FIRST BANCORP /NC/
For the period ended Mar 31, 2025. Filed May 9, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 9, 2025
FBNC$64.60-0.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-06.
0000811589-24-000070
Item 2. – Management’s Discussion and Analysis of Consolidated Results of Operations and Financial ConditionCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-09.
0000811589-25-000024
Item 2. – Management’s Discussion and Analysis of Consolidated Results of Operations and Financial ConditionThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 144 previous paragraphs and 121 current paragraphs.
52 unchanged; 53 reworded; 16 added; 29 removed; 10 previous and 0 current paragraphs rearranged.
Tables are not compared: 13 previous and 13 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (16)
Current report
•Net interest margin ("NIM") on a tax-equivalent basis ("NIM-T/E") increased 47 basis points to 3.27% in the first quarter of 2025 from 2.80% in the first quarter of 2024 as a result of the lower cost of funds and higher yields on loans, securities, and other earning assets. The aforementioned decrease in borrowings along with a reduction in deposit costs further enhanced NIM-T/E from the prior year's like quarter.
Current report
•Noninterest income for the three months ended March 31, 2025 totaled $12.9 million, which was consistent with the comparable prior year period. Decreases from the like quarter of $0.8 million in SBA loan sale gains and $0.6 million in other income were partially offset by the $1.0 million securities loss in the first quarter of 2024.
Current report
•Noninterest expense of $57.9 million decreased $1.3 million, or 2.2%, for the quarter ended March 31, 2025 from the prior year. This decrease is attributable to a $1.0 million decrease in other operating expenses and a $0.9 million decrease in occupancy and equipment expenses, partially offset by a $0.8 million increase in personnel costs resulting from increased incentives and commissions driven by improved performance.
Current report
•The first quarter results include the $2.0 million reversal of provision related to the potential impact of Hurricane Helene. On an after-tax basis, this reversal increased our current quarter earnings by $1.5 million.
Current report
Adjusted net income and adjusted diluted EPS are non-GAAP financial measures that exclude the effect of the $2.0 million reversal of provision related to Hurricane Helene to GAAP basis net income and diluted EPS. Management believes these non-GAAP financial measures provide additional information that is useful to investors in evaluating our performance and may facilitate comparisons with other institutions in the banking industry as well as period-to-period comparisons. Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the Company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Non-GAAP measures have limitations as analytical tools, are not audited, and may not be comparable to other similarly titled financial measures used by other companies. Investors should not consider non-GAAP measures in isolation or as a substitute for analysis of the Company’s
Current report
results or financial condition as reported under GAAP. The following table reconciles net income and diluted EPS to adjusted net income and adjusted diluted EPS for the quarter ended March 31, 2025:
Current report
•Total cash and cash equivalents amounted to $772.4 million at March 31, 2025, representing a $264.9 million, or 52.2%, increase from December 31, 2024. Interest-bearing cash comprised $193.7 million of this increase.
Current report
•AFS securities increased $21.5 million, or 1.1%, during the quarter ended March 31, 2025.
Current report
•Total deposits were $10.7 billion at March 31, 2025, an increase of $214.1 million, or 2.03%, from December 31, 2024. Deposit growth during the quarter was evenly split between noninterest-bearing deposits, which saw an increase of $109.2 million, and interest-bearing deposits, which increased $105.0 million.
Current report
•Net interest income for the first quarter of 2025 was $92.9 million, an increase of $13.6 million from the like quarter. The increase in net interest income was primarily driven by our focused efforts to reduce borrowings and manage deposit costs after the rate cuts by the Federal Reserve in the second half of 2024, which saw the federal funds rate fall 100 basis points. We also focused on increasing loan yields as new originations were at higher rates than older loans. Further, securities yields increased as a result of the loss-earnback transaction in the fourth quarter of 2024.
Current report
•The Company’s NIM for the first quarter of 2025 was 3.27%, an increase of 47 basis points from the like quarter. Within interest-earning assets, the loss-earnback transaction in the securities portfolio during the fourth quarter of 2024 resulted in an increase of 50 basis points as compared to the like quarter. In addition, loan yields increased 7 basis points to 5.52%. Following the three rate cuts by the Federal Reserve between September and December of 2024, the rate on interest-bearing deposits fell 19 basis points from the like quarter to the first quarter of 2025.
Current report
The provision for credit losses was $1.1 million and $1.2 million for the three months ended March 31, 2025 and 2024, respectively.
