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, 2020March 31, 2021
Commission File Number 0-15572
FIRST BANCORP
(Exact Name of Registrant as Specified in its Charter)
North Carolina56-1421916
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification Number)
300 SW Broad St.,Southern Pines,North Carolina28387
(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 classTrading SymbolName of each exchange on which registered:
Common Stock, No Par ValueFBNCThe 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 FilerAccelerated Filer
Non-Accelerated FilerSmaller Reporting Company
Emerging growth companyGrowth 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, 2020April 30, 2021 was 28,630,058.28,489,474.



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FIRST BANCORP AND SUBSIDIARIES
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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 20192020 Annual Report on Form 10-K and Item 1A of Part II of this report.

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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
ASSETSASSETS  ASSETS  
Cash and due from banks, noninterest-bearingCash 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-bearingDue from banks, interest-bearing304,731 166,783 Due from banks, interest-bearing458,860 273,566 
Total cash and cash equivalentsTotal cash and cash equivalents397,196 231,302 Total cash and cash equivalents530,066 367,290 
Securities available for saleSecurities available for sale1,168,706 821,945 Securities available for sale1,821,697 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 settlement34,028 19,712 
Presold mortgages in process of settlement at fair valuePresold mortgages in process of settlement at fair value31,869 42,271 
SBA Loans held for saleSBA Loans held for sale15,012 SBA Loans held for sale7,002 6,077 
LoansLoans4,813,736 4,453,466 Loans4,624,054 4,731,315 
Allowance for loan losses(49,226)(21,398)
Allowance for credit losses on loansAllowance for credit losses on loans(65,849)(52,388)
Net loansNet loans4,764,510 4,432,068 Net loans4,558,205 4,678,927 
Premises and equipmentPremises and equipment118,568 114,859 Premises and equipment123,271 120,502 
Operating right-of-use lease assetsOperating right-of-use lease assets18,400 19,669 Operating right-of-use lease assets16,899 17,514 
Accrued interest receivableAccrued interest receivable19,646 16,648 Accrued interest receivable18,652 20,272 
GoodwillGoodwill240,972 234,368 Goodwill239,272 239,272 
Other intangible assetsOther intangible assets14,517 17,217 Other intangible assets14,606 15,366 
Foreclosed propertiesForeclosed properties2,741 3,873 Foreclosed properties1,811 2,424 
Bank-owned life insuranceBank-owned life insurance106,345 104,441 Bank-owned life insurance107,594 106,974 
Other assetsOther assets53,427 59,605 Other assets66,607 52,179 
Total assetsTotal assets$7,064,268 6,143,639 Total assets$7,736,394 7,289,751 
LIABILITIESLIABILITIESLIABILITIES
Deposits: Noninterest bearing checking accountsDeposits: Noninterest bearing checking accounts$2,121,354 1,515,977 Deposits: Noninterest bearing checking accounts$2,430,198 2,210,012 
Interest bearing checking accountsInterest bearing checking accounts1,102,343 912,784 Interest bearing checking accounts1,258,500 1,172,022 
Money market accountsMoney market accounts1,524,710 1,173,107 Money market accounts1,721,230 1,581,364 
Savings accountsSavings accounts492,946 424,415 Savings accounts567,715 519,266 
Time deposits of $100,000 or moreTime deposits of $100,000 or more586,408 649,947 Time deposits of $100,000 or more535,519 564,365 
Other time depositsOther time deposits232,465 255,125 Other time deposits220,325 226,567 
Total depositsTotal deposits6,060,226 4,931,355 Total deposits6,733,487 6,273,596 
BorrowingsBorrowings61,816 300,671 Borrowings61,342 61,829 
Accrued interest payableAccrued interest payable1,305 2,154 Accrued interest payable741 904 
Operating lease liabilitiesOperating lease liabilities18,716 19,855 Operating lease liabilities17,354 17,868 
Other liabilitiesOther liabilities41,387 37,203 Other liabilities46,617 42,133 
Total liabilitiesTotal liabilities6,183,450 5,291,238 Total liabilities6,859,541 6,396,330 
Commitments and contingenciesCommitments and contingenciesCommitments and contingencies00
SHAREHOLDERS’ EQUITYSHAREHOLDERS’ EQUITYSHAREHOLDERS’ EQUITY
Preferred stock, no par value per share. Authorized: 5,000,000 sharesPreferred stock, no par value per share. Authorized: 5,000,000 sharesPreferred stock, no par value per share. Authorized: 5,000,000 shares
Issued & outstanding: none and noneIssued & outstanding: none and noneIssued & outstanding: none and none
Common stock, no par value per share. Authorized: 40,000,000 sharesCommon stock, no par value per share. Authorized: 40,000,000 sharesCommon stock, no par value per share. Authorized: 40,000,000 shares
Issued & outstanding: 28,687,832 and 29,601,264 shares403,351 429,514 
Issued & outstanding: 28,489,474 and 28,579,335 sharesIssued & outstanding: 28,489,474 and 28,579,335 shares397,094 400,582 
Retained earningsRetained earnings459,988 417,764 Retained earnings483,944 478,489 
Stock in rabbi trust assumed in acquisitionStock in rabbi trust assumed in acquisition(2,230)(2,587)Stock in rabbi trust assumed in acquisition(2,256)(2,243)
Rabbi trust obligationRabbi trust obligation2,230 2,587 Rabbi trust obligation2,256 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’ equityTotal shareholders’ equity880,818 852,401 Total shareholders’ equity876,853 893,421 
Total liabilities and shareholders’ equityTotal 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.

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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,
202020192020201920212020
INTEREST INCOMEINTEREST INCOMEINTEREST INCOME
Interest and fees on loansInterest 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 incomeTaxable interest income4,958 5,130 15,203 14,859 Taxable interest income5,913 5,474 
Tax-exempt interest incomeTax-exempt interest income189 212 470 820 Tax-exempt interest income323 164 
Other, principally overnight investmentsOther, principally overnight investments802 1,898 2,688 6,705 Other, principally overnight investments700 1,098 
Total interest incomeTotal interest income58,688 62,382 178,361 187,138 Total interest income58,009 62,033 
INTEREST EXPENSEINTEREST EXPENSEINTEREST EXPENSE
Savings, checking and money market accountsSavings, checking and money market accounts1,440 2,560 5,132 6,904 Savings, checking and money market accounts1,314 2,359 
Time deposits of $100,000 or moreTime deposits of $100,000 or more1,747 3,519 6,994 10,219 Time deposits of $100,000 or more858 2,924 
Other time depositsOther time deposits346 518 1,254 1,375 Other time deposits216 490 
BorrowingsBorrowings422 2,007 2,865 7,092 Borrowings383 1,501 
Total interest expenseTotal interest expense3,955 8,604 16,245 25,590 Total interest expense2,771 7,274 
Net interest incomeNet interest income54,733 53,778 162,116 161,548 Net interest income55,238 54,759 
Provision for loan losses6,120 (1,105)31,008 (913)
Net interest income after provision for loan losses48,613 54,883 131,108 162,461 
Provision for credit lossesProvision for credit losses5,590 
Net interest income after provision for credit lossesNet interest income after provision for credit losses55,238 49,169 
NONINTEREST INCOMENONINTEREST INCOMENONINTEREST INCOME
Service charges on deposit accountsService charges on deposit accounts2,567 3,388 8,193 9,543 Service charges on deposit accounts2,733 3,337 
Other service charges, commissions and feesOther service charges, commissions and fees6,190 5,067 14,883 14,623 Other service charges, commissions and fees5,522 4,069 
Fees from presold mortgage loansFees from presold mortgage loans4,864 1,275 9,725 2,677 Fees from presold mortgage loans4,544 1,841 
Commissions from sales of insurance and financial productsCommissions from sales of insurance and financial products2,357 2,203 6,515 6,436 Commissions from sales of insurance and financial products2,190 2,068 
SBA consulting feesSBA consulting fees1,956 663 6,722 2,847 SBA consulting fees2,764 1,027 
SBA loan sale gainsSBA loan sale gains2,929 1,917 5,541 7,048 SBA loan sale gains2,330 647 
Bank-owned life insurance incomeBank-owned life insurance income633 651 1,904 1,928 Bank-owned life insurance income620 642 
Securities gains (losses), net97 8,024 97 
Other gains (losses), netOther gains (losses), net(44)(105)(157)(331)Other gains (losses), net(34)74 
Total noninterest incomeTotal noninterest income21,452 15,156 61,350 44,868 Total noninterest income20,669 13,705 
NONINTEREST EXPENSESNONINTEREST EXPENSESNONINTEREST EXPENSES
Salaries expenseSalaries expense22,127 19,833 62,843 58,530 Salaries expense20,131 20,110 
Employee benefits expenseEmployee benefits expense3,918 4,144 12,312 13,150 Employee benefits expense4,574 4,547 
Total personnel expenseTotal personnel expense26,045 23,977 75,155 71,680 Total personnel expense24,705 24,657 
Occupancy expenseOccupancy expense2,856 2,786 8,538 8,269 Occupancy expense2,904 2,958 
Equipment related expensesEquipment related expenses1,049 1,231 3,214 3,783 Equipment related expenses1,045 1,145 
Merger and acquisition expenses213 
Intangibles amortization expenseIntangibles amortization expense928 1,163 2,961 3,737 Intangibles amortization expense897 1,055 
Foreclosed property losses, netForeclosed property losses, net90 273 284 899 Foreclosed property losses, net157 159 
Other operating expensesOther operating expenses9,471 9,016 29,264 28,723 Other operating expenses10,357 10,102 
Total noninterest expensesTotal noninterest expenses40,439 38,446 119,416 117,304 Total noninterest expenses40,065 40,076 
Income before income taxesIncome before income taxes29,626 31,593 73,042 90,025 Income before income taxes35,842 22,798 
Income tax expenseIncome tax expense6,329 6,574 15,213 18,862 Income tax expense7,648 4,618 
Net incomeNet 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:
BasicBasic$0.81 0.84 1.99 2.39 Basic$0.99 0.62 
DilutedDiluted0.81 0.84 1.99 2.39 Diluted0.99 0.62 
Dividends declared per common shareDividends 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:
BasicBasic28,857,111 29,542,001 28,962,576 29,585,383 Basic28,357,809 29,230,788 
DilutedDiluted28,940,018 29,684,105 29,102,953 29,759,459 Diluted28,537,853 29,399,114 
See accompanying notes to unaudited consolidated financial statements.

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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,
202020192020201920212020
Net incomeNet 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, pretaxUnrealized holding gains (losses) arising during the period, pretax19 2,210 23,556 19,814 Unrealized holding gains (losses) arising during the period, pretax(24,235)20,765 
Tax (expense) benefitTax (expense) benefit(4)(508)(5,413)(4,602)Tax (expense) benefit5,569 (4,772)
Reclassification to realized (gains) losses(97)(8,024)(97)
Tax expense (benefit)22 1,844 22 
Postretirement Plans:Postretirement Plans:Postretirement Plans:
Amortization of unrecognized net actuarial lossAmortization of unrecognized net actuarial loss153 155 511 611 Amortization of unrecognized net actuarial loss171 178 
Tax benefitTax 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 incomeComprehensive income$23,430 26,765 70,185 86,758 Comprehensive income$9,659 34,310 
See accompanying notes to unaudited consolidated financial statements.

