The following table presents the activity in the allowance for loan losses for the year ended December 31, ~~2019.~~2020 (under the Incurred Loss methodology).


($ in thousands)	($ in thousands)	Commercial, Financial, and Agricultural		Real Estate – Construction, Land Development & Other Land Loans	Real Estate – Residential (1-4 Family) First Mortgages	Real Estate – Mortgage – Home Equity Lines of Credit	Real Estate – Mortgage – Commercial and Other	Consumer Loans	Unallocated	Total		($ in thousands)	Commercial, Financial, and Agricultural		Real Estate – Construction, Land Development & Other Land Loans	Real Estate – Residential (1-4 Family) First Mortgages	Real Estate – Mortgage – Home Equity Lines of Credit	Real Estate – Mortgage – Commercial and Other	Consumer Loans	Unallocated	Total
As of and for the year ended December 31, 2019

As of and for the year ended December 31, 2020												As of and for the year ended December 31, 2020
Beginning balance	Beginning balance	$	2,889	2,243	5,197	1,665	7,983	952	110	21,039		Beginning balance	$	4,553	1,976	3,832	1,127	8,938	972	0	21,398
Charge-offs	Charge-offs	(2,473)		(553)	(657)	(307)	(1,556)	(757)	0	(6,303)		Charge-offs	(5,608)		(51)	(478)	(524)	(968)	(873)	0	(8,502)
Recoveries	Recoveries	980		1,275	705	629	575	235	0	4,399		Recoveries	745		1,552	754	487	621	294	0	4,453
Provisions	Provisions	3,157		(989)	(1,413)	(860)	1,936	542	(110)	2,263		Provisions	11,626		1,878	3,940	1,285	15,012	1,085	213	35,039
Ending balance	Ending balance	$	4,553	1,976	3,832	1,127	8,938	972	0	21,398		Ending balance	$	11,316	5,355	8,048	2,375	23,603	1,478	213	52,388

Ending balances as of December 31, 2019: Allowance for loan losses
Ending balances as of December 31, 2020: Allowance for loan losses												Ending balances as of December 31, 2020: Allowance for loan losses
Individually evaluated for impairment	Individually evaluated for impairment	$	1,791	50	750	0	983	0	0	3,574		Individually evaluated for impairment	$	3,546	30	800	0	2,175	0	0	6,551
Collectively evaluated for impairment	Collectively evaluated for impairment	$	2,720	1,926	2,976	1,127	7,931	961	0	17,641		Collectively evaluated for impairment	$	7,742	5,325	7,141	2,375	21,428	1,475	213	45,699
Purchased credit impaired	Purchased credit impaired	$	42	0	106	0	24	11	0	183		Purchased credit impaired	$	28	0	107	0	0	3	0	138

Loans receivable as of December 31, 2019:
Loans receivable as of December 31, 2020:												Loans receivable as of December 31, 2020:
Ending balance – total	Ending balance – total	$	504,271	530,866	1,105,014	337,922	1,917,280	56,172	0	4,451,525		Ending balance – total	$	782,549	570,672	972,378	306,256	2,049,203	53,955	0	4,735,013
Unamortized net deferred loan costs										1,941
Unamortized net deferred loan fees												Unamortized net deferred loan fees									(3,698)
Total loans	Total loans									$	4,453,466	Total loans									$	4,731,315

Ending balances as of December 31, 2019: Loans
Ending balances as of December 31, 2020: Loans												Ending balances as of December 31, 2020: Loans
Individually evaluated for impairment	Individually evaluated for impairment	$	4,957	796	9,546	333	9,570	0	0	25,202		Individually evaluated for impairment	$	7,700	677	9,303	15	18,582	4	0	36,281
Collectively evaluated for impairment	Collectively evaluated for impairment	$	499,101	529,904	1,090,125	337,366	1,901,080	56,083	0	4,413,659		Collectively evaluated for impairment	$	774,712	569,845	958,848	306,141	2,026,682	53,913	0	4,690,141
Purchased credit impaired	Purchased credit impaired	$	213	166	5,343	223	6,630	89	0	12,664		Purchased credit impaired	$	137	150	4,227	100	3,939	38	0	8,591

Page 22

Index

The following table presents the activity in the allowance for loan losses for ~~all loans for~~ the three ~~and nine~~ months ended ~~September 30, 2019.~~March 31, 2020 (under the Incurred Loss methodology).

($ in thousands) Commercial,
Financial,
and
Agricultural Real Estate
–
Construction,
Land
Development
& Other Land
Loans Real Estate
–
Residential
(1-4 Family)
First
Mortgages Real Estate
– Mortgage
– Home
Equity
Lines of
Credit Real Estate
– Mortgage
–
Commercial
and Other Consumer Loans Unallocated Total
As of and for the three months ended September 30, 2019
Beginning balance $ 3,218 1,815 4,123 1,271 8,852 1,211 299 20,789
Charge-offs (288) (47) (194) (70) (617) (119) 0 (1,335)
Recoveries 163 308 139 58 176 67 0 911
Provisions (226) (270) (112) (122) (199) (141) (35) (1,105)
Ending balance $ 2,867 1,806 3,956 1,137 8,212 1,018 264 19,260
As of and for the nine months ended September 30, 2019
Beginning balance $ 2,889 2,243 5,197 1,665 7,983 952 110 21,039
Charge-offs (1,224) (340) (379) (216) (1,455) (555) 0 (4,169)
Recoveries 768 797 521 513 550 154 0 3,303
Provisions 434 (894) (1,383) (825) 1,134 467 154 (913)
Ending balance $ 2,867 1,806 3,956 1,137 8,212 1,018 264 19,260
Ending balance as of September 30, 2019: Allowance for loan losses
Individually evaluated for impairment $ 168 45 828 0 230 0 0 1,271
Collectively evaluated for impairment $ 2,657 1,761 3,060 1,137 7,925 1,005 264 17,809
Purchased credit impaired $ 42 0 68 0 57 13 0 180
Loans receivable as of September 30, 2019
Ending balance – total $ 486,768 471,326 1,093,619 343,378 1,928,931 70,962 0 4,394,984
Unamortized net deferred loan costs 1,560
Total loans $ 4,396,544
Ending balances as of September 30, 2019: Loans
Individually evaluated for impairment $ 1,090 804 9,942 338 6,941 0 0 19,115
Collectively evaluated for impairment $ 485,436 470,353 1,078,004 342,831 1,914,603 70,844 0 4,362,071
Purchased credit impaired $ 242 169 5,673 209 7,387 118 0 13,798


($ in thousands)	Commercial, Financial, and Agricultural		Real Estate – Construction, Land Development & Other Land Loans	Real Estate – Residential (1-4 Family) First Mortgages	Real Estate – Mortgage – Home Equity Lines of Credit	Real Estate – Mortgage – Commercial and Other	Consumer Loans	Unallocated	Total
As of and for the three months ended March 31, 2020
Beginning balance	$	4,553	1,976	3,832	1,127	8,938	972	0	21,398
Charge-offs	(2,460)		(40)	(195)	(68)	(263)	(287)	0	(3,313)
Recoveries	217		290	91	83	47	95	0	823
Provisions	1,894		373	645	252	2,191	235	0	5,590
Ending balance	$	4,204	2,599	4,373	1,394	10,913	1,015	0	24,498

Ending balances as of March 31, 2020: Allowance for loan losses
Individually evaluated for impairment	$	1,093	73	739	90	1,233	0	0	3,228
Collectively evaluated for impairment	$	3,069	2,526	3,528	1,304	9,680	1,006	0	21,113
Purchased credit impaired	$	42	0	106	0	0	9	0	157

Loans receivable as of March 31, 2020:
Ending balance – total	$	521,470	590,485	1,083,022	331,170	1,970,716	54,133	0	4,550,996
Unamortized net deferred loan costs									1,712
Total loans									$	4,552,708

Ending balances as of March 31, 2020: Loans
Individually evaluated for impairment	$	3,050	756	9,915	433	11,862	0	0	26,016
Collectively evaluated for impairment	$	518,233	589,566	1,067,805	330,644	1,954,834	54,059	0	4,515,141
Purchased credit impaired	$	187	163	5,302	93	4,020	74	0	9,839

Page 23

Index

~~The following table presents loans individually evaluated for impairment by class of loans, excluding PCI loans, as of September 30, 2020.~~

($ in thousands) Recorded
Investment Unpaid
Principal
Balance Related
Allowance Average
Recorded
Investment
Impaired loans with no related allowance recorded:
Commercial, financial, and agricultural $ 12 16 — 15
Real estate – mortgage – construction, land development & other land loans 316 494 — 246
Real estate – mortgage – residential (1-4 family) first mortgages 4,336 4,674 — 4,530
Real estate – mortgage –home equity loans / lines of credit 319 357 — 327
Real estate – mortgage –commercial and other 10,959 12,004 — 8,342
Consumer loans 0 0 — 0
Total impaired loans with no allowance $ 15,942 17,545 — 13,460
Impaired loans with an allowance recorded:
Commercial, financial, and agricultural $ 6,989 7,042 1,814 5,421
Real estate – mortgage – construction, land development & other land loans 537 546 56 597
Real estate – mortgage – residential (1-4 family) first mortgages 5,321 5,498 820 5,185
Real estate – mortgage –home equity loans / lines of credit 0 0 0 26
Real estate – mortgage –commercial and other 5,390 6,231 1,624 5,528
Consumer loans 0 0 0 0
Total impaired loans with allowance $ 18,237 19,317 4,314 16,757

~~Interest income recorded on impaired loans during the nine months ended September 30, 2020 was insignificant.~~

~~Page 24~~

~~Index~~

The following table presents loans individually evaluated for impairment by class of loans, excluding PCI loans, as of December 31, ~~2019.~~2020.


($ in thousands)	($ in thousands)	Recorded Investment		Unpaid Principal Balance	Related Allowance	Average Recorded Investment	($ in thousands)	Recorded Investment		Unpaid Principal Balance	Related Allowance	Average Recorded Investment
Impaired loans with no related allowance recorded:	Impaired loans with no related allowance recorded:						Impaired loans with no related allowance recorded:

Commercial, financial, and agricultural	Commercial, financial, and agricultural	$	16	19	—	74	Commercial, financial, and agricultural	$	3,688	4,325	—	750
Real estate – mortgage – construction, land development & other land loans	Real estate – mortgage – construction, land development & other land loans	221		263	—	366	Real estate – mortgage – construction, land development & other land loans	554		694	—	308
Real estate – mortgage – residential (1-4 family) first mortgages	Real estate – mortgage – residential (1-4 family) first mortgages	4,300		4,539	—	4,415	Real estate – mortgage – residential (1-4 family) first mortgages	4,115		4,456	—	4,447
Real estate – mortgage –home equity loans / lines of credit	Real estate – mortgage –home equity loans / lines of credit	333		357	—	147	Real estate – mortgage –home equity loans / lines of credit	15		27	—	264
Real estate – mortgage –commercial and other	Real estate – mortgage –commercial and other	2,643		3,328	—	3,240	Real estate – mortgage –commercial and other	11,763		13,107	—	9,026
Consumer loans	Consumer loans	0		0	—	0	Consumer loans	4		4	—	1
Total impaired loans with no allowance	Total impaired loans with no allowance	$	7,513	8,506	—	8,242	Total impaired loans with no allowance	$	20,139	22,613	—	14,796

Impaired loans with an allowance recorded:	Impaired loans with an allowance recorded:						Impaired loans with an allowance recorded:

Commercial, financial, and agricultural	Commercial, financial, and agricultural	$	4,941	4,995	1,791	1,681	Commercial, financial, and agricultural	$	4,012	4,398	3,546	5,139
Real estate – mortgage – construction, land development & other land loans	Real estate – mortgage – construction, land development & other land loans	575		575	50	586	Real estate – mortgage – construction, land development & other land loans	123		131	30	502
Real estate – mortgage – residential (1-4 family) first mortgages	Real estate – mortgage – residential (1-4 family) first mortgages	5,246		5,469	750	6,206	Real estate – mortgage – residential (1-4 family) first mortgages	5,188		5,361	800	5,186
Real estate – mortgage –home equity loans / lines of credit	Real estate – mortgage –home equity loans / lines of credit	0		0	0	55	Real estate – mortgage –home equity loans / lines of credit	0		0	0	21
Real estate – mortgage –commercial and other	Real estate – mortgage –commercial and other	6,927		7,914	983	5,136	Real estate – mortgage –commercial and other	6,819		7,552	2,175	5,786
Consumer loans	Consumer loans	0		0	0	0	Consumer loans	0		0	0	0
Total impaired loans with allowance	Total impaired loans with allowance	$	17,689	18,953	3,574	13,664	Total impaired loans with allowance	$	16,142	17,442	6,551	16,634

Interest income recorded on impaired loans during the year ended December 31, ~~2019~~2020 was ~~$1.3~~$1.1 million, and reflects interest income recorded on nonaccrual loans prior to them being placed on nonaccrual status and interest income recorded on accruing ~~restructured loans.~~TDRs.

The Company tracks credit quality based on its internal risk ratings. Upon origination, a loan is assigned an initial risk grade, which is generally based on several factors such as the borrower’s credit score, the loan-to-value ratio, the debt-to-income ratio, etc. Loans that are risk-graded as substandard during the origination process are declined. After loans are initially graded, they are monitored regularly for credit quality based on many factors, such as payment history, the borrower’s financial status, and changes in collateral value. Loans can be downgraded or upgraded depending on management’s evaluation of these factors. Internal risk-grading policies are consistent throughout each loan type.

Page 2524

Index

The following describes the Company’s internal risk grades in ascending order of likelihood of loss:


	Risk Grade	Description
Pass:
	1	Loans with virtually no risk, including cash secured loans.
	2	Loans with documented significant overall financial strength. These loans have minimum chance of loss due to the presence of multiple sources of repayment – each clearly sufficient to satisfy the obligation.
	3	Loans with documented satisfactory overall financial strength. These loans have a low loss potential due to presence of at least two clearly identified sources of repayment – each of which is sufficient to satisfy the obligation under the present circumstances.
	4	Loans to borrowers with acceptable financial condition. These loans could have signs of minor operational weaknesses, lack of adequate financial information, or loans supported by collateral with questionable value or marketability.
	5	Loans that represent above average risk due to minor weaknesses and warrant closer scrutiny by management. Collateral is generally required and felt to provide reasonable coverage with realizable liquidation values in normal circumstances. Repayment performance is satisfactory.
	P (Pass)	Consumer loans (<$500,000) that are of satisfactory credit quality with borrowers who exhibit good personal credit history, average personal financial strength and moderate debt levels. These loans generally conform to Bank policy, but may include approved mitigated exceptions to the guidelines.
Special Mention:
	6	Existing loans with defined weaknesses in primary source of repayment that, if not corrected, could cause a loss to the Bank.
Classified:
	7	An existing loan inadequately protected by the current sound net worth and paying capacity of the obligor or the collateral pledged, if any. These loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.
	8	Loans that have a well-defined weakness that make the collection or liquidation in full highly questionable and improbable. Loss appears imminent, but the exact amount and timing is uncertain.
	9	Loans that are considered uncollectible and are in the process of being charged-off. This grade is a temporary grade assigned for administrative purposes until the charge-off is completed.
	F (Fail)	Consumer loans (<$500,000) with a well-defined weakness, such as exceptions of any kind with no mitigating factors, history of paying outside the terms of the note, insufficient income to support the current level of debt, etc.

Page 25

Index

The following table presents the Company’s recorded investment in loans by credit quality indicators by year of origination as of ~~September 30, 2020.~~March 31, 2021.


									Term Loans by Year of Origination
($ in thousands)	($ in thousands)	Pass		Special Mention Loans	Classified Accruing Loans	Classified Nonaccrual Loans	Total	($ in thousands)	2021	2020	2019	2018	2017	Prior	Revolving	Total
Commercial, financial, and agricultural	Commercial, financial, and agricultural	$	778,593	16,517	1,072	8,473	804,655	Commercial, financial, and agricultural
Pass								Pass	147,842	293,349	105,182	87,514	21,260	27,420	66,442	749,009
Special Mention								Special Mention	22	653	3,690	2,900	49	42	452	7,808
Classified								Classified	177	4,067	3,724	2,729	255	48	501	11,501
Total commercial, financial, and agricultural								Total commercial, financial, and agricultural	148,041	298,069	112,596	93,143	21,564	27,510	67,395	768,318
Real estate – construction, land development & other land loans	Real estate – construction, land development & other land loans	643,826		7,058	1,214	872	652,970	Real estate – construction, land development & other land loans
Pass								Pass	104,771	311,765	70,727	12,754	12,577	11,343	18,161	542,098
Special Mention								Special Mention	48	4,037	55	3	116	254	109	4,622
Classified								Classified	28	486	217	292	88	414	263	1,788
Total real estate – construction, land development & other land loans								Total real estate – construction, land development & other land loans	104,847	316,288	70,999	13,049	12,781	12,011	18,533	548,508
Real estate – mortgage – residential (1-4 family) first mortgages	Real estate – mortgage – residential (1-4 family) first mortgages	985,925		7,634	12,611	5,742	1,011,912	Real estate – mortgage – residential (1-4 family) first mortgages
Pass								Pass	26,304	172,807	170,991	180,894	119,528	213,166	7,325	891,015
Special Mention								Special Mention	638	1,459	291	313	384	3,963	23	7,071
Classified								Classified	431	1,406	2,508	2,210	1,180	9,910	438	18,083
Total real estate – mortgage – residential (1-4 family) first mortgages								Total real estate – mortgage – residential (1-4 family) first mortgages	27,373	175,672	173,790	183,417	121,092	227,039	7,786	916,169
Real estate – mortgage – home equity loans / lines of credit	Real estate – mortgage – home equity loans / lines of credit	300,708		1,854	6,074	1,594	310,230	Real estate – mortgage – home equity loans / lines of credit
Pass								Pass	175	531	1,139	1,827	1,810	1,388	279,116	285,986
Special Mention								Special Mention	0	0	18	0	0	20	1,298	1,336
Classified								Classified	0	162	137	0	0	738	6,252	7,289
Total real estate – mortgage – home equity loans / lines of credit								Total real estate – mortgage – home equity loans / lines of credit	175	693	1,294	1,827	1,810	2,146	286,666	294,611
Real estate – mortgage – commercial and other	Real estate – mortgage – commercial and other	1,928,787		32,052	4,017	14,795	1,979,651	Real estate – mortgage – commercial and other
Pass								Pass	180,222	699,117	349,785	222,224	189,511	326,685	26,465	1,994,009
Special Mention								Special Mention	3,833	15,743	2,775	2,940	3,394	1,915	817	31,417
Classified								Classified	379	6,569	6,783	2,842	2,900	4,346	262	24,081
Total real estate – mortgage – commercial and other								Total real estate – mortgage – commercial and other	184,434	721,429	359,343	228,006	195,805	332,946	27,544	2,049,507
Consumer loans	Consumer loans	49,658		85	218	180	50,141	Consumer loans
Purchased credit impaired		7,778		86	1,752	0	9,616
Pass								Pass	4,696	26,569	5,675	2,872	1,281	1,293	10,626	53,012
Special Mention								Special Mention	0	0	0	0	0	0	76	76
Classified								Classified	0	88	45	28	0	84	151	396
Total consumer loans								Total consumer loans	4,696	26,657	5,720	2,900	1,281	1,377	10,853	53,484
Total	Total	$	4,695,275	65,286	26,958	31,656	4,819,175	Total	469,566	1,538,808	723,742	522,342	354,333	603,029	418,777	4,630,597
Unamortized net deferred loan costs							(5,439)
Unamortized net deferred loan fees								Unamortized net deferred loan fees								(6,543)
Total loans	Total loans						4,813,736	Total loans								4,624,054

Page 26

Index

In the table above, substantially all of the "Classified Loans" have grades of 7 or Fail, with those categories having similar levels of risk. The amount of revolving lines of credit that converted to term loans during the period was immaterial.

The following table presents the Company’s recorded investment in loans by credit quality indicators as of December 31, ~~2019.~~2020.


($ in thousands)	($ in thousands)	Pass		Special Mention Loans	Classified Accruing Loans	Classified Nonaccrual Loans	Total	($ in thousands)	Pass		Special Mention Loans	Classified Accruing Loans	Classified Nonaccrual Loans	Total
Commercial, financial, and agricultural	Commercial, financial, and agricultural	$	486,081	7,998	4,461	5,518	504,058	Commercial, financial, and agricultural	$	762,091	9,553	1,087	9,681	782,412
Real estate – construction, land development & other land loans	Real estate – construction, land development & other land loans	522,767		4,075	2,791	1,067	530,700	Real estate – construction, land development & other land loans	560,845		7,877	1,157	643	570,522
Real estate – mortgage – residential (1-4 family) first mortgages	Real estate – mortgage – residential (1-4 family) first mortgages	1,063,735		13,187	15,197	7,552	1,099,671	Real estate – mortgage – residential (1-4 family) first mortgages	943,455		7,609	11,039	6,048	968,151
Real estate – mortgage – home equity loans / lines of credit	Real estate – mortgage – home equity loans / lines of credit	328,903		1,258	5,741	1,797	337,699	Real estate – mortgage – home equity loans / lines of credit	297,795		1,468	5,560	1,333	306,156
Real estate – mortgage – commercial and other	Real estate – mortgage – commercial and other	1,873,594		20,800	7,436	8,820	1,910,650	Real estate – mortgage – commercial and other	1,988,684		34,588	4,801	17,191	2,045,264
Consumer loans	Consumer loans	55,203		413	355	112	56,083	Consumer loans	53,488		80	169	180	53,917
Purchased credit impaired	Purchased credit impaired	8,098		2,590	1,976	0	12,664	Purchased credit impaired	6,901		85	1,605	0	8,591
Total	Total	$	4,338,381	50,321	37,957	24,866	4,451,525	Total	$	4,613,259	61,260	25,418	35,076	4,735,013
Unamortized net deferred loan costs							1,941
Unamortized net deferred loan fees								Unamortized net deferred loan fees						(3,698)
Total loans	Total loans						4,453,466	Total loans						4,731,315

Troubled Debt Restructurings

The restructuring of a loan is considered a ~~“troubled debt restructuring” ("TDR")~~TDR if both (i) the borrower is experiencing financial difficulties and (ii) the creditor has granted a concession. Concessions may include interest rate reductions or below market interest rates, principal forgiveness, extension of terms and other actions intended to minimize potential losses. As previously noted, under the CARES Act and banking regulator guidance, which the Company has applied, modifications deemed to be COVID-19-related are not considered a TDR if the loan was not more than 30 days past due as of December 31, 2019 and the deferral was executed between March 1, 2020 and the earlier of 60 days after the date of termination of the COVID-19 national emergency or December 31, 2020. As the initial 90 day deferrals began to expire late in the second quarter and early in the third quarter, the Company approved second deferral requests of another 90 days based on the circumstances of each borrower. Under these terms, as of September 30, 2020, the Company had payment deferrals for 207 loans with an aggregate loan balance of $186 million, and for the reasons previously noted, these loans are not included in the TDR's disclosed in this report. Approximately $158 million of the $186 million in deferrals were second deferrals and for $100 million of the total deferrals, the borrower is scheduled to make interest payments with only principal being deferred. The Company continues to accrue interest on these loans during the deferral period.

The vast majority of the Company’s TDR's modified during the periods ended ~~September 30,~~March 31, 2021 and March 31, 2020 ~~and September 30, 2019~~ related to interest rate reductions combined with extension of terms. The Company does not generally grant principal forgiveness.