Current report
The provision for loan losses for the first quarter of 2025 included $2.0 million reversal specifically attributed to Hurricane Helene and totaled $1.4 million as compared to $1.8 million for the first quarter of 2024. The provision for unfunded commitments reflected reversals of $0.3 million and $0.6 million for the three months ended March 31, 2025 and 2024, respectively.
Current report
Total noninterest expenses totaled $57.9 million and $59.2 million for the three months ended March 31, 2025 and 2024, respectively. The primary contributors to the $1.3 million, or 2.2%, decrease in noninterest expense for the first quarter of 2025 were the $0.9 million decrease in Occupancy and equipment expenses, the $0.4 million decrease in FDIC insurance costs, the $0.4 million decrease in Professional fees and the $0.4 million decrease in software licenses and other software costs, partially offset by increases of $0.8 million in Total personnel costs and $0.4 million in Non-credit losses. For the three months ended March 31, 2025, there was a continued overall effort by management to control costs and reduce expenses.
Current report
Total deposits amounted to $10.7 billion at March 31, 2025, an increase of $214.1 million, or 2.0%, from December 31, 2024. Organic growth accounted for the growth, as brokered deposits remained flat during the quarter.
Current report
The following table discloses shares of our common stock repurchased during the three months ended March 31, 2025.
Removed paragraphs (29)
Previous report
•Net interest margin ("NIM") on a tax-equivalent basis decreased in the third quarter of 2024 to 2.90% from 2.97% for the third quarter of 2023 as a result of the higher cost of funds and decreased loan accretion, partially offset by increases in market interest rates driving higher yields on loans and other earning assets.
Previous report
•Noninterest income for the three months ended September 30, 2024 totaled $13.6 million which was a decrease of $1.6 million, or 10.5%, from the comparable period of 2023 and was primarily related to an decrease in Other income, net, related to the timing of the recognition of gain and loss from other investment activity, which does not include available for sale or held to maturity securities.
Previous report
•Noninterest expense of $59.9 million for the quarter ended September 30, 2024 decreased $2.4 million, or 3.8%, from the three months ended September 30, 2023. This decrease is attributable to a $2.4 million decrease in other operating expenses.
Previous report
•These third quarter results include the potential impact of Hurricane Helene of $13.4 million, comprised of $13.0 million of provision for potential credit loss exposure in our footprint hardest hit by Helene, $0.3 million of estimated property damages and an additional $0.1 million of other impacts. After considering the tax effect of these items, our net income was reduced by $10.3 million.
Previous report
We earned net income of $72.7 million, or $1.76 diluted EPS, during the nine months ended September 30, 2024 compared to net income of $74.5 million, or $1.81 diluted EPS, for the nine months ended September 30, 2023. Adjusting for the potential impact from Hurricane Helene, our adjusted net income was $83.0 million, or $2.01 per diluted share, for the nine months ended September 30, 2024.
Previous report
•Net interest income for the nine months ended September 30, 2024 was $243.4 million, a 7.9% decrease from the $264.2 million recorded for the comparable period of 2023. The decrease in net interest income was driven by higher cost of funds, partially offset by higher yields on interest earning assets.
Previous report
•NIM on a tax-equivalent basis decreased to 2.86% for the nine months ended September 30, 2024 from 3.12% for the nine months ended September 30, 2023 related to higher cost of funds driven by increases in market rates and competition for deposits. Higher rates on interest-bearing liabilities and lower purchase accounting loan discount accretion were partially offset by increased loan yields from market rate increases and pricing on new loans.
Previous report
•For the nine months ended September 30, 2024, the Company recorded $15.9 million in provision for credit losses as compared to $14.9 million for the nine months ended September 30, 2023. The higher provision in 2024 was significantly impacted by the $13.0 million provision related to Hurricane Helene. The 2023 provision was primarily driven by the GrandSouth acquisition as follows: (1) a one-time provision of $12.2 million for non-credit deteriorated loans; and (2) a one-time initial provision for unfunded commitments of $1.9 million.
Previous report
•Noninterest income for the nine months ended September 30, 2024 totaled $41.1 million, a decrease of $1.9 million, or 4.4%, from the comparable period of 2023 primarily related to decreased Other income, net of $1.9 million and increased securities losses of $1.2 million, partially offset by an increase in SBA loan sale gains of $1.3 million.