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First Bancorp and Subsidiaries
Consolidated Statements of Shareholders’ Equity
($ in thousands, except share data - unaudited)($ in thousands, except share data - unaudited)Common StockRetained
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 StockRetained
Earnings
Stock in
Rabbi
Trust
Assumed
in
Acquisition
Rabbi
Trust
Obligation
Accumulated
Other
Comprehensive
Income
(Loss)
Total
Shareholders’
Equity
SharesAmountSharesAmount
Three Months Ended September 30, 2019
Balances, July 1, 201929,717 $432,533 380,748 (2,866)2,866 1,888 815,169 
Three Months Ended March 31, 2020Three Months Ended March 31, 2020
Balances, January 1, 2020Balances, January 1, 202029,601 $429,514 417,764 (2,587)2,587 5,123 852,401 
Net incomeNet income25,019 25,019 Net income18,180 18,180 
Cash dividends declared ($0.12 per common share)(3,555)(3,555)
Change in Rabbi Trust Obligation289 (289)
Equity issued related to acquisition earnout
Cash dividends declared ($0.18 per common share)Cash dividends declared ($0.18 per common share)(5,235)(5,235)
Change in Rabbi Trust obligationChange in Rabbi Trust obligation(15)15 
Stock repurchasesStock repurchases(100)(3,476)(3,476)Stock repurchases(576)(20,000)(20,000)
Stock option exercises
Stock-based compensationStock-based compensation16 722 722 
Other comprehensive income (loss)Other comprehensive income (loss)16,130 16,130 
Balances, March 31, 2020Balances, March 31, 202029,041 $410,236 430,709 (2,602)2,602 21,253 862,198 
Three Months Ended March 31, 2021Three Months Ended March 31, 2021
Balances, January 1, 2021Balances, January 1, 202128,579 $400,582 478,489 (2,243)2,243 14,350 893,421 
Adoption of new accounting standardAdoption of new accounting standard(17,051)(17,051)
Net incomeNet income28,194 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 obligationChange in Rabbi Trust obligation(13)13 
Stock repurchasesStock repurchases(107)(4,036)(4,036)
Stock withheld for payment of taxesStock withheld for payment of taxes(12)(467)(467)Stock withheld for payment of taxes(3)(103)(103)
Stock-based compensationStock-based compensation546 546 Stock-based compensation20 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, 201929,605 $429,136 402,212 (2,577)2,577 3,634 834,982 
Three Months Ended September 30, 2020
Balances, July 1, 202028,977 $408,699 441,846 (2,217)2,217 17,346 867,891 
Net income23,297 23,297 
Cash dividends declared ($0.18 per common share)(5,155)(5,155)
Change in Rabbi Trust Obligation(13)13 
Equity issued related to acquisition24 494 494 
Stock repurchases(306)(6,269)(6,269)
Stock withheld for payment of taxes(7)(178)(178)
Stock-based compensation605 605 
Other comprehensive income (loss)133 133 
Balances, September 30, 202028,688 $403,351 459,988 (2,230)2,230 17,479 880,818 
Balances, March 31, 2021Balances, March 31, 202128,489 $397,094 483,944 (2,256)2,256 (4,185)876,853 

See accompanying notes to unaudited consolidated financial statements.






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Index
($ in thousands, except share data - unaudited)Common StockRetained
Earnings
Stock in
Rabbi
Trust
Assumed
in
Acquisition
Rabbi
Trust
Obligation
Accumulated
Other
Comprehensive
Income
(Loss)
Total
Shareholders’
Equity
SharesAmount
Nine Months Ended September 30, 2019
Balances, January 1, 201929,725 $434,453 341,738 (3,235)3,235 (11,961)764,230 
Net income71,163 71,163 
Cash dividends declared ($0.36 per common share)(10,689)(10,689)
Change in Rabbi Trust Obligation658 (658)
Equity issued related to acquisition earnout78 3,070 3,070 
Stock repurchases(282)(10,000)(10,000)
Stock option exercises129 129 
Stock withheld for payment of taxes(15)(558)(558)
Stock-based compensation90 2,042 2,042 
Other comprehensive income (loss)15,595 15,595 
Balances, September 30, 201929,605 $429,136 402,212 (2,577)2,577 3,634 834,982 
Nine Months Ended September 30, 2020
Balances, January 1, 202029,601 429,514 417,764 (2,587)2,587 5,123 852,401 
Net income57,829 57,829 
Cash dividends declared ($0.54 per common share)(15,605)(15,605)
Change in Rabbi Trust Obligation357 (357)
Equity issued related to acquisition24 494 494 
Stock repurchases(986)(28,701)(28,701)
Stock withheld for payment of taxes(7)(178)(178)
Stock-based compensation56 2,222 2,222 
Other comprehensive income (loss)12,356 12,356 
Balances, September 30, 202028,688 $403,351 459,988 (2,230)2,230 17,479 880,818 

See accompanying notes to unaudited consolidated financial statements.


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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,
2020201920212020
Cash Flows From Operating ActivitiesCash Flows From Operating ActivitiesCash Flows From Operating Activities
Net incomeNet 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 losses31,008 (913)
Provision for credit lossesProvision for credit losses5,590 
Net security premium amortizationNet security premium amortization2,832 1,827 Net security premium amortization2,876 804 
Loan discount accretionLoan discount accretion(4,789)(4,473)Loan discount accretion(1,341)(1,841)
Other purchase accounting accretion and amortization, netOther purchase accounting accretion and amortization, net55 (16)Other purchase accounting accretion and amortization, net29 14 
Foreclosed property losses and write-downs, netForeclosed property losses and write-downs, net284 899 Foreclosed property losses and write-downs, net157 159 
Gains on securities available for sale(8,024)(97)
Other lossesOther losses157 331 Other losses34 (74)
Increase (decrease) in net deferred loan costs7,380 (261)
Increase in net deferred loan feesIncrease in net deferred loan fees2,845 320 
Bank-owned life insurance incomeBank-owned life insurance income(620)(642)
Depreciation of premises and equipmentDepreciation of premises and equipment4,392 4,326 Depreciation of premises and equipment1,448 1,563 
Amortization of operating lease right-of-use assetsAmortization of operating lease right-of-use assets1,522 1,372 Amortization of operating lease right-of-use assets517 496 
Repayments of lease obligationsRepayments of lease obligations(1,392)(1,250)Repayments of lease obligations(416)(452)
Stock-based compensation expenseStock-based compensation expense2,013 1,748 Stock-based compensation expense397 513 
Amortization of intangible assetsAmortization of intangible assets2,961 3,737 Amortization of intangible assets897 1,055 
Amortization of SBA servicing assetsAmortization of SBA servicing assets1,231 975 Amortization of SBA servicing assets470 918 
Fees/gains from sale of presold mortgages and SBA loansFees/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 settlementOrigination 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 settlementProceeds from sales of presold mortgage loans in process of settlement290,657 99,606 Proceeds from sales of presold mortgage loans in process of settlement127,346 54,764 
Origination of SBA loans for saleOrigination of SBA loans for sale(117,412)(125,982)Origination of SBA loans for sale(37,359)(36,081)
Proceeds from sales of SBA loansProceeds from sales of SBA loans82,998 101,349 Proceeds from sales of SBA loans32,467 16,031 
Increase in accrued interest receivable(2,998)(293)
Decrease in accrued interest receivableDecrease in accrued interest receivable1,620 881 
Increase in other assetsIncrease 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 assetIncrease in net deferred income tax asset(4,596)(63)
Decrease in accrued interest payableDecrease in accrued interest payable(163)(54)
Increase in other liabilitiesIncrease in other liabilities1,180 1,690 Increase in other liabilities639 3,318 
Net cash provided by operating activitiesNet cash provided by operating activities34,045 33,422 Net cash provided by operating activities30,733 13,672 
Cash Flows From Investing ActivitiesCash Flows From Investing ActivitiesCash Flows From Investing Activities
Purchases of securities available for salePurchases of securities available for sale(701,201)(339,030)Purchases of securities available for sale(475,960)(9,423)
Purchases of securities held to maturityPurchases of securities held to maturity(69,899)Purchases of securities held to maturity(37,438)(3,624)
Proceeds from maturities/issuer calls of securities available for saleProceeds from maturities/issuer calls of securities available for sale156,108 114,003 Proceeds from maturities/issuer calls of securities available for sale80,650 45,037 
Proceeds from maturities/issuer calls of securities held to maturityProceeds from maturities/issuer calls of securities held to maturity26,989 26,316 Proceeds from maturities/issuer calls of securities held to maturity5,780 10,075 
Proceeds from sales of securities available for sale219,697 39,797 
Redemptions of FRB and FHLB stock, net9,853 4,088 
Net increase in loans(327,496)(116,664)
Redemptions (purchases) of FRB and FHLB stock, netRedemptions (purchases) of FRB and FHLB stock, net1,836 (4,572)
Net decrease (increase) in loansNet decrease (increase) in loans110,212 (95,680)
Proceeds from sales of foreclosed propertiesProceeds from sales of foreclosed properties1,880 4,628 Proceeds from sales of foreclosed properties1,183 889 
Purchases of premises and equipmentPurchases of premises and equipment(8,983)(2,714)Purchases of premises and equipment(4,534)(1,321)
Proceeds from sales of premises and equipmentProceeds from sales of premises and equipment189 1,148 Proceeds from sales of premises and equipment218 189 
Net cash paid in acquisition(9,559)
Net cash used by investing activitiesNet cash used by investing activities(702,422)(268,428)Net cash used by investing activities(318,053)(58,430)
Cash Flows From Financing ActivitiesCash Flows From Financing ActivitiesCash Flows From Financing Activities
Net increase in depositsNet increase in deposits1,128,951 216,195 Net increase in deposits459,906 113,664 
Net decrease in short-term borrowings Net decrease in short-term borrowings(148,000)(55,000) Net decrease in short-term borrowings(48,000)
Proceeds from long-term borrowings Proceeds from long-term borrowings150,000  Proceeds from long-term borrowings150,000 
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 stockCash dividends paid – common stock(15,798)(10,108)Cash dividends paid – common stock(5,140)(5,328)
Repurchases of common stockRepurchases of common stock(28,701)(10,000)Repurchases of common stock(4,036)(20,000)
Proceeds from stock option exercises129 
Payment of taxes related to stock withheldPayment of taxes related to stock withheld(178)(558)Payment of taxes related to stock withheld(103)
Net cash provided by financing activitiesNet cash provided by financing activities834,271 89,569 Net cash provided by financing activities450,096 189,805 
Increase (decrease) in cash and cash equivalents165,894 (145,437)
Increase in cash and cash equivalentsIncrease in cash and cash equivalents162,776 145,047 
Cash and cash equivalents, beginning of periodCash and cash equivalents, beginning of period231,302 462,898 Cash and cash equivalents, beginning of period367,290 231,302 
Cash and cash equivalents, end of periodCash 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 interestCash 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 taxesCash paid during the period for income taxes21,302 20,106 Cash paid during the period for income taxes9,585 20 
Non-cash: Unrealized gain (loss) on securities available for sale, net of taxes18,143 15,137 
Non-cash: Unrealized (loss) gain on securities available for sale, net of taxesNon-cash: Unrealized (loss) gain on securities available for sale, net of taxes(18,666)15,993 
Non-cash: Foreclosed loans transferred to other real estateNon-cash: Foreclosed loans transferred to other real estate1,032 2,676 Non-cash: Foreclosed loans transferred to other real estate727 662 
Non-cash: Initial recognition of operating lease right-of-use assets and operating lease liabilitiesNon-cash: Initial recognition of operating lease right-of-use assets and operating lease liabilities253 19,406 Non-cash: Initial recognition of operating lease right-of-use assets and operating lease liabilities444 
Non-cash: Equity issued related to acquisitions494 3,070 
Non-cash: Loans acquired14,633 
Non-cash: Other assets acquired451 
Non-cash: Borrowings assumed11,671 
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, 2020March 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 ninethree months ended September 30, 2020March 31, 2021 and 2019. All2020. Any such adjustments were of a normal, recurring nature. Reference is made to the 20192020 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 impactedcontinued to impact our operations in 2021. We remain committed and focused on the global economy, disrupted global supply chainshealth and increased unemployment levels. The resulting temporary closuresafety of many businessesour team members, customers, and the implementation of social distancingcommunities, and sheltering-in-place policies have impacted and maywe continue to impacthave a many of the Company’s customers. While the fullemployees working remotely. The most significant effects of the pandemic remain unknown, the Company is committedthat we have continued to supporting its customers, employeesexperience in 2021 have been lower loan demand (excluding PPP loans) and communities during this difficult time. The Companyhigh deposit growth, which has provided hardship relief assistance to customers, including the considerationlikely been impacted by stimulus payments and higher savings rates by our customers. Low interest rates have also resulted in high levels of variousmortgage 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 MarchDecember 27, 2020, the CoronavirusEconomic 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 Presidentnew 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, whichfirst quarter of 2021, the Company has applied, modifications deemedfunded $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”) if2020 PPP loan originations.

In response to the loan was not more than 30 days past due as of December 31, 2019 andpandemic 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 theseour borrowers have resumed normal payments. However, some borrowers requested a second 90 day deferral, with certainpayments 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 paymentpandemic-related loan deferrals relatedof $5.9 million.

The extent to 207 loans with an aggregate loan balancewhich the COVID-19 pandemic has a further impact on our business, results of $186 million. Approximately $158 millionoperations, 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 deferralsCOVID-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 createdthird 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.