~~All loans classified as TDR's are considered to be impaired and are evaluated as such for determination of the allowance for loan losses.~~ The Company’s TDR's can be classified as either nonaccrual or accruing based on the loan’s payment status. The TDR's that are nonaccrual are reported within the nonaccrual loan totals presented previously.

As of March 31, 2021, the Company had granted short-term deferrals related to the COVID-19 pandemic for $5.9 million of loans that were otherwise performing prior to modification. Pursuant to the CARES Act and banking regulator guidance, these loans were not considered TDRs.

The following table presents information related to loans modified in a TDR during the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020.

Page 27

Index


($ in thousands)	($ in thousands)	For the three months ended September 30, 2020					For the three months ended September 30, 2019					($ in thousands)	For the three months ended March 31, 2021					For the three months ended March 31, 2020
		Number of Contracts	Pre- Modification Restructured Balances		Post- Modification Restructured Balances		Number of Contracts	Pre- Modification Restructured Balances		Post- Modification Restructured Balances			Number of Contracts	Pre- Modification Restructured Balances		Post- Modification Restructured Balances		Number of Contracts	Pre- Modification Restructured Balances		Post- Modification Restructured Balances
TDRs – Accruing	TDRs – Accruing											TDRs – Accruing
Commercial, financial, and agricultural	Commercial, financial, and agricultural	0	$	0	$	0	0	$	0	$	0	Commercial, financial, and agricultural	0	$	0	$	0	2	$	143	$	143
Real estate – construction, land development & other land loans	Real estate – construction, land development & other land loans	0	0		0		0	0		0		Real estate – construction, land development & other land loans	0	0		0		0	0		0
Real estate – mortgage – residential (1-4 family) first mortgages	Real estate – mortgage – residential (1-4 family) first mortgages	0	0		0		1	133		133		Real estate – mortgage – residential (1-4 family) first mortgages	0	0		0		0	0		0
Real estate – mortgage – home equity loans / lines of credit	Real estate – mortgage – home equity loans / lines of credit	0	0		0		0	0		0		Real estate – mortgage – home equity loans / lines of credit	0	0		0		0	0		0
Real estate – mortgage – commercial and other	Real estate – mortgage – commercial and other	0	0		0		0	0		0		Real estate – mortgage – commercial and other	1	160		160		0	0		0
Consumer loans	Consumer loans	0	0		0		0	0		0		Consumer loans	0	0		0		0	0		0
TDRs – Nonaccrual	TDRs – Nonaccrual											TDRs – Nonaccrual
Commercial, financial, and agricultural	Commercial, financial, and agricultural	0	0		0		0	0		0		Commercial, financial, and agricultural	1	111		108		0	0		0
Real estate – construction, land development & other land loans	Real estate – construction, land development & other land loans	0	0		0		0	0		0		Real estate – construction, land development & other land loans	0	0		0		0	0		0
Real estate – mortgage – residential (1-4 family) first mortgages	Real estate – mortgage – residential (1-4 family) first mortgages	0	0		0		0	0		0		Real estate – mortgage – residential (1-4 family) first mortgages	0	0		0		0	0		0
Real estate – mortgage – home equity loans / lines of credit	Real estate – mortgage – home equity loans / lines of credit	0	0		0		0	0		0		Real estate – mortgage – home equity loans / lines of credit	0	0		0		0	0		0
Real estate – mortgage – commercial and other	Real estate – mortgage – commercial and other	1	2,344		2,344		0	0		0		Real estate – mortgage – commercial and other	0	0		0		0	0		0
Consumer loans	Consumer loans	0	0		0		0	0		0		Consumer loans	0	0		—		0	0		0
Total TDRs arising during period	Total TDRs arising during period	1	$	2,344	$	2,344	1	$	133	$	133	Total TDRs arising during period	2	$	271	$	268	2	$	143	$	143

~~Page 28~~

~~Index~~

~~The following table presents information related to loans modified in a TDR during the nine months ended September 30, 2020 and 2019.~~

($ in thousands) For the nine months ended September 30, 2020 For the nine months ended September 30, 2019
Number of
Contracts Pre-
Modification
Restructured
Balances Post-
Modification
Restructured
Balances Number of
Contracts Pre-
Modification
Restructured
Balances Post-
Modification
Restructured
Balances
TDRs – Accruing
Commercial, financial, and agricultural 2 $ 143 $ 143 1 $ 143 $ 143
Real estate – construction, land development & other land loans 1 67 67 0 0 0
Real estate – mortgage – residential (1-4 family) first mortgages 2 75 78 4 523 527
Real estate – mortgage – home equity loans / lines of credit 0 0 0 0 0 0
Real estate – mortgage – commercial and other 0 0 0 1 965 965
Consumer loans 0 0 0 0 0 0
TDRs – Nonaccrual
Commercial, financial, and agricultural 0 0 0 0 0 0
Real estate – construction, land development & other land loans 0 0 0 0 0 0
Real estate – mortgage – residential (1-4 family) first mortgages 0 0 0 0 0 0
Real estate – mortgage – home equity loans / lines of credit 0 0 0 0 0 0
Real estate – mortgage – commercial and other 1 2,344 2,344 0 0 0
Consumer loans 0 0 0 0 0 0
Total TDRs arising during period 6 $ 2,629 $ 2,632 6 $ 1,631 $ 1,635

~~Accruing TDR's that were modified in the previous twelve months and that defaulted during the three months ended September 30, 2020 and 2019 are presented in the table below.~~ The Company considers a loan to have defaulted when it becomes 90 or more days delinquent under the modified terms, has been transferred to nonaccrual status, or has been transferred to foreclosed real estate.

($ in thousands) For the Three Months Ended September 30, 2020 For the Three Months Ended September 30, 2019
Number of
Contracts Recorded
Investment Number of
Contracts Recorded
Investment
Accruing TDRs that subsequently defaulted
Real estate – mortgage – residential (1-4 family first mortgages) 0 $ 0 0 $ 0
Real estate – mortgage – commercial and other 0 0 0 0
Total accruing TDRs that subsequently defaulted 1 $ 274 1 $ 93

~~Accruing~~ There were no accruing TDR's that were modified in the previous twelve months and that defaulted during the ~~nine~~three months ended ~~September 30,~~March 31, 2021 or 2020.

Allowance for Credit Losses - Unfunded Loan Commitments

In addition to the allowance for credit losses on loans, the Company maintains an allowance for lending-related commitments such as unfunded loan commitments and letters of credit. Under CECL, the Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for lending-related commitments on off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information, and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss rates that are used in computing the allowance for credit losses on loans, and are discussed in Note 2. The allowance for credit losses for unfunded loan commitments of $8.1 million and $0.6 million at March 31, 2021 and December 31, 2020, respectively, is separately classified on the balance sheet within Other Liabilities. The following table presents the balance and ~~2019 are presented~~activity in the ~~table below.~~allowance for credit losses for unfunded loan commitments for the three months ended March 31, 2021.

Page 2928

Index

($ in thousands) For the Nine Months Ended September 30, 2020 For the Nine Months Ended September 30, 2019
Number of
Contracts Recorded
Investment Number of
Contracts Recorded
Investment
Accruing TDRs that subsequently defaulted
Real estate – mortgage – residential (1-4 family first mortgages) 0 $ 0 1 $ 93
Real estate – mortgage – commercial and other 1 274 0 0
Total accruing TDRs that subsequently defaulted 1 $ 274 1 $ 93


($ in thousands)	Total Allowance for Credit Losses - Unfunded Loan Commitments
Beginning balance at December 31, 2020	$	582
Adjustment for implementation of CECL on January 1, 2021	7,504
Charge-offs	0
Recoveries	0
Provisions for credit losses on unfunded commitments	0
Ending balance at March 31, 2021	$	8,086

Allowance for Credit Losses - Securities Held to Maturity

As previously discussed, the allowance for credit losses for securities held to maturity was immaterial at March 31, 2021.

Note 87 – Goodwill and Other Intangible Assets

The following is a summary of the gross carrying amount and accumulated amortization of amortizable intangible assets as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, and the carrying amount of unamortized intangible assets as of those same dates.


		September 30, 2020			December 31, 2019			March 31, 2021			December 31, 2020
($ in thousands)	($ in thousands)	Gross Carrying Amount		Accumulated Amortization	Gross Carrying Amount	Accumulated Amortization	($ in thousands)	Gross Carrying Amount		Accumulated Amortization	Gross Carrying Amount	Accumulated Amortization
Amortizable intangible assets:	Amortizable intangible assets:						Amortizable intangible assets:
Customer lists	Customer lists	$	6,013	2,575	6,013	2,185	Customer lists	$	7,613	3,023	7,613	2,814
Core deposit intangibles	Core deposit intangibles	28,440		23,112	28,440	20,610	Core deposit intangibles	28,440		24,500	28,440	23,832
SBA servicing asset	SBA servicing asset	9,268		3,624	7,776	2,393	SBA servicing asset	10,583		4,658	9,976	4,188
Other	Other	1,303		1,196	1,303	1,127	Other	1,403		1,252	1,403	1,232
Total	Total	$	45,024	30,507	43,532	26,315	Total	$	48,039	33,433	47,432	32,066

Unamortizable intangible assets:	Unamortizable intangible assets:						Unamortizable intangible assets:
Goodwill	Goodwill	$	240,972		234,368		Goodwill	$	239,272		239,272

SBA servicing assets are recorded for the portions of SBA loans ~~or portions thereof,~~ that the Company has sold but ~~continue~~continues to service for a fee. Servicing assets are initially recorded at fair value and amortized over the expected lives of the related loans and are tested for impairment on a quarterly basis. SBA servicing asset amortization expense is recorded within noninterest income as an offset to SBA servicing fees within the line item "Other service charges, commissions, and fees." As derived from the table above, the Company had a SBA servicing asset at ~~September 30, 2020~~March 31, 2021 with a remaining book value of ~~$5,644,000.~~$5,925,000. The Company recorded ~~$1,492,000~~$607,000 and ~~$2,057,000~~$217,000 in servicing assets associated with the guaranteed portion of SBA loans sold during the first ~~nine~~three months of ~~2020~~2021 and ~~2019,~~2020, respectively. During the first ~~nine~~three months of ~~2020~~2021 and ~~2019,~~2020, the Company recorded ~~$1,231,000~~$470,000 and ~~$975,000,~~$918,000, respectively, in related amortization expense.

~~In connection with~~ Included in the ~~September 1,~~amortization expense for the first three months of 2020 ~~acquisition~~was an impairment charge of approximately $500,000 due to a ~~business financing company,~~decrease in the fair value of the asset resulting from deterioration in market conditions at March 31, 2020. At March 31, 2021 and December 31, 2020, the Company ~~recorded a $6.6~~serviced for others SBA loans totaling $412.5 million ~~intangible asset, which has initially been recorded as goodwill. The Company is currently performing valuation studies of this intangible asset~~ and ~~may reclassify a portion of this amount from goodwill to other types of intangible assets at the next reporting date. See Note 16 for additional discussion of this acquisition.~~$395.4 million, respectively.

Amortization expense of all other intangible assets, excluding the SBA servicing asset, totaled ~~$928,000~~$897,000 and ~~$1,163,000~~$1,055,000 for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. ~~Amortization expense~~

Goodwill is evaluated for impairment on at least an annual basis, with the annual evaluation occurring on October 31 of ~~all other intangible assets totaled $2,961,000 and $3,737,000 for the nine months ended September 30, 2020 and 2019, respectively.~~

each year. During the period ended March 31, 2020, the economic turmoil and market volatility resulting from the COVID-19 crisis resulted in a substantial decrease in the Company's stock price and market capitalization. Management believed such decrease was a triggering indicator requiring an interim ~~step-one~~ goodwill impairment quantitative analysis. The results of the March 31, 2020 analysis determined that none of the Company's goodwill was impaired. As a result of the continued economic turmoil and market volatility during the period ended June 30, 2020, the Company qualitatively reviewed the factors and assumptions used in the March 31, 2020 analysis, including financial projections, discount rates, and market premiums, in light of the triggering event existing as of June 30, 2020. Based on thatIn this analysis, the Company ~~concluded there was no impairment~~determined that 0ne of its goodwill ~~at June 30,~~was impaired as of March 31, 2020. ~~With~~Due to improving economic conditions and increases in the ~~economic turmoil~~Company's stock price and market ~~volatility continuing in~~capitalization at year end 2020 and the ~~third~~first quarter of 2021, no triggering events were identified and therefore, the Company did not perform an interim impairment evaluation at December 31, 2020 ~~a triggering event was~~or March 31, 2021.

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identified and management again performed an interim step-one goodwill impairment quantitative analysis as of September 30, 2020. This analysis again concluded that none of the Company's goodwill was impaired as of that date. Management will continue to evaluate the economic conditions at future reporting periods for applicable changes and take appropriate actions.

The following table presents the estimated amortization expense schedule related to acquisition-related amortizable intangible assets. These amounts will be recorded as "Intangibles amortization expense" within the noninterest expense section of the Consolidated Statements of Income. These estimates are subject to change in future periods to the extent management determines it is necessary to make adjustments to the carrying value or estimated useful lives of amortized intangible assets. income within the line item "Other service charges, commissions and fees" of the Consolidated Statements of Income.


($ in thousands)	($ in thousands)	Estimated Amortization Expense		($ in thousands)	Estimated Amortization Expense
October 1 to December 31, 2020		$	880
2021		2,927
April 1, 2021 to December 31, 2021				April 1, 2021 to December 31, 2021	$	2,375
2022	2022	2,022		2022	2,367
2023	2023	1,041		2023	1,386
2024	2024	404		2024	741
2025				2025	562
Thereafter	Thereafter	1,599		Thereafter	1,250
Total	Total	$	8,873	Total	$	8,681

Note 98 – Pension Plans

The Company has historically sponsored 2 defined benefit pension plans – a qualified retirement plan (the “Pension Plan”) which was generally available to all employees, and a Supplemental Executive Retirement Plan (the “SERP”), which was for the benefit of certain senior management executives of the Company. Effective December 31, 2012, the Company froze both plans for all participants. Although no previously accrued benefits were lost, employees no longer accrue benefits for service subsequent to 2012.

The Company recorded periodic pension cost totaling ~~$186,000~~$191,000 and ~~$244,000~~$216,000 for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $617,000 and $732,000 for the nine months ended September 30, 2020 and 2019,~~ respectively. The following table contains the components of the pension cost.


		For the Three Months Ended September 30,								For the Three Months Ended March 31,
($ in thousands)	($ in thousands)	2020 Pension Plan		2019 Pension Plan	2020 SERP	2019 SERP	2020 Total Both Plans	2019 Total Both Plans	($ in thousands)	2021 Pension Plan		2020 Pension Plan	2021 SERP	2020 SERP	2021 Total Both Plans	2020 Total Both Plans
Service cost	Service cost	$	0	0	0	0	0	0	Service cost	$	0	0	0	0	0	0
Interest cost	Interest cost	303		367	55	82	358	449	Interest cost	306		308	39	55	345	363
Expected return on plan assets	Expected return on plan assets	(325)		(360)	0	0	(325)	(360)	Expected return on plan assets	(325)		(325)	0	0	(325)	(325)
Amortization of net (gain)/loss	Amortization of net (gain)/loss	194		282	(41)	(127)	153	155	Amortization of net (gain)/loss	210		219	(39)	(41)	171	178
Net periodic pension cost	Net periodic pension cost	$	172	289	14	(45)	186	244	Net periodic pension cost	$	191	202	0	14	191	216

Nine Months Ended September 30, 2020
($ in thousands) 2020 Pension Plan 2019 Pension Plan 2020 SERP 2019 SERP 2020 Total Both Plans 2019 Total Both Plans
Service cost $ 0 0 0 0 0 0
Interest cost 917 1,111 165 164 1,082 1,275
Expected return on plan assets (976) (1,154) 0 0 (976) (1,154)
Amortization of net (gain)/loss 634 733 (123) (122) 511 611
Net periodic pension cost $ 575 690 42 42 617 732

The service cost component of net periodic pension cost is included in salaries and benefits expense and all other components of net periodic pension cost are included in other noninterest expense.

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~~Index~~

The Company’s contributions to the Pension Plan are based on computations by independent actuarial consultants and are intended to be deductible for income tax purposes. The Company did 0t contribute to the Pension Plan in the first ~~nine~~three months of ~~2020~~2021 and does 0t expect to contribute to the Pension Plan in the remainder of ~~2020.~~2021.

The Company’s funding policy with respect to the SERP is to fund the related benefits from the operating cash flow of the Company.

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Note 109 – Accumulated Other Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity during a period for non-owner transactions and is divided into net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) includes revenues, expenses, gains, and losses that are excluded from earnings under current accounting standards. The components of accumulated other comprehensive income (loss) for the Company are as follows:


($ in thousands)	($ in thousands)	September 30, 2020		December 31, 2019	($ in thousands)	March 31, 2021		December 31, 2020
Unrealized gain (loss) on securities available for sale	Unrealized gain (loss) on securities available for sale	$	25,275	9,743	Unrealized gain (loss) on securities available for sale	$	(3,787)	20,448
Deferred tax asset (liability)	Deferred tax asset (liability)	(5,808)		(2,239)	Deferred tax asset (liability)	870		(4,699)
Net unrealized gain (loss) on securities available for sale	Net unrealized gain (loss) on securities available for sale	19,467		7,504	Net unrealized gain (loss) on securities available for sale	(2,917)		15,749

Postretirement plans asset (liability)	Postretirement plans asset (liability)	(2,581)		(3,092)	Postretirement plans asset (liability)	(1,646)		(1,817)
Deferred tax asset (liability)	Deferred tax asset (liability)	593		711	Deferred tax asset (liability)	378		418
Net postretirement plans asset (liability)	Net postretirement plans asset (liability)	(1,988)		(2,381)	Net postretirement plans asset (liability)	(1,268)		(1,399)

Total accumulated other comprehensive income (loss)	Total accumulated other comprehensive income (loss)	$	17,479	5,123	Total accumulated other comprehensive income (loss)	$	(4,185)	14,350

The following table discloses the changes in accumulated other comprehensive income (loss) for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 (all amounts are net of tax).


($ in thousands)	($ in thousands)	Unrealized Gain (Loss) on Securities Available for Sale		Postretirement Plans Asset (Liability)	Total	($ in thousands)	Unrealized Gain (Loss) on Securities Available for Sale		Postretirement Plans Asset (Liability)	Total
Beginning balance at January 1, 2020		$	7,504	(2,381)	5,123
Beginning balance at January 1, 2021						Beginning balance at January 1, 2021	$	15,749	(1,399)	14,350
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	18,143		0	18,143	Other comprehensive income (loss) before reclassifications	(18,666)		0	(18,666)
Amounts reclassified from accumulated other comprehensive income	Amounts reclassified from accumulated other comprehensive income	(6,180)		393	(5,787)	Amounts reclassified from accumulated other comprehensive income	0		131	131
Net current-period other comprehensive income (loss)	Net current-period other comprehensive income (loss)	11,963		393	12,356	Net current-period other comprehensive income (loss)	(18,666)		131	(18,535)

Ending balance at September 30, 2020		$	19,467	(1,988)	17,479
Ending balance at March 31, 2021						Ending balance at March 31, 2021	$	(2,917)	(1,268)	(4,185)

The following table discloses the changes in accumulated other comprehensive income (loss) for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 (all amounts are net of tax).


($ in thousands)	($ in thousands)	Unrealized Gain (Loss) on Securities Available for Sale		Postretirement Plans Asset (Liability)	Total	($ in thousands)	Unrealized Gain (Loss) on Securities Available for Sale		Postretirement Plans Asset (Liability)	Total
Beginning balance at January 1, 2019		$	(9,494)	(2,467)	(11,961)
Beginning balance at January 1, 2020						Beginning balance at January 1, 2020	$	7,504	(2,381)	5,123
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	15,212		0	15,212	Other comprehensive income (loss) before reclassifications	15,993		0	15,993
Amounts reclassified from accumulated other comprehensive income	Amounts reclassified from accumulated other comprehensive income	(75)		458	383	Amounts reclassified from accumulated other comprehensive income	0		137	137
Net current-period other comprehensive income (loss)	Net current-period other comprehensive income (loss)	15,137		458	15,595	Net current-period other comprehensive income (loss)	15,993		137	16,130

Ending balance at September 30, 2019		$	5,643	(2,009)	3,634
Ending balance at March 31, 2020						Ending balance at March 31, 2020	$	23,497	(2,244)	21,253

Amounts reclassified from accumulated other comprehensive income for Unrealized Gain (Loss) on Securities Available for Sale represent realized securities gains or losses, net of tax effects. Amounts reclassified from

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~~Index~~

accumulated other comprehensive income for Postretirement Plans Asset (Liability) represent amortization of amounts included in Accumulated Other Comprehensive Income, net of taxes, and are recorded in the "Other operating expenses" line item of the Consolidated Statements of Income.

Note 1110 – Fair Value

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal and most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair value:

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Level 1: Quoted prices (unadjusted) of identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The following table summarizes the Company’s financial instruments that were measured at fair value on a recurring and nonrecurring basis at ~~September 30, 2020.~~March 31, 2021.


($ in thousands)	($ in thousands)						($ in thousands)
Description of Financial Instruments	Description of Financial Instruments	Fair Value at September 30, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Description of Financial Instruments	Fair Value at March 31, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Recurring	Recurring						Recurring
Securities available for sale:	Securities available for sale:						Securities available for sale:
Government-sponsored enterprise securities	Government-sponsored enterprise securities	$	75,653	0	75,653	0	Government-sponsored enterprise securities	$	67,022	0	67,022	0
Mortgage-backed securities	Mortgage-backed securities	1,047,922		0	1,047,922	0	Mortgage-backed securities	1,709,811		0	1,709,811	0
Corporate bonds	Corporate bonds	45,131		0	45,131	0	Corporate bonds	44,864		0	44,864	0
Total available for sale securities	Total available for sale securities	$	1,168,706	0	1,168,706	0	Total available for sale securities	$	1,821,697	0	1,821,697	0

Presold mortgages in process of settlement	Presold mortgages in process of settlement	$	34,028	34,028	0	0	Presold mortgages in process of settlement	$	31,869	31,869	0	0

Nonrecurring	Nonrecurring						Nonrecurring
Impaired loans		$	16,547	0	0	16,547
Collateral dependent loans							Collateral dependent loans	$	28,082	0	0	28,082
Foreclosed real estate	Foreclosed real estate	1,253		0	0	1,253	Foreclosed real estate	1,484		0	0	1,484

The following table summarizes the Company’s financial instruments that were measured at fair value on a recurring and nonrecurring basis at December 31, ~~2019.~~2020.

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~~Index~~


($ in thousands)	($ in thousands)						($ in thousands)
Description of Financial Instruments	Description of Financial Instruments	Fair Value at December 31, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Description of Financial Instruments	Fair Value at December 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Recurring	Recurring						Recurring
Securities available for sale:	Securities available for sale:						Securities available for sale:
Government-sponsored enterprise securities	Government-sponsored enterprise securities	$	20,009	0	20,009	0	Government-sponsored enterprise securities	$	70,206	0	70,206	0
Mortgage-backed securities	Mortgage-backed securities	767,285		0	767,285	0	Mortgage-backed securities	1,337,706		0	1,337,706	0
Corporate bonds	Corporate bonds	34,651		0	34,651	0	Corporate bonds	45,220		0	45,220	0
Total available for sale securities	Total available for sale securities	$	821,945	0	821,945	0	Total available for sale securities	$	1,453,132	0	1,453,132	0

Presold mortgages in process of settlement	Presold mortgages in process of settlement	$	19,712	19,712	0	0	Presold mortgages in process of settlement	$	42,271	42,271	0	0

Nonrecurring	Nonrecurring						Nonrecurring
Impaired loans	Impaired loans	$	16,215	0	0	16,215	Impaired loans	$	22,142	0	0	22,142
Foreclosed real estate	Foreclosed real estate	1,830		0	0	1,830	Foreclosed real estate	1,484		0	0	1,484

The following is a description of the valuation methodologies used for instruments measured at fair value.