Previous report
•Noninterest expense decreased $20.7 million, or 10.4%, to $177.3 million for the nine months ended September 30, 2024 as compared to the prior year period, primarily driven by a $13.5 million decrease in merger expenses resulting from the GrandSouth acquisition along with a $4.7 million decrease in other operating expenses and a $1.6 million decrease in personnel expense.
Previous report
•These 2024 year to date results include the potential impact of Hurricane Helene of $13.4 million. This comprised of $13.0 million of provision for potential credit loss exposure in our footprint hardest hit by Helene, $0.3 million of estimated property damages and an additional $0.1 million of other impacts. After considering the tax effect of these items, our net income was reduced by $10.3 million.
Previous report
•Total deposits were $10.5 billion at September 30, 2024, an increase of $473.3 million, or 4.72%, from December 31, 2023.
Previous report
•Capital grew during the quarter, keeping us well-capitalized by all regulatory standards. At September 30, 2024, our total common equity Tier 1 ratio was 14.37%, our Tier 1 risk-based capital ratio was 15.19% and our total risk-based capital ratio was 16.65%. All capital ratios grew during the quarter and from September 30, 2023.
Previous report
•During 2023, the Federal Reserve increased the fed funds rate four times for a total of 100 basis points, in addition to the substantial increases made during 2022. During 2024, the Federal Reserve did not change rates until mid September at which point the fed funds rate was reduced 50 basis points. These changes resulted in a decrease of 50 basis points in fed funds rates between September 2023 and September 2024, with an average prime rate of 8.43% for three months ended September 30, 2024, a slight decrease from the prior year period. During much of 2024, the market yield curve was inverted.
Previous report
•The decrease in NIM was directly related to higher rates on interest-bearing liabilities driven by the aforementioned short-term Federal Reserve rate increases in 2022 and 2023, the inverted yield curve in 2024 and the repricing of our deposits during the last year occurring at a more rapid pace than the increase in yields on interest-earning assets.
Previous report
Net interest income for the nine months ended September 30, 2024 amounted to $243.4 million, a decrease of $20.7 million, or 7.9%, from the $264.2 million recorded in the nine months ended September 30, 2023. As described above, the Federal Reserve actions from 2022 through 2024 affected market rates which had resulting impacts on the rates we paid or received in 2023 and 2024. Similar to the impact during the three months ended September 30, 2024, the decrease for the nine months ended September 30, 2024 was also driven by higher cost of funds, partially offset by increased yields on interest-earning assets. Our tax-equivalent NIM fell to 2.86% for the nine months ended September 30, 2024 from 3.12% for the nine months ended September 30, 2023 as discussed further below.
Previous report
(2) Includes accretion of discount on acquired loans of $6.7 million and $9.0 million for nine months ended September 30, 2024 and 2023, respectively.
Previous report
(3) Includes tax-equivalent adjustments of $2.2 million and $2.1 million for nine months ended September 30, 2024 and 2023, 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
Previous report
Overall, as demonstrated in the table above, the reduction in NIM, partially offset by higher earning asset volumes, drove the decrease in net interest income.
Previous report
•During 2023, the Federal Reserve increased the fed funds rate four times for a total of 100 basis points, in addition to the substantial increases made during 2022. During 2024, the Federal Reserve did not change rates until mid September at which point the fed funds rate was reduced 50 basis points. These changes resulted in a decrease of 50 basis points in fed funds rates between September 2023 and September 2024, with an average prime rate of 8.48% for nine months ended September 30, 2024, compared to 8.09% for the prior year period. During much of 2024, the market yield curve was inverted.
Previous report
•Average loan volumes for the nine months ended September 30, 2024 were $224.1 million higher than the same period in 2023 due to organic loan growth. In addition, interest rates on loans increased 22 basis points to 5.49% for the nine months ended September 30, 2024, resulting in an increase in loan interest income of $22.5 million.
Previous report
•Interest expense on borrowings decreased $6.0 million for the nine months ended September 30, 2024 as compared to the same period in 2023 due to the $173.3 million decrease in the average volume of borrowings between periods, partially offset by a 61 basis point increase in the rates on those borrowings. The lower balances were due in large part to a decreased reliance on short-term borrowings during 2024 as deposit growth provided additional liquidity. The remaining borrowings are longer term in nature and carry higher interest rates than those that were paid off.