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Note 2 – Accounting Policies
Accounting Standards:
Note 1 to the 20192020 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 20202021
InOn January 2017,1, 2021, the FASB amended the Goodwill and Other Intangibles topic of theCompany adopted Accounting Standards Codification to simplify("ASC") 326 ("CECL"), which replaced the accounting for goodwill impairment for public business entities and other entitiesincurred 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") modelmethodology. The measurement of expected credit losses under the CECL methodology is applicable to estimate its lifetime "expectedfinancial assets measured at amortized cost, including loan receivables and held to maturity debt securities. It also applies to off-balance sheet credit losses" and recordexposures, 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 fromit 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 presentsaccounted for in pools were TDRs as of the net amount expected todate of adoption, PCD loans that are restructured and meet the definition of troubled debt restructurings after the adoption of CECL will be collectedreported 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 guidanceConsolidated Balance Sheets. The Company elected not to provide entitiesmeasure 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 optiona one-year reasonable and supportable forecast period and a three-year straight-line reversion period. The Company elected to irrevocably electuse, as a practical expedient, the fair value option, applied on an instrument-by-instrument basisof 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 andon loans for which repayment is expected to be significantly influenced byprovided substantially through the composition, characteristics and qualityoperation 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 conditionssize 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

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beginningcomposition 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 removesremoved disclosures that arewere no longer considered cost-beneficial, clarifiesclarified the specific requirements of disclosures, and addsadded disclosure requirements identified as relevant. The amendments arewere effective for fiscal years,the Company on January 1, 2021 and interim periods within those fiscal years, beginning after December 15, 2020. Earlythe adoption is permitted. The Company doesof 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 guidanceestimate 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 assecurities 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 amendmentsthen 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 effectlong 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 standardsReal 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 proposedmodified 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 FASBCompany. 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 notdecrease 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 onbe funded over its estimated life. The allowance is calculated using the Company’s financial position, resultssame aggregate reserve rates calculated for the funded portion of operations or cash flows.
See Note 1 regarding temporary provisions ofloans 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 conformportfolio 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 576,614530,345 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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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 ninethree months of 20202021 related to the Company’s outstanding restricted stock:
Long-Term Restricted Stock
Number of UnitsWeighted-Average
Grant-Date Fair Value
Nonvested at January 1, 2020159,366 $36.79 
Granted during the period41,966 28.58 
Vested during the period(42,464)33.13 
Forfeited or expired during the period
Nonvested at September 30, 2020158,868 $35.60 

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Long-Term Restricted Stock
Number of UnitsWeighted-Average
Grant-Date Fair Value
Nonvested at January 1, 2021172,105 $33.80 
Granted during the period26,350 35.19 
Vested during the period(6,057)36.35 
Forfeited or expired during the period(6,819)37.32 
Nonvested at March 31, 2021185,579 $33.79 
Total unrecognized compensation expense as of September 30, 2020March 31, 2021 amounted to $2,428,000$2,576,000 with a weighted-average remaining term of 1.82.0 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 quarterquarters 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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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,
20202019 20212020
($ 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 incomeNet income$23,297 $25,019 Net income$28,194 $18,180 
Less: income allocated to participating securitiesLess: income allocated to participating securities(67)(119)Less: income allocated to participating securities(178)(81)
Basic EPS per common shareBasic 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 incomeNet 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 SecuritiesEffect of Dilutive Securities82,907 142,104 Effect of Dilutive Securities180,044 168,326 
Diluted EPS per common shareDiluted 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,
20202019
($ 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 Securities140,377 174,076 
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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Note 65 – Securities

The book values and approximate fair values of investment securities at September 30, 2020March 31, 2021 and December 31, 20192020 are summarized as follows:
($ in thousands)September 30, 2020December 31, 2019
Amortized
Cost
Fair
Value
UnrealizedAmortized
Cost
Fair
Value
Unrealized
Gains(Losses)Gains(Losses)
Securities available for sale:
Government-sponsored enterprise securities$75,016 75,653 637 20,000 20,009 17 (8)
Mortgage-backed securities1,024,735 1,047,922 24,194 (1,007)758,491 767,285 9,463 (669)
Corporate bonds43,680 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 41,423 41,542 125 (6)
State and local governments76,978 77,953 975 26,509 26,791 285 (3)
Total held to maturity$110,200 112,114 1,914 67,932 68,333 410 (9)

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($ in thousands)March 31, 2021December 31, 2020
Amortized
Cost
Fair
Value
UnrealizedAmortized
Cost
Fair
Value
Unrealized
Gains(Losses)Gains(Losses)
Securities available for sale:
Government-sponsored enterprise securities$70,015 67,022 (2,993)70,016 70,206 371 (181)
Mortgage-backed securities1,711,809 1,709,811 17,167 (19,165)1,318,998 1,337,706 20,832 (2,124)
Corporate bonds43,660 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 29,959 30,900 941 
State and local governments171,866 167,425 410 (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, 2020March 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 ValueUnrealized
Losses
Fair ValueUnrealized
Losses
Fair ValueUnrealized
Losses
Fair ValueUnrealized
Losses
Fair ValueUnrealized
Losses
Fair ValueUnrealized
Losses
Government-sponsored enterprise securitiesGovernment-sponsored enterprise securities$Government-sponsored enterprise securities$67,022 2,993 67,022 2,993 
Mortgage-backed securitiesMortgage-backed securities212,533 816 6,639 191 219,172 1,007 Mortgage-backed securities1,094,263 19,010 5,844 155 1,100,107 19,165 
Corporate bondsCorporate bonds13,907 93 801 199 14,708 292 Corporate bonds4,790 210 4,790 210 
State and local governmentsState and local governmentsState and local governments108,006 4,851 108,006 4,851 
Total temporarily impaired securities$226,440 909 7,440 390 233,880 1,299 
Total unrealized loss positionTotal 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 ValueUnrealized
Losses
Fair ValueUnrealized
Losses
Fair ValueUnrealized
Losses
Fair ValueUnrealized
Losses
Fair ValueUnrealized
Losses
Fair ValueUnrealized
Losses
Government-sponsored enterprise securitiesGovernment-sponsored enterprise securities$4,992 4,992 Government-sponsored enterprise securities$29,812 181 29,812 181 
Mortgage-backed securitiesMortgage-backed securities77,274 293 50,851 382 128,125 675 Mortgage-backed securities497,992 1,957 6,168 167 504,160 2,124 
Corporate bondsCorporate bonds915 85 915 85 Corporate bonds3,956 45 835 165 4,791 210 
State and local governmentsState and local governments934 934 State and local governments23,310 165 23,310 165 
Total temporarily impaired securities$82,266 301 52,700 470 134,966 771 
Total unrealized loss positionTotal unrealized loss position$555,070 2,348 7,003 332 562,073 2,680 

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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, 2020March 31, 2021 and December 31, 2019 were2020 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. TheIn arriving at this conclusion, the Company evaluatedreviewed third-party credit ratings and considered the collectabilityseverity of each of these bonds and concluded that there was 0 other-than-temporarythe 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, 2020CECL on January 1, 2021 and Decemberat March 31, 2019,2021, the Company's security portfolioCompany determined that expected credit losses associated with held 31to maturity debt securities and 54was 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 SaleSecurities Held to Maturity Securities Available for SaleSecurities 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
SecuritiesSecuritiesSecurities
Due within one yearDue within one year$1,496 1,509 Due within one year$1,587 1,620 
Due after one year but within five yearsDue after one year but within five years28,680 30,423 3,957 4,075 Due after one year but within five years28,660 30,023 537 557 
Due after five years but within ten yearsDue after five years but within ten years79,016 79,560 5,877 5,985 Due after five years but within ten years74,015 71,578 5,355 5,389 
Due after ten yearsDue after ten years11,000 10,801 65,648 66,384 Due after ten years11,000 10,285 164,387 159,859 
Mortgage-backed securitiesMortgage-backed securities1,024,735 1,047,922 33,222 34,161 Mortgage-backed securities1,711,809 1,709,811 26,977 27,999 
Total securitiesTotal 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, 2020March 31, 2021 and December 31, 20192020 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, 2020March 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, 2020March 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, 2020March 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, 2020March 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, 2020December 31, 2019($ in thousands)March 31, 2021December 31, 2020
AmountPercentageAmountPercentage AmountPercentageAmountPercentage
All loans:All loans:All loans:
Commercial, financial, and agriculturalCommercial, 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 loansReal estate – construction, land development & other land loans653,120 14 %530,866 12 %Real estate – construction, land development & other land loans548,508 12 %570,672 12 %
Real estate – mortgage – residential (1-4 family) first mortgagesReal estate – mortgage – residential (1-4 family) first mortgages1,017,087 21 %1,105,014 25 %Real estate – mortgage – residential (1-4 family) first mortgages916,169 20 %972,378 21 %
Real estate – mortgage – home equity loans / lines of creditReal estate – mortgage – home equity loans / lines of credit310,326 %337,922 %Real estate – mortgage – home equity loans / lines of credit294,611 %306,256 %
Real estate – mortgage – commercial and otherReal estate – mortgage – commercial and other1,983,622 41 %1,917,280 43 %Real estate – mortgage – commercial and other2,049,507 44 %2,049,203 43 %
Consumer loansConsumer loans50,189 %56,172 %Consumer loans53,484 %53,955 %
SubtotalSubtotal4,819,175 100 %4,451,525 100 %Subtotal4,630,597 100 %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 loansTotal 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 $7.6approximately $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 beis 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, 2020December 31, 2019($ in thousands)March 31, 2021December 31, 2020
Guaranteed portions of non-PPP SBA loans included in table aboveGuaranteed 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 above134,953 110,782 
Unguaranteed portions of non-PPP SBA loans included in table aboveUnguaranteed portions of non-PPP SBA loans included in table above133,917 135,703 
Total non-PPP SBA loans included in the table aboveTotal 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 aboveSold portions of SBA loans with servicing retained - not included in tables above$412,472 395,398 
At September 30, 2020both 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 andMarch 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.

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The following table presents changes in At December 31, 2020, the carrying value of PCI loans.
PCI loansFor the Nine Months Ended September 30, 2020For 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
Other27 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 loansFor the Nine Months Ended September 30, 2020For the Nine Months Ended September 30, 2019
Balance at beginning of period$4,149 4,750 
Accretion(927)(1,050)
Reclassification from (to) nonaccretable difference400 583 
Other, net(481)211 
Balance at end of period$3,141 4,494 

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Accretable Yield for PCI loansFor the Three Months Ended March 31, 2020
Balance at beginning of period4,149 
Accretion(567)
Reclassification from (to) nonaccretable difference304 
Other, net(453)
Balance at end of period3,433 
During the first ninethree 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 assetsNonperforming assets  Nonperforming assets  
Nonaccrual loansNonaccrual loans$31,656 24,866 Nonaccrual loans$39,566 35,076 
TDR's - accruing9,896 9,053 
TDRs - accruingTDRs - accruing8,601 9,497 
Accruing loans > 90 days past dueAccruing loans > 90 days past dueAccruing loans > 90 days past due
Total nonperforming loansTotal nonperforming loans41,552 33,919 Total nonperforming loans48,167 44,573 
Foreclosed real estateForeclosed real estate2,741 3,873 Foreclosed real estate1,811 2,424 
Total nonperforming assetsTotal 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 theAt 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.
CECLIncurred Loss
($ in thousands)March 31,
2021
December 31,
2020
Nonaccrual Loans with No AllowanceNonaccrual Loans with an AllowanceTotal Nonaccrual LoansNonaccrual Loans
Commercial, financial, and agricultural$$10,330 $10,330 9,681 
Real estate – construction, land development & other land loans227 313 540 643 
Real estate – mortgage – residential (1-4 family) first mortgages2,444 3,763 6,207 6,048 
Real estate – mortgage – home equity loans / lines of credit378 1,298 1,676 1,333 
Real estate – mortgage – commercial and other7,521 13,133 20,654 17,191 
Consumer loans159 159 180 
Total$10,570 $28,996 $39,566 35,076 

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









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Index
($ in thousands)September 30,
2020
December 31,
2019
Commercial, financial, and agricultural$8,473 5,518 
Real estate – construction, land development & other land loans872 1,067 
Real estate – mortgage – residential (1-4 family) first mortgages5,742 7,552 
Real estate – mortgage – home equity loans / lines of credit1,594 1,797 
Real estate – mortgage – commercial and other14,795 8,820 
Consumer loans180 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
Real estate – mortgage – residential (1-4 family) first mortgages
Real estate – mortgage – home equity loans / lines of credit
Real estate – mortgage – commercial and other220 
Consumer loans
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 8,473 795,437 804,655 
Real estate – construction, land development & other land loans41 872 652,057 652,970 
Real estate – mortgage – residential (1-4 family) first mortgages1,122 1,307 5,742 1,003,741 1,011,912 
Real estate – mortgage – home equity loans / lines of credit678 40 1,594 307,918 310,230 
Real estate – mortgage – commercial and other466 14,795 1,964,390 1,979,651 
Consumer loans113 37 180 49,811 50,141 
Purchased credit impaired13 799 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 