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Presold Mortgages in Process of Settlement - The fair value is based on the committed price that an investor has agreed to pay for the loan and is considered a Level 1 input.

Securities Available for Sale — When quoted market prices are available in an active market, the securities are classified as Level 1 in the valuation hierarchy. If quoted market prices are not available, but fair values can be estimated by observing quoted prices of securities with similar characteristics, the securities are classified as Level 2 on the valuation hierarchy. Most of the fair values for the Company’s Level 2 securities are determined by our third-party bond accounting provider using matrix pricing. Matrix pricing is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities. For the Company, Level 2 securities include mortgage-backed securities, commercial mortgage-backed obligations, government-sponsored enterprise securities, and corporate bonds. In cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

The Company reviews the pricing methodologies utilized by the bond accounting provider to ensure the fair value determination is consistent with the applicable accounting guidance and that the investments are properly classified in the fair value hierarchy.

~~Impaired~~Collateral-dependent loans — Fair values for ~~impaired~~collateral-dependent loans ~~in the above table~~ are measured on a non-recurring basis and are based on the underlying collateral values securing the loans, adjusted for estimated selling costs, or the net present value of the cash flows expected to be received for such loans. Collateral may be in the form of real estate or business assets including equipment, inventory and accounts receivable. The vast majority of the collateral is real estate. The value of real estate collateral is generally determined by third-party appraisers using an income or market valuation approach based on an appraisal conducted by an independent, licensed third party appraiser (Level 3). The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable borrower’s financial statements if not considered significant. Likewise, values for inventory and accounts receivable collateral are based on borrower financial statement balances or aging reports on a discounted basis as appropriate (Level 3). Appraisals used in this analysis are generally obtained at least annually based on when the loans first became impaired, and thus the appraisals are not necessarily as of the period ends presented. Any fair value adjustments are recorded in the period incurred as provision for ~~loan~~credit losses on the Consolidated Statements of Income.

Foreclosed real estate – Foreclosed real estate, consisting of properties obtained through foreclosure or in satisfaction of loans, is reported at the lower of cost or fair value. Fair value is measured on a non-recurring basis and is based upon independent market prices or current appraisals that are generally prepared using

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~~Index~~

an income or market valuation approach and conducted by an independent, licensed third party appraiser, adjusted for estimated selling costs (Level 3). Appraisals used in this analysis are generally obtained at least annually based on when the assets were acquired, and thus the appraisals are not necessarily as of the period ends presented. At the time of foreclosure, any excess of the loan balance over the fair value of the real estate held as collateral is treated as a charge against the allowance for loan losses. For any real estate valuations subsequent to foreclosure, any excess of the real estate recorded value over the fair value of the real estate is treated as a foreclosed real estate write-down on the Consolidated Statements of Income.

For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of ~~September 30, 2020,~~March 31, 2021, the significant unobservable inputs used in the fair value measurements were as follows:

($ in thousands)
Description Fair Value at September 30, 2020 Valuation
Technique Significant Unobservable
Inputs Range (Weighted Average)
Impaired loans - valued at collateral value $ 10,746 Appraised value Discounts applied for estimated costs to sell 10%
Impaired loans - valued at PV of expected cash flows 5,801 PV of expected cash flows Discount rates used in the calculation of PV of expected cash flows 4-11% (6.2%)
Foreclosed real estate 1,253 Appraised value Discounts for estimated costs to sell 10%

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($ in thousands)

Description

Fair Value at March 31, 2021

Valuation
Technique

Significant Unobservable
Inputs

Range (Weighted Average)

Nonaccrual loans - valued at collateral value

22,176

Appraised value

Discounts applied for estimated costs to sell

10%

Nonaccrual loans - valued at PV of expected cash flows

5,906

PV of expected cash flows

Discount rates used in the calculation of the present value ("PV") of expected cash flows

4-11% (6.18%)

Foreclosed real estate

1,484

Appraised value

Discounts for estimated costs to sell

10%

For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of December 31, ~~2019,~~2020, the significant unobservable inputs used in the fair value measurements were as follows:

($ in thousands)

Description

Fair Value atDecember 31, 2019

Valuation
Technique

Significant Unobservable
Inputs

Range (Weighted Average)

Description

Fair Value at December 31, 2020

Valuation
Technique

Significant Unobservable
Inputs

Range (Weighted Average)

Impaired loans - valued at collateral value

10,718

Appraised value

Discounts applied for estimated costs to sell

10%

Impaired loans - valued at collateral value

16,000

Appraised value

Discounts applied for estimated costs to sell

10%

Impaired loans - valued at PV of expected cash flows

5,497

PV of expected cash flows

Discount rates used in the calculation of PV of expected cash flows

4-11% (6.50%)

Impaired loans - valued at PV of expected cash flows

6,142

PV of expected cash flows

Discount rates used in the calculation of PV of expected cash flows

4-11% (6.21%)

Foreclosed real estate

1,830

Appraised value

Discounts for estimated costs to sell

10%

Foreclosed real estate

1,484

Appraised value

Discounts for estimated costs to sell

10%

The carrying amounts and estimated fair values of financial instruments not carried at fair value at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 are as follows:

September 30, 2020 December 31, 2019
($ in thousands) Level in Fair
Value
Hierarchy Carrying
Amount Estimated
Fair Value Carrying
Amount Estimated
Fair Value
Cash and due from banks, noninterest-bearing Level 1 $ 92,465 92,465 64,519 64,519
Due from banks, interest-bearing Level 1 304,731 304,731 166,783 166,783
Securities held to maturity Level 2 110,200 112,114 67,932 68,333
SBA loans held for sale Level 2 15,012 16,645 0 0
Total loans, net of allowance Level 3 4,764,510 4,750,959 4,432,068 4,407,610
Accrued interest receivable Level 1 19,646 19,646 16,648 16,648
Bank-owned life insurance Level 1 106,345 106,345 104,441 104,441
SBA Servicing Asset Level 3 5,644 6,714 5,383 5,649
Deposits Level 2 6,060,226 6,062,358 4,931,355 4,930,751
Borrowings Level 2 61,816 53,099 300,671 295,399
Accrued interest payable Level 2 1,305 1,305 2,154 2,154

~~Page 35~~

~~Index~~


		March 31, 2021			December 31, 2020
($ in thousands)	Level in Fair Value Hierarchy	Carrying Amount		Estimated Fair Value	Carrying Amount	Estimated Fair Value
Cash and due from banks, noninterest-bearing	Level 1	$	71,206	71,206	93,724	93,724
Due from banks, interest-bearing	Level 1	458,860		458,860	273,566	273,566
Securities held to maturity	Level 2	198,843		195,424	167,551	170,734
SBA loans held for sale	Level 2	7,002		7,905	6,077	7,465
Total loans, net of allowance	Level 3	4,558,205		4,537,472	4,678,927	4,661,197
Accrued interest receivable	Level 1	18,652		18,652	20,272	20,272
Bank-owned life insurance	Level 1	107,594		107,594	106,974	106,974
SBA Servicing Asset	Level 3	5,925		6,481	5,788	6,569

Deposits	Level 2	6,733,487		6,734,623	6,273,596	6,275,329
Borrowings	Level 2	61,342		53,005	61,829	53,321
Accrued interest payable	Level 2	741		741	904	904

Commitments to extend credit	Level 3	0		8,086	0	461

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no highly liquid market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

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Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial assets or liabilities include net premises and equipment, intangible and other assets such as deferred income taxes, prepaid expense accounts, income taxes currently payable and other various accrued expenses. In addition, the income tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates.

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Note 1211 – Revenue from Contracts with Customers

All of the Company’s revenues that are in the scope of the “Revenue from Contracts with Customers” accounting standard (“ASC 606”) are recognized within noninterest income. The following table presents the Company’s sources of noninterest income for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020. Items outside the scope of ASC 606 are noted as such.


		For the Three Months Ended			For the Nine Months Ended			For the Three Months Ended
$ in thousands	$ in thousands	September 30, 2020		September 30, 2019	September 30, 2020	September 30, 2019	$ in thousands	March 31, 2021		March 31, 2020
Noninterest Income	Noninterest Income						Noninterest Income
In-scope of ASC 606:	In-scope of ASC 606:						In-scope of ASC 606:
Service charges on deposit accounts:	Service charges on deposit accounts:	$	2,567	3,388	8,193	9,543	Service charges on deposit accounts:	$	2,733	3,337
Other service charges, commissions, and fees:	Other service charges, commissions, and fees:						Other service charges, commissions, and fees:
Interchange income	Interchange income	3,608		3,228	9,580	9,529	Interchange income	3,524		2,887
Other service charges and fees	Other service charges and fees	2,582		1,839	5,303	5,094	Other service charges and fees	1,998		1,182
Commissions from sales of insurance and financial products:	Commissions from sales of insurance and financial products:						Commissions from sales of insurance and financial products:
Insurance income	Insurance income	1,477		1,355	4,058	4,027	Insurance income	1,326		1,198
Wealth management income	Wealth management income	880		848	2,457	2,409	Wealth management income	864		870
SBA consulting fees	SBA consulting fees	1,956		663	6,722	2,847	SBA consulting fees	2,764		1,027
Noninterest income (in-scope of ASC 606)	Noninterest income (in-scope of ASC 606)	13,070		11,321	36,313	33,449	Noninterest income (in-scope of ASC 606)	13,209		10,501
Noninterest income (out-of-scope of ASC 606)	Noninterest income (out-of-scope of ASC 606)	8,382		3,835	25,037	11,419	Noninterest income (out-of-scope of ASC 606)	7,460		3,204
Total noninterest income	Total noninterest income	$	21,452	15,156	61,350	44,868	Total noninterest income	$	20,669	13,705

A description of the Company’s revenue streams accounted for under ASC 606 is detailed below.

Service ~~Charges~~charges on ~~Deposit Accounts:~~deposit accounts: The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Overdraft fees are recognized at the point in time that the overdraft occurs. Maintenance and activity fees include account maintenance fees and transaction-based fees. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of the month, representing the period over which the Company satisfies the performance obligation. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Service charges on deposits are withdrawn from the customer’s account balance.

Other service charges, commissions, and fees: The Company earns interchange income on its customers’ debit and credit card usage and earns fees from other services utilized by its customers. Interchange income is primarily comprised of interchange fees earned whenever the Company’s debit and credit cards are processed through card payment networks such as MasterCard. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. Interchange fees are offset with interchange expenses ~~were presented on a gross basis prior to the adoption of ASC 606~~ and are presented on a net ~~basis in 2019 and 2020.~~basis. Other service charges include revenue from processing wire transfers, bill pay service, cashier’s checks, ATM surcharge fees, and other services. The Company’s performance obligation for fees, exchange, and other service charges are largely satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month.

Commissions from the sale of insurance and financial products: The Company earns commissions from the sale of insurance policies and wealth management products.

Insurance income generally consists of commissions from the sale of insurance policies and performance-based commissions from insurance companies. The Company recognizes commission income from the sale of insurance policies when it acts as an agent between the insurance company and the policyholder. The Company’s performance obligation is generally satisfied upon the issuance of the insurance policy. Shortly after the policy is issued, the carrier remits the commission payment to the Company, and the Company recognizes the revenue. Performance-based commissions from insurance companies are recognized at a point in time as policies are sold.

Wealth Management Income primarily consists of commissions received on financial product sales, such as annuities. The Company’s performance obligation is generally satisfied upon the issuance of the financial product.

Page 3736

Index

Shortly after the policy is issued, the carrier remits the commission payment to the Company, and the Company recognizes the revenue. The Company also earns some fees from asset management, which is billed quarterly for services rendered in the most recent period, for which the performance obligation has been satisfied.

SBA ~~Consulting~~consulting fees: The Company earns fees for its consulting services related to the origination of SBA loans. Fees are based on a percentage of the dollar amount of the originated loans and are recorded when the performance obligation has been satisfied. During ~~the three months ended June 30,~~ 2020, the Company's SBA subsidiary assisted its third-party clients in the origination of PPP loans and charged and received fees for doing so. For several clients, the forgiveness piece of the PPP process, which will occur at a future time, was included in the fees charged. Accordingly, the Company recorded deferred revenue, ~~for approximately one-half of the fees received,~~ which amounted to ~~$1.6~~$1.4 million at December 31, 2020. During the first three months of 2021, the Company realized approximately $0.8 million of this deferred revenue related to fulfilling a portion of the forgiveness services. At March 31, 2021, the remaining amount of deferred revenue was $0.6 million. These fees will be recorded as income in the period in which the services associated with the forgiveness process are rendered.

The Company has made no significant judgments in applying the revenue guidance prescribed in ASC 606 that affect the determination of the amount and timing of revenue from the above-described contracts with customers.

Note 1312 – Leases

The Company enters into leases in the normal course of business. As of ~~September 30, 2020,~~March 31, 2021, the Company leased 87 branch offices for which the land and buildings are leased and 98 branch offices for which the land is leased but the building is owned. The Company also leases office space for several operational departments. All of the Company’s leases are operating leases under applicable accounting standards and the lease agreements have maturity dates ranging from ~~January~~May 2021 through May 2076, some of which include options for multiple five- and ten-year extensions. The weighted average remaining life of the lease term for these leases was ~~20.4~~18.2 years as of ~~September 30, 2020.~~March 31, 2021. The Company includes lease extension and termination options in the lease term if, after considering relevant economic factors, it is reasonably certain the Company will exercise the option. As permitted by applicable accounting standards, the Company has elected not to recognize leases with original lease terms of 12 months or less (short-term leases) on the Company's Consolidated Balance Sheets.

Leases are classified as either operating or finance leases at the lease commencement date, and as previously noted, all of the Company's leases have been determined to be operating leases. Lease expense for operating leases and short-term leases is recognized on a straight-line basis over the lease term. Right-of-use assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

The Company uses its incremental borrowing rate, on a collateralized basis, at lease commencement to calculate the present value of lease payments when the rate implicit in the lease is not known. The weighted average discount rate for leases was ~~3.26%~~3.01% as of ~~September 30, 2020.~~March 31, 2021.

Total operating lease expense was ~~$2.2~~$0.7 million and ~~$1.9~~$0.7 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. The right-of-use assets and lease liabilities were ~~$18.4~~$16.9 million and ~~$18.7~~$17.4 million as of ~~September 30,~~March 31, 2021, respectively, and were $17.5 million and $17.9 million as of December 31, 2020, respectively.

Future undiscounted lease payments for operating leases with initial terms of one year or more as of ~~September 30, 2020~~March 31, 2021 are as follows.

($ in thousands)
October 1 to December 31, 2020 $ 643
2021 2,297
2022 1,925
2023 1,775
2024 1,574
Thereafter 19,564
Total undiscounted lease payments 27,778
Less effect of discounting (9,062)
Present value of estimated lease payments (lease liability) $ 18,716

Page 3837

Index


($ in thousands)
April 1, 2021 to December 31, 2021	$	1,492
2022	1,742
2023	1,640
2024	1,503
2025	1,318
Thereafter	18,380
Total undiscounted lease payments	26,075
Less effect of discounting	(8,721)
Present value of estimated lease payments (lease liability)	$	17,354

Note 1413 - Shareholders' Equity

Stock Repurchases

During the first ~~nine~~three months months of ~~2020,~~2021, the Company repurchased approximately ~~985,795~~106,744 shares of the Company's common stock at an average stock price of ~~$29.11~~$37.81 per share, which totaled ~~$28.7~~$4 million, under a ~~$40~~$20 million repurchase authorization publicly announced in ~~November 2019. The~~January 2021.

During the first three months months of 2020, the Company ~~has $11.3 million remaining~~repurchased approximately 576,406 shares of the ~~$40 million repurchase authorization.~~Company's common stock at an average stock price of $34.70 per share, which totaled $20 million.

Note 1514 - Borrowings

The following tables present information regarding the Company’s outstanding borrowings at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 - dollars are in thousands:

Description

Due date

Call Feature

September 30, 2020

Interest Rate

Description

Due date

Call Feature

March 31, 2021

Interest Rate

FHLB Principal Reducing Credit

7/24/2023

None

135

1.00% fixed

FHLB Principal Reducing Credit

7/24/2023

None

113

1.00% fixed

FHLB Principal Reducing Credit

12/22/2023

None

1,001

1.25% fixed

FHLB Principal Reducing Credit

12/22/2023

None

982

1.25% fixed

FHLB Principal Reducing Credit

1/15/2026

None

5,500

1.98% fixed

FHLB Principal Reducing Credit

1/15/2026

None

5,000

1.98% fixed

FHLB Principal Reducing Credit

6/26/2028

None

237

0.25% fixed

FHLB Principal Reducing Credit

6/26/2028

None

232

0.25% fixed

FHLB Principal Reducing Credit

7/17/2028

None

0.00% fixed

FHLB Principal Reducing Credit

7/17/2028

None

0.00% fixed

FHLB Principal Reducing Credit

8/18/2028

None

176

1.00% fixed

FHLB Principal Reducing Credit

8/18/2028

None

172

1.00% fixed

FHLB Principal Reducing Credit

8/22/2028

None

176

1.00% fixed

FHLB Principal Reducing Credit

8/22/2028

None

172

1.00% fixed

FHLB Principal Reducing Credit

12/20/2028

None

358

0.50% fixed

FHLB Principal Reducing Credit

12/20/2028

None

352

0.50% fixed

Other Borrowing

4/7/2022

None

103

1.00% fixed

Other Borrowing

4/7/2022

None

103

1.00% fixed

Trust Preferred Securities

1/23/2034

Quarterly by Company
beginning 1/23/2009

20,620

2.97% at 9/30/2020
adjustable rate
3 month LIBOR + 2.70%

Trust Preferred Securities

1/23/2034

Quarterly by Company
beginning 1/23/2009

20,620

2.91% at 3/31/21
adjustable rate
3 month LIBOR + 2.70%

Trust Preferred Securities

6/15/2036

Quarterly by Company
beginning 6/15/2011

25,774

1.64% at 9/30/2020
adjustable rate
3 month LIBOR + 1.39%

Trust Preferred Securities

6/15/2036

Quarterly by Company
beginning 6/15/2011

25,774

1.57% at 3/31/21
adjustable rate
3 month LIBOR + 1.39%

Trust Preferred Securities

1/7/2035

Quarterly by Company
beginning 1/7/2010

10,310

2.28% at 9/30/2020
adjustable rate
3 month LIBOR + 2.00%

Trust Preferred Securities

1/7/2035

Quarterly by Company
beginning 1/7/2010

10,310

2.24% at 3/31/21
adjustable rate
3 month LIBOR + 2.00%

Total borrowings/ weighted average rate as of

September 30, 2020

64,441

2.26%

Total borrowings/ weighted average rate as of

March 31, 2021

63,878

2.21%

Unamortized discount on acquired borrowings

(2,625)

Unamortized discount on acquired borrowings

(2,536)

Total borrowings

61,816

Total borrowings

61,342

Page 3938

Index

Description Due date Call Feature December 31, 2019 Interest Rate
FHLB Term Note 1/30/2020 None $ 100,000 1.70% fixed
FHLB Term Note 1/31/2020 None 68,000 1.70% fixed
FHLB Term Note 1/31/2020 None 30,000 1.70% fixed
FHLB Term Note 5/29/2020 None 40,000 1.62% fixed
FHLB Principal Reducing Credit 7/24/2023 None 168 1.00% fixed
FHLB Principal Reducing Credit 12/22/2023 None 1,029 1.25% fixed
FHLB Principal Reducing Credit 1/15/2026 None 6,500 1.98% fixed
FHLB Principal Reducing Credit 6/26/2028 None 245 0.25% fixed
FHLB Principal Reducing Credit 7/17/2028 None 55 0.00% fixed
FHLB Principal Reducing Credit 8/18/2028 None 181 1.00% fixed
FHLB Principal Reducing Credit 8/22/2028 None 181 1.00% fixed
FHLB Principal Reducing Credit 12/20/2028 None 367 0.50% fixed
Trust Preferred Securities 1/23/2034 Quarterly by Company
beginning 1/23/2009 20,620 4.64% at 12/31/2019
adjustable rate
3 month LIBOR + 2.70%
Trust Preferred Securities 6/15/2036 Quarterly by Company
beginning 6/15/2011 25,774 3.28% at 12/31/2019
adjustable rate
3 month LIBOR + 1.39%
Trust Preferred Securities 1/7/2035 Quarterly by Company
beginning 1/7/2010 10,310 3.99% at 12/31/2019
adjustable rate
3 month LIBOR + 2.00%
Total borrowings / weighted average rate as of December 31, 2019 $ 303,430 2.12%
Unamortized discount on acquired borrowings (2,759)
Total borrowings $ 300,671

~~Note 16 - Acquisition~~

On September 1, 2020, the Company completed the acquisition of Magnolia Financial, Inc., a business financing company headquartered in Spartanburg, South Carolina, that makes loans throughout the southeastern United States. In the transaction, the Company acquired $14.6 million in loans and $0.5 million of other assets, and assumed $11.7 million in borrowings, substantially all of which was paid off subsequent to the closing. The transaction value was approximately $10.0 million with the Company paying $9.5 million in cash and issuing 24,096 shares of its common stock, which had a value of approximately $0.5 million.

This acquisition was accounted for using the purchase method of accounting for business combinations, and accordingly, the assets and liabilities of the financing company were recorded based on estimates of fair values, which according to applicable accounting guidance, are subject to change for twelve months following the acquisition. In connection with this transaction, the Company recorded an intangible asset of $6.6 million, which is deductible for tax purposes over 15 years and has initially been recorded as goodwill. The Company is currently performing valuation studies of this intangible asset and may reclassify a portion of this amount from goodwill to other types of intangible assets at the next reporting date. Any such reclassification is not expected to be material. See Note 8 for additional information.

Description

Due date

Call Feature

December 31, 2020

Interest Rate

FHLB Term Note

7/24/2023

None

124

1.00% fixed

FHLB Principal Reducing Credit

12/22/2023

None

991

1.25% fixed

FHLB Principal Reducing Credit

1/15/2026

None

5,500

1.98% fixed

FHLB Principal Reducing Credit

6/26/2028

None

235

0.25% fixed

FHLB Principal Reducing Credit

7/17/2028

None

0.00% fixed

FHLB Principal Reducing Credit

8/18/2028

None

174

1.00% fixed

FHLB Principal Reducing Credit

8/22/2028

None

174

1.00% fixed

FHLB Principal Reducing Credit

12/20/2028

None

355

0.50% fixed

FHLB Principal Reducing Credit

4/7/2022

None

103

1.00% fixed

Trust Preferred Securities

1/23/2034

Quarterly by Company
beginning 1/23/2009

20,620

2.91% at 12/31/2020
adjustable rate
3 month LIBOR + 2.70%

Trust Preferred Securities

6/15/2036

Quarterly by Company
beginning 6/15/2011

25,774

1.61% at 12/31/2020
adjustable rate
3 month LIBOR + 1.39%

Trust Preferred Securities

1/7/2035

Quarterly by Company
beginning 1/7/2010

10,310

2.24% at 12/31/2020
adjustable rate
3 month LIBOR + 2.00%

Total borrowings / weighted average rate as of December 31, 2020

64,409

2.22%

Unamortized discount on acquired borrowings

(2,580)

Total borrowings

61,829

Page 4039

Index

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

Critical Accounting Policies

The accounting principles we follow and our methods of applying these principles conform with accounting principles generally accepted in the United States of America and with general practices followed by the banking industry. Certain of these principles involve a significant amount of judgment and may involve the use of estimates based on our best assumptions at the time of the estimation. The allowance for ~~loan~~credit losses on loans and unfunded commitments and intangible assets ~~and the fair value and discount accretion of acquired loans~~ are ~~three~~ policies we have identified as being more sensitive in terms of judgments and estimates, taking into account their overall potential impact to our consolidated financial statements.