Previous report
•NIM decreased 26 basis points between the comparable periods as higher loan yields and reduced cost of borrowings were more than offset by the higher cost of deposits, also driven by the increases in Fed funds rates during 2022 and 2023 and competition for deposits.
Previous report
The provision for credit losses was $14.2 million and zero for the three months ended September 30, 2024 and 2023, respectively, and $15.9 million and $14.9 million for the nine months ended September 30, 2024 and 2023, respectively.
Previous report
For the three months ended September 30, 2024 as compared to the same period in 2023, the higher provision was primarily due to the $13.0 million provision specifically attributed to Hurricane Helene. Generally improving economic forecasts that lead to a reduction in the reserves required for unfunded commitments during the three months ended September 30, 2024, but the effect was not as impactful as was the case in the three months ended September 30, 2023 by $0.6 million.
Previous report
For the nine months ended September 30, 2024 as compared to the same period in 2023, the higher provision was primarily due to the $13.0 million provision specifically attributed to Hurricane Helene and a $0.4 million increase in net charge off activity for the period, partially offset by generally improving economic forecasts that lead to a reduction in the reserves required for unfunded commitments. The provision for the nine months ended September 30, 2023 was directly related to the GrandSouth acquisition, which consisted of: (1) a one-time provision of $12.2 million for non-credit deteriorated loans; and (2) a one-time initial provision for unfunded commitments of $1.9 million.
Previous report
Total noninterest expenses totaled $59.9 million and $62.2 million for the three months ended September 30, 2024 and 2023, respectively, and $177.3 million and $198.0 million for the nine months ended September 30, 2024 and 2023, respectively. The primary contributors to the $2.4 million, or 3.8%, decrease in noninterest expense for the third quarter of 2024 as compared to the same period of 2023 were the $1.4 million decrease in "Other operating expenses", the $0.6 million decrease in "Non-credit losses," and the $0.5 million decrease in "Equipment related expenses," partially offset by an increase in "Total personnel expense" of $0.5 million. The primary contributors to the $20.7 million decrease for the nine months ended September 30, 2024 as compared to the same period in 2023 were the $13.5 million decrease in "Merger and acquisition expenses," the $2.7 million decrease in "Other operating expenses," the $1.7 million decrease in "Non-credit losses," and the $1.6 million decrease in "Total personnel expenses." The decline in "Other operating expenses" was primarily related to a $2.4 million charge in 2023 for the estimated termination costs associated with the Company's pension plan. For the three and nine months ended September 30, 2024, there was an overall effort my management to cut costs and control expenses.
Previous report
Total deposits amounted to $10.5 billion at September 30, 2024, an increase of $473.3 million, or 4.7%, from December 31, 2023. Brokered deposits decreased $3.1 million from year end, while organic growth from customer deposits totaled $476.4 million.
Reworded paragraphs (53)
Previous wording
Highlights of the results for the quarter and year-to-date period are presented below (refer also to additional discussion in the "Results of Operations" and "Financial Condition" sections following). Comparisons for the financial periods presented are impacted by the GrandSouth acquisition which was completed on January 1, 2023 with the related core system conversion occurring in March 2023.
Current wording
Highlights of the results for the first quarter of 2025 is presented below. Refer also to additional discussion in the "Results of Operations" and "Financial Condition" sections following.
Previous wording
We earned net income of $18.7 million, or $0.45 diluted EPS, during the three months ended September 30, 2024 compared to net income of $29.9 million, or $0.73 diluted EPS, for the three months ended September 30, 2023. The decrease in net income in the current year period as compared to the prior year period was driven primarily by a $14.2 million increase in provision for credit losses, $13.0 million of which was related to anticipated impact from Hurricane Helene and a higher cost of funds, partially offset by a higher yield on interest earning assets, both of which were driven by the overall interest rate environment for the past year. Adjusting for the impact from Hurricane Helene, our adjusted net income was $29.0 million, or $0.70 per diluted share, for the third quarter.
Current wording
We earned net income of $36.4 million, or $0.88 diluted EPS, during the first quarter of 2025 compared to net income of $25.3 million, or $0.61 diluted EPS, for the first quarter of 2024. The increase in net income in the current year was driven primarily by a $13.6 million increase in net interest income due to lower cost of funds and higher yield on interest earning assets, both of which were driven by the overall interest rate environment for the past year. Adjusting for the impact of the $2.0 million reversal of provision related to Hurricane Helene, our adjusted net income, which is a non-GAAP financial measure, was $34.9 million, or $0.84 per diluted share, for the first quarter.