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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 10,330 756,915 768,318 
Real estate – construction, land development & other land loans938 91 540 546,939 548,508 
Real estate – mortgage – residential (1-4 family) first mortgages6,257 80 6,207 903,625 916,169 
Real estate – mortgage – home equity loans / lines of credit487 1,676 292,448 294,611 
Real estate – mortgage – commercial and other628 1,352 20,654 2,026,873 2,049,507 
Consumer loans82 68 159 53,175 53,484 
Total$9,179 1,877 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 agriculturalCommercial, financial, and agricultural$752 5,518 497,788 504,058 Commercial, financial, and agricultural$1,464 1,101 9,681 770,166 782,412 
Real estate – construction, land development & other land loansReal estate – construction, land development & other land loans37 152 1,067 529,444 530,700 Real estate – construction, land development & other land loans572 643 569,307 570,522 
Real estate – mortgage – residential (1-4 family) first mortgagesReal estate – mortgage – residential (1-4 family) first mortgages10,858 5,056 7,552 1,076,205 1,099,671 Real estate – mortgage – residential (1-4 family) first mortgages10,146 869 6,048 951,088 968,151 
Real estate – mortgage – home equity loans / lines of creditReal estate – mortgage – home equity loans / lines of credit770 300 1,797 334,832 337,699 Real estate – mortgage – home equity loans / lines of credit1,088 42 1,333 303,693 306,156 
Real estate – mortgage – commercial and otherReal estate – mortgage – commercial and other4,257 8,820 1,897,573 1,910,650 Real estate – mortgage – commercial and other2,540 3,111 17,191 2,022,422 2,045,264 
Consumer loansConsumer loans344 137 112 55,490 56,083 Consumer loans180 36 180 53,521 53,917 
Purchased credit impairedPurchased credit impaired218 38 762 11,646 12,664 Purchased credit impaired328 112 719 7,432 8,591 
TotalTotal$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 costs1,941 
Unamortized net deferred loan feesUnamortized net deferred loan fees(3,698)
Total loansTotal 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 PropertyBusiness AssetsLandCommercial PropertyOtherTotal Collateral-Dependent Loans
Commercial, financial, and agricultural$400 4,916 974 6,290 
Real estate – construction, land development & other land loans547 547 
Real estate – mortgage – residential (1-4 family) first mortgages3,434 3,434 
Real estate – mortgage – home equity loans / lines of credit378 378 
Real estate – mortgage – commercial and other4,664 14,956 19,620 
Consumer loans
Total$4,212 4,916 5,211 15,930 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 LoansUnallocatedTotal
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 42,342 
Charge-offs(325)(6)(4)(23)(310)(668)
Recoveries126 213 279 207 482 125 1,432 
Provisions2,986 388 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 21,398 
Charge-offs(4,256)(51)(478)(404)(545)(707)(6,441)
Recoveries603 856 594 373 584 251 3,261 
Provisions7,876 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 1,624 4,314 
Collectively evaluated for impairment$6,921 6,216 7,760 2,460 19,982 1,342 70 44,751 
Purchased credit impaired$41 116 161 
Loans receivable as of September 30, 2020
Ending balance – total$804,831 653,120 1,017,087 310,326 1,983,622 50,189 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 34,179 
Collectively evaluated for impairment$797,654 652,117 1,002,254 309,911 1,963,303 50,141 4,775,380 
Purchased credit impaired$176 150 5,176 96 3,970 48 9,616 
($ 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 LoansUnallocatedTotal
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 CECL3,067 6,140 2,584 2,580 (257)674 (213)14,575 
Charge-offs(1,438)(66)(38)(131)(510)(134)(2,317)
Recoveries514 294 87 11 262 35 1,203 
Provisions147 (1,589)(1,685)(526)3,409 244 
Ending balance$13,606 10,134 8,996 4,309 26,507 2,297 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 LoansUnallocatedTotal($ 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 LoansUnallocatedTotal
As of and for the year ended December 31, 2019
As of and for the year ended December 31, 2020As of and for the year ended December 31, 2020
Beginning balanceBeginning 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 21,398 
Charge-offsCharge-offs(2,473)(553)(657)(307)(1,556)(757)(6,303)Charge-offs(5,608)(51)(478)(524)(968)(873)(8,502)
RecoveriesRecoveries980 1,275 705 629 575 235 4,399 Recoveries745 1,552 754 487 621 294 4,453 
ProvisionsProvisions3,157 (989)(1,413)(860)1,936 542 (110)2,263 Provisions11,626 1,878 3,940 1,285 15,012 1,085 213 35,039 
Ending balanceEnding balance$4,553 1,976 3,832 1,127 8,938 972 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 lossesEnding balances as of December 31, 2020: Allowance for loan losses
Individually evaluated for impairmentIndividually evaluated for impairment$1,791 50 750 983 3,574 Individually evaluated for impairment$3,546 30 800 2,175 6,551 
Collectively evaluated for impairmentCollectively evaluated for impairment$2,720 1,926 2,976 1,127 7,931 961 17,641 Collectively evaluated for impairment$7,742 5,325 7,141 2,375 21,428 1,475 213 45,699 
Purchased credit impairedPurchased credit impaired$42 106 24 11 183 Purchased credit impaired$28 107 138 
Loans receivable as of December 31, 2019:
Loans receivable as of December 31, 2020:Loans receivable as of December 31, 2020:
Ending balance – totalEnding balance – total$504,271 530,866 1,105,014 337,922 1,917,280 56,172 4,451,525 Ending balance – total$782,549 570,672 972,378 306,256 2,049,203 53,955 4,735,013 
Unamortized net deferred loan costs1,941 
Unamortized net deferred loan feesUnamortized net deferred loan fees(3,698)
Total loansTotal loans$4,453,466 Total loans$4,731,315 
Ending balances as of December 31, 2019: Loans
Ending balances as of December 31, 2020: LoansEnding balances as of December 31, 2020: Loans
Individually evaluated for impairmentIndividually evaluated for impairment$4,957 796 9,546 333 9,570 25,202 Individually evaluated for impairment$7,700 677 9,303 15 18,582 36,281 
Collectively evaluated for impairmentCollectively evaluated for impairment$499,101 529,904 1,090,125 337,366 1,901,080 56,083 4,413,659 Collectively evaluated for impairment$774,712 569,845 958,848 306,141 2,026,682 53,913 4,690,141 
Purchased credit impairedPurchased credit impaired$213 166 5,343 223 6,630 89 12,664 Purchased credit impaired$137 150 4,227 100 3,939 38 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 LoansUnallocatedTotal
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)(1,335)
Recoveries163 308 139 58 176 67 911 
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)(4,169)
Recoveries768 797 521 513 550 154 3,303 
Provisions434 (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 45 828 230 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 68 57 13 180 
Loans receivable as of September 30, 2019
Ending balance – total$486,768 471,326 1,093,619 343,378 1,928,931 70,962 4,394,984 
Unamortized net deferred loan costs1,560 
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 19,115 
Collectively evaluated for impairment$485,436 470,353 1,078,004 342,831 1,914,603 70,844 4,362,071 
Purchased credit impaired$242 169 5,673 209 7,387 118 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 LoansUnallocatedTotal
As of and for the three months ended March 31, 2020
Beginning balance$4,553 1,976 3,832 1,127 8,938 972 21,398 
Charge-offs(2,460)(40)(195)(68)(263)(287)(3,313)
Recoveries217 290 91 83 47 95 823 
Provisions1,894 373 645 252 2,191 235 5,590 
Ending balance$4,204 2,599 4,373 1,394 10,913 1,015 24,498 
Ending balances as of March 31, 2020: Allowance for loan losses
Individually evaluated for impairment$1,093 73 739 90 1,233 3,228 
Collectively evaluated for impairment$3,069 2,526 3,528 1,304 9,680 1,006 21,113 
Purchased credit impaired$42 106 157 
Loans receivable as of March 31, 2020:
Ending balance – total$521,470 590,485 1,083,022 331,170 1,970,716 54,133 4,550,996 
Unamortized net deferred loan costs1,712 
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 26,016 
Collectively evaluated for impairment$518,233 589,566 1,067,805 330,644 1,954,834 54,059 4,515,141 
Purchased credit impaired$187 163 5,302 93 4,020 74 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 loans316 494 — 246 
Real estate – mortgage – residential (1-4 family) first mortgages4,336 4,674 — 4,530 
Real estate – mortgage –home equity loans / lines of credit319 357 — 327 
Real estate – mortgage –commercial and other10,959 12,004 — 8,342 
Consumer loans— 
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 loans537 546 56 597 
Real estate – mortgage – residential (1-4 family) first mortgages5,321 5,498 820 5,185 
Real estate – mortgage –home equity loans / lines of credit26 
Real estate – mortgage –commercial and other5,390 6,231 1,624 5,528 
Consumer loans
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 agriculturalCommercial, financial, and agricultural$16 19 — 74 Commercial, financial, and agricultural$3,688 4,325 — 750 
Real estate – mortgage – construction, land development & other land loansReal estate – mortgage – construction, land development & other land loans221 263 — 366 Real estate – mortgage – construction, land development & other land loans554 694 — 308 
Real estate – mortgage – residential (1-4 family) first mortgagesReal estate – mortgage – residential (1-4 family) first mortgages4,300 4,539 — 4,415 Real estate – mortgage – residential (1-4 family) first mortgages4,115 4,456 — 4,447 
Real estate – mortgage –home equity loans / lines of creditReal estate – mortgage –home equity loans / lines of credit333 357 — 147 Real estate – mortgage –home equity loans / lines of credit15 27 — 264 
Real estate – mortgage –commercial and otherReal estate – mortgage –commercial and other2,643 3,328 — 3,240 Real estate – mortgage –commercial and other11,763 13,107 — 9,026 
Consumer loansConsumer loans— Consumer loans— 
Total impaired loans with no allowanceTotal 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 agriculturalCommercial, 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 loansReal estate – mortgage – construction, land development & other land loans575 575 50 586 Real estate – mortgage – construction, land development & other land loans123 131 30 502 
Real estate – mortgage – residential (1-4 family) first mortgagesReal estate – mortgage – residential (1-4 family) first mortgages5,246 5,469 750 6,206 Real estate – mortgage – residential (1-4 family) first mortgages5,188 5,361 800 5,186 
Real estate – mortgage –home equity loans / lines of creditReal estate – mortgage –home equity loans / lines of credit55 Real estate – mortgage –home equity loans / lines of credit21 
Real estate – mortgage –commercial and otherReal estate – mortgage –commercial and other6,927 7,914 983 5,136 Real estate – mortgage –commercial and other6,819 7,552 2,175 5,786 
Consumer loansConsumer loansConsumer loans
Total impaired loans with allowanceTotal 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, 20192020 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 GradeDescription
Pass:
1Loans with virtually no risk, including cash secured loans.
2Loans 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.
3Loans 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.
4Loans 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.  
5Loans 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:
6Existing loans with defined weaknesses in primary source of repayment that, if not corrected, could cause a loss to the Bank.
Classified:
7An 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.
8Loans 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.
9Loans 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)PassSpecial
Mention Loans
Classified
Accruing Loans
Classified
Nonaccrual
Loans
Total($ in thousands)20212020201920182017PriorRevolvingTotal
Commercial, financial, and agriculturalCommercial, financial, and agricultural$778,593 16,517 1,072 8,473 804,655 Commercial, financial, and agricultural
PassPass147,842 293,349 105,182 87,514 21,260 27,420 66,442 749,009 
Special MentionSpecial Mention22 653 3,690 2,900 49 42 452 7,808 
ClassifiedClassified177 4,067 3,724 2,729 255 48 501 11,501 
Total commercial, financial, and agriculturalTotal commercial, financial, and agricultural148,041 298,069 112,596 93,143 21,564 27,510 67,395 768,318 
Real estate – construction, land development & other land loansReal estate – construction, land development & other land loans643,826 7,058 1,214 872 652,970 Real estate – construction, land development & other land loans
PassPass104,771 311,765 70,727 12,754 12,577 11,343 18,161 542,098 
Special MentionSpecial Mention48 4,037 55 116 254 109 4,622 
ClassifiedClassified28 486 217 292 88 414 263 1,788 
Total real estate – construction, land development & other land loansTotal real estate – construction, land development & other land loans104,847 316,288 70,999 13,049 12,781 12,011 18,533 548,508 
Real estate – mortgage – residential (1-4 family) first mortgagesReal estate – mortgage – residential (1-4 family) first mortgages985,925 7,634 12,611 5,742 1,011,912 Real estate – mortgage – residential (1-4 family) first mortgages
PassPass26,304 172,807 170,991 180,894 119,528 213,166 7,325 891,015 
Special MentionSpecial Mention638 1,459 291 313 384 3,963 23 7,071 
ClassifiedClassified431 1,406 2,508 2,210 1,180 9,910 438 18,083 
Total real estate – mortgage – residential (1-4 family) first mortgagesTotal real estate – mortgage – residential (1-4 family) first mortgages27,373 175,672 173,790 183,417 121,092 227,039 7,786 916,169 
Real estate – mortgage – home equity loans / lines of creditReal estate – mortgage – home equity loans / lines of credit300,708 1,854 6,074 1,594 310,230 Real estate – mortgage – home equity loans / lines of credit
PassPass175 531 1,139 1,827 1,810 1,388 279,116 285,986 
Special MentionSpecial Mention18 20 1,298 1,336 
ClassifiedClassified162 137 738 6,252 7,289 
Total real estate – mortgage – home equity loans / lines of creditTotal real estate – mortgage – home equity loans / lines of credit175 693 1,294 1,827 1,810 2,146 286,666 294,611 
Real estate – mortgage – commercial and otherReal estate – mortgage – commercial and other1,928,787 32,052 4,017 14,795 1,979,651 Real estate – mortgage – commercial and other
PassPass180,222 699,117 349,785 222,224 189,511 326,685 26,465 1,994,009 
Special MentionSpecial Mention3,833 15,743 2,775 2,940 3,394 1,915 817 31,417 
ClassifiedClassified379 6,569 6,783 2,842 2,900 4,346 262 24,081 
Total real estate – mortgage – commercial and otherTotal real estate – mortgage – commercial and other184,434 721,429 359,343 228,006 195,805 332,946 27,544 2,049,507 
Consumer loansConsumer loans49,658 85 218 180 50,141 Consumer loans
Purchased credit impaired7,778 86 1,752 9,616 
PassPass4,696 26,569 5,675 2,872 1,281 1,293 10,626 53,012 
Special MentionSpecial Mention76 76 
ClassifiedClassified88 45 28 84 151 396 
Total consumer loansTotal consumer loans4,696 26,657 5,720 2,900 1,281 1,377 10,853 53,484 
TotalTotal$4,695,275 65,286 26,958 31,656 4,819,175 Total469,566 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 feesUnamortized net deferred loan fees(6,543)
Total loansTotal loans4,813,736 Total loans4,624,054 