Allowance for ~~Loan~~Credit Losses on Loans and Unfunded Commitments

~~Due to the estimation process~~The allowance for credit losses on loans, which is presented as a reduction of loans outstanding, and ~~the potential materiality of the amounts involved, we have identified the accounting for~~ the allowance for ~~loan losses and the related provision for loan losses as an accounting policy critical to our consolidated financial statements. The provision for loan losses charged to operations~~unfunded commitments, which is ~~an amount sufficient to bring the allowance for loan losses to an estimated balance considered adequate to absorb losses inherent in the portfolio.~~

~~As previously noted, and as permitted by the CARES Act, we elected to defer the implementation~~recorded within Other Liabilities require high degrees of ~~CECL until the earlier~~judgement. Each of ~~the cessation of the national emergency or December 31, 2020 because of the challenges associated with developing a reliable forecast~~these allowances reflects management’s estimate of losses that ~~may~~will result from the ~~unprecedented COVID-19 pandemic. Accordingly, the Company's provision for~~inability of our borrowers to make required loan ~~losses for the first nine months of 2020 is based on the limited information available and the conditions that existed at September 30, 2020 related~~payments. Management uses a systematic methodology to COVID-19, according to the pre-CECL incurred loss methodology for determining loan losses and the remaining discussion below is based on that methodology. Upon the adoption of CECL, the Company expectsdetermine its allowance for credit losses ~~related to all financial assets will increase to approximately $40-$44 million as~~on loans and off-balance-sheet credit exposures. Management considers the effects of January 1, 2020 compared to its allowance for loan losses at December 31, 2019 of approximately $21 million. As previously discussed, this initial impact will be reflected as a cumulative-effect adjustment to retained earnings.

~~Our determination of the adequacy of the allowance is based primarily~~past events, current conditions, and reasonable and supportable forecasts on a mathematical model that estimates the appropriate allowance for loan losses. This model has two components. The first component involves the estimation of losses on individually evaluated “impaired loans.” A loan is considered to be impaired when, based on current information and events, it is probable we will be unable to collect all amounts due according to the contractual terms of the original loan agreement. A loan is specifically evaluated for an appropriate valuation allowance if the loan balance is above a prescribed evaluation threshold (which varies based on credit quality, accruing status, troubled debt restructured status, purchased credit impaired status, and type of collateral) and the loan is determined to be impaired. The estimated valuation allowance is the difference, if any, between the loan balance outstanding and the value of the impaired loan as determined by either 1) an estimate of the cash flows that we expect to receive from the borrower discounted at the loan’s effective rate, or 2) in the case of a collateral-dependent loan, the fair value of the collateral.

The second component of the allowance model is an estimate of losses for all loans not considered to be impaired loans (“general reserve loans”). General reserve loans are segregated into pools by loan type and risk grade and estimated loss percentages are assigned to each loan pool based on historical losses. The historical loss percentages are then adjusted for any environmental factors used to reflect changes in the collectability of the ~~portfolio not captured by historical data such. In 2020, we have included environmental factors~~loan portfolio. The Company’s estimate of these items involves a high degree of judgment; therefore, management’s process for determining expected credit losses may result in a range of expected credit losses. It is possible that others, given the same information, may at any point in time reach a different reasonable conclusion. The Company’s allowances for credit losses on loans and unfunded commitments reflect management’s best estimates within the range of expected credit losses. The Company recognizes in net income the amount needed to adjust either of these items for management’s current estimate of expected credit losses. See Note 2 - Summary of Significant Accounting Policies in this Quarterly Report on Form 10-Q for further detailed descriptions of our estimation process and methodology related to the ~~COVID-19 pandemic.~~ACL. See ~~additional discussion the "Summary of Loan Loss Experience."~~

~~The reserves estimated~~also Note 6 — Loans, Allowance for individually evaluated impaired loans are then added to the reserve estimated for general reserve loans. This becomes our “allocated allowance.” The allocated allowance is compared to the actual allowance for loan losses recordedCredit Losses and Asset Quality Information - in this Quarterly Report on our books and any adjustment necessary for the recorded allowance to absorb losses inherent in the portfolio is recorded as a provision for loan losses. The provision for loan losses is a direct charge to earnings in the period recorded. Any remaining difference between the allocated allowance and the actual allowance for loan losses recorded on our books is our “unallocated allowance.”

Purchased loans are recorded at fair value at the acquisition date. Therefore, amounts deemed uncollectible at the acquisition date represent a discount to the loan value and become a part of the fair value calculation. Subsequent decreases in the amount expected to be collected result in a provision for loan losses with a corresponding increase

~~Page 41~~

~~Index~~

in the allowance for loan losses. Subsequent increases in the amount expected to be collected are accreted into income over the life of the loan and this accretion is referred to as “loan discount accretion.”

Within the purchased loan portfolio, loans are deemed purchased credit impaired at acquisition if the bank believes it will not be able to collect all contractual cash flows. Performing loans with an unamortized discount or premium that are not deemed purchased credit impaired are considered to be purchased performing loans. Purchased credit impaired loans are individually evaluated as impaired loans, as described above, while purchased performing loans are evaluated as general reserve loans. For purchased performing loan pools, any computed allowance that is in excess of remaining net discounts is a component of the allocated allowance.

Although we use the best information available to make evaluations, future material adjustments may be necessary if economic, operational, or other conditions change. In addition, various regulatory agencies, as an integral part of their examination process, periodically review our allowance for loan losses. Such agencies may require us to recognize additions to the allowance based on the examiners’ judgment about information available to them at the time of their examinations.

~~For further discussion, see “Nonperforming Assets”~~Form 10-Q, and “Allowance for ~~Loan~~Credit Losses and Provision for ~~Loan~~Credit Losses” below.

Intangible Assets

Due to the estimation process and the potential materiality of the amounts involved, we have also identified the accounting for intangible assets as an accounting policy critical to our consolidated financial statements.

When we complete an acquisition transaction, the excess of the purchase price over the amount by which the fair market value of assets acquired exceeds the fair market value of liabilities assumed represents an intangible asset. We must then determine the identifiable portions of the intangible asset, with any remaining amount classified as goodwill. Identifiable intangible assets associated with these acquisitions are generally amortized over the estimated life of the related asset, whereas goodwill is tested annually for impairment, but not systematically amortized. Assuming no goodwill impairment, it is beneficial to our future earnings to have a lower amount assigned to identifiable intangible assets and higher amount of goodwill as opposed to having a higher amount considered to be identifiable intangible assets and a lower amount classified as goodwill.

The primary identifiable intangible asset we typically record in connection with a whole bank or bank branch acquisition is the value of the core deposit intangible, whereas when we acquire an insurance agency or a consulting firm, as we did in 2016 and 2017, the primary identifiable intangible asset is the value of the acquired customer list. Determining the amount of identifiable intangible assets and their average lives involves multiple assumptions and estimates and is typically determined by performing a discounted cash flow analysis, which involves a combination of any or all of the following assumptions: customer attrition/runoff, alternative funding costs, deposit servicing costs, and discount rates. We typically engage a third party consultant to assist in each analysis. For the whole bank and bank branch transactions recorded to date, the core deposit intangibles have generally been estimated to have a life ranging from seven to ten years, with an accelerated rate of amortization. For insurance agency acquisitions, the identifiable intangible assets related to the customer lists were determined to have a life of ten to fifteen years, with amortization occurring on a straight-line basis. For SBA Complete, the consulting firm we acquired in 2016, the identifiable intangible asset related to the customer list was determined to have a life of approximately seven years, with amortization occurring on a straight-line basis.

Subsequent to the initial recording of the identifiable intangible assets and goodwill, we amortize the identifiable intangible assets over their estimated average lives, as discussed above. In addition, on at least an annual basis, with the annual evaluation occurring on OctoberAt March 31, ~~of each year, goodwill is evaluated for impairment by comparing the fair value of our reporting units to their related carrying value, including goodwill. At September 30, 2020,~~2021, we had three reporting units – 1) First Bank with ~~$235.9~~$227.6 million in goodwill, 2) First Bank Insurance with $7.4 million in goodwill, and 3) SBA activities, including SBA Complete and our SBA Lending Division, with $4.3 million in goodwill. If the carrying value of a reporting unit were ever to exceed its fair value, we

Page 40

Index

would determine whether the implied fair value of the goodwill, using a discounted cash flow analysis, exceeded the carrying value of the goodwill. If the carrying value of the goodwill exceeded the implied fair value of the goodwill, an impairment loss would be recorded in an amount equal to that excess. Performing such a discounted cash flow analysis would involve the significant use of estimates and assumptions.

~~Page 42~~

~~Index~~

Subsequent to the initial recording of the identifiable intangible assets and goodwill, we amortize the identifiable intangible assets over their estimated average lives, as discussed above. In ~~our 2019 goodwill impairment evaluation,~~addition, we ~~concluded that the~~test goodwill for ~~each~~impairment annually on October 31 or on an interim basis if an event triggering impairment may have occurred, by comparing the fair value of our reporting units was not impaired. Additionally, during the period ended March 31, 2020, the economic turmoil and market volatility resulting from the COVID-19 crisis resulted in a substantial decrease in the Company's stock price and market capitalization. Management believed such decrease was a triggering indicator requiring an interim step-one goodwill impairment quantitative analysis.to their related carrying value, including goodwill. The ~~results~~conclusion of ~~the March 31, 2020 analysis determined~~our last review was that none of ~~the Company's~~our goodwill was impaired as of March 31, 2020. As a result of the continued economic turmoil and market volatility during the period ended June 30, 2020, the Company qualitatively reviewed the factors and assumptions used in the March 31, 2020 analysis, including financial projections, discount rates, and market premiums, in light of the triggering event existing as of June 30, 2020. Based on that analysis, the Company concluded there was no impairment of its goodwill at June 30, 2020. Due to continued economic and market volatility in the third quarter of 2020, a triggering event was identified and management performed another interim step-one goodwill impairment analysis as of September 30, 2020, and determined that none of the Company's goodwill was impaired. Based on the results of the September 30, 2020 step-one goodwill impairment analysis, management has concluded that none of the reporting units are at risk of failing a step-one goodwill impairment analysis, however management will continue to evaluate the economic conditions at future reporting periods for applicable changes and take appropriate actions.

We review identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Our policy is that an impairment loss is recognized, equal to the difference between the asset’s carrying amount and its fair value, if the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Estimating future cash flows involves the use of multiple estimates and assumptions, such as those listed above.

~~Fair Value and Discount Accretion of Acquired Loans~~

~~We consider the determination of the initial fair value of acquired loans and the subsequent discount accretion of the purchased loans to involve a high degree of judgment and complexity.~~

We determine fair value accounting estimates of newly assumed assets and liabilities in accordance with relevant accounting guidance. However, the amount that we realize on these assets could differ materially from the carrying value reflected in our financial statements, based upon the timing of collections on the acquired loans in future periods. Because of inherent credit losses and interest rate marks associated with acquired loans, the amount that we record as the fair values for the loans is generally less than the contractual unpaid principal balance due from the borrowers, with the difference being referred to as the “discount” on the acquired loans. For non-impaired purchased loans, we accrete the discount over the lives of the loans in a manner consistent with the guidance for accounting for loan origination fees and costs.

For purchased credit-impaired (“PCI”) loans, the excess of the cash flows initially expected to be collected over the fair value of the loans at the acquisition date (i.e., the accretable yield) is accreted into interest income over the estimated remaining life of the loans using the effective yield method, provided that the timing and the amount of future cash flows is reasonably estimable. Accordingly, such loans are not classified as nonaccrual and they are considered to be accruing because their interest income relates to the accretable yield recognized under accounting for PCI loans and not to contractual interest payments. The difference between the contractually required payments and the cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the nonaccretable difference.

Subsequent to an acquisition, estimates of cash flows expected to be collected are updated periodically based on updated assumptions regarding default rates, loss severities, and other factors that are reflective of current market conditions. If there is a decrease in cash flows expected to be collected, the provision for loan losses is charged, resulting in an increase to the allowance for loan losses. If the Company has a probable increase in cash flows expected to be collected, we will first reverse any previously established allowance for loan losses and then increase interest income as a prospective yield adjustment over the remaining life of the loan. The impact of changes in variable interest rates is recognized prospectively as adjustments to interest income.

Current Accounting Matters

See Note 2 to the Consolidated Financial Statements above for information about accounting standards that we have recently ~~adopted and accounting standards that are pending adoption.~~adopted.

Recent Developments: COVID-19

~~Page 43~~

~~Index~~

~~In March 2020,~~See Note 1 to the outbreak of the coronavirus (COVID-19) was recognized as a pandemic by the World Health Organization. The spread of COVID-19 has caused economic and social disruption resulting in unprecedented uncertainty, volatility and disruption in financial markets, and has placed significant health, economic and other major pressures throughout the communities we serve, the United States and globally. While some industries have been impacted more severely than others, almost all businesses have been impacted to some degree. This disruption has resulted in the shuttering of businesses across the country, significant job loss, material decreases in oil and gas prices and in business valuations, changes in consumer behavior related to pandemic fears, and aggressive measures by the federal government.Consolidated Financial Statements.

On March 27, 2020, the CARES Act was signed into law. It contains substantial tax and spending provisions intended to address the impact of the COVID-19 pandemic. The goal of the CARES Act is to prevent a severe economic downturn through various measures, including direct financial aid to American families and economic stimulus to significantly impacted industry sectors. The CARES Act also includes a range of other provisions designed to support the U.S. economy and mitigate the impact of COVID-19 on financial institutions and their customers, including through the authorization of various programs and measures that the U.S. Department of the Treasury, the Small Business Administration, the Federal Reserve Board, and other federal banking agencies may or are required to implement. Further, in response to the COVID-19 outbreak, the Federal Reserve Board has implemented or announced a number of facilities to provide emergency liquidity to various segments of the U.S. economy and financial market.

~~Under the CARES Act, financial institutions are permitted to delay the implementation of ASU 2016-13,~~ ~~Financial Instruments - Credit Losses~~ (CECL) until the earlier of the termination date of the national emergency declaration by the President or December 31, 2020. The Company has elected such provision and will defer the adoption of CECL until such time that has occurred with an effective retrospective implementation date of January 1, 2020. Refer to Note 2, Accounting Policies, to the Company's consolidated financial statements included elsewhere in this report. Additionally, in a related action to the CARES Act, the joint federal bank regulatory agencies issued an interim final rule effective March 31, 2020, that allows banking organizations that implement CECL this year to elect to mitigate the effects of the CECL accounting standard on their regulatory capital for two years. This two-year delay is in addition to the three-year transition period that the agencies had already made available. Upon such point of adoption of CECL during 2020, the Company will likely elect to defer the regulatory capital effects of CECL in accordance with the interim final rule.

The CARES Act also includes a provision that permits a financial institution to elect to suspend temporarily TDR accounting under ASC Subtopic 310-40 in certain circumstances (“section 4013”). To be eligible under section 4013, a loan modification must be (1) related to COVID-19; (2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (A) 60 days after the date of termination of the National Emergency or (B) December 31, 2020. In response to this section of the CARES Act, the federal banking agencies issued a revised interagency statement on April 7, 2020 that, in consultation with the Financial Accounting Standards Board, confirmed that for loans not subject to section 4013, short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not troubled debt restructurings under ASC Subtopic 310-40. This includes short-term (e.g., up to six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented.

In response to the pandemic, the Company generally offered impacted borrowers loan payment deferrals of 90 days in duration. As of June 30, 2020, the Company had deferred payments for 1,483 loans with an aggregate loan balance of $774 million. During the third quarter of 2020, most of these borrowers resumed normal payments. However, some borrowers requested a second 90 day deferral, with certain of the borrowers resuming interest payments, but deferring scheduled principal payments. As of September 30, 2020, the Company had remaining payment deferrals related to 207 loans with an aggregate loan balance of $186 million. Approximately 85% of the $186 million in deferrals were second deferrals and for 54% of the total deferrals, the borrower is scheduled to make interest payments with only principal being deferred.

In response to the pandemic, the Company has implemented a number of procedures to support the safety and well-being of its employees, customers and shareholders. In addition, the Company has taken deliberate actions to ensure the continued health and strength of its balance sheet in order to serve its clients and communities.

~~Employees, Customers and Communities~~

~~Page 44~~

~~Index~~

The Company is supporting the health and safety of its employees and customers, and complying with government directives, through responsible operations administered under its Board approved business continuity plan and protocols:

•~~Extra precautions are being taken to safeguard health and safety in branch facilities.~~

•~~The Company participated in the SBA's PPP program. As of September 30, 2020, the Company held 2,810 PPP loans totaling approximately $244.9 million.~~

•As previously discussed, the Company has implemented a short-term deferral modification program that complies with federal banking regulators' interagency guidance and is working with borrowers effected by COVID-19 on a case by case basis.

~~Capital, Liquidity & Credit~~

~~Capital remains strong, with ratios of the Company, and its subsidiary bank, well above the standards to be considered well-capitalized under regulatory requirements.~~

Liquidity has increased since the onset of the pandemic, with the Company experiencing increases in deposits and in its cash levels. Management considers the Company's current liquidity position to be adequate to meet short-term and long-term liquidity needs.

~~Asset quality remains solid, with nonperforming assets to total assets amounting to 0.63% at September 30, 2020 compared to 0.62% at December 31, 2019.~~

In determining the appropriate level of allowance for loan losses at September 30, 2020, we reviewed industry types and deferral percentages within our loan portfolio in light of the pandemic. Based on that analysis, we assigned loan loss reserves for certain of those loan types that were consistent with probable loss rates incurred in a stressed economic scenario. The Company also recorded supplemental qualitative reserves for all other loans in deferral status. As a result of the analysis, approximately $22.1 million of COVID-19 related qualitative reserves are included in the Company's September 30, 2020 allowance for loan loss amount of $49.2 million at September 30, 2020.

FINANCIAL OVERVIEW

Net income amounted to ~~$23.3~~$28.2 million, or ~~$0.81~~$0.99 per diluted common share, for the three months ended ~~September 30, 2020~~March 31, 2021, an increase of 59.7% on a per share basis, compared to ~~$25.0~~$18.2 million, or ~~$0.84~~$0.62 per diluted common share, recorded in the ~~third~~first quarter of ~~2019.~~

For the nine months ended September 30, 2020, we recorded net income of $57.8 million, or $1.99 per diluted common share compared to $71.2 million, or $2.39 per diluted common share, for the nine months ended September 30, 2019.

~~Earnings for the periods~~2020. The increase in ~~2020 were impacted~~earnings was driven by ~~provisions for loan losses related to estimated losses arising from the economic impact of COVID-19. See additional discussion below.~~lower credit costs and higher noninterest income.

Net Interest Income and Net Interest Margin

Net interest income for the ~~third~~first quarter of ~~2020~~2021 was ~~$54.7~~$55.2 million, a ~~1.8%~~0.9% increase from the ~~$53.8~~$54.8 million recorded in the ~~third~~first quarter of ~~2019. Net interest income for the first nine months of 2020 was $162.1 million, a 0.4%~~2020. The increase ~~from the $161.5 million recorded in the comparable period of 2019. The increases~~ in net interest income was due to higher levels of interest-earning assets and the recognition of PPP loan fees, the effects of which were ~~due primarily to growth in interest-earning assets.~~mostly offset by a lower net interest margin.

Our net interest margin (a non-GAAP measure calculated by dividing tax-equivalent net interest income by average earning assets) for the ~~third~~first quarter of ~~2020~~2021 was ~~3.48%~~3.27%, which was 4769 basis points lower than the ~~3.95%~~3.96% realized in the ~~third~~first quarter of ~~2019. For the nine months ended September 30, 2020, our net interest margin~~2020. The decline was ~~3.63% compared to 4.02% for the same period in 2019. The lower margins were~~ primarily due to the impact of lower interest ~~rates.~~rates and the lower incremental reinvestment rates realized from funds provided by the high deposit growth.

~~Provision~~Driven by high deposit growth, average interest-earning assets increased by 23.3% in the first quarter of 2021 compared to the first quarter of 2020. The funds provided by the in-flow of deposits were used primarily to either purchase investment securities or were held in our account at the Federal Reserve Bank, each of which increased net interest income but negatively impacted our net interest margin. Additionally, in March 2020, the Federal Reserve Bank decreased interest rates by 150 basis points, which negatively impacted our net interest margin beginning in the second quarter of 2020.

In the first quarter of 2021, we processed $111 million in PPP loan forgiveness payments related to 2020 originations and also originated approximately $111 million in new PPP loans, which resulted in an unchanged balance of total PPP loans of $241 million from December 31, 2020. Including accelerated amortization of deferred PPP loan fees, we recorded a total of $3.0 million in PPP fee-related interest income during the first quarter of 2021, which, when combined with the note rate of 1.00%, resulted in a total yield on PPP loans of 6.16% for ~~Loan Losses~~the quarter. We have $9.0 million in remaining deferred PPP loan fees, of which $3.1 million relates to 2020 originations and ~~Asset Quality~~$5.9 million relates to 2021 originations.

Page 4541

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~~As permitted by the CARES Act enacted in March 2020, the Company elected to defer the implementation of~~Allowance for Credit Losses, Provision for Credit Losses and Asset Quality

On January 1, 2021, we adopted the Current Expected Credit Loss (CECL) ~~methodology. Accordingly, the Company's~~methodology for estimating credit losses, which resulted in an increase of $14.6 million in our allowance for loan losses ~~at each period end is based on the Company's estimate~~and an increase of ~~probable losses that have been incurred at the end of such period, including losses arising from the~~$7.5 million in our allowance for unfunded commitments. The tax-effected impact of ~~COVID-19, in accordance with the pre-CECL methodology for determining loan losses.~~those two items amounted to $17.1 million and was recorded as an adjustment to our retained earnings as of January 1, 2021.

We recorded ano provision for ~~loan~~credit losses in the first quarter of ~~$6.1~~2021 compared to $5.6 million in the ~~third~~first quarter of ~~2020 compared to a negative~~2020. The higher provision for loan losses (reduction of the allowance for loan losses) of $1.1 million in the third quarter of 2019. For the nine months ended September 30, 2020, we recorded a provision for loan losses of $31.0 million compared to a negative provision for loan losses of $0.9 million for the same period of 2019. The increases in 2020 ~~are~~was primarily related to estimated ~~probable~~incurred loan losses ~~arising from~~associated with the ~~economic impact~~pandemic that was emerging at the time. Under the CECL methodology for recording expected credit losses adopted at January 1, 2021, which resulted in the increases to the allowance for credit losses noted above, we determined that no further adjustments were necessary for the first quarter of ~~COVID-19.~~2021. See additional discussion below in the section "Allowance for Credit Losses and Provision for Credit Losses."

Total net loan charge-offs ~~(recoveries)~~ for the ~~third~~first quarters of ~~2020~~2021 and ~~2019~~2020 amounted to ~~($0.8 million)~~$1.1 million and ~~$0.4~~$2.5 million, respectively, or ~~(0.06%)~~0.10% and ~~0.04%~~0.22% of average loans on an annualized basis, ~~respectively. For the nine months ended September 30, 2020 and 2019, total net charge-offs were $3.2 million and $0.9 million, respectively, which on an annualized basis amounted to 0.09% and 0.03%,~~ respectively.