Previous wording
•Net interest income for the third quarter of 2024 was $83.0 million, a 2.0% decrease from the $84.7 million recorded in the third quarter of 2023. The decrease in net interest income from the prior year period was driven by higher cost of funds, partially offset by higher yield on earning assets.
Current wording
•Net interest income for the first quarter of 2025 was $92.9 million, a 17.2% increase from the $79.3 million recorded in the first quarter of 2024. The increase in net interest income from the like quarter was driven by higher yields on earning assets and lower cost of funds. We also grew deposits and repaid the majority of our borrowings, thereby further reducing the cost of borrowings.
Previous wording
•We remained well-capitalized by all regulatory standards. Capital grew during the quarter with a total common equity Tier 1 ratio of 14.37%, Tier 1 risk-based capital ratio of 15.19% and total risk-based capital ratio of 16.65% at September 30, 2024, all growing for the quarter and from September 30, 2023.
Current wording
•We remained well-capitalized by all regulatory standards. Capital grew during the quarter with a total common equity Tier 1 ratio of 14.52%, Tier 1 risk-based capital ratio of 15.34% and total risk-based capital ratio of 16.80% at March 31, 2025, all increasing from March 31, 2024.
Previous wording
•The provision for credit losses for the third quarter of 2024 was $14.2 million, driven by an incremental provision of $13.0 million related to the potential exposure from Hurricane Helene and $2.1 million of net charge-off activity, partially offset by generally improving economic forecasts that lead to a reduction in the reserves required for unfunded commitments. See the "Allowance for Credit Losses, Allowance for Unfunded Commitments, and Loan Loss Experience" discussion in the Financial Condition section of Management's Discussion and Analysis.
Current wording
•The provision for credit losses for the first quarter of 2025 was $1.1 million, driven by $3.3 million of net charge-off activity, partially offset by a $2.0 million reduction in the incremental provision related to potential exposure from Hurricane Helene. Net charge-offs for the first quarter of 2025 included $1.3 million related to the sale of a credit relationship as the result of an accelerated resolution.
Previous wording
Total assets at September 30, 2024 amounted to $12.2 billion, a 0.3% increase from December 31, 2023, and was driven primarily by higher interest-bearing cash balances, partially offset by a short term strategy to intentional reduce investment securities and loan balances. The primary balance sheet changes are presented below.
Current wording
Total assets were $12.4 billion at March 31, 2025, a 2.4% increase from December 31, 2024. The increase was driven primarily by deposit growth generating investable funds that were deployed in interest-bearing cash, securities and loan balances. The primary balance sheet changes are presented below.
Previous wording
•Total loans amounted to $8.0 billion at September 30, 2024, reflecting a contraction of $136.6 million from December 31, 2023.
Current wording
•Total loans amounted to $8.1 billion at March 31, 2025, reflecting an increase of $8.4 million from December 31, 2024.
Previous wording
•Credit quality continued to be strong at September 30, 2024, with NPAs of 0.38% of total assets as of September 30, 2024, up slightly from 0.37% at December 31, 2023.
Current wording
•Credit quality continued to be strong at March 31, 2025, with NPAs of 0.27% of total assets as of March 31, 2025, down 3 basis points from 0.30% at December 31, 2024.
Previous wording
•On-balance sheet liquidity ratio was 17.7% at September 30, 2024. Available off-balance sheet sources totaled $2.4 billion at quarter end, resulting in a total liquidity ratio of 35.2%.
Current wording
•Our on-balance sheet liquidity ratio was 19.8% at March 31, 2025. Available off-balance sheet sources totaled $2.4 billion at quarter end, resulting in a total liquidity ratio of 36.4%.
Previous wording
The accounting principles we follow and our methods of applying these principles conform with GAAP and with general practices followed by the banking industry. Certain policies inherently have a greater reliance on the use of estimates, assumptions, or judgments and as such, have a greater possibility of producing results that could be materially different than originally reported. We have identified the determination of our ACL and related Allowance for Unfunded Commitments, as well as business combinations, related fair value measurements and goodwill determination to be the accounting areas that require the most subjective or complex judgments, estimates, and assumptions, and where changes in those judgments, estimates, and assumptions (based on new or additional
Current wording
The accounting principles we follow and our methods of applying these principles conform with GAAP and with general practices followed by the banking industry. Certain policies inherently have a greater reliance on the use of estimates, assumptions, or judgments and as such, have a greater possibility of producing results that could be materially different than originally reported. We have identified the determination of our ACL and related Allowance for Unfunded Commitments, as well as business combinations, related fair value measurements and goodwill determination to be the accounting areas that require the most subjective or complex judgments, estimates, and assumptions, and where changes in those judgments, estimates, and assumptions (based on new or additional information, changes in the economic climate and/or market interest rates, etc.) could have a significant effect on our financial statements. See the "Allowance for Credit Losses, Allowance for Unfunded Commitments, and Loan Loss Experience" discussion in the Financial Condition section of Management's Discussion and Analysis.