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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)PassSpecial
Mention Loans
Classified
Accruing Loans
Classified
Nonaccrual
Loans
Total($ in thousands)PassSpecial
Mention Loans
Classified
Accruing Loans
Classified
Nonaccrual
Loans
Total
Commercial, financial, and agriculturalCommercial, 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 loansReal estate – construction, land development & other land loans522,767 4,075 2,791 1,067 530,700 Real estate – construction, land development & other land loans560,845 7,877 1,157 643 570,522 
Real estate – mortgage – residential (1-4 family) first mortgagesReal estate – mortgage – residential (1-4 family) first mortgages1,063,735 13,187 15,197 7,552 1,099,671 Real estate – mortgage – residential (1-4 family) first mortgages943,455 7,609 11,039 6,048 968,151 
Real estate – mortgage – home equity loans / lines of creditReal estate – mortgage – home equity loans / lines of credit328,903 1,258 5,741 1,797 337,699 Real estate – mortgage – home equity loans / lines of credit297,795 1,468 5,560 1,333 306,156 
Real estate – mortgage – commercial and otherReal estate – mortgage – commercial and other1,873,594 20,800 7,436 8,820 1,910,650 Real estate – mortgage – commercial and other1,988,684 34,588 4,801 17,191 2,045,264 
Consumer loansConsumer loans55,203 413 355 112 56,083 Consumer loans53,488 80 169 180 53,917 
Purchased credit impairedPurchased credit impaired8,098 2,590 1,976 12,664 Purchased credit impaired6,901 85 1,605 8,591 
TotalTotal$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 costs1,941 
Unamortized net deferred loan feesUnamortized net deferred loan fees(3,698)
Total loansTotal loans4,453,466 Total loans4,731,315 
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, 2020March 31, 2021 and 2019.2020.

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($ in thousands)($ in thousands)For the three months ended September 30, 2020For the three months ended September 30, 2019($ in thousands)For the three months ended March 31, 2021For 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 – AccruingTDRs – AccruingTDRs – Accruing
Commercial, financial, and agriculturalCommercial, financial, and agricultural$$$$Commercial, financial, and agricultural$$$143 $143 
Real estate – construction, land development & other land loansReal estate – construction, land development & other land loansReal estate – construction, land development & other land loans
Real estate – mortgage – residential (1-4 family) first mortgagesReal estate – mortgage – residential (1-4 family) first mortgages133 133 Real estate – mortgage – residential (1-4 family) first mortgages
Real estate – mortgage – home equity loans / lines of creditReal estate – mortgage – home equity loans / lines of creditReal estate – mortgage – home equity loans / lines of credit
Real estate – mortgage – commercial and otherReal estate – mortgage – commercial and otherReal estate – mortgage – commercial and other160 160 
Consumer loansConsumer loansConsumer loans
TDRs – NonaccrualTDRs – NonaccrualTDRs – Nonaccrual
Commercial, financial, and agriculturalCommercial, financial, and agriculturalCommercial, financial, and agricultural111 108 
Real estate – construction, land development & other land loansReal estate – construction, land development & other land loansReal estate – construction, land development & other land loans
Real estate – mortgage – residential (1-4 family) first mortgagesReal estate – mortgage – residential (1-4 family) first mortgagesReal estate – mortgage – residential (1-4 family) first mortgages
Real estate – mortgage – home equity loans / lines of creditReal estate – mortgage – home equity loans / lines of creditReal estate – mortgage – home equity loans / lines of credit
Real estate – mortgage – commercial and otherReal estate – mortgage – commercial and other2,344 2,344 Real estate – mortgage – commercial and other
Consumer loansConsumer loansConsumer loans— 
Total TDRs arising during periodTotal TDRs arising during period$2,344 $2,344 $133 $133 Total TDRs arising during period$271 $268 $143 $143 


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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, 2020For 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$143 $143 $143 $143 
Real estate – construction, land development & other land loans67 67 
Real estate – mortgage – residential (1-4 family) first mortgages75 78 523 527 
Real estate – mortgage – home equity loans / lines of credit
Real estate – mortgage – commercial and other965 965 
Consumer loans
TDRs – Nonaccrual
Commercial, financial, and agricultural
Real estate – construction, land development & other land loans
Real estate – mortgage – residential (1-4 family) first mortgages
Real estate – mortgage – home equity loans / lines of credit
Real estate – mortgage – commercial and other2,344 2,344 
Consumer loans
Total TDRs arising during period$2,629 $2,632 $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, 2020For 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)$$
Real estate – mortgage – commercial and other
Total accruing TDRs that subsequently defaulted$274 $93 

Accruing There were no accruing TDR's that were modified in the previous twelve months and that defaulted during the ninethree 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 presentedactivity in the table below.allowance for credit losses for unfunded loan commitments for the three months ended March 31, 2021.


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($ in thousands)For the Nine Months Ended September 30, 2020For 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)$$93 
Real estate – mortgage – commercial and other274 
Total accruing TDRs that subsequently defaulted$274 $93 
($ 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, 20217,504 
Charge-offs
Recoveries
Provisions for credit losses on unfunded commitments
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, 2020March 31, 2021 and December 31, 2019,2020, and the carrying amount of unamortized intangible assets as of those same dates.
September 30, 2020December 31, 2019March 31, 2021December 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 listsCustomer lists$6,013 2,575 6,013 2,185 Customer lists$7,613 3,023 7,613 2,814 
Core deposit intangiblesCore deposit intangibles28,440 23,112 28,440 20,610 Core deposit intangibles28,440 24,500 28,440 23,832 
SBA servicing assetSBA servicing asset9,268 3,624 7,776 2,393 SBA servicing asset10,583 4,658 9,976 4,188 
OtherOther1,303 1,196 1,303 1,127 Other1,403 1,252 1,403 1,232 
TotalTotal$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:
GoodwillGoodwill$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 continuecontinues 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, 2020March 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 ninethree months of 20202021 and 2019,2020, respectively. During the first ninethree months of 20202021 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 acquisitionwas 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 $6.6serviced 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 impairmentdetermined that 0ne of its goodwill at June 30,was impaired as of March 31, 2020. WithDue to improving economic conditions and increases in the economic turmoilCompany's stock price and market volatility continuing incapitalization at year end 2020 and the thirdfirst 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 wasor 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 
20212,927 
April 1, 2021 to December 31, 2021April 1, 2021 to December 31, 2021$2,375 
202220222,022 20222,367 
202320231,041 20231,386 
20242024404 2024741 
20252025562 
ThereafterThereafter1,599 Thereafter1,250 
TotalTotal$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 Plan2019 Pension Plan2020 SERP2019 SERP2020 Total Both Plans2019 Total Both Plans($ in thousands)2021 Pension Plan2020 Pension Plan2021 SERP2020 SERP2021 Total Both Plans2020 Total Both Plans
Service costService cost$Service cost$
Interest costInterest cost303 367 55 82 358 449 Interest cost306 308 39 55 345 363 
Expected return on plan assetsExpected return on plan assets(325)(360)(325)(360)Expected return on plan assets(325)(325)(325)(325)
Amortization of net (gain)/lossAmortization of net (gain)/loss194 282 (41)(127)153 155 Amortization of net (gain)/loss210 219 (39)(41)171 178 
Net periodic pension costNet periodic pension cost$172 289 14 (45)186 244 Net periodic pension cost$191 202 14 191 216 
 Nine Months Ended September 30, 2020
($ in thousands)2020 Pension Plan2019 Pension Plan2020 SERP2019 SERP2020 Total Both Plans2019 Total Both Plans
Service cost$
Interest cost917 1,111 165 164 1,082 1,275 
Expected return on plan assets(976)(1,154)(976)(1,154)
Amortization of net (gain)/loss634 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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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 ninethree months of 20202021 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, 2020December 31, 2019($ in thousands)March 31, 2021December 31, 2020
Unrealized gain (loss) on securities available for saleUnrealized 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 saleNet unrealized gain (loss) on securities available for sale19,467 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 ninethree months ended September 30, 2020March 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, 2021Beginning balance at January 1, 2021$15,749 (1,399)14,350 
Other comprehensive income (loss) before reclassificationsOther comprehensive income (loss) before reclassifications18,143 18,143 Other comprehensive income (loss) before reclassifications(18,666)(18,666)
Amounts reclassified from accumulated other comprehensive incomeAmounts reclassified from accumulated other comprehensive income(6,180)393 (5,787)Amounts reclassified from accumulated other comprehensive income131 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$19,467 (1,988)17,479 
Ending balance at March 31, 2021Ending balance at March 31, 2021$(2,917)(1,268)(4,185)
The following table discloses the changes in accumulated other comprehensive income (loss) for the ninethree months ended September 30, 2019March 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, 2020Beginning balance at January 1, 2020$7,504 (2,381)5,123 
Other comprehensive income (loss) before reclassificationsOther comprehensive income (loss) before reclassifications15,212 15,212 Other comprehensive income (loss) before reclassifications15,993 15,993 
Amounts reclassified from accumulated other comprehensive incomeAmounts reclassified from accumulated other comprehensive income(75)458 383 Amounts reclassified from accumulated other comprehensive income137 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, 2020Ending 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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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 InstrumentsDescription of Financial InstrumentsFair Value at September 30, 2020Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
Description of Financial InstrumentsFair Value at March 31, 2021Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
RecurringRecurringRecurring
Securities available for sale:Securities available for sale:Securities available for sale:
Government-sponsored enterprise securitiesGovernment-sponsored enterprise securities$75,653 75,653 Government-sponsored enterprise securities$67,022 67,022 
Mortgage-backed securitiesMortgage-backed securities1,047,922 1,047,922 Mortgage-backed securities1,709,811 1,709,811 
Corporate bondsCorporate bonds45,131 45,131 Corporate bonds44,864 44,864 
Total available for sale securitiesTotal available for sale securities$1,168,706 1,168,706 Total available for sale securities$1,821,697 1,821,697 
Presold mortgages in process of settlementPresold mortgages in process of settlement$34,028 34,028 Presold mortgages in process of settlement$31,869 31,869 
NonrecurringNonrecurringNonrecurring
Impaired loans$16,547 16,547 
Collateral dependent loansCollateral dependent loans$28,082 28,082 
Foreclosed real estateForeclosed real estate1,253 1,253 Foreclosed real estate1,484 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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($ in thousands)($ in thousands)($ in thousands)
Description of Financial InstrumentsDescription of Financial InstrumentsFair Value at December 31, 2019Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Description of Financial InstrumentsFair Value at December 31, 2020Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
RecurringRecurringRecurring
Securities available for sale:Securities available for sale:Securities available for sale:
Government-sponsored enterprise securitiesGovernment-sponsored enterprise securities$20,009 20,009 Government-sponsored enterprise securities$70,206 70,206 
Mortgage-backed securitiesMortgage-backed securities767,285 767,285 Mortgage-backed securities1,337,706 1,337,706 
Corporate bondsCorporate bonds34,651 34,651 Corporate bonds45,220 45,220 
Total available for sale securitiesTotal available for sale securities$821,945 821,945 Total available for sale securities$1,453,132 1,453,132 
Presold mortgages in process of settlementPresold mortgages in process of settlement$19,712 19,712 Presold mortgages in process of settlement$42,271 42,271 
NonrecurringNonrecurringNonrecurring
Impaired loansImpaired loans$16,215 16,215 Impaired loans$22,142 22,142 
Foreclosed real estate Foreclosed real estate1,830 1,830  Foreclosed real estate1,484 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.
ImpairedCollateral-dependent loans — Fair values for impairedcollateral-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 loancredit 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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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)
DescriptionFair Value at September 30, 2020Valuation
Technique
Significant Unobservable
Inputs
Range (Weighted Average)
Impaired loans - valued at collateral value$10,746 Appraised valueDiscounts applied for estimated costs to sell10%
Impaired loans - valued at PV of expected cash flows5,801 PV of expected cash flowsDiscount rates used in the calculation of PV of expected cash flows4-11% (6.2%)
Foreclosed real estate1,253 Appraised valueDiscounts for estimated costs to sell10%