Total nonperforming assets amounted to ~~$44.3~~$50 million at ~~September 30, 2020,~~March 31, 2021, or ~~0.63%~~0.65% of total assets, compared to ~~$37.8~~$37.0 million at December 31, ~~2019,~~2020, or ~~0.62%~~0.64% of total assets. At March 31, 2021, loans on deferral status associated with the pandemic amounted to $5.9 million.

Noninterest Income

Total noninterest income ~~was $21.5 million and $15.2 million~~ for the ~~three months ended September 30, 2020 and 2019, respectively. For~~first quarter of 2021 was $20.7 million, a 50.8% increase from the ~~nine months ended September 30, 2020 and 2019, total noninterest income was $61.4~~$13.7 million ~~and $44.9 million, respectively.~~recorded for the first quarter of 2020. The increases in noninterest income in ~~2020~~2021 are primarily due to fees earned as a result of high mortgage loan activity, SBA consulting fees related to client assistance with PPP originations, and ~~an $8.0 million gain realized from securities sales in the second quarter of 2020.~~increased SBA loan sale gains. See additional discussion below.

Noninterest Expenses

Noninterest expenses amounted to ~~$40.4~~$40.1 million in each of the ~~third quarter~~first quarters of 2021 and 2020 ~~compared to $38.4 million recorded~~with no significant variances in the third quarter of 2019, an increase of 5.2%. For the nine months ended September 30, 2020 and 2019, noninterest expenses amounted to $119.4 million and $117.3 million, respectively, an increase of 1.8%. The increases were primarily due to increased incentive compensation expense related to improvement in financial performance, higher commission expense resulting from increases in mortgage loan volume in 2020, and higher FDIC insurance expense.individual line items. See additional discussion below.

Income Taxes

Our effective tax rate was ~~21.4%~~21.3% and ~~20.8%~~20.3% for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, respectively, ~~compared~~with the 2021 increase being due to ~~20.8% and 21.0% for the three and nine months ended September 30, 2019, respectively.~~a higher proportion of fully-taxable income.

Balance Sheet and Capital

We continued to experience high balance sheet growth during the first quarter of 2021, with total assets increasing by $447 million, or 24.8% annualized. Total assets at ~~September 30, 2020~~March 31, 2021 amounted to ~~$7.1~~$7.7 billion ~~a 15.0% increase from a year earlier.~~compared to $7.3 billion at December 31, 2020.

~~Loan~~This growth ~~for the nine months ended September 30, 2020~~ was ~~$361~~driven by a $460 million, or ~~10.8% on an~~29.7% annualized, ~~basis, which includes $245 million~~increase in ~~PPP loans.~~

~~Deposit growth for the nine months ended September 30, 2020 was $1.1 billion, or 30.5% on an annualized basis. In addition to~~ deposits ~~arising~~ from ~~PPP loans, this~~December 31, 2020. The high deposit growth is believed to be due to a combination of stimulus funds and changes in customer behaviors during the ~~pandemic.~~pandemic, as well as ongoing growth initiatives by the Company.

~~With the excess liquidity resulting~~Total loans amounted to $4.6 billion at March 31, 2021 compared to $4.7 billion at December 31, 2020. Our level of outstanding loans has been negatively impacted by high mortgage loan refinancing activity, commercial loan payoffs, and soft demand arising from the high deposit growth during the first nine months of 2020, we reduced our level of borrowings by $239 million, or 79.4%, reduced our level of brokered deposits by $49 million, or 57.4%, and increased our holdings of investment securities by $389 million, or 43.7%.pandemic.

We remain well-capitalized by all regulatory standards, with an estimated Total Risk-Based Capital Ratio at ~~September 30, 2020~~March 31, 2021 of ~~15.01%~~15.49%, an increase from the ~~14.89%~~15.37% reported at December 31, ~~2019.~~

~~Page 46~~

~~Index~~

2020.

Components of Earnings

Net interest income is the largest component of earnings, representing the difference between interest and fees generated from earning assets and the interest costs of deposits and other funds needed to support those assets.

Page 42

Index

We believe that analysis of net interest income on a tax-equivalent basis is useful and appropriate because it allows a comparison of net interest income amounts in different periods without taking into account the different mix of taxable versus non-taxable loans and investments that may have existed during those periods.

Net interest income for the three month period ended ~~September 30, 2020~~March 31, 2021 amounted to ~~$54.7~~$55.2 million, an increase of ~~$0.9~~$0.5 million, or ~~1.8%~~0.9%, from the ~~$53.8~~$54.8 million recorded in the ~~third~~first quarter of ~~2019.~~2020. Net interest income on a tax-equivalent basis for the three month period ended ~~September 30, 2020~~March 31, 2021 amounted to ~~$55.1 million, an increase of $0.9 million, or 1.6%, from the $54.2 million recorded in the third quarter of 2019.~~

~~Net interest income for the nine month period ended September 30, 2020 amounted to $162.1~~$55.7 million, an increase of $0.6 million, or ~~0.4%~~1.1%, from the ~~$161.5~~$55.1 million recorded in the first ~~nine months~~quarter of 2019. Net interest income on a tax-equivalent basis for the nine month period ended September 30, 2020 amounted to $163.1 million, an increase of $0.3 million, or 0.2%, from the $162.8 million recorded in the first nine months of 2019.2020.


($ in thousands)	($ in thousands)	Three Months Ended September 30,			($ in thousands)	Three Months Ended March 31,
		2020		2019		2021		2020
Net interest income, as reported	Net interest income, as reported	$	54,733	53,778	Net interest income, as reported	$	55,238	54,759
Tax-equivalent adjustment	Tax-equivalent adjustment	347		413	Tax-equivalent adjustment	443		334
Net interest income, tax-equivalent	Net interest income, tax-equivalent	$	55,080	54,191	Net interest income, tax-equivalent	$	55,681	55,093

		Nine Months Ended September 30,
		2020		2019
Net interest income, as reported		$	162,116	161,548
Tax-equivalent adjustment		1,011		1,260
Net interest income, tax-equivalent		$	163,127	162,808

There are two primary factors that cause changes in the amount of net interest income we record - 1) changes in our loans and deposits balances, and 2) our net interest margin (tax-equivalent net interest income divided by average interest-earning assets).

For the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021, the higher net interest income compared to the same ~~periods~~period of ~~2019~~2020 was primarily due to ~~growth in our~~higher levels of interest-earning assets and the recognition of PPP fees, which ~~was partially~~were mostly offset by a lower net interest margin.

The following table presents an analysis of net interest income.

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		For the Three Months Ended September 30,													For the Three Months Ended March 31,
		2020						2019							2021						2020
($ in thousands)	($ in thousands)	Average Volume		Average Rate		Interest Earned or Paid		Average Volume		Average Rate		Interest Earned or Paid		($ in thousands)	Average Volume		Average Rate		Interest Earned or Paid		Average Volume		Average Rate		Interest Earned or Paid
Assets	Assets													Assets
Loans (1)		$	4,785,848	4.38	%	$	52,739	$	4,354,477	5.02	%	$	55,142
Loans (1) (2)														Loans (1) (2)	$	4,684,143	4.42	%	$	51,073	$	4,512,893	4.93	%	$	55,297
Taxable securities	Taxable securities	973,183		2.03	%	4,958		747,044		2.72	%	5,129		Taxable securities	1,652,834		1.45	%	5,913		834,528		2.64	%	5,474
Non-taxable securities	Non-taxable securities	39,754		1.89	%	189		27,711		3.04	%	212		Non-taxable securities	67,196		1.95	%	323		21,719		3.04	%	164
Short-term investments, primarily interest-bearing cash	Short-term investments, primarily interest-bearing cash	495,771		0.64	%	802		310,781		2.42	%	1,898		Short-term investments, primarily interest-bearing cash	494,233		0.57	%	700		226,797		1.95	%	1,098
Total interest-earning assets	Total interest-earning assets	6,294,556		3.71	%	58,688		5,440,013		4.55	%	62,381		Total interest-earning assets	6,898,406		3.41	%	58,009		5,595,937		4.46	%	62,033

Cash and due from banks	Cash and due from banks	89,282						54,132						Cash and due from banks	80,898						63,218
Premises and equipment	Premises and equipment	116,660						117,342						Premises and equipment	121,798						114,323
Other assets	Other assets	403,614						410,492						Other assets	376,724						409,620
Total assets	Total assets	$	6,904,112					$	6,021,979					Total assets	$	7,477,826					$	6,183,098

Liabilities	Liabilities													Liabilities
Interest bearing checking	Interest bearing checking	$	1,065,485	0.10	%	$	273	$	883,002	0.15	%	$	338	Interest bearing checking	$	1,203,942	0.09	%	$	266	$	899,004	0.18	%	$	408
Money market deposits	Money market deposits	1,407,314		0.29	%	1,014		1,124,240		0.68	%	1,915		Money market deposits	1,650,387		0.23	%	918		1,203,129		0.56	%	1,683
Savings deposits	Savings deposits	483,089		0.12	%	152		416,732		0.29	%	307		Savings deposits	538,781		0.10	%	130		426,225		0.25	%	269
Time deposits >$100,000	Time deposits >$100,000	604,887		1.15	%	1,747		692,417		2.02	%	3,519		Time deposits >$100,000	555,180		0.63	%	858		644,113		1.83	%	2,924
Other time deposits	Other time deposits	236,672		0.58	%	347		261,424		0.79	%	518		Other time deposits	224,045		0.39	%	216		250,860		0.78	%	489
Total interest-bearing deposits	Total interest-bearing deposits	3,797,447		0.37	%	3,533		3,377,815		0.77	%	6,597		Total interest-bearing deposits	4,172,335		0.23	%	2,388		3,423,331		0.68	%	5,773
Borrowings	Borrowings	81,362		2.06	%	422		300,714		2.65	%	2,006		Borrowings	61,405		2.53	%	383		316,136		1.91	%	1,501
Total interest-bearing liabilities	Total interest-bearing liabilities	3,878,809		0.41	%	3,955		3,678,529		0.93	%	8,603		Total interest-bearing liabilities	4,233,740		0.27	%	2,771		3,739,467		0.78	%	7,274

Noninterest bearing checking	Noninterest bearing checking	2,085,345						1,460,759						Noninterest bearing checking	2,301,780						1,526,868
Other liabilities	Other liabilities	61,633						55,777						Other liabilities	57,116						58,171
Shareholders’ equity	Shareholders’ equity	878,325						826,914						Shareholders’ equity	885,190						858,592
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	6,904,112					$	6,021,979					Total liabilities and shareholders’ equity	$	7,477,826					$	6,183,098

Net yield on interest-earning assets and net interest income	Net yield on interest-earning assets and net interest income			3.46	%	$	54,733			3.92	%	$	53,778	Net yield on interest-earning assets and net interest income			3.25	%	$	55,238			3.94	%	$	54,759
Net yield on interest-earning assets and net interest income – tax-equivalent ~~(2)~~(3)	Net yield on interest-earning assets and net interest income – tax-equivalent ~~(2)~~(3)			3.48	%	$	55,080			3.95	%	$	54,191	Net yield on interest-earning assets and net interest income – tax-equivalent ~~(2)~~(3)			3.27	%	$	55,681			3.96	%	$	55,093

Interest rate spread	Interest rate spread			3.30	%					3.62	%			Interest rate spread			3.14	%					3.68	%

Average prime rate	Average prime rate			3.25	%					5.27	%			Average prime rate			3.25	%					4.42	%

(1) Average loans include nonaccruing loans, the effect of which is to lower the average rate shown. Interest earned includes recognized net loan fees, including late fees, prepayment fees, and deferred loan fee amortization (including deferred PPP fees), in the amounts of $3,395, and $345 for the three months ended March 31, 2021 and 2020, respectively.

(2) Includes accretion of discount on acquired and SBA loans of $1,341 and $1,841 for the three months ended March 31, 2021 and 2020, respectively.

(3) Includes tax-equivalent adjustments of ~~$347,000~~$443 and ~~$413,000~~$334 in ~~2020~~2021 and ~~2019,~~2020, respectively, to reflect the tax benefit that we receive related to tax-exempt securities and tax-exempt loans, which carry interest rates lower than similar taxable investments/loans due to their tax exempt status. This amount has been computed assuming a 23% tax rate and is reduced by the related nondeductible portion of interest expense.

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For the Nine Months Ended September 30,
2020 2019
($ in thousands) Average
Volume Average
Rate Interest
Earned
or Paid Average
Volume Average
Rate Interest
Earned
or Paid
Assets
Loans (1) $ 4,679,479 4.57 % $ 160,000 $ 4,322,078 5.10 % $ 164,754
Taxable securities 859,800 2.36 % 15,203 706,300 2.81 % 14,859
Non-taxable securities 26,471 2.37 % 470 34,833 3.15 % 820
Short-term investments, primarily interest-bearing cash 432,782 0.83 % 2,688 347,335 2.58 % 6,705
Total interest-earning assets 5,998,532 3.97 % $ 178,361 5,410,546 4.62 % 187,138
Cash and due from banks 80,523 54,579
Premises and equipment 115,303 118,152
Other assets 411,290 403,364
Total assets $ 6,605,648 $ 5,986,641
Liabilities
Interest bearing checking $ 979,339 0.13 % $ 948 $ 894,488 0.14 % $ 966
Money market deposits 1,302,021 0.37 % 3,617 1,093,736 0.62 % 5,036
Savings deposits 454,805 0.17 % 568 419,210 0.29 % 903
Time deposits >$100,000 627,025 1.49 % 6,996 709,247 1.93 % 10,221
Other time deposits 243,404 0.69 % 1,251 262,424 0.70 % 1,372
Total interest-bearing deposits 3,606,594 0.50 % 13,380 3,379,105 0.73 % 18,498
Borrowings 228,295 1.68 % 2,865 343,431 2.76 % 7,092
Total interest-bearing liabilities 3,834,889 0.57 % 16,245 3,722,536 0.92 % 25,590
Noninterest bearing checking 1,840,133 1,405,830
Other liabilities 61,056 57,047
Shareholders’ equity 869,570 801,228
Total liabilities and
shareholders’ equity $ 6,605,648 $ 5,986,641
Net yield on interest-earning assets and net interest income 3.61 % $ 162,116 3.99 % $ 161,548
Net yield on interest-earning assets and net interest income – tax-equivalent (2) 3.63 % $ 163,127 4.02 % $ 162,808
Interest rate spread 3.40 % 3.70 %
Average prime rate 3.64 % 5.42 %

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

(2) Includes tax-equivalent adjustments of $1,011,000 and $1,260,000 in 2020 and 2019, respectively, to reflect the tax benefit that we receive related to tax-exempt securities and tax-exempt loans, which carry interest rates lower than similar taxable investments/loans due to their tax exempt status. This amount has been computed assuming a 23% tax rate and is reduced by the related nondeductible portion of interest expense.

Average loans outstanding for the ~~third~~first quarter of ~~2020~~2021 were ~~$4.786~~$4.684 billion, which was ~~$431~~$171 million, or ~~9.9%~~3.8%, higher than the average loans outstanding for the ~~third~~first quarter of ~~2019~~2020 ($4.354 billion). Average loans for the nine months ended September 30, 2020 were $4.679 billion, which was $357 million, or 8.3%, higher than the average loans outstanding for the comparable period of 2019 ($4.3224.513 billion). The higher amount of average loans outstanding in ~~2020~~2021 was primarily due to our loan growth initiatives, including our continued focus and expansion into higher growth markets, our hiring of experienced bankers and our emphasis on SBA lending. Also significantly impacting our growth in loans in 2020 was the origination of ~~$245~~PPP loans since March 31, 2020. We had $241 million in outstanding PPP loans ~~during the second quarter~~as of ~~2020.~~March 31, 2021, with an average balance of $237 million. Excluding PPP loan balances, average loans outstanding were approximately ~~4.3% and 5.0% higher~~1.5% lower for the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021, respectively, compared to the ~~prior respective periods.~~

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first quarter of 2020.

As derived from the tables above, our average balance of ~~taxable~~total securities grew by ~~$226~~$864 million, or ~~30.3%, when comparing the third quarter of 2020 to the third quarter of 2019, and $154 million, or 21.7%~~100.9%, when comparing the first ~~nine months~~quarter of ~~2020~~2021 to the first ~~nine months~~quarter of ~~2019. These increases were~~2020. This increase was due to higher levels of investment purchases ~~that were made possible by~~arising from the cash provided by the high deposit growth experienced in recent periods.

For the ~~third~~first quarter of ~~2020,~~2021, average short-term investments, primarily interest-bearing cash, amounted to ~~$496~~$494 million, which was ~~$185~~$267 million, or ~~59.5%~~117.9%, higher than for the ~~third~~first quarter of ~~2019~~2020 ($~~311 million)~~227million). ~~For the nine months ended September 30, 2020, average~~The higher level of short-term investments ~~outstanding increased $85 million, or 24.6%, compared to the first nine months of 2019. The higher levels of interest-bearing cash~~ in ~~2020 were~~2021 was also due to the high deposit growth experienced, as discussed in the following paragraph.

Average total deposits outstanding for the ~~third~~first quarter of ~~2020~~2021 were ~~$5.883~~$6.474 billion, which was ~~$1.044~~$1.524 billion, or ~~21.6%~~30.8%, higher than the average deposits outstanding for the ~~third~~first quarter of ~~2019~~2020 ($~~4.839~~4.950 billion). ~~Average total deposits outstanding for the first nine months of 2020 were $662 million, or 13.8%, higher than the comparable period of 2019.~~ The majority of the growth has occurred in our transaction deposit accounts (noninterest bearing checking, interest bearing checking, money market and savings accounts). We believe the high deposit growth was due to a combination of factors including: 1) the deposit of PPP funds into customer checking accounts, 2) the government’s stimulus payments, 3) consumer savings habits, and 4) positive results from our deposit account growth initiatives.

We also utilized funds provided by our high deposit growth to pay down a substantial portion of our borrowings insince March 31, 2020. Total borrowings at September 30, 2020 amounted to $61.8 million, a decline of $239 million, or 79.4% from December 31, 2019, while average borrowings decreased $219 million, or 72.9%, when comparing the third quarter of 2020 to the third quarter of 2019. Average borrowings decreased ~~$115~~$255 million, or ~~33.5%~~80.6%, when comparing the first ~~nine months~~quarter of ~~2020~~2021 to the first ~~nine months~~quarter of ~~2019.~~2020.

The net result of the balance sheet growth discussed above was that our average interest-earning assets for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 were ~~15.7% and 10.9%~~23.3% higher than for the comparable ~~periods~~period in ~~2019, respectively,~~2020, which, as it relates to the net interest income we recorded, slightly more than offset the impact of the decline in our net interest margin, which is discussed below.

See additional information regarding changes in our loans and deposits in the section below entitled “Financial Condition.”

Our net interest margin (a non-GAAP measure calculated by dividing tax-equivalent net interest income by average earning assets) for the ~~third~~first quarter of ~~2020~~2021 was ~~3.48%~~3.27%, which was 4769 basis points lower than the ~~3.95%~~3.96% realized in the ~~third~~first quarter of ~~2019. For the nine months ended September 30, 2020, our net interest~~2020. The lower margin was ~~3.63% compared to 4.02% for the same period in 2019. The lower margins were~~ primarily due to the impact of lower interest rates, as discussed in the following ~~paragraph.~~paragraph, and the lower incremental reinvestment rates from realized from funds provided by the high deposit growth,

From August 2019 to March 2020, the Federal Reserve cut interest rates by 225 basis points, which ~~resulted~~played a significant role in our ~~interest-earning~~ asset yields declining by more than our cost of ~~funds. For~~funds since those interest rate cuts. In comparing the ~~three months ended September 30,~~first quarter of 2021 to the first quarter of 2020, our yield on interest-earning ~~asset yield~~assets declined by 84105 basis points compared to a ~~52 basis point decline in the cost of our interest-bearing liabilities. For the nine months ended September 30, 2020, our interest-earning asset yield declined by 65 basis points compared to a 35~~51 basis point decline in the cost of our interest-bearing liabilities. See additional discussion in Item 3 - Quantitative and Qualitative Disclosures About Market Risk.

We continue to have $245 million of PPP loans outstanding. In the third quarter of 2020, the yield earned on those loans was 2.90%, which included $1.2 million of amortization of origination fees, and lowered the reportedAnother factor negatively impacting our net interest margin ~~by approximately 2 basis points. Since inception,~~has been our high deposit growth, which, due to lower loan growth, has resulted in a higher percentage of our earning assets being comprised of short-term investments and securities, each of which generally yield less than loans. Short-term investments and securities comprised 32% of average interest-earning assets for the first quarter of 2021 compared to 19% in the first quarter of 2020.

Our PPP loans ~~have yielded 3.35%~~outstanding totaled $241 million at both March 31, 2021 and ~~did not significantly impact~~December 31, 2020, while no PPP loans were outstanding at March 31, 2020. Including accelerated amortization of deferred PPP loan fees, we recorded a total of $3.0 million in PPP fee-related interest income during the first quarter of 2021, which, when combined with the ~~net interest margin~~note rate of 1.00%, resulted in a total yield on ~~a year to date basis.~~PPP loans of 6.16% for the quarter. We have ~~$7.6~~$9.0 million in remaining deferred PPP ~~origination~~loan fees, ~~that will be recognized over the lives~~ of ~~the loans, with accelerated amortization expected~~which $3.1 million relates to ~~result from the loan forgiveness process.~~2020 originations and $5.9 million relates to 2021 originations

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We recorded loan discount accretion of ~~$1.6 million in the third quarter of 2020, compared to~~ $1.3 million in the ~~third~~first quarter of ~~2019. For~~2021, compared to $1.8 million in the ~~nine months ended September 30, 2020 and 2019, we recorded loan discount accretion~~first quarter of ~~$4.8 million and $4.5 million, respectively.~~2020. The ~~higher~~lower loan discount accretion was primarily attributable to ~~higher~~lower accretion on ~~SBA~~acquired loans due to ~~growth~~the natural paydowns in ~~that portfolio.~~

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our acquired loan portfolios.

See additional information regarding net interest income in the section entitled “Interest Rate Risk.”

We recorded ano provision for ~~loan~~credit losses in the first quarter of ~~$6.1~~2021 compared to $5.6 million in the ~~third~~first quarter of ~~2020 compared to a negative~~2020. The higher provision for loan losses (reduction of the allowance for loan losses) of $1.1 million in the third quarter of 2019. For the nine months ended September 30, 2020, we recorded a provision for loan losses of $31.0 million compared to a negative provision for loan losses of $0.9 million for the same period of 2019. The increases in 2020 ~~were~~was primarily related to estimated ~~probable~~incurred loan losses ~~arising from the economic impact of COVID-19. With the onset of~~associated with the pandemic ~~in March 2020,~~that was emerging at the time. Under the CECL methodology for recording expected credit losses adopted at January 1, 2021, for the first quarter of 2021, we ~~worked with many of our borrowers and provided the option of loan payment deferrals, with~~determined that no provisions for credit losses were necessary as it relates to loans, ~~on deferral status amounting~~unfunded commitments or held to ~~$186 million, or 3.9% of total loans, at September 30, 2020, a decrease from $774 million, or 16.2% of total loans, at June 30, 2020.~~maturity securities. See additional discussion below in the section ~~entitled~~ "Allowance for ~~Loan~~Credit Losses and Provision for ~~Loan Losses" below for additional information~~Credit Losses."