Previous wording
Net interest income for the three months ended September 30, 2024 amounted to $83.0 million, a decrease of $1.7 million, or 2.0%, from the $84.7 million recorded in the third quarter of 2023. The decrease was primarily driven by higher cost of funds, partially offset by higher yields on earning assets. While average interest-earning assets for the third quarter of 2024 increased $83.9 million, or 0.7%, from the comparable period of the prior year, the mix of assets shifted to higher earning assets, with average loans growing $79.9 million and short term investments growing $400.0 million, while taxable securities decreased $391.5 million. The increase in the cost of interest bearing deposits of 64 basis points between the third quarter of 2023 and the third quarter of 2024 more than offset improvements from earning asset mix changes and higher yields. This resulted in the reduction in our tax-equivalent NIM (see discussion below) from 2.97% for the third quarter of 2023 to 2.90% for the third quarter of 2024.
Current wording
Net interest income for the first quarter of 2025 amounted to $92.9 million, an increase of $13.6 million, or 17.2%, from the $79.3 million recorded in the first quarter of 2024. The increase was primarily driven by lower cost of funds and higher yields on interest-earning assets. While average interest-earning assets for the first quarter of 2025 increased $38.9 million, or 0.3%, from the comparable period of the prior year, the mix of assets shifted to higher earning assets, with average short-term investments growing $225.4 million, while average taxable securities decreased $186.2 million. While the cost of interest bearing deposits decreased 19 basis points between the first quarter of 2024 and the first quarter of 2025, the biggest decrease within interest expense between the first quarter of 2025 and the like quarter was in cost of short-term borrowings, which decreased $6.5 million. This decrease was mostly attributable to the payoff of FRB Bank Term Funding Program borrowings, which decreased the average borrowing balance by $476.8 million from the like quarter. This resulted in the 47 basis point improvement in our NIM-T/E (see discussion below) from the like quarter to 3.27% for the first quarter of 2025.
Previous wording
For internal purposes, we evaluate our NIM on a tax-equivalent basis by adding the tax benefit realized from tax-exempt loans and securities to reported interest income then dividing by total average earning assets. We believe that analysis of tax-equivalent NIM is useful and appropriate because it allows a comparison of net interest income in different periods without taking into account the different mix of taxable versus non-taxable loans and investments that may have existed during those periods.The following is a reconciliation of reported net interest income to tax-equivalent net interest income and the resulting NIM as reported and on a tax-equivalent basis.
Current wording
For internal purposes, we evaluate our NIM-T/E, which is a non-GAAP financial measure, by adding the tax benefit realized from tax-exempt loans and securities to reported interest income then dividing by total average earning assets. We believe that analysis of NIM-T/E is useful and appropriate because it allows a comparison of net interest income in different periods without taking into account the different mix of taxable versus non-taxable loans and investments that may have existed during those periods.The following is a reconciliation of reported net interest income to tax-equivalent net interest income and the resulting NIM to NIM-T/E.
Previous wording
The following table presents an analysis of net interest income for the three months ended September 30, 2024 and 2023:
Current wording
The following table presents an analysis of net interest income for the first quarter of 2025 and 2024:
Previous wording
(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 net deferred loan (cost)/fee amortization in the amounts of $(342,000), and $52,000 for three months ended September 30, 2024 and 2023, respectively.
Current wording
(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 net deferred loan (cost)/fee amortization in the amounts of $(0.4) million, and $(0.1) million for three months ended March 31, 2025 and 2024, respectively.
Previous wording
(2) Includes accretion of discount on acquired loans of $2.0 million and $2.8 million for three months ended September 30, 2024 and 2023, respectively.
Current wording
(2) Includes accretion of discount on acquired loans of $2.2 million and $2.9 million for three months ended March 31, 2025 and 2024, respectively.