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($ in thousands)
DescriptionFair Value at March 31, 2021Valuation
Technique
Significant Unobservable
Inputs
Range (Weighted Average)
Nonaccrual loans - valued at collateral value$22,176 Appraised valueDiscounts applied for estimated costs to sell10%
Nonaccrual loans - valued at PV of expected cash flows5,906 PV of expected cash flowsDiscount rates used in the calculation of the present value ("PV") of expected cash flows4-11% (6.18%)
Foreclosed real estate1,484 Appraised valueDiscounts for estimated costs to sell10%
For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of December 31, 2019,2020, the significant unobservable inputs used in the fair value measurements were as follows:
($ in thousands)($ in thousands)($ in thousands)
DescriptionDescriptionFair Value atDecember 31, 2019Valuation
Technique
Significant Unobservable
Inputs
Range (Weighted Average)DescriptionFair Value at December 31, 2020Valuation
Technique
Significant Unobservable
Inputs
Range (Weighted Average)
Impaired loans - valued at collateral valueImpaired loans - valued at collateral value$10,718 Appraised valueDiscounts applied for estimated costs to sell10%Impaired loans - valued at collateral value$16,000 Appraised valueDiscounts applied for estimated costs to sell10%
Impaired loans - valued at PV of expected cash flowsImpaired loans - valued at PV of expected cash flows5,497 PV of expected cash flowsDiscount rates used in the calculation of PV of expected cash flows4-11% (6.50%)Impaired loans - valued at PV of expected cash flows6,142 PV of expected cash flowsDiscount rates used in the calculation of PV of expected cash flows4-11% (6.21%)
Foreclosed real estateForeclosed real estate1,830 Appraised valueDiscounts for estimated costs to sell10%Foreclosed real estate1,484 Appraised valueDiscounts for estimated costs to sell10%

The carrying amounts and estimated fair values of financial instruments not carried at fair value at September 30, 2020March 31, 2021 and December 31, 20192020 are as follows:
  September 30, 2020December 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-bearingLevel 1$92,465 92,465 64,519 64,519 
Due from banks, interest-bearingLevel 1304,731 304,731 166,783 166,783 
Securities held to maturityLevel 2110,200 112,114 67,932 68,333 
SBA loans held for saleLevel 215,012 16,645 
Total loans, net of allowanceLevel 34,764,510 4,750,959 4,432,068 4,407,610 
Accrued interest receivableLevel 119,646 19,646 16,648 16,648 
Bank-owned life insuranceLevel 1106,345 106,345 104,441 104,441 
SBA Servicing AssetLevel 35,644 6,714 5,383 5,649 
DepositsLevel 26,060,226 6,062,358 4,931,355 4,930,751 
BorrowingsLevel 261,816 53,099 300,671 295,399 
Accrued interest payableLevel 21,305 1,305 2,154 2,154 

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  March 31, 2021December 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-bearingLevel 1$71,206 71,206 93,724 93,724 
Due from banks, interest-bearingLevel 1458,860 458,860 273,566 273,566 
Securities held to maturityLevel 2198,843 195,424 167,551 170,734 
SBA loans held for saleLevel 27,002 7,905 6,077 7,465 
Total loans, net of allowanceLevel 34,558,205 4,537,472 4,678,927 4,661,197 
Accrued interest receivableLevel 118,652 18,652 20,272 20,272 
Bank-owned life insuranceLevel 1107,594 107,594 106,974 106,974 
SBA Servicing AssetLevel 35,925 6,481 5,788 6,569 
DepositsLevel 26,733,487 6,734,623 6,273,596 6,275,329 
BorrowingsLevel 261,342 53,005 61,829 53,321 
Accrued interest payableLevel 2741 741 904 904 
Commitments to extend creditLevel 38,086 461 
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, 2020March 31, 2021 and 2019.2020. Items outside the scope of ASC 606 are noted as such.
For the Three Months EndedFor the Nine Months EndedFor the Three Months Ended
$ in thousands$ in thousandsSeptember 30, 2020September 30, 2019September 30, 2020September 30, 2019$ in thousandsMarch 31, 2021March 31, 2020
Noninterest IncomeNoninterest IncomeNoninterest 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 incomeInterchange income3,608 3,228 9,580 9,529 Interchange income3,524 2,887 
Other service charges and feesOther service charges and fees2,582 1,839 5,303 5,094 Other service charges and fees1,998 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 incomeInsurance income1,477 1,355 4,058 4,027 Insurance income1,326 1,198 
Wealth management incomeWealth management income880 848 2,457 2,409 Wealth management income864 870 
SBA consulting feesSBA consulting fees1,956 663 6,722 2,847 SBA consulting fees2,764 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 incomeTotal 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 Chargescharges 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.

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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 Consultingconsulting 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 JanuaryMay 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 20.418.2 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 ninethree 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 $17.9 million as of December 31, 2020, respectively.
Future undiscounted lease payments for operating leases with initial terms of one year or more as of September 30, 2020March 31, 2021 are as follows.
($ in thousands)
October 1 to December 31, 2020$643 
20212,297 
20221,925 
20231,775 
20241,574 
Thereafter19,564 
Total undiscounted lease payments27,778 
Less effect of discounting(9,062)
Present value of estimated lease payments (lease liability)$18,716 

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($ in thousands)
April 1, 2021 to December 31, 2021$1,492 
20221,742 
20231,640 
20241,503 
20251,318 
Thereafter18,380 
Total undiscounted lease payments26,075 
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 ninethree months months of 2020,2021, the Company repurchased approximately 985,795106,744 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. TheJanuary 2021.

During the first three months months of 2020, the Company has $11.3 million remainingrepurchased 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, 2020March 31, 2021 and December 31, 20192020 - dollars are in thousands:
DescriptionDescriptionDue dateCall FeatureSeptember 30, 2020Interest RateDescriptionDue dateCall FeatureMarch 31, 2021Interest Rate
FHLB Principal Reducing CreditFHLB Principal Reducing Credit7/24/2023None$135 1.00% fixedFHLB Principal Reducing Credit7/24/2023None$113 1.00% fixed
FHLB Principal Reducing CreditFHLB Principal Reducing Credit12/22/2023None1,001 1.25% fixedFHLB Principal Reducing Credit12/22/2023None982 1.25% fixed
FHLB Principal Reducing CreditFHLB Principal Reducing Credit1/15/2026None5,500 1.98% fixedFHLB Principal Reducing Credit1/15/2026None5,000 1.98% fixed
FHLB Principal Reducing CreditFHLB Principal Reducing Credit6/26/2028None237 0.25% fixedFHLB Principal Reducing Credit6/26/2028None232 0.25% fixed
FHLB Principal Reducing CreditFHLB Principal Reducing Credit7/17/2028None51 0.00% fixedFHLB Principal Reducing Credit7/17/2028None48 0.00% fixed
FHLB Principal Reducing CreditFHLB Principal Reducing Credit8/18/2028None176 1.00% fixedFHLB Principal Reducing Credit8/18/2028None172 1.00% fixed
FHLB Principal Reducing CreditFHLB Principal Reducing Credit8/22/2028None176 1.00% fixedFHLB Principal Reducing Credit8/22/2028None172 1.00% fixed
FHLB Principal Reducing CreditFHLB Principal Reducing Credit12/20/2028None358 0.50% fixedFHLB Principal Reducing Credit12/20/2028None352 0.50% fixed
Other BorrowingOther Borrowing4/7/2022None103 1.00% fixedOther Borrowing4/7/2022None103 1.00% fixed
Trust Preferred SecuritiesTrust Preferred Securities1/23/2034Quarterly by Company
beginning 1/23/2009
20,620 2.97% at 9/30/2020
adjustable rate
3 month LIBOR + 2.70%
Trust Preferred Securities1/23/2034Quarterly by Company
beginning 1/23/2009
20,620 2.91% at 3/31/21
adjustable rate
3 month LIBOR + 2.70%
Trust Preferred SecuritiesTrust Preferred Securities6/15/2036Quarterly by Company
beginning 6/15/2011
25,774 1.64% at 9/30/2020
adjustable rate
3 month LIBOR + 1.39%
Trust Preferred Securities6/15/2036Quarterly by Company
beginning 6/15/2011
25,774 1.57% at 3/31/21
adjustable rate
3 month LIBOR + 1.39%
Trust Preferred SecuritiesTrust Preferred Securities1/7/2035Quarterly by Company
beginning 1/7/2010
10,310 2.28% at 9/30/2020
adjustable rate
3 month LIBOR + 2.00%
Trust Preferred Securities1/7/2035Quarterly 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 ofTotal borrowings/ weighted average rate as ofSeptember 30, 2020$64,441 2.26%Total borrowings/ weighted average rate as ofMarch 31, 2021$63,878 2.21%
Unamortized discount on acquired borrowingsUnamortized discount on acquired borrowings(2,625)Unamortized discount on acquired borrowings(2,536)
Total borrowingsTotal borrowings$61,816 Total borrowings$61,342 


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DescriptionDue dateCall FeatureDecember 31, 2019Interest Rate
FHLB Term Note1/30/2020None$100,000 1.70% fixed
FHLB Term Note1/31/2020None68,000 1.70% fixed
FHLB Term Note1/31/2020None30,000 1.70% fixed
FHLB Term Note5/29/2020None40,000 1.62% fixed
FHLB Principal Reducing Credit7/24/2023None168 1.00% fixed
FHLB Principal Reducing Credit12/22/2023None1,029 1.25% fixed
FHLB Principal Reducing Credit1/15/2026None6,500 1.98% fixed
FHLB Principal Reducing Credit6/26/2028None245 0.25% fixed
FHLB Principal Reducing Credit7/17/2028None55 0.00% fixed
FHLB Principal Reducing Credit8/18/2028None181 1.00% fixed
FHLB Principal Reducing Credit8/22/2028None181 1.00% fixed
FHLB Principal Reducing Credit12/20/2028None367 0.50% fixed
Trust Preferred Securities1/23/2034Quarterly by Company
beginning 1/23/2009
20,620 4.64% at 12/31/2019
adjustable rate
3 month LIBOR + 2.70%
Trust Preferred Securities6/15/2036Quarterly by Company
beginning 6/15/2011
25,774 3.28% at 12/31/2019
adjustable rate
3 month LIBOR + 1.39%
Trust Preferred Securities1/7/2035Quarterly 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.