Total noninterest income ~~was $21.5 million and $15.2 million~~ for the ~~three months ended September 30, 2020 and 2019, respectively. For~~first quarter of 2021 was $20.7 million, a 50.8% increase from the ~~nine months ended September 30, 2020 and 2019, total~~$13.7 million recorded for the first quarter of 2020. The increases in noninterest income ~~was $61.4 million~~in 2021 are primarily due to fees earned as a result of high mortgage loan activity, SBA consulting fees related to client assistance with PPP originations, and ~~$44.9 million, respectively.~~increased SBA loan sale gains, as discussed below.

Service charges on deposit accounts amounted to ~~$2.6~~$2.7 million for the ~~third~~first quarter of ~~2020~~2021, an 18.1% decrease compared to ~~$3.4~~$3.3 million in the ~~third~~first quarter of ~~2019. For the first nine months of 2020 and 2019, service charges on deposit accounts amounted to $8.2 million and $9.5 million, respectively.~~2020. The ~~decreases are~~decline was primarily due to fewer instances of ~~overdraft fees that we believe is likely associated with the generally higher levels of deposits maintained by our customers during 2020.~~customer overdrafts.

Other service charges, commissions and fees amounted to $6.2 million in the third quarter of 2020 compared to $5.1 million in the third quarter of 2019. This same line item amounted to $14.9 million for the nine months ended September 30, 2020 compared to $14.6$5.5 million for the first ~~nine months~~quarter of ~~2019. Bankcard revenue, including debit and credit card interchange income, comprises~~2021, an increase of 35.7% from the ~~majority of this line item. Bankcard revenue~~$4.1 million for the ~~third~~first quarter of 2020. The increase was primarily due to a $0.9 million increase in bankcard revenue. Additionally, the first quarter of 2020 ~~amounted~~included a $0.5 million charge related to $3.8 million compared to $3.5 million in the third quarter of 2019. Bankcard revenue amounted to $10.1 million for both of the first nine months in 2020 and 2019. Included in this line item for the third quarter of 2020 was income of $0.6 million due to the reversal of previously recorded impairment of our SBA servicing asset resulting from improved market conditions. We had recorded impairment expense of our SBA servicing asset of $0.5 million in the first quarter of 2020 and $0.1 million in the fourth quarter of 2019.asset.

Fees from presold mortgages amounted to ~~$4.9~~$4.5 million for the ~~third~~first quarter of ~~2020~~2021, an increase of 146.8%, compared to ~~$1.3~~$1.8 million in the ~~third~~first quarter of ~~2019. For the first nine months of 2020 and 2019, fees from presold mortgages amounted to $9.7 million and $2.7 million, respectively.~~2020. The ~~increases~~increase in ~~2020 were~~2021 was primarily due to higher mortgage loan origination volume arising from ~~historically~~ low mortgage loan interest rates.

Commissions from sales of insurance and financial products did not vary significantly for the ~~periods~~period presented, amounting to approximately ~~$2.4~~$2.2 million and ~~$2.2~~$2.1 million for the ~~third~~first quarters of ~~2020~~2021 and ~~2019, respectively, and $6.5 million and $6.4 million for the nine months ended September 30,~~ 2020, ~~and 2019,~~ respectively.

~~For the third quarters of 2020 and 2019,~~ SBA consulting fees amounted to ~~$2.0~~$2.8 million ~~and $0.7 million, respectively. For~~for the first ~~nine months~~quarter, an increase of ~~2020 and 2019, SBA consulting fees amounted~~169.1%, compared to ~~$6.7~~$1.0 million ~~and $2.8 million, respectively.~~for the first quarter of 2020. The ~~increases in 2020 were~~increase was due to fees earned inby the ~~second and third quarters by our~~Company's SBA subsidiary, SBA Complete, primarily related to assisting its third-party client banks with the ~~PPP.~~PPP loan program. SBA Complete recorded approximately ~~$0.8 million and $3.8~~$1.6 million in ~~PPP~~PPP-related fees for the three ~~and nine~~ months ended ~~September 30, 2020.~~March 31, 2021. At March 31, 2021, SBA Complete ~~also recorded $1.6~~had $0.6 million in remaining deferred PPP revenue ~~in the second quarter of 2020~~ that will be recorded as income upon completing the forgiveness ~~portion of the PPP.~~process for its client banks.

SBA loan sale gains amounted to ~~$2.9 million and $1.9~~$2.3 million for the ~~three months ended September 30, 2020 and 2019, respectively,~~first quarter of 2021 compared to ~~$5.5~~$0.6 million ~~and $7.0 million for the nine months ended September 30, 2020 and 2019, respectively. Origination of SBA loans generally declined~~ in the first ~~and second quarters~~quarter of ~~2020 due to the economic impact of COVID-19, while during the third~~2020. The first quarter of 2020 ~~SBA loan sales increased due to increased~~was significantly impacted by temporary pandemic-related market ~~activity.~~

~~During the second~~conditions. The first quarter of ~~2020, we sold approximately $220 million in mortgage-backed and commercial mortgage-backed securities at a gain of $8.0 million. The securities sold were believed to be~~2021 was favorably impacted by ~~historically low interest rates and Federal Reserve stimulus measures. Securities gains~~the SBA increasing the guarantee percentage on most loans from 75% to 90% as part of ~~$0.1 million were recorded in~~ the ~~first nine months of 2019.~~

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economic relief package.

Noninterest expenses amounted to ~~$40.4~~$40.1 million in each of the ~~third quarter~~first quarters of ~~2020 compared to $38.4 million recorded in the third quarter of 2019, an increase of 5.2%. For the nine months ended September 30, 2020~~2021 and ~~2019, noninterest expenses amounted to $119.4 million and $117.3 million, respectively, an increase of 1.8%.~~2020.

Personnel expense, ~~increased 8.6% to $26.0~~which includes salaries expense and employee benefit expense, was unchanged at $24.7 million infor each of the ~~third quarter~~first quarters of ~~2020 from $24.0 million in the third quarter of 2019. The increase was primarily due to increased incentive compensation expense related to improvement in financial performance~~2021 and ~~higher commission expense resulting from increases in mortgage loan volume in~~ 2020.

For the nine months ended September 30, 2020 and 2019, personnel expense amounted to $75.2 million and $71.7 million, an increase of 4.9%. The increase was primarily due to higher mortgage loan commissions.

The combined amount of occupancy and equipment expense did not vary significantly among the periods presented, amounting to $3.9 million and ~~$4.0~~$4.1 million for three month periods ending ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $11.8 million and $12.1 million for the nine month periods ending September 30, 2020 and 2019,~~ respectively.

Intangibles amortization expense decreased from ~~$1.2~~$1.1 million in the ~~third~~first quarter of ~~2019~~2020 to $0.9 million in the ~~third~~first quarter of ~~2020, and decreased from $3.7 million in the first nine months of 2019 to $3.0 million in the first nine months of 2020.~~2021. The declines were primarily a result of the amortization of intangible assets associated with acquisitions that typically have amortization schedules that decline over time.

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Foreclosed property losses ~~decreased among~~were $0.2 million for each of the ~~2020 periods presented due primarily to lower levels of foreclosed properties that the Bank holds.~~three months ending March 31, 2021 and 2020.

Other operating expenses amounted to ~~$9.5~~$10.4 million for the ~~third~~first quarter of 2021 compared to $10.1 million in the first quarter of 2020, ~~compared to $9.0 million in the third quarter of 2019,~~ an increase of ~~5.1%~~2.5%. ~~For the nine months ended September 30, 2020 and 2019, other operating expenses amounted to $29.3 million and $28.7 million, respectively.~~ The ~~increases were~~increase in 2021 was primarily a result of higher FDIC insurance expense in ~~2020 due to the 2019 usage of FDIC credits that were allocated to the Company~~2021 and substantially offset FDIC insurance costs in 2019 before being depleted in the first quarter of 2020. We recorded $0.5 million in FDIC insurance expense for the three months ended September 30, 2020, compared to the reversal of accrued expense of $0.4 million (which resulted in income) for the thee months ended September 30, 2019. We recorded $1.2 million in FDIC insurance expense for the nine months ended September 30, 2020, compared to $0.3 million for the nine months ended September 30, 2019.increased technology costs.

For the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the provision for income taxes was ~~$6.3~~$7.6 million, an effective tax rate of ~~21.4%~~21.3%, and ~~$6.6~~$4.6 million, an effective tax rate of ~~20.8%~~20.3%, respectively. ~~For~~The increase in the ~~nine months ended September 30, 2020 and 2019, the provision for income taxes was $15.2 million, an~~ effective tax rate in 2021 was primarily due to a higher proportion of ~~20.8%, and $18.9 million, an effective tax rate of 21.0%, respectively.~~fully-taxable income.

The consolidated statements of comprehensive income reflect other comprehensive ~~income~~loss of ~~$0.1~~$18.5 million during the ~~third~~first quarter of ~~2020~~2021 compared to other comprehensive income of ~~$1.7~~$16.1 million during the ~~third~~first quarter of ~~2019. For the first nine months of 2020 and 2019, the consolidated statements of comprehensive income reflect other comprehensive income of $12.4 million and $15.6 million, respectively.~~2020. The primary component of other comprehensive income for the periods presented was changes in unrealized holding gains (losses) of our available for sale ~~securities resulting from declines in interest rates.~~securities. Our available for sale securities portfolio is predominantly comprised of fixed rate bonds that generally increase in value when market yields for fixed rate bonds decrease and decline in value when market yields for fixed rate bonds increase. Longer term interest rates increased late in the first quarter of 2021, which decreased the value of our fixed rate securities, while in the first quarter of 2020, longer term interest rates decreased, which increased the value of our fixed rate securities. Management has evaluated any unrealized losses on individual securities at each period end and determined that there is no other-than-temporary impairment.

FINANCIAL CONDITION

Total assets at ~~September 30, 2020~~March 31, 2021 amounted to ~~$7.1~~$7.7 billion, a ~~15.0%~~6.1% increase from December 31, ~~2019.~~2020. Total loans at ~~September 30, 2020~~March 31, 2021 amounted to ~~$4.8~~$4.6 billion, ~~an 8.1% increase~~a 2.3% decrease from December 31, ~~2019,~~2020, and total deposits amounted to ~~$6.1~~$6.7 billion, a ~~22.9%~~7.3% increase from December 31, ~~2019.~~2020.

The following table presents information regarding the nature of changes in our levels of loans and deposits for the first ~~nine~~three months of ~~2020.~~2021.

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$ in thousands	$ in thousands								$ in thousands
January 1, 2020 to September 30, 2020		Balance at beginning of period		Internal Growth, net	Growth from Acquisitions	Balance at end of period	Total percentage growth
January 1, 2021 to March 31, 2021									January 1, 2021 to March 31, 2021	Balance at beginning of period		Internal Growth, net	Growth from Acquisitions	Balance at end of period	Total percentage growth
Total loans	Total loans	$	4,453,466	345,637	14,633	4,813,736	8.1	%	Total loans	$	4,731,315	(107,261)	—	4,624,054	(2.3)	%

Deposits – Noninterest bearing checking	Deposits – Noninterest bearing checking	1,515,977		605,377	—	2,121,354	39.9	%	Deposits – Noninterest bearing checking	2,210,012		220,186	—	2,430,198	10.0	%
Deposits – Interest bearing checking	Deposits – Interest bearing checking	912,784		189,559	—	1,102,343	20.8	%	Deposits – Interest bearing checking	1,172,022		86,478	—	1,258,500	7.4	%
Deposits – Money market	Deposits – Money market	1,173,107		351,603	—	1,524,710	30.0	%	Deposits – Money market	1,581,364		139,866	—	1,721,230	8.8	%
Deposits – Savings	Deposits – Savings	424,415		68,531	—	492,946	16.1	%	Deposits – Savings	519,266		48,449	—	567,715	9.3	%
Deposits – Brokered	Deposits – Brokered	86,141		(49,405)	—	36,736	(57.4)	%	Deposits – Brokered	20,222		(10,761)	—	9,461	(53.2)	%
Deposits – Internet time	Deposits – Internet time	698		(449)	—	249	(64.3)	%	Deposits – Internet time	249		—	—	249	—	%
Deposits – Time>$100,000	Deposits – Time>$100,000	563,108		(13,685)	—	549,423	(2.4)	%	Deposits – Time>$100,000	543,894		(18,085)	—	525,809	(3.3)	%
Deposits – Time<$100,000	Deposits – Time<$100,000	255,125		(22,660)	—	232,465	(8.9)	%	Deposits – Time<$100,000	226,567		(6,242)	—	220,325	(2.8)	%
Total deposits	Total deposits	$	4,931,355	1,128,871	—	6,060,226	22.9	%	Total deposits	$	6,273,596	459,891	—	6,733,487	7.3	%

As derived from the table above, for the first ~~nine~~three months of ~~2020, total loan growth was $360.3~~2021, loans declined $107.3 million, or ~~8.1%~~2.3%. ~~Loan growth for~~Our level of outstanding loans has been negatively impacted by high mortgage loan refinancing activity, commercial loan payoffs, and soft demand arising from the ~~period~~pandemic. PPP loans amounted to $241 million at both March 31, 2021 and December 31, 2020, with $111 million in new PPP loans, which was ~~primarily driven~~offset by ~~the origination of $244.9~~$111 million in PPP ~~loans. Loan growth for~~forgiveness payments. We generally believe that our market area is beginning to emerge from the ~~nine month period,~~pandemic, and thus, we expect economic activity to increase. Accordingly, excluding the impact of PPP ~~loans, was $100.7 million, or 3.5% annualized, which includes the $14.6 million assumed in the acquisition of Magnolia. Our~~loan forgiveness, we expect to experience organic loan growth ~~was driven by our continued expansion into high-growth markets, our hiring~~during the remainder of experienced bankers and our emphasis on SBA lending. Exclusive of PPP balances, we expect growth in our loan portfolio in the near term, however likely at lower levels than we would normally expect as a result of the impact of the pandemic.2021.

The mix of our loan portfolio remains substantially the same at ~~September 30, 2020~~March 31, 2021 compared to December 31, ~~2019, with PPP loans increasing the percentage of commercial and industrial loans at September 30,~~ 2020. Also, the majority of our real estate loans are personal and commercial loans where real estate provides additional

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security for the loan. Note 76 to the consolidated financial statements presents additional detailed information regarding our mix of loans.

For the ~~nine~~three month period ended ~~September 30, 2020,~~March 31, 2021, we experienced strong growth in our deposit base, with total deposits increasing by ~~$1.1 billion,~~$460 million, or ~~22.9%~~7.3% from December 31, ~~2019.~~2020. Deposit growth in our transaction accounts (checking, money market and savings), was especially strong, ranging from ~~16%-40%~~7-10% growth for the ~~nine~~three month period. ~~In addition to deposits arising from PPP loans,~~We believe this high deposit growth is ~~believed to be~~ due to a combination of stimulus funds and changes in customer behaviors during the pandemic, as well as our ongoing deposit growth initiatives. We routinely engage in activities designed to grow and retain deposits, such as (1) emphasizing relationship banking to new and existing customers, where borrowers are encouraged and normally expected to maintain deposit accounts with us, (2) pricing deposits at rate levels that will attract and/or retain deposits, and (3) continually working to identify and introduce new products that will attract customers or enhance our appeal as a primary provider of financial services.

Our liquidity levels have increased over the ~~past year.~~period. Our liquid assets (cash and securities) as a percentage of our total deposits and borrowings increased from ~~21.4%~~31.4% at December 31, ~~2019~~2020 to ~~27.4%~~37.5% at ~~September 30, 2020.~~March 31, 2021.

Nonperforming Assets

Nonperforming assets include nonaccrual loans, ~~TDR's,~~TDRs, loans past due 90 or more days and still accruing interest, and foreclosed real estate. Nonperforming assets are summarized as follows:

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ASSET QUALITY DATA ($ in thousands)	ASSET QUALITY DATA ($ in thousands)	As of/for the quarter ended September 30, 2020			As of/for the quarter ended December 31, 2019		ASSET QUALITY DATA ($ in thousands)	As of/for the quarter ended March 31, 2021			As of/for the quarter ended December 31, 2020
Nonperforming assets	Nonperforming assets						Nonperforming assets
Nonaccrual loans	Nonaccrual loans	$	31,656		24,866		Nonaccrual loans	$	39,566		35,076
TDR's – accruing		9,896			9,053
TDRs – accruing							TDRs – accruing	8,601			9,497
Accruing loans >90 days past due	Accruing loans >90 days past due	—			—		Accruing loans >90 days past due	—			—
Total nonperforming loans	Total nonperforming loans	41,552			33,919		Total nonperforming loans	48,167			44,573
Foreclosed real estate	Foreclosed real estate	2,741			3,873		Foreclosed real estate	1,811			2,424
Total nonperforming assets	Total nonperforming assets	$	44,293		37,792		Total nonperforming assets	$	49,978		46,997

Purchased credit impaired loans not included above (1)		$	9,616		12,664

Asset Quality Ratios – All Assets	Asset Quality Ratios – All Assets						Asset Quality Ratios – All Assets
Net charge-offs to average loans - annualized	Net charge-offs to average loans - annualized	(0.06)		%	0.09	%	Net charge-offs to average loans - annualized	0.10		%	0.07	%
Nonperforming loans to total loans	Nonperforming loans to total loans	0.86		%	0.76	%	Nonperforming loans to total loans	1.04		%	0.94	%
Nonperforming assets to total assets	Nonperforming assets to total assets	0.63		%	0.62	%	Nonperforming assets to total assets	0.65		%	0.64	%
Allowance for loan losses to total loans	Allowance for loan losses to total loans	1.02		%	0.48	%	Allowance for loan losses to total loans	1.42		%	1.11	%
Allowance for loan losses to nonperforming loans	Allowance for loan losses to nonperforming loans	118.47		%	63.09	%	Allowance for loan losses to nonperforming loans	136.71		%	117.53	%


(1) In the March 3, 2017 acquisition of Carolina Bank and the October 1, 2017 acquisition of Asheville Savings Bank, we acquired $19.3 million and $9.9 million, respectively, in PCI loans in accordance with ASC 310-30 accounting guidance. These loans are excluded from the nonperforming loan amounts, including $0.8 million and $0.8 million in PCI loans at September 30, 2020 and December 31, 2019, respectively, that were contractually past due 90 days or more.

As shown in the table above, nonperforming assets increased from December 31, ~~2019~~2020 to ~~September 30, 2020,~~March 31, 2021, which was primarily driven by ~~three loans in the $2-$4~~one borrower relationship amounting to $5.5 million ~~range~~ being placed on nonaccrual status in the ~~second~~first quarter of ~~2020 that were~~2021 and which was not directly related to the impact of the pandemic. Due primarily to ~~the SBA's~~government stimulus and ~~the Company's COVID-19 deferral~~ relief programs, the nonperforming asset level at ~~September 30, 2020 does~~March 31, 2021 may not ~~likely~~ reflect the full impact of COVID-19. While there are still many uncertainties associated with the pandemic and the stimulus measures taken by the United States government to address it, higher unemployment levels and business closures would generally be expected to result in higher levels of nonperforming assets in the future.

We have reviewed the collateral for our nonperforming assets, including nonaccrual loans, and have included this review among the factors considered in the evaluation of the allowance for loan losses discussed below.

At ~~September 30, 2020,~~March 31, 2021, total nonaccrual loans amounted to ~~$31.7~~$39.6 million, compared to ~~$24.9~~$35.1 million at December 31, ~~2019.~~2021. As noted above, the increase was primarily driven by ~~three loans. One~~one borrower relationship.

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The following is the composition, by loan type, of ~~those three~~all of our nonaccrual loans ~~with a balance of approximately $4 million, has a 75% SBA guarantee.~~at each period end.

~~Restructured loans (TDRs)~~


($ in thousands)	At March 31, 2021		At December 31, 2020
Commercial, financial, and agricultural	$	10,330	9,681
Real estate – construction, land development, and other land loans	540		643
Real estate – mortgage – residential (1-4 family) first mortgages	6,207		6,048
Real estate – mortgage – home equity loans/lines of credit	1,676		1,333
Real estate – mortgage – commercial and other	20,654		17,191
Consumer loans	159		180
Total nonaccrual loans	$	39,566	35,076

TDRs are accruing loans for which we have granted concessions to the borrower as a result of the borrower’s financial difficulties. At ~~September 30, 2020,~~March 31, 2021, total accruing TDRs amounted to ~~$9.9~~$8.6 million, compared to ~~$9.1~~$9.5 million at December 31, ~~2019. As previously discussed,~~2020, with the decrease being attributed to several TDRs paying off during the period. COVID-19 related deferrals, which amounted to ~~$186~~$5.9 million at ~~September 30, 2020~~March 31, 2021, are excluded from TDR consideration at ~~September 30, 2020.~~

~~As reflected in Note 7 to the financial statements, total classified loans were $58.6 million at September 30, 2020 compared to $62.8 million at December~~March 31, 2019. Special mention loans increased from $50.3 million at December 31, 2019 to $65.3 million at September 30, 2020, with the increase being primarily due to loans that management believed are at a higher risk of financial difficulty due to the impact of COVID-19.

Foreclosed real estate includes primarily foreclosed properties. Total foreclosed real estate amounted to $2.7 million at September 30, 2020 and $3.9 million at December 31, 2019. Our foreclosed property balances have generally been decreasing as a result of sales activity during the periods and favorable overall asset quality.

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~~The following is the composition, by loan type, of all of our nonaccrual loans at each period end.~~

($ in thousands) At September 30, 2020 At December 31, 2019
Commercial, financial, and agricultural $ 8,473 5,518
Real estate – construction, land development, and other land loans 872 1,067
Real estate – mortgage – residential (1-4 family) first mortgages 5,742 7,552
Real estate – mortgage – home equity loans/lines of credit 1,594 1,797
Real estate – mortgage – commercial and other 14,795 8,820
Consumer loans 180 112
Total nonaccrual loans $ 31,656 24,866

We believe that the fair values of the items of foreclosed real estate, less estimated costs to sell, equal or exceed their respective carrying values at the dates presented. The following table presents the detail of all of our foreclosed real estate at each period end:

($ in thousands) At September 30, 2020 At December 31, 2019
Vacant land and farmland $ 1,128 1,752
1-4 family residential properties 648 974
Commercial real estate 965 1,147
Total foreclosed real estate $ 2,741 3,873

2021.

The following table presents geographic information regarding our nonperforming ~~assets~~loans (nonaccrual loans and TDRs) at ~~September 30, 2020.~~March 31, 2021.