DescriptionDue dateCall FeatureDecember 31, 2020Interest Rate
FHLB Term Note7/24/2023None124 1.00% fixed
FHLB Principal Reducing Credit12/22/2023None991 1.25% fixed
FHLB Principal Reducing Credit1/15/2026None5,500 1.98% fixed
FHLB Principal Reducing Credit6/26/2028None235 0.25% fixed
FHLB Principal Reducing Credit7/17/2028None49 0.00% fixed
FHLB Principal Reducing Credit8/18/2028None174 1.00% fixed
FHLB Principal Reducing Credit8/22/2028None174 1.00% fixed
FHLB Principal Reducing Credit12/20/2028None355 0.50% fixed
FHLB Principal Reducing Credit4/7/2022None103 1.00% fixed
Trust Preferred Securities1/23/2034Quarterly by Company
beginning 1/23/2009
20,620 2.91% at 12/31/2020
adjustable rate
3 month LIBOR + 2.70%
Trust Preferred Securities6/15/2036Quarterly by Company
beginning 6/15/2011
25,774 1.61% at 12/31/2020
adjustable rate
3 month LIBOR + 1.39%
Trust Preferred Securities1/7/2035Quarterly 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 

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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 loancredit 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 LoanCredit Losses on Loans and Unfunded Commitments
Due to the estimation processThe 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 operationsunfunded 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 implementationrecorded within Other Liabilities require high degrees of CECL until the earlierjudgement. Each of the cessation of the national emergency or December 31, 2020 because of the challenges associated with developing a reliable forecastthese allowances reflects management’s estimate of losses that maywill result from the unprecedented COVID-19 pandemic. Accordingly, the Company's provision forinability 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 relatedpayments. 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 ason 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 primarilypast 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 factorsloan 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 estimatedalso 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

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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 LoanCredit Losses and Provision for LoanCredit 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

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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.

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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 thetest goodwill for eachimpairment 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 resultsconclusion of the March 31, 2020 analysis determinedour last review was that none of the Company'sour 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


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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

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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, 2020March 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 thirdfirst 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 periods2020. The increase in 2020 were impactedearnings 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 thirdfirst quarter of 20202021 was $54.7$55.2 million, a 1.8%0.9% increase from the $53.8$54.8 million recorded in the thirdfirst 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 thirdfirst quarter of 20202021 was 3.48%3.27%, which was 4769 basis points lower than the 3.95%3.96% realized in the thirdfirst quarter of 2019. For the nine months ended September 30, 2020, our net interest margin2020. 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.

ProvisionDriven 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 Lossesthe 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.


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As permitted by the CARES Act enacted in March 2020, the Company elected to defer the implementation ofAllowance 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'smethodology 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 estimateand 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 loancredit losses in the first quarter of $6.12021 compared to $5.6 million in the thirdfirst quarter of 2020 compared to a negative2020. 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 arewas primarily related to estimated probableincurred loan losses arising fromassociated with the economic impactpandemic 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 thirdfirst quarters of 20202021 and 20192020 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. Forfirst 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 20202021 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 quarterfirst quarters of 2021 and 2020 compared to $38.4 million recordedwith 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, comparedwith 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, 2020March 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.

LoanThis growth for the nine months ended September 30, 2020 was $361driven by a $460 million, or 10.8% on an29.7% annualized, basis, which includes $245 millionincrease 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, thisDecember 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 resultingTotal 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, 2020March 31, 2021 of 15.01%15.49%, an increase from the 14.89%15.37% reported at December 31, 2019.

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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.

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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, 2020March 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 thirdfirst quarter of 2019.2020. Net interest income on a tax-equivalent basis for the three month period ended September 30, 2020March 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 monthsquarter 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,
2020201920212020
Net interest income, as reportedNet interest income, as reported$54,733 53,778 Net interest income, as reported$55,238 54,759 
Tax-equivalent adjustmentTax-equivalent adjustment347 413 Tax-equivalent adjustment443 334 
Net interest income, tax-equivalentNet interest income, tax-equivalent$55,080 54,191 Net interest income, tax-equivalent$55,681 55,093 
Nine Months Ended September 30,
20202019
Net interest income, as reported$162,116 161,548 
Tax-equivalent adjustment1,011 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 periodsperiod of 20192020 was primarily due to growth in ourhigher levels of interest-earning assets and the recognition of PPP fees, which was partiallywere 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,
20202019 20212020
($ 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
AssetsAssets      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 securitiesTaxable securities973,183 2.03 %4,958 747,044 2.72 %5,129 Taxable securities1,652,834 1.45 %5,913 834,528 2.64 %5,474 
Non-taxable securitiesNon-taxable securities39,754 1.89 %189 27,711 3.04 %212 Non-taxable securities67,196 1.95 %323 21,719 3.04 %164 
Short-term investments, primarily interest-bearing cashShort-term investments, primarily interest-bearing cash495,771 0.64 %802 310,781 2.42 %1,898 Short-term investments, primarily interest-bearing cash494,233 0.57 %700 226,797 1.95 %1,098 
Total interest-earning assetsTotal interest-earning assets6,294,556 3.71 %58,688 5,440,013 4.55 %62,381 Total interest-earning assets6,898,406 3.41 %58,009 5,595,937 4.46 %62,033 
Cash and due from banksCash and due from banks89,282 54,132 Cash and due from banks80,898 63,218 
Premises and equipmentPremises and equipment116,660 117,342 Premises and equipment121,798 114,323 
Other assetsOther assets403,614 410,492 Other assets376,724 409,620 
Total assetsTotal assets$6,904,112 $6,021,979 Total assets$7,477,826 $6,183,098 
LiabilitiesLiabilitiesLiabilities
Interest bearing checkingInterest 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 depositsMoney market deposits1,407,314 0.29 %1,014 1,124,240 0.68 %1,915 Money market deposits1,650,387 0.23 %918 1,203,129 0.56 %1,683 
Savings depositsSavings deposits483,089 0.12 %152 416,732 0.29 %307 Savings deposits538,781 0.10 %130 426,225 0.25 %269 
Time deposits >$100,000Time deposits >$100,000604,887 1.15 %1,747 692,417 2.02 %3,519 Time deposits >$100,000555,180 0.63 %858 644,113 1.83 %2,924 
Other time depositsOther time deposits236,672 0.58 %347 261,424 0.79 %518 Other time deposits224,045 0.39 %216 250,860 0.78 %489 
Total interest-bearing depositsTotal interest-bearing deposits3,797,447 0.37 %3,533 3,377,815 0.77 %6,597 Total interest-bearing deposits4,172,335 0.23 %2,388 3,423,331 0.68 %5,773 
BorrowingsBorrowings81,362 2.06 %422 300,714 2.65 %2,006 Borrowings61,405 2.53 %383 316,136 1.91 %1,501 
Total interest-bearing liabilitiesTotal interest-bearing liabilities3,878,809 0.41 %3,955 3,678,529 0.93 %8,603 Total interest-bearing liabilities4,233,740 0.27 %2,771 3,739,467 0.78 %7,274 
Noninterest bearing checkingNoninterest bearing checking2,085,345 1,460,759 Noninterest bearing checking2,301,780 1,526,868 
Other liabilitiesOther liabilities61,633 55,777 Other liabilities57,116 58,171 
Shareholders’ equityShareholders’ equity878,325 826,914 Shareholders’ equity885,190 858,592 
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 incomeNet yield on interest-earning assets and net interest income3.46 %$54,733 3.92 %$53,778 Net yield on interest-earning assets and net interest income3.25 %$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 spreadInterest rate spread3.30 %3.62 %Interest rate spread3.14 %3.68 %
Average prime rateAverage prime rate3.25 %5.27 %Average prime rate3.25 %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 20202021 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,
 20202019
($ 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 securities859,800 2.36 %15,203 706,300 2.81 %14,859 
Non-taxable securities26,471 2.37 %470 34,833 3.15 %820 
Short-term investments, primarily interest-bearing cash432,782 0.83 %2,688 347,335 2.58 %6,705 
Total interest-earning assets5,998,532 3.97 %$178,361 5,410,546 4.62 %187,138 
Cash and due from banks80,523 54,579 
Premises and equipment115,303 118,152 
Other assets411,290 403,364 
Total assets$6,605,648 $5,986,641 
Liabilities
Interest bearing checking$979,339 0.13 %$948 $894,488 0.14 %$966 
Money market deposits1,302,021 0.37 %3,617 1,093,736 0.62 %5,036 
Savings deposits454,805 0.17 %568 419,210 0.29 %903 
Time deposits >$100,000627,025 1.49 %6,996 709,247 1.93 %10,221 
Other time deposits243,404 0.69 %1,251 262,424 0.70 %1,372 
Total interest-bearing deposits3,606,594 0.50 %13,380 3,379,105 0.73 %18,498 
Borrowings228,295 1.68 %2,865 343,431 2.76 %7,092 
Total interest-bearing liabilities3,834,889 0.57 %16,245 3,722,536 0.92 %25,590 
Noninterest bearing checking1,840,133 1,405,830 
Other liabilities61,056 57,047 
Shareholders’ equity869,570 801,228 
Total liabilities and
shareholders’ equity
$6,605,648 $5,986,641 
Net yield on interest-earning assets and net interest income3.61 %$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 spread3.40 %3.70 %
Average prime rate3.64 %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 thirdfirst quarter of 20202021 were $4.786$4.684 billion, which was $431$171 million, or 9.9%3.8%, higher than the average loans outstanding for the thirdfirst quarter of 20192020 ($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 20202021 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 $245PPP loans since March 31, 2020. We had $241 million in outstanding PPP loans during the second quarteras 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% higher1.5% 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 taxabletotal 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 monthsquarter of 20202021 to the first nine monthsquarter of 2019. These increases were2020. This increase was due to higher levels of investment purchases that were made possible byarising from the cash provided by the high deposit growth experienced in recent periods.

For the thirdfirst 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 thirdfirst quarter of 20192020 ($311 million)227million). For the nine months ended September 30, 2020, averageThe 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 were2021 was also due to the high deposit growth experienced, as discussed in the following paragraph.
Average total deposits outstanding for the thirdfirst quarter of 20202021 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 thirdfirst quarter of 20192020 ($4.8394.950 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 monthsquarter of 20202021 to the first nine monthsquarter 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, 2020March 31, 2021 were 15.7% and 10.9%23.3% higher than for the comparable periodsperiod 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 thirdfirst quarter of 20202021 was 3.48%3.27%, which was 4769 basis points lower than the 3.95%3.96% realized in the thirdfirst quarter of 2019. For the nine months ended September 30, 2020, our net interest2020. 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 resultedplayed a significant role in our interest-earning asset yields declining by more than our cost of funds. Forfunds 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 yieldassets 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 3551 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 impactDecember 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 marginnote 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 originationloan fees, that will be recognized over the lives of the loans, with accelerated amortization expectedwhich $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 thirdfirst quarter of 2019. For2021, compared to $1.8 million in the nine months ended September 30, 2020 and 2019, we recorded loan discount accretionfirst quarter of $4.8 million and $4.5 million, respectively.2020. The higherlower loan discount accretion was primarily attributable to higherlower accretion on SBAacquired loans due to growththe 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 loancredit losses in the first quarter of $6.12021 compared to $5.6 million in the thirdfirst quarter of 2020 compared to a negative2020. 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 werewas primarily related to estimated probableincurred loan losses arising from the economic impact of COVID-19. With the onset ofassociated 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, withdetermined that no provisions for credit losses were necessary as it relates to loans, on deferral status amountingunfunded 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 LoanCredit Losses and Provision for Loan Losses" below for additional informationCredit Losses."

Total noninterest income was $21.5 million and $15.2 million for the three months ended September 30, 2020 and 2019, respectively. Forfirst 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 millionin 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 thirdfirst quarter of 20202021, an 18.1% decrease compared to $3.4$3.3 million in the thirdfirst 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 aredecline 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 monthsquarter of 2019. Bankcard revenue, including debit and credit card interchange income, comprises2021, an increase of 35.7% from the majority of this line item. Bankcard revenue$4.1 million for the thirdfirst quarter of 2020. The increase was primarily due to a $0.9 million increase in bankcard revenue. Additionally, the first quarter of 2020 amountedincluded 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 thirdfirst quarter of 20202021, an increase of 146.8%, compared to $1.3$1.8 million in the thirdfirst 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 increasesincrease in 2020 were2021 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 periodsperiod presented, amounting to approximately $2.4$2.2 million and $2.2$2.1 million for the thirdfirst quarters of 20202021 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. Forfor the first nine monthsquarter, an increase of 2020 and 2019, SBA consulting fees amounted169.1%, compared to $6.7$1.0 million and $2.8 million, respectively.for the first quarter of 2020. The increases in 2020 wereincrease was due to fees earned inby the second and third quarters by ourCompany'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 PPPPPP-related fees for the three and nine months ended September 30, 2020.March 31, 2021. At March 31, 2021, SBA Complete also recorded $1.6had $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 quartersquarter of 2020 due to the economic impact of COVID-19, while during the third2020. The first quarter of 2020 SBA loan sales increased due to increasedwas significantly impacted by temporary pandemic-related market activity.