		As of September 30, 2020								As of March 31, 2021
($ in thousands)	($ in thousands)	Total Nonperforming Loans		Total Loans	Nonperforming Loans to Total Loans		Total Foreclosed Real Estate		($ in thousands)	Total Nonperforming Loans		Total Loans	Nonperforming Loans to Total Loans		Total Foreclosed Real Estate
Region (1)	Region (1)								Region (1)
Eastern Region (NC)	Eastern Region (NC)	$	5,379	1,054,310	0.51	%	$	653	Eastern Region (NC)	$	5,167	1,044,774	0.49	%	$	382
Triangle Region (NC)	Triangle Region (NC)	5,885		974,628	0.60	%	848		Triangle Region (NC)	10,663		985,508	1.08	%	252
Triad Region (NC)	Triad Region (NC)	6,855		856,837	0.80	%	165		Triad Region (NC)	6,418		750,682	0.85	%	91
Charlotte Region (NC)	Charlotte Region (NC)	1,406		374,189	0.38	%	—		Charlotte Region (NC)	1,261		358,445	0.35	%	—
Southern Piedmont Region (NC)	Southern Piedmont Region (NC)	3,005		265,982	1.13	%	106		Southern Piedmont Region (NC)	2,872		269,544	1.07	%	65
Western Region (NC)	Western Region (NC)	3,385		633,268	0.53	%	23		Western Region (NC)	3,383		581,433	0.58	%	21
South Carolina Region	South Carolina Region	1,247		219,512	0.57	%	423		South Carolina Region	763		202,007	0.38	%	40
Former Virginia Region	Former Virginia Region	82		—	—	%	264		Former Virginia Region	81		336	24.11	%	209
Other	Other	14,308		435,010	3.29	%	259		Other	17,559		431,325	4.07	%	751
Total	Total	$	41,552	4,813,736	0.86	%	$	2,741	Total	$	48,167	4,624,054	1.04	%	$	1,811

(1)The counties comprising each region are as follows:

Eastern North Carolina Region - New Hanover, Brunswick, Duplin, Dare, Beaufort, Pitt, Onslow, Carteret

Triangle North Carolina Region - Moore, Lee, Harnett, Chatham, Wake

Triad North Carolina Region - Montgomery, Randolph, Davidson, Rockingham, Guilford, Stanly, Forsyth, Alamance

Charlotte North Carolina Region - Iredell, Cabarrus, Rowan, Mecklenburg

Southern Piedmont North Carolina Region - Richmond, Scotland, Robeson, Bladen, Columbus, Cumberland

Western North Carolina Region – Buncombe, Henderson, McDowell, Madison, Transylvania

South Carolina Region - Chesterfield, Dillon, Florence

Former Virginia Region - Wythe, Washington, Montgomery, Roanoke

Other includes loans originated on a national basis through the Company’s SBA Lending Division and through the Company's Credit Card Division

As reflected in Note 6 to the financial statements, total classified loans were $63.1 million at March 31, 2021 compared to $60.5 million at December 31, 2020. Special mention loans decreased from $61.3 million at December 31, 2020 to $52.3 million at March 31, 2021.

Foreclosed real estate includes primarily foreclosed properties. Total foreclosed real estate amounted to $1.8 million at March 31, 2021 and $2.4 million at December 31, 2020. Our foreclosed property balances have generally been decreasing as a result of sales activity during the periods and favorable overall asset quality.

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($ in thousands)	At March 31, 2021		At December 31, 2020
Vacant land and farmland	$	610	753
1-4 family residential properties	214		517
Commercial real estate	987		1,154
Total foreclosed real estate	$	1,811	2,424

Allowance for ~~Loan~~Credit Losses and Provision for ~~Loan~~Credit Losses

~~As previously noted, and as permitted by the CARES Act,~~On January 1, 2021, we ~~elected to defer the implementation~~adopted CECL for estimating credit losses, which resulted in an increase of CECL until the earlier of the cessation of the national emergency or December 31, 2020 because of the challenges associated with developing a reliable forecast of losses that may result from the unprecedented COVID-19 pandemic. Accordingly, the Company's provision$14.6 million in our allowance for loan losses and an increase of $7.5 million in our allowance for ~~the first nine months~~unfunded commitments, which is recorded within Other Liabilities. The tax-effected impact of ~~2020 is based on the information available~~those two items amounted to $17.1 million and ~~the conditions that existed at September 30, 2020 related~~was recorded as an adjustment to ~~COVID-19, according to the pre-CECL incurred loss methodology for determining loan losses. See further discussion below.~~our retained earnings as of January 1, 2021.

The allowance for loan loss accounting in effect at December 31, 2020 and all prior periods was based on our estimate of probable incurred loan losses as of the reporting date ("Incurred Loss" methodology). Under the CECL methodology, our allowance for credit losses on loans is ~~created by direct charges~~based on the total amount of loan losses that are expected over the remaining life of the loan portfolio. Our estimate of credit losses on loans under CECL is determined using a complex model, based primarily on the utilization of discounted cash flows, that relies on reasonable and supportable forecasts and historical loss information to ~~operations (known as a “provision~~determine the balance of the allowance for loan ~~losses”~~losses and resulting provision for credit losses.

We recorded no provision for credit losses on loans in the first quarter of 2021 compared to $5.6 million in the first quarter of 2020. The higher provision in 2020 was primarily related to our estimate of probable incurred losses associated with the pandemic that was emerging at the time. Under the CECL methodology for recording expected credit losses on loans adopted as of January 1, 2021, which resulted in the increase to the allowance for credit losses on loans noted above, we determined that no further adjustment was necessary for the ~~period~~first quarter of 2021, and thus no provisions for credit losses recorded. The primary factors that resulted in ~~which~~this determination were an immaterial change in loan balances outstanding, the ~~charge is taken). Losses on loans are charged against the allowance~~immaterial change in the ~~period~~level of the Company's past due and classified loans, and the relatively consistent economic projections in the forecasts utilized. See Note 2 to the consolidated financial statements for additional information, which ~~such loans, in management’s opinion, become uncollectible. Recoveries realized during~~includes discussion noting that a more negative forecast scenario was utilized at March 31, 2021 compared to the ~~period are credited to this allowance.~~scenario used on the January 1, 2021 CECL adoption date.

We have no foreign loans, few agricultural loans and do not engage in significant lease financing or highly leveraged transactions. Commercial loans are diversified among a variety of industries. The majority of our real estate loans are primarily personal and commercial loans where real estate provides additional security for the loan. Collateral for virtually all of these loans is located within our principal market area.

The factors that influence management’s judgment in determining the amount charged to operating expense include recent loan loss experience, composition of the loan portfolio, evaluation of probable inherent losses and current economic conditions.

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For the periods indicated, the following table summarizes our balances of loans outstanding, average loans outstanding, changes in the allowance for loan losses arising from charge-offs and recoveries, and additions to the allowance for loan losses that have been charged to expense.

($ in thousands) Nine Months
Ended
September 30, 2020 Twelve Months
Ended December 31,
2019 Nine Months
Ended
September 30, 2019
Loans outstanding at end of period $ 4,813,736 4,453,466 4,396,544
Average amount of loans outstanding $ 4,679,479 4,346,331 4,322,078
Allowance for loan losses, at beginning of year $ 21,398 21,039 21,039
Provision (reversal) for loan losses 31,008 2,263 (913)
52,406 23,302 20,126
Loans charged off:
Commercial, financial, and agricultural (4,256) (2,473) (1,224)
Real estate – construction, land development & other land loans (51) (553) (340)
Real estate – mortgage – residential (1-4 family) first mortgages (478) (657) (379)
Real estate – mortgage – home equity loans / lines of credit (404) (307) (216)
Real estate – mortgage – commercial and other (545) (1,556) (1,455)
Consumer loans (707) (757) (555)
Total charge-offs (6,441) (6,303) (4,169)
Recoveries of loans previously charged-off:
Commercial, financial, and agricultural 603 980 768
Real estate – construction, land development & other land loans 856 1,275 797
Real estate – mortgage – residential (1-4 family) first mortgages 594 705 521
Real estate – mortgage – home equity loans / lines of credit 373 629 513
Real estate – mortgage – commercial and other 584 575 550
Consumer loans 251 235 154
Total recoveries 3,261 4,399 3,303
Net (charge-offs) recoveries (3,180) (1,904) (866)
Allowance for loan losses, at end of period $ 49,226 21,398 19,260
Ratios:
Net charge-offs (recoveries) as a percent of average loans (annualized) 0.09 % 0.09 % 0.03 %
Allowance for loan losses as a percent of loans at end of period 1.02 % 0.48 % 0.44 %

We recorded a provision for loan losses of $6.1 million in the third quarter of 2020 compared to a negative provision for loan losses (reduction of the allowance for loan losses) of $1.1 million in the third quarter of 2019. For the nine months ended September 30, 2020 and 2019, we recorded a provision for loan losses of $31.0 million and a negative provision for loan losses of $0.9 million, respectively. The increases in 2020 are primarily related to estimated probable losses arising from the economic impact of COVID-19, as discussed below.

In March 2020, the COVID-19 pandemic began to impact our nation. The subsequent closures of, or restrictions on, many businesses and job losses continue to result in widespread negative economic impacts. The U.S. Government has taken steps to lessen the negative impacts, including stimulus payments and the SBA's relief program. Under the SBA program, the SBA is making six months of principal and interest payments on most of our SBA loans. Additionally, as previously discussed, we implemented a loan deferral program. We are uncertain as to the extent that these programs have reduced probable loan losses, and due to that uncertainty and the temporary nature of the programs, we have not relied on these programs as significant positive factors in the risk grading of loans in our portfolio.

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In determining the appropriate level of allowance for loan losses at September 30, 2020, we reviewed industry types and deferral percentages within our loan portfolio, as reflected in the table below, in light of the impact of the pandemic. Based on that analysis, we assigned elevated loan loss reserve percentages for certain of those loan types that brought the total reserve percentages to a level consistent with what we believe are the probable loss rates incurred in a stressed economic scenario. The Company also recorded supplemental qualitative reserves for all other loans in deferral status. As a result of the analysis, approximately $22.1 million of COVID-19 related qualitative reserves are included in the Company's September 30, 2020 allowance for loan loss amount of $49.2 million at September 30, 2020.


($ in thousands)	Three Months Ended March 31, 2021			Twelve Months Ended December 31, 2020		Three Months Ended March 31, 2020
Loans outstanding at end of period	$	4,624,054		4,731,315		4,552,708
Average amount of loans outstanding	$	4,684,143		4,702,743		4,512,893

Allowance for loan losses, at beginning of year	$	52,388		21,398		21,398
Adoption of CECL	14,575			—		—
Provision (reversal) for loan losses	—			35,039		5,590
	66,963			56,437		26,988

Loans charged off:
Commercial, financial, and agricultural	(1,438)			(5,608)		(2,460)
Real estate – construction, land development & other land loans	(66)			(51)		(40)
Real estate – mortgage – residential (1-4 family) first mortgages	(38)			(478)		(195)
Real estate – mortgage – home equity loans / lines of credit	(131)			(524)		(68)
Real estate – mortgage – commercial and other	(510)			(968)		(263)
Consumer loans	(134)			(873)		(287)
Total charge-offs	(2,317)			(8,502)		(3,313)
Recoveries of loans previously charged-off:
Commercial, financial, and agricultural	514			745		217
Real estate – construction, land development & other land loans	294			1,552		290
Real estate – mortgage – residential (1-4 family) first mortgages	87			754		91
Real estate – mortgage – home equity loans / lines of credit	11			487		83
Real estate – mortgage – commercial and other	262			621		47
Consumer loans	35			294		95
Total recoveries	1,203			4,453		823
Net (charge-offs) recoveries	(1,114)			(4,049)		(2,490)
Allowance for credit losses on loans, at end of period	$	65,849		52,388		24,498

Ratios:
Net charge-offs (recoveries) as a percent of average loans (annualized)	0.10		%	0.09	%	0.22	%
Allowance for loan losses as a percent of loans at end of period	1.42		%	1.11	%	0.54	%

As previously discussed, as of ~~September 30, 2020,~~March 31, 2021, we have granted approximately ~~$186~~$5.9 million in loan deferrals under the CARES act provisions, ~~as detailed below,~~ which is reduction from the highest level of $774 million in loan deferrals at June 30, 2020.

COVID-19 Loan Deferral Information at September 30, 2020
Deferrals Total Loans Percentage Deferred
Construction Loans $ 1,764 653,120 0.3 %
Farmland and Agriculture 881 32,966 2.7 %
Home equity loans 206 310,326 0.1 %
Residential first lien loans 8,027 1,011,829 0.8 %
Multifamily loans 23,441 197,424 11.9 %
Owner-Occupied Commercial Real Estate 21,094 745,770 2.8 %
Non-Owner-Occupied Commercial Real Estate 120,811 1,007,643 12.0 %
Commercial & Industrial Loans 9,208 648,792 1.4 %
Loans to Municipalities — 138,353 — %
Consumer Loans 190 50,189 0.4 %
Other Loans — 17,324 — %
$ 185,622 4,813,736 3.9 %

The ratio of our allowance to total loans was ~~1.02%~~1.42% and ~~0.48%~~1.11% at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. The increase in this ratio was a result of the ~~factors discussed above that impacted our increased level~~adoption of ~~provision~~CECL on January 1, 2021.

In addition to the allowance for ~~loan~~credit losses ~~in 2020.~~

~~Our ratio of allowance to total~~on loans, ~~is significantly impacted by the acquisitions of Carolina Bank and Asheville Savings Bank in 2017, which had over $1 billion in total loans. Applicable accounting guidance did not allow us to record~~we maintain an allowance for lending-related commitments such as unfunded loan ~~losses upon the acquisition~~commitments and letters of loans – instead the acquired loans were recorded at their discounted fair value, which included the consideration of any expected losses. No allowance for loan losses is recorded for the acquired loans unless thecredit. Under CECL, we estimate expected credit losses ~~exceed~~associated with these commitments over the ~~remaining unamortized discounts –~~contractual period in which we are exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for lending-related commitments on off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. Methodology is based on ~~an individual basis~~a loss rate approach that starts with the probability of funding based on historical experience. Similar to methodology

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discussed above related to the loans receivable portfolio, adjustments are made to the historical losses for ~~purchased credit impaired loans~~current conditions and ~~on a pooled basis~~reasonable and supportable forecast. The allowance for performing acquired loans. See Critical Accounting Policies above for further discussion. Unaccreted discount on acquired loans, which is available to absorb loan losses on those acquired loans, amounted to $9.7lending-related commitments of $8.1 million and ~~$12.7~~$0.6 million at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019, respectively.~~2020, respectively, is separately classified on the balance sheet within Other Liabilities. We recorded no provision for credit losses on unfunded commitments during the first quarter of 2021 for primarily the same reasons noted above related to loans.

We believe our ~~reserve~~allowance levels are adequate ~~to cover probable loan losses~~at each period end, based on the ~~loans outstanding~~respective methodologies utilized, as ~~of each reporting date.~~described above. It must be emphasized, however, that the determination of the ~~reserve~~allowances using our procedures and methods rests upon various judgments and assumptions about economic conditions and other factors affecting loans. No assurance can be given that we will not in any particular period sustain loan losses that are sizable in relation to the amounts reserved or that subsequent evaluations of the loan portfolio, in light of conditions and factors then prevailing, will not require significant changes in the allowance for loan losses or future charges to earnings. See “Critical Accounting Policies – Allowance for ~~Loan Losses”~~Credit Losses on Loans and Unfunded Commitments” above.

In addition, various regulatory agencies, as an integral part of their examination process, periodically review our allowance for loan losses and value of other real estate. Such agencies may require us to recognize adjustments to the allowance or the carrying value of other real estate based on their judgments about information available at the time of their examinations.

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~~Index~~

Based on the results of our loan analysis and grading program and our evaluation of the allowance for loan losses at September 30, 2020, there have been no material changes to the allocation of the allowance for loan losses among the various categories of loans since December 31, 2019.

Liquidity, Commitments, and Contingencies

Our liquidity is determined by our ability to convert assets to cash or acquire alternative sources of funds to meet the needs of our customers who are withdrawing or borrowing funds, and to maintain required reserve levels, pay expenses and operate the Company on an ongoing basis. Our primary liquidity sources are net income from operations, cash and due from banks, federal funds sold and other short-term investments. Our securities portfolio is comprised almost entirely of readily marketable securities, which could also be sold to provide cash. Thus far in the COVID-19 pandemic, we have seen our liquidity levels increase, with increases in deposits account balances leading to higher cash levels.

In addition to internally generated liquidity sources, we have the ability to obtain borrowings from the following three sources - 1) an approximately ~~$1.080 billion~~$969 million line of credit with the FHLB (of which $8$7 million and ~~$247~~$8 million were outstanding at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively), 2) a ~~$35~~$100 million federal funds line with a correspondent bank (of which none was outstanding at ~~September 30, 2020~~March 31, 2021 or December 31, ~~2019)~~2020), and 3) an approximately ~~$121~~$135 million line of credit through the Federal Reserve Bank of Richmond’s discount window (of which none was outstanding at ~~September 30, 2020~~March 31, 2021 or December 31, ~~2019)~~2020). In addition to the outstanding borrowings from the FHLB that reduce the available borrowing capacity of that line of credit, our borrowing capacity was reduced by $190 million at both September 30, 2020 and December 31, 2019, as a result of our pledging letters of credit for public deposits at each of those dates. Unused and available lines of credit amounted to ~~$1.0~~$1.2 billion at ~~September 30, 2020 compared to $775 million at December~~March 31, ~~2019.~~2021.

Our overall liquidity has increased since December 31, ~~2019~~2020 due primarily to the strong deposit growth which has exceeded loan growth. Our liquid assets (cash and securities) as a percentage of our total deposits and borrowings increased from ~~21.4%~~31.4% at December 31, ~~2019~~2020 to ~~27.4%~~37.5% at ~~September 30, 2020.~~March 31, 2021.

We believe our liquidity sources, including unused lines of credit, are at an acceptable level and remain adequate to meet our operating needs in the foreseeable future. We will continue to monitor our liquidity position carefully and will explore and implement strategies to increase liquidity if deemed appropriate.

The amount and timing of our contractual obligations and commercial commitments has not changed materially since December 31, ~~2019,~~2020, detail of which is presented in Table 18 on page 6674 of our ~~2019~~2020 Annual Report on Form 10-K.

We are not involved in any other legal proceedings that, in our opinion, could have a material effect on our consolidated financial position.

Off-Balance Sheet Arrangements and Derivative Financial Instruments

Off-balance sheet arrangements include transactions, agreements, or other contractual arrangements pursuant to which we have obligations or provide guarantees on behalf of an unconsolidated entity. We have no off-balance sheet arrangements of this kind other than letters of credit and repayment guarantees associated with our trust preferred securities.

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Derivative financial instruments include futures, forwards, interest rate swaps, options contracts, and other financial instruments with similar characteristics. We have not engaged in significant derivative activities through ~~September 30, 2020,~~March 31, 2021, and have no current plans to do so.

Capital Resources

The Company is regulated by the Board of Governors of the Federal Reserve Board (“FRB”) and is subject to the securities registration and public reporting regulations of the Securities and Exchange Commission. Our banking subsidiary, First Bank, is also regulated by the FRB and the North Carolina Office of the Commissioner of Banks. We must comply with regulatory capital requirements established by the FRB. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on our financial statements. We are not aware of any recommendations of regulatory authorities or otherwise which, if they were to be implemented, would have a material effect on our liquidity, capital resources, or operations.

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In May 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act (the “Economic Growth Act”), was enacted and which amended certain aspects of the regulatory framework for small depository institutions with assets less than $10 billion and for large banks with assets of more than $50 billion. The Economic Growth Act, among other matters, provided for an alternative capital rule for financial institutions and their holding companies with total consolidated assets of less than $10 billion. The Economic Growth Act instructed the federal banking regulators to establish a single “Community Bank Leverage Ratio” of between 8% and 10%, which was proposed to be 9% by the federal regulators. The Community Bank Leverage Ratio provides for a simpler calculation of a bank’s capital ratio than the Basel III provisions that have been in place. Any qualifyingdepository institution or its holding company that elects to adopt the Community Bank Leverage Ratio and exceeds the ratio set by the banking regulators is considered to have met generally applicable leverage and risk-based regulatory capital requirements and any qualifying depository institution that exceeds the new ratio will be considered to be “well capitalized” under the prompt corrective action rules. March 31, 2020 was the earliest date that the Company could have elected to adopt the Community Bank Leverage Ratio. However, the Company did not opt-in to that alternative framework and instead continues to use the Basel III standards.

Under Basel III standards and capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Our capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

The capital standards require us to maintain minimum ratios of “Common Equity Tier 1” capital to total risk-weighted assets, “Tier 1” capital to total risk-weighted assets, and total capital to risk-weighted assets of 4.50%, 6.00% and 8.00%, respectively. Common Equity Tier 1 capital is comprised of common stock and related surplus, plus retained earnings, and is reduced by goodwill and other intangible assets, net of associated deferred tax liabilities. Tier 1 capital is comprised of Common Equity Tier 1 capital plus Additional Tier 1 Capital, which for the Company includes non-cumulative perpetual preferred stock and trust preferred securities. Total capital is comprised of Tier 1 capital plus certain adjustments, the largest of which is our allowance for loan losses. Risk-weighted assets refer to our on- and off-balance sheet exposures, adjusted for their related risk levels using formulas set forth in FRB and FDIC regulations.

The capital conservation buffer requirement began to be phased in on January 1, 2016, at 0.625% of risk weighted assets, and increased each year until fully implemented at 2.5% on January 1, 2019.

In addition to the risk-based capital requirements described above, we are subject to a leverage capital requirement, which calls for a minimum ratio of Tier 1 capital (as defined above) to quarterly average total assets of 3.00% to 5.00%, depending upon the institution’s composite ratings as determined by its regulators. The FRB has not advised us of any requirement specifically applicable to us.

At ~~September 30, 2020,~~March 31, 2021, our capital ratios exceeded the regulatory minimum ratios discussed above. The following table presents our capital ratios and the regulatory minimums discussed above for the periods indicated.

September 30, 2020 December 31,
2019
Risk-based capital ratios:
Common equity Tier 1 to Tier 1 risk weighted assets 12.89 % 13.28 %
Minimum required Common Equity Tier 1 capital 7.00 % 7.00 %
Tier I capital to Tier 1 risk weighted assets 13.98 % 14.41 %
Minimum required Tier 1 capital 8.50 % 8.50 %
Total risk-based capital to Tier II risk weighted assets 15.01 % 14.89 %
Minimum required total risk-based capital 10.50 % 10.50 %
Leverage capital ratios:
Tier 1 capital to quarterly average total assets 10.13 % 11.19 %
Minimum required Tier 1 leverage capital 4.00 % 4.00 %

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	March 31, 2021		December 31, 2020
Risk-based capital ratios:
Common equity Tier 1 to Tier 1 risk weighted assets	13.16	%	13.19	%
Minimum required Common Equity Tier 1 capital	7.00	%	7.00	%

Tier I capital to Tier 1 risk weighted assets	14.24	%	14.28	%
Minimum required Tier 1 capital	8.50	%	8.50	%

Total risk-based capital to Tier II risk weighted assets	15.49	%	15.37	%
Minimum required total risk-based capital	10.50	%	10.50	%

Leverage capital ratios:
Tier 1 capital to quarterly average total assets	9.60	%	9.88	%
Minimum required Tier 1 leverage capital	4.00	%	4.00	%

First Bank is also subject to capital requirements that do not vary materially from the Company’s capital ratios presented above. At ~~September 30, 2020,~~March 31, 2021, First Bank significantly exceeded the minimum ratios established by the

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regulatory authorities. The ~~106 basis point~~ reduction in our leverage ratio reflected in the table above was due to the significant balance sheet growth experienced in ~~2020,~~the first three months of 2021, resulting primarily from a strong increase in deposits.

BUSINESS DEVELOPMENT AND OTHER SHAREHOLDER MATTERS

The following is a list of business development and other miscellaneous matters affecting the Company and First Bank, our bank subsidiary.

•On September 1, 2020, the Company completed the acquisition of Magnolia Financial, Inc., a business financing company headquartered in Spartanburg, South Carolina, that makes loans throughout the southeastern United States. In the transaction, the Company acquired $14.6 million in loans and recorded intangible assets of $6.6 million.

•~~On September~~March 15, ~~2020,~~2021, the Company announced a quarterly cash dividend of ~~$0.18~~$0.20 per share payable on ~~October 23, 2020~~April 25, 2021 to shareholders of record on ~~September 30, 2020.~~March 31, 2021. This dividend rate represents ~~a 50%~~an 11% increase over the dividend rate declared in the ~~third~~first quarter of ~~2019.~~

2020.