During the secondconditions. 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 be2021 was favorably impacted by historically low interest rates and Federal Reserve stimulus measures. Securities gainsthe 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 quarterfirst 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, 20202021 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 $26.0which includes salaries expense and employee benefit expense, was unchanged at $24.7 million infor each of the third quarterfirst 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 performance2021 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 thirdfirst quarter of 20192020 to $0.9 million in the thirdfirst 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 amongwere $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 thirdfirst 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 wereincrease 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 Company2021 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. ForThe 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 incomeloss of $0.1$18.5 million during the thirdfirst quarter of 20202021 compared to other comprehensive income of $1.7$16.1 million during the thirdfirst 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, 2020March 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, 2020March 31, 2021 amounted to $4.8$4.6 billion, an 8.1% increasea 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 ninethree 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 AcquisitionsBalance at
end of
period
Total
percentage
growth
January 1, 2021 to March 31, 2021January 1, 2021 to March 31, 2021Balance at
beginning
of period
Internal
Growth,
net
Growth from AcquisitionsBalance at
end of
period
Total
percentage
growth
Total loansTotal 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 checkingDeposits – Noninterest bearing checking1,515,977 605,377 — 2,121,354 39.9 %Deposits – Noninterest bearing checking2,210,012 220,186 — 2,430,198 10.0 %
Deposits – Interest bearing checkingDeposits – Interest bearing checking912,784 189,559 — 1,102,343 20.8 %Deposits – Interest bearing checking1,172,022 86,478 — 1,258,500 7.4 %
Deposits – Money marketDeposits – Money market1,173,107 351,603 — 1,524,710 30.0 %Deposits – Money market1,581,364 139,866 — 1,721,230 8.8 %
Deposits – SavingsDeposits – Savings424,415 68,531 — 492,946 16.1 %Deposits – Savings519,266 48,449 — 567,715 9.3 %
Deposits – BrokeredDeposits – Brokered86,141 (49,405)— 36,736 (57.4)%Deposits – Brokered20,222 (10,761)— 9,461 (53.2)%
Deposits – Internet timeDeposits – Internet time698 (449)— 249 (64.3)%Deposits – Internet time249 — — 249 — %
Deposits – Time>$100,000Deposits – Time>$100,000563,108 (13,685)— 549,423 (2.4)%Deposits – Time>$100,000543,894 (18,085)— 525,809 (3.3)%
Deposits – Time<$100,000Deposits – Time<$100,000255,125 (22,660)— 232,465 (8.9)%Deposits – Time<$100,000226,567 (6,242)— 220,325 (2.8)%
Total depositsTotal 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 ninethree months of 2020, total loan growth was $360.32021, loans declined $107.3 million, or 8.1%2.3%. Loan growth forOur level of outstanding loans has been negatively impacted by high mortgage loan refinancing activity, commercial loan payoffs, and soft demand arising from the periodpandemic. 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 drivenoffset by the origination of $244.9$111 million in PPP loans. Loan growth forforgiveness 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. Ourloan forgiveness, we expect to experience organic loan growth was driven by our continued expansion into high-growth markets, our hiringduring 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, 2020March 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 ninethree 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 ninethree 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, 20192020 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, 2020As of/for the quarter ended December 31, 2019
ASSET QUALITY DATA ($ in thousands)
As of/for the quarter ended March 31, 2021As of/for the quarter ended December 31, 2020
Nonperforming assetsNonperforming assetsNonperforming assets
Nonaccrual loansNonaccrual loans$31,656 24,866 Nonaccrual loans$39,566 35,076 
TDR's – accruing9,896 9,053 
TDRs – accruingTDRs – accruing8,601 9,497 
Accruing loans >90 days past dueAccruing loans >90 days past due— — Accruing loans >90 days past due— — 
Total nonperforming loansTotal nonperforming loans41,552 33,919 Total nonperforming loans48,167 44,573 
Foreclosed real estateForeclosed real estate2,741 3,873 Foreclosed real estate1,811 2,424 
Total nonperforming assetsTotal 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 AssetsAsset Quality Ratios – All AssetsAsset Quality Ratios – All Assets
Net charge-offs to average loans - annualizedNet charge-offs to average loans - annualized(0.06)%0.09 %Net charge-offs to average loans - annualized0.10 %0.07 %
Nonperforming loans to total loansNonperforming loans to total loans0.86 %0.76 %Nonperforming loans to total loans1.04 %0.94 %
Nonperforming assets to total assetsNonperforming assets to total assets0.63 %0.62 %Nonperforming assets to total assets0.65 %0.64 %
Allowance for loan losses to total loansAllowance for loan losses to total loans1.02 %0.48 %Allowance for loan losses to total loans1.42 %1.11 %
Allowance for loan losses to nonperforming loansAllowance for loan losses to nonperforming loans118.47 %63.09 %Allowance for loan losses to nonperforming loans136.71 %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, 20192020 to September 30, 2020,March 31, 2021, which was primarily driven by three loans in the $2-$4one borrower relationship amounting to $5.5 million range being placed on nonaccrual status in the secondfirst quarter of 2020 that were2021 and which was not directly related to the impact of the pandemic. Due primarily to the SBA'sgovernment stimulus and the Company's COVID-19 deferral relief programs, the nonperforming asset level at September 30, 2020 doesMarch 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. Oneone borrower relationship.

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The following is the composition, by loan type, of those threeall 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, 2021At December 31, 2020
Commercial, financial, and agricultural$10,330 9,681 
Real estate – construction, land development, and other land loans540 643 
Real estate – mortgage – residential (1-4 family) first mortgages6,207 6,048 
Real estate – mortgage – home equity loans/lines of credit1,676 1,333 
Real estate – mortgage – commercial and other20,654 17,191 
Consumer loans159 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, 2020March 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 DecemberMarch 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, 2020At December 31, 2019
Commercial, financial, and agricultural$8,473 5,518 
Real estate – construction, land development, and other land loans872 1,067 
Real estate – mortgage – residential (1-4 family) first mortgages5,742 7,552 
Real estate – mortgage – home equity loans/lines of credit1,594 1,797 
Real estate – mortgage – commercial and other14,795 8,820 
Consumer loans180 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, 2020At December 31, 2019
Vacant land and farmland$1,128 1,752 
1-4 family residential properties648 974 
Commercial real estate965 1,147 
Total foreclosed real estate$2,741 3,873 

2021.
The following table presents geographic information regarding our nonperforming assetsloans (nonaccrual loans and TDRs) at September 30, 2020.March 31, 2021.
As of September 30, 2020As of March 31, 2021
($ in thousands)($ in thousands)Total
Nonperforming
Loans
Total LoansNonperforming
Loans to Total
Loans
Total
Foreclosed
Real Estate
($ in thousands)Total
Nonperforming
Loans
Total LoansNonperforming
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 RegionSouth Carolina Region1,247 219,512 0.57 %423 South Carolina Region763 202,007 0.38 %40 
Former Virginia RegionFormer Virginia Region82 — — %264 Former Virginia Region81 336 24.11 %209 
OtherOther14,308 435,010 3.29 %259 Other17,559 431,325 4.07 %751 
TotalTotal$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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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 March 31, 2021At December 31, 2020
Vacant land and farmland$610 753 
1-4 family residential properties214 517 
Commercial real estate987 1,154 
Total foreclosed real estate$1,811 2,424 

Allowance for LoanCredit Losses and Provision for LoanCredit Losses
As previously noted, and as permitted by the CARES Act,On January 1, 2021, we elected to defer the implementationadopted 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 monthsunfunded commitments, which is recorded within Other Liabilities. The tax-effected impact of 2020 is based on the information availablethose two items amounted to $17.1 million and the conditions that existed at September 30, 2020 relatedwas 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 chargesbased 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 “provisiondetermine 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 periodfirst quarter of 2021, and thus no provisions for credit losses recorded. The primary factors that resulted in whichthis determination were an immaterial change in loan balances outstanding, the charge is taken). Losses on loans are charged against the allowanceimmaterial change in the periodlevel 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 duringincludes 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 losses31,008 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 agricultural603 980 768 
Real estate – construction, land development & other land loans856 1,275 797 
Real estate – mortgage – residential (1-4 family) first mortgages594 705 521 
Real estate – mortgage – home equity loans / lines of credit373 629 513 
Real estate – mortgage – commercial and other584 575 550 
Consumer loans251 235 154 
Total recoveries3,261 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 period1.02 %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 CECL14,575 — — 
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 agricultural514 745 217 
Real estate – construction, land development & other land loans294 1,552 290 
Real estate – mortgage – residential (1-4 family) first mortgages87 754 91 
Real estate – mortgage – home equity loans / lines of credit11 487 83 
Real estate – mortgage – commercial and other262 621 47 
Consumer loans35 294 95 
Total recoveries1,203 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 period1.42 %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 LoansPercentage Deferred
Construction Loans$1,764 653,120 0.3 %
Farmland and Agriculture881 32,966 2.7 %
Home equity loans206 310,326 0.1 %
Residential first lien loans8,027 1,011,829 0.8 %
Multifamily loans23,441 197,424 11.9 %
Owner-Occupied Commercial Real Estate21,094 745,770 2.8 %
Non-Owner-Occupied Commercial Real Estate120,811 1,007,643 12.0 %
Commercial & Industrial Loans9,208 648,792 1.4 %
Loans to Municipalities— 138,353 — %
Consumer Loans190 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, 2020March 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 leveladoption of provisionCECL on January 1, 2021.

In addition to the allowance for loancredit losses in 2020.
Our ratio of allowance to totalon 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 recordwe maintain an allowance for lending-related commitments such as unfunded loan losses upon the acquisitioncommitments 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 exceedassociated 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 basisa 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 loanscurrent conditions and on a pooled basisreasonable 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, 2020March 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 reserveallowance levels are adequate to cover probable loan lossesat each period end, based on the loans outstandingrespective methodologies utilized, as of each reporting date.described above. It must be emphasized, however, that the determination of the reserveallowances 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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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, 2020March 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, 2020March 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, 2020March 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 DecemberMarch 31, 2019.2021.
Our overall liquidity has increased since December 31, 20192020 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, 20192020 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 20192020 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, 2020December 31,
2019
Risk-based capital ratios:  
Common equity Tier 1 to Tier 1 risk weighted assets12.89 %13.28 %
Minimum required Common Equity Tier 1 capital7.00 %7.00 %
Tier I capital to Tier 1 risk weighted assets13.98 %14.41 %
Minimum required Tier 1 capital8.50 %8.50 %
Total risk-based capital to Tier II risk weighted assets15.01 %14.89 %
Minimum required total risk-based capital10.50 %10.50 %
Leverage capital ratios:  
Tier 1 capital to quarterly average total assets10.13 %11.19 %
Minimum required Tier 1 leverage capital4.00 %4.00 %

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 March 31, 2021December 31, 2020
Risk-based capital ratios:  
Common equity Tier 1 to Tier 1 risk weighted assets13.16 %13.19 %
Minimum required Common Equity Tier 1 capital7.00 %7.00 %
Tier I capital to Tier 1 risk weighted assets14.24 %14.28 %
Minimum required Tier 1 capital8.50 %8.50 %
Total risk-based capital to Tier II risk weighted assets15.49 %15.37 %
Minimum required total risk-based capital10.50 %10.50 %
Leverage capital ratios:  
Tier 1 capital to quarterly average total assets9.60 %9.88 %
Minimum required Tier 1 leverage capital4.00 %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 SeptemberMarch 15, 2020,2021, the Company announced a quarterly cash dividend of $0.18$0.20 per share payable on October 23, 2020April 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 thirdfirst quarter of 2019.

2020.
SHARE REPURCHASES
For the three months ended September 30, 2020,March 31, 2021, we repurchased 305,100106,744 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 wereare 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 $1.9over $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 areMarch 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 maywill 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 approvedhave 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 arewith the net amount deferral amount initially being amortized as interest income over thetheir contractual lives of either two year maturities of the loansyears 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. Becauseas interest income. For the first three months of 2021, we amortized $3.0 million of the uncertaintiesPPP 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 timing2020 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 impactremainder of these loans has not been incorporated into2021, 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 ninefirst 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, 2020March 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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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
PeriodTotal 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, 2021106,744 37.81 106,744 $15,964,472 
March 1, 2021 to March 31, 2021— — — $15,964,472 
Total106,744 23.32 106,744 $15,964,472 
Footnotes to the Above Table

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Issuer Purchases of Equity Securities
PeriodTotal 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, 2020305,100 20.55 305,100 $11,298,850 
Total305,100 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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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
2.b
2.c
2.d
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
4.a
31.1
31.2
32.1
32.2
101The 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, 2020May 10, 2021BY:/s/  Richard H. Moore
 Richard H. Moore
Chief Executive Officer
(Principal Executive Officer),
and Director
 
November 9, 2020May 10, 2021BY:/s/  Eric P. Credle
 Eric P. Credle
Executive Vice President
and Chief Financial Officer

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