SHARE REPURCHASES

For the three months ended ~~September 30, 2020,~~March 31, 2021, we repurchased ~~305,100~~106,744 shares of our common stock at an average price of ~~$20.55~~$37.81 per share, which totaled ~~$6.3 million. For the nine months ended September 30, 2020, we repurchased 985,795 shares of our common stock at an average price of $29.11 per share, which totaled $28.7~~$4.0 million. At ~~September 30, 2020,~~March 31, 2021, we had authority from our Board of Directors to repurchase up to an additional ~~$11.3~~$16.0 million in shares of the Company’s common stock. We may repurchase shares of our stock in open market and privately negotiated transactions, as market conditions and our liquidity warrants, subject to compliance with applicable regulations. See also Part II, Item 2 “Unregistered Sales of Equity Securities and Use of Proceeds.”

Item 3 – Quantitative and Qualitative Disclosures About Market Risk

INTEREST RATE RISK (INCLUDING QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK)

Net interest income is our most significant component of earnings. Notwithstanding changes in volumes of loans and deposits, our level of net interest income is continually at risk due to the effect that changes in general market interest rate trends have on interest yields earned and paid with respect to our various categories of earning assets and interest-bearing liabilities. It is our policy to maintain portfolios of earning assets and interest-bearing liabilities with maturities and repricing opportunities that will afford protection, to the extent practical, against wide interest rate fluctuations. Our exposure to interest rate risk is analyzed on a regular basis by management using standard GAP reports, maturity reports, and an asset/liability software model that simulates future levels of interest income and expense based on current interest rates, expected future interest rates, and various intervals of “shock” interest rates. Over the years, we have been able to maintain a fairly consistent yield on average earning assets ~~(and net~~(net interest margin)., even during periods of changing interest rates. Over the past five calendar years, our net interest margin has ranged from a low of ~~4.00%~~3.56% (realized in ~~2019)~~2020) to a high of ~~4.13%~~4.09% (realized in ~~2015)~~2018). ~~As discussed below, we experienced a significant decline in our net interest margin in the second quarter of 2020, but which stabilized in the third quarter of 2020.~~ The ~~historical~~ consistency of the net interest margin is aided by the relatively low level of long-term interest rate exposure that we maintain. At ~~September 30, 2020, approximately 70%~~March 31, 2021 a majority of our interest-earning assets ~~were~~are subject to repricing within five years (because they are either adjustable rate assets or they are fixed rate assets that mature) and substantially all of our interest-bearing liabilities reprice within five years.

Using stated maturities for all fixed rate instruments except mortgage-backed securities (which are allocated in the periods of their expected payback) and securities and borrowings with call features that are expected to be called (which are shown in the period of their expected call), at ~~September 30, 2020,~~March 31, 2021, we had ~~$1.9~~over $2 billion more in interest-bearing liabilities that are subject to interest rate changes within one year than earning assets. This generally would indicate that net interest income would experience downward pressure in a rising interest rate environment and would benefit from a declining interest rate environment. However, this method of analyzing interest sensitivity only measures the magnitude of the timing differences and does not address earnings, market value, or management actions. Also, interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market

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interest rates, while interest rates on other types may lag behind changes in market rates. In addition to the effects of “when” various rate-sensitive products reprice, market rate changes may not result in uniform changes in rates among all products. For example, included in interest-bearing liabilities subject to interest rate changes within one year at ~~September 30, 2020 are~~March 31, 2021 were deposits totaling ~~$3.1 billion~~$4.3 billion comprised of checking, savings, and certain types of money market deposits with interest rates set by management. These types of deposits historically have not repriced with, or in the same proportion, as general market indicators.

Overall, we believe that in the near term (twelve months), net interest income will not likely experience significant downward pressure from rising interest rates. Similarly, we would not expect a significant increase in near term net

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interest income from falling interest rates. Generally, when rates change, our interest-sensitive assets that are subject to adjustment reprice immediately at the full amount of the change, while our interest-sensitive liabilities that are subject to adjustment reprice at a lag to the rate change and typically not to the full extent of the rate change. In the short-term (less than twelve months), this generally results in us being asset-sensitive, meaning that our net interest income benefits from an increase in interest rates and is negatively impacted by a decrease in interest rates, which is what we experienced following the March 2020 interest rate cuts. However, in the twelve-month and longer horizon, the impact of having a higher level of interest-sensitive liabilities generally lessens the short-term effects of changes in interest rates.

The general discussion in the foregoing paragraph applies most directly in a “normal” interest rate environment in which longer-term maturity instruments carry higher interest rates than short-term maturity instruments, and is less applicable in periods in which there is a “flat” interest rate curve. A “flat yield curve” means that short-term interest rates are substantially the same as long-term interest rates. Due to actions taken by the Federal Reserve related to short-term interest rates and the impact of the global economy on longer-term interest rates, we are currently in a very low and flat interest rate curve environment. A flat interest rate curve is an unfavorable interest rate environment for many banks, including the Bank, as short-term interest rates generally drive our deposit pricing and longer-term interest rates generally drive loan pricing. When these rates converge, the profit spread we realize between loan yields and deposit rates narrows, which pressures our net interest margin. While there have been periods in the last few years that the yield curve has steepened slightly, it currently remains very flat. This flat yield curve and the intense competition for high-quality loans in our market areas have resulted in lower interest rates on loans.

In an effort to address concerns about the national and global economy the Federal Reserve cut interest rates by 75 basis points in the second half of 2019. And in March 2020, the Federal Reserve cut interest rates by an additional 150 basis points in response to the COVID-19 pandemic. Our interest-bearing cash balances and most of our variable rate loans, ~~which comprise approximately one-third of our loan portfolio,~~ generally reset to lower rates soon after these interest rate cuts. We reduced our offering rates on most deposit products ~~in March 2020~~ and our borrowing costs were also reduced by lower rates and repaying a significant portion of our outstanding borrowings. Overall however, the impact of the interest rate cuts negatively impacted our net interest margin in 2020 and our earnings in the second quarter of 2020, with interest-earning asset yields declining from 4.46% in the first quarter of 2020 to 3.80% in the second quarter of 2020 a decline of 66 basis points, while our average cost of interest-bearing liabilities only declined by 26 basis points, from 0.78% in the first quarter of 2020 to 0.52% in the second quarter of 2020.

In the third quarter of 2020, the interest rate environment was fairly stable. While yields on new and maturing assets generally trended lower as a result of lower interest rates, we invested more of our cash in into higher yielding investments, and we were also able to reprice maturing liabilities at lower rates. As a result, our yield on interest-earning assets for the third quarter of 2020 declined only nine basis points from the second quarter of 2020 (from 3.80% to 3.71%), while our average cost of interest-bearing liabilities declined 11 basis points (from 0.52% to 0.41%), which resulted in a stable net interest margin. Our net interest margin for the third quarter of 2020 was 3.48%, a one basis point decline from the 3.49% margin realized in the second quarter of 2020.2021.

Assuming no significant changes in interest rates in the next twelve months, we expect continued pressure on our net interest margin (excluding the impact of PPP - see below) as a result of the flat yield curve and the expectation of lower interest rates on the redeployment of cash received on maturing loans and investments that ~~may~~will likely not be fully offset by lower funding costs.

~~In April and early May 2020,~~Since the announcement of the SBA's PPP program, we ~~approved~~have originated at total of approximately ~~$245~~$356 million in PPP ~~loans.~~loans, of which $241 million were outstanding at both December 31, 2020 and March 31, 2021. These loans all have an interest rate of 1.00%. In addition to the interest rate, the SBA compensated us with an origination fee for each loan of between 1% to 5% of the loan amount, depending on the size of each loan. We received a total of approximately ~~$10.6~~$16.9 million in these fees, ~~related to these loans,~~ which were netted against the direct cost to originate each loan of

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that totaled approximately ~~$0.6~~$0.7 million, ~~and are~~with the net amount deferral amount initially being amortized as interest income over ~~the~~their contractual lives of either two ~~year maturities of the loans~~years or five years using the effective interest method of recognition. Early repayments, including the loan forgiveness provisions contained in the PPP, ~~will~~ result in accelerated amortization. In ~~the second and third quarters of~~ 2020, we amortized ~~$2.4~~$4.1 million of the PPP loan ~~fees. Remaining deferred~~ fees ~~at September 30, 2020 amounted to $7.6 million. Because~~as interest income. For the first three months of 2021, we amortized $3.0 million of the ~~uncertainties~~PPP loan fees as interest income. The Company has $9.0 million in remaining deferred PPP loan fees, of which $3.1 million relates to 2020 originations and $5.9 million relates to 2021 originations. We expected the fees associated with the ~~timing~~2020 originations to be substantially realized during 2021, while we expect the fees associated with the 2021 originations to be recognized at a rate of ~~PPP repayments,~~approximately $150 thousand per quarter for the ~~anticipated impact~~remainder of ~~these loans has not been incorporated into~~2021, and accelerated amortization occurring in 2022 upon the ~~discussion above.~~forgiveness process.

As previously discussed in the section “Net Interest Income,” our net interest income has been impacted by certain purchase accounting adjustments related to the acquired banks. The purchase accounting adjustments related to the premium amortization on loans, deposits and borrowings are based on amortization schedules and are thus systematic and predictable. The accretion of the loan discount on acquired loans amounted to ~~$1.0 million for each of the three months ended September 30, 2020 and 2019, respectively, and $3.0~~$1.3 million and ~~$3.4~~$1.8 million for the ~~nine~~first three months ~~ended September 30,~~of 2021 and 2020, ~~and 2019,~~ respectively, is less predictable and could be materially different among periods. This is because of the magnitude of the discounts that are initially recorded and the fact that the accretion being recorded is dependent on both the credit quality of the acquired loans and the impact of any accelerated loan repayments, including payoffs. If the credit quality of the loans declines, some, or all, of the

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remaining discount will cease to be accreted into income. If the underlying loans experience accelerated paydowns or improved performance expectations, the remaining discount will be accreted into income on an accelerated basis. In the event of total payoff, the remaining discount will be entirely accreted into income in the period of the payoff. Each of these factors is difficult to predict and susceptible to volatility. The remaining loan discount on acquired loans amounted to ~~$9.7~~$8.2 million at ~~September 30, 2020~~March 31, 2021 compared to ~~$12.7~~$8.9 million at December 31, ~~2019.~~2020.

We have no market risk sensitive instruments held for trading purposes, nor do we maintain any foreign currency positions.

See additional discussion regarding net interest income, as well as discussion of the changes in the annual net interest margin in the section entitled “Net Interest Income” above.

Item 4 – Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, which are our controls and other procedures that are designed to ensure that information required to be disclosed in our periodic reports with the SEC is recorded, processed, summarized and reported within the required time periods. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed is communicated to our management to allow timely decisions regarding required disclosure. Based on the evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective in allowing timely decisions regarding disclosure to be made about material information required to be included in our periodic reports with the SEC. In addition, no change in our internal control over financial reporting has occurred during, or subsequent to, the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

Item 1 – Legal Proceedings

Various legal proceedings may arise in the ordinary course of business and may be pending or threatened against the Company and its subsidiaries. Neither the Company nor any of its subsidiaries is involved in any pending legal proceedings that management believes are material to the Company or its consolidated financial position. If an exposure were to be identified, it is the Company’s policy to establish and accrue appropriate reserves during the accounting period in which a loss is deemed to be probable and the amount is determinable.

Item 1A – Risk Factors

Investing in shares of our common stock involves certain risks, including those identified and described in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019,~~2020, as well as cautionary statements contained in this Form 10-Q, including those under the caption “Forward-Looking Statements” set forth in the forepart of this Form 10-Q, risks and matters described elsewhere in this Form 10-Q and in our other filings with the

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~~Index~~

SEC. There are no material changes from the risk factors set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019, except as described below.~~

~~Changes in business and economic conditions, in particular those of North Carolina and South Carolina, are expected to lead to lower revenue, lower asset quality, and lower earnings.~~

Our business and earnings are closely tied to the economies of North Carolina and South Carolina. These local economies rely significantly on tourism, real estate, construction, government, and other service-based industries. Less tourism, real or threatened acts of war or terrorism, increases in energy costs, natural disasters and adverse weather, public health issues including the spread of the COVID-19 virus, and Federal, State of North Carolina, State of South Carolina, and local government budget issues may impact consumer and corporate spending.

Deterioration of economic conditions, locally, nationally, or globally could adversely affect the quality of our assets, credit losses, and the demand for our products and services, which could lead to lower revenues and lower earnings. Housing prices and unemployment rates are some of the metrics that we continually monitor. We also monitor the value of collateral, such as real estate, that secures the loans we have made. The borrowing power of our customers could also be negatively impacted by a decline in the value of collateral.

The COVID-19 pandemic has impacted the local economies in the communities we serve and our business, and the extent and severity of the impact on our business and our financial results will depend on future developments, which are highly uncertain and cannot be predicted.

The COVID-19 pandemic has negatively impacted the local, national, and global economy, disrupted global supply chains, lowered equity market valuations, created significant volatility and disruption in financial markets, and increased unemployment levels. The duration of the COVID-19 pandemic and its effects cannot be determined with certainty, but the effects could be present for an extended period of time.

Since the onset of the pandemic, the majority of state and local jurisdictions have imposed, and others in the future may impose, varying levels of restrictions, including “shelter-in-place” orders, quarantines, executive orders and similar government orders to control the spread of COVID-19.

The COVID-19 pandemic and the institution of social distancing and sheltering-in-place requirements resulted in temporary closures of, or operating restrictions, on many businesses. While many of the closed businesses reopened at varying levels of capacity, a resurgence of the pandemic may result in future restrictions or closures. As a result, the demand for our products and services may be significantly impacted. Furthermore, the COVID-19 pandemic has influenced and may continue to influence the recognition of credit losses in our loan portfolios and our allowance for credit losses, particularly as some businesses remain closed and as more customers are expected to draw on their lines of credit or seek additional loans to help finance their businesses. Our operations may also be disrupted if significant portions of our workforce are unable to work effectively, including due to illness, quarantines, government actions, or other restrictions in connection with the COVID-19 pandemic.

The extent to which the COVID-19 pandemic impacts our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the COVID-19 pandemic and actions taken by governmental authorities and other third parties in response to the COVID-19 pandemic.2020.

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds


Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number of Shares (or Approximate Dollar Value) that May Yet Be Purchased Under the Plans or Programs (1)
January 1, 2021 to January 31, 2021	—	$	—	—	$	20,000,000
February 1, 2021 to February 28, 2021	106,744	37.81		106,744	$	15,964,472
March 1, 2021 to March 31, 2021	—	—		—	$	15,964,472
Total	106,744	23.32		106,744	$	15,964,472

Footnotes to the Above Table

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Index

Issuer Purchases of Equity Securities
Period Total Number of
Shares
Purchased (2) Average Price
Paid per Share Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs (1) Maximum Number of
Shares (or Approximate Dollar Value) that May Yet Be
Purchased Under the
Plans or Programs (1)
July 1, 2020 to July 31, 2020 — $ — — $ 17,567,520
August 1, 2020 to August 31, 2020 — — — $ 17,567,520
September 1, 2020 to September 30, 2020 305,100 20.55 305,100 $ 11,298,850
Total 305,100 23.32 305,100 $ 11,298,850

~~Footnotes to the Above Table~~

(1)All shares available for repurchase are pursuant to publicly announced share repurchase authorizations. On January 27, 2021, the Company reported the authorization of a new $20 million repurchase program with an expiration date of December 31, 2021. As of ~~September 30, 2020,~~March 31, 2021, the Company had the remaining authorization to repurchase up to ~~$11.3~~$16.0 million of the Company's ~~stock, which was authorized and announced on November 19, 2019. The repurchase authorization has an expiration date of December 31, 2020.~~stock.

~~(2)~~The table above does not include shares that were used by option holders to satisfy the exercise price of the options issued by the Company to its employees and directors pursuant to the Company’s stock option plans. There were no such transactions during the three months ended September 30, 2020.

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Index

Item 6 - Exhibits

The following exhibits are filed with this report or, as noted, are incorporated by reference. Except as noted below the exhibits identified have Securities and Exchange Commission File No. 000-15572. Management contracts, compensatory plans and arrangements are marked with an asterisk (*).


2.a			Purchase and Assumption Agreement dated as of March 3, 2016 between First Bank (as Seller) and First Community Bank (as Purchaser) was filed as Exhibit 99.2 to the Company’s Current Report on Form 8-K filed on March 7, 2016, and is incorporated herein by reference.

2.b			Purchase and Assumption Agreement dated as of March 3, 2016 between First Community Bank (as Seller) and First Bank (as Purchaser) was filed as Exhibit 99.3 to the Company’s Current Report on Form 8-K filed on March 7, 2016, and is incorporated herein by reference.

2.c			Merger Agreement between First Bancorp and Carolina Bank Holdings, Inc. dated June 21, 2016 was filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on June 22, 2016, and is incorporated herein by reference.

2.d			Merger Agreement between First Bancorp and ASB Bancorp, Inc. dated May 1, 2017 was filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on May 1, 2017, and is incorporated herein by reference.

3.a			Articles of Incorporation of the Company and amendments thereto were filed as Exhibits 3.a.i through 3.a.v to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2002, and are incorporated herein by reference. Articles of Amendment to the Articles of Incorporation were filed as Exhibits 3.1 and 3.2 to the Company’s Current Report on Form 8-K filed on January 13, 2009, and are incorporated herein by reference. Articles of Amendment to the Articles of Incorporation were filed as Exhibit 3.1.b to the Company’s Registration Statement on Form S-3D filed on June 29, 2010 (Commission File No. 333-167856), and are incorporated herein by reference. Articles of Amendment to the Articles of Incorporation were filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on September 6, 2011, and are incorporated herein by reference. Articles of Amendment to the Articles of Incorporation were filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on December 26, 2012, and are incorporated herein by reference.

3.b			Amended and Restated Bylaws of the Company were filed as Exhibit 3.1 to the Company's Current Report on Form 8-K filed on February 9, 2018, and are incorporated herein by reference.

4.a			Form of Common Stock Certificate was filed as Exhibit 4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999, and is incorporated herein by reference.

31.1			Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.

31.2			Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.

32.1			Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2			Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101			The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2020,~~March 31, 2021, formatted in eXtensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Shareholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements.

Copies of exhibits are available upon written request to: First Bancorp, Elizabeth B. Bostian, Secretary, 300 SW Broad Street, Southern Pines, North Carolina, 28387

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			FIRST BANCORP

~~November 9, 2020~~May 10, 2021			BY:/s/ Richard H. Moore
			Richard H. Moore Chief Executive Officer (Principal Executive Officer), and Director


~~November 9, 2020~~May 10, 2021			BY:/s/ Eric P. Credle
			Eric P. Credle Executive Vice President and Chief Financial Officer

Page 6759


	For the Nine Months Ended September 30,
	2020					2019
($ in thousands except per share amounts)	Income (Numerator)		Shares (Denominator)	Per Share Amount		Income (Numerator)		Shares (Denominator)	Per Share Amount
Basic EPS:
Net income	$	57,829				$	71,163
Less: income allocated to participating securities	$	(279)				$	(329)
Basic EPS per common share	$	57,550	28,962,576	$	1.99	$	70,834	29,585,383	$	2.39

Diluted EPS:
Net income	$	57,829	28,962,576			$	71,163	29,585,383
Effect of Dilutive Securities	0		140,377			0		174,076
Diluted EPS per common share	$	57,829	29,102,953	$	1.99	$	71,163	29,759,459	$	2.39


PCI loans	For the Nine Months Ended September 30, 2020		For the Nine Months Ended September 30, 2019
Balance at beginning of period	$	12,664	17,393
Change due to payments received and accretion	(3,062)		(3,694)
Change due to loan charge-offs	(13)		(11)
Transfers to foreclosed real estate	0		0
Other	27		110
Balance at end of period	$	9,616	13,798


	Nine Months Ended September 30, 2020
($ in thousands)	2020 Pension Plan		2019 Pension Plan	2020 SERP	2019 SERP	2020 Total Both Plans	2019 Total Both Plans
Service cost	$	0	0	0	0	0	0
Interest cost	917		1,111	165	164	1,082	1,275
Expected return on plan assets	(976)		(1,154)	0	0	(976)	(1,154)
Amortization of net (gain)/loss	634		733	(123)	(122)	511	611
Net periodic pension cost	$	575	690	42	42	617	732


($ in thousands)	At September 30, 2020		At December 31, 2019
Commercial, financial, and agricultural	$	8,473	5,518
Real estate – construction, land development, and other land loans	872		1,067
Real estate – mortgage – residential (1-4 family) first mortgages	5,742		7,552
Real estate – mortgage – home equity loans/lines of credit	1,594		1,797
Real estate – mortgage – commercial and other	14,795		8,820
Consumer loans	180		112
Total nonaccrual loans	$	31,656	24,866


($ in thousands)	Nine Months Ended September 30, 2020			Twelve Months Ended December 31, 2019		Nine Months Ended September 30, 2019
Loans outstanding at end of period	$	4,813,736		4,453,466		4,396,544
Average amount of loans outstanding	$	4,679,479		4,346,331		4,322,078

Allowance for loan losses, at beginning of year	$	21,398		21,039		21,039
Provision (reversal) for loan losses	31,008			2,263		(913)
	52,406			23,302		20,126

Loans charged off:
Commercial, financial, and agricultural	(4,256)			(2,473)		(1,224)
Real estate – construction, land development & other land loans	(51)			(553)		(340)
Real estate – mortgage – residential (1-4 family) first mortgages	(478)			(657)		(379)
Real estate – mortgage – home equity loans / lines of credit	(404)			(307)		(216)
Real estate – mortgage – commercial and other	(545)			(1,556)		(1,455)
Consumer loans	(707)			(757)		(555)
Total charge-offs	(6,441)			(6,303)		(4,169)
Recoveries of loans previously charged-off:
Commercial, financial, and agricultural	603			980		768
Real estate – construction, land development & other land loans	856			1,275		797
Real estate – mortgage – residential (1-4 family) first mortgages	594			705		521
Real estate – mortgage – home equity loans / lines of credit	373			629		513
Real estate – mortgage – commercial and other	584			575		550
Consumer loans	251			235		154
Total recoveries	3,261			4,399		3,303
Net (charge-offs) recoveries	(3,180)			(1,904)		(866)
Allowance for loan losses, at end of period	$	49,226		21,398		19,260

Ratios:
Net charge-offs (recoveries) as a percent of average loans (annualized)	0.09		%	0.09	%	0.03	%
Allowance for loan losses as a percent of loans at end of period	1.02		%	0.48	%	0.44	%


COVID-19 Loan Deferral Information at September 30, 2020
	Deferrals		Total Loans	Percentage Deferred
Construction Loans	$	1,764	653,120	0.3	%
Farmland and Agriculture	881		32,966	2.7	%
Home equity loans	206		310,326	0.1	%
Residential first lien loans	8,027		1,011,829	0.8	%
Multifamily loans	23,441		197,424	11.9	%
Owner-Occupied Commercial Real Estate	21,094		745,770	2.8	%
Non-Owner-Occupied Commercial Real Estate	120,811		1,007,643	12.0	%
Commercial & Industrial Loans	9,208		648,792	1.4	%
Loans to Municipalities	—		138,353	—	%
Consumer Loans	190		50,189	0.4	%
Other Loans	—		17,324	—	%
	$	185,622	4,813,736	3.9	%


Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased (2)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number of Shares (or Approximate Dollar Value) that May Yet Be Purchased Under the Plans or Programs (1)
July 1, 2020 to July 31, 2020	—	$	—	—	$	17,567,520
August 1, 2020 to August 31, 2020	—	—		—	$	17,567,520
September 1, 2020 to September 30, 2020	305,100	20.55		305,100	$	11,298,850
Total	305,100	23.32		305,100	$	11,298,850