Previous wording
(3) Includes tax-equivalent adjustments of $722,000 and $740,000 for three months ended September 30, 2024 and 2023, 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.
Current wording
(3) Includes tax-equivalent adjustments to reflect the tax benefit that we receive related to tax-exempt securities and loans as reduced by the related nondeductible portion of interest expense.
Previous wording
Overall, as demonstrated in the table above, despite the change in the mix of earning assets to higher yielding assets, the compression in NIM drove the decrease in net interest income.
Current wording
Overall, as demonstrated in the table above, the change in the mix of earning assets to higher yielding assets and a decrease in the cost of liabilities drove the expansion in NIM and net interest income. While not impacting NIM-T/E, net interest income was impacted by the one less earning day in the first quarter of 2025 compared to the first quarter of 2024.
Previous wording
•Average loan volumes for the three months ended September 30, 2024 were $79.9 million higher than the same period in 2023. In addition, interest rates on loans increased 19 basis points to 5.51% for the third quarter of 2024, resulting in an increase in interest income on loans of $4.6 million.
Current wording
•Average loan volumes for the three months ended March 31, 2025 were $4.0 million higher than the same period in 2024. In addition, interest rates on loans increased 7 basis points to 5.52% for the first quarter of 2025, resulting in an increase in interest income on loans of $0.7 million.
Previous wording
•Due to the impact of the aforementioned fed funds increases in 2022 and 2023 and the resulting increased market rates along with higher average balances, deposit interest expense for the three months ended September 30, 2024 increased $13.8 million compared to the same period in 2023. Average interest-bearing deposit balances increased $500.6 million while rates on those deposits increased 64 basis points as compared to the same period in the prior year.
Current wording
•Due to the impact of the aforementioned Federal Reserve rate cuts in 2024 and the resulting decreased market rates partially offset by higher average balances, deposit interest expense for the three months ended March 31, 2025 decreased $1.0 million compared to the same period in 2024. Average interest-bearing deposit balances increased $453.1 million while rates on those deposits decreased 19 basis points basis points as compared to the same period in the prior year.
Previous wording
•Average borrowings were $341.7 million lower in the third quarter of 2024 as compared to the third quarter of 2023 due in large part to the decreased utilization of short-term borrowings to fund loan growth and manage fluctuations in deposit balances. This decrease in volume of borrowings between periods was partially offset by higher rates on the remaining borrowings, with overall rates increasing 209 basis points in the third quarter of 2024 from the third quarter of 2023. These changes resulted in the $4.6 million decrease in interest expense on borrowings.
Current wording
•Average borrowings were $486.0 million lower in the first quarter of 2025 as compared to the first quarter of 2024 due in large part to the decreased utilization of short-term borrowings. This decrease in volume of borrowings between periods was mainly attributable to the pay off of the FRB Bank Term Funding Program and FHLB Fixed Rate Credit borrowings, which,during the first quarter of 2024, had an average balance of approximately $477.6 million and carried an interest rate of 5.15%. Coupled with the payoff of $10.0 million of subordinated debt with an interest rate of 8.99% as of March 31, 2024, these changes resulted in the $6.5 million decrease in interest expense on borrowings.
Previous wording
At September 30, 2024 and 2023, unaccreted loan discounts on purchased loans amounted to $17.3 million and $26.5 million, respectively. The GrandSouth acquired portfolio comprised the majority of the remaining unaccreted loan discount at September 30, 2024.
Current wording
At March 31, 2025 and 2024, unaccreted loan discounts on purchased loans amounted to $13.3 million and $21.6 million, respectively. The portfolio acquired with the GrandSouth Bancorporation acquisition on January 1, 2023 comprised the majority of the remaining unaccreted loan discount.
Previous wording
In addition to the loan discount accretion recorded on acquired loans, we recorded accretion on the discounts associated with the retained unguaranteed portions of SBA loans sold in the secondary market. The level of SBA
Current wording
In addition to the loan discount accretion recorded on acquired loans, we recorded accretion on the discounts associated with the retained unguaranteed portions of SBA loans sold in the secondary market. The level of SBA loan discount accretion will fluctuate relative to the SBA loan portfolio balances. At March 31, 2025 and 2024, the unaccreted loan discounts on SBA loans amounted to $2.5 million and $3.4 million, respectively.
Previous wording
Within the portions of Western North and South Carolina that were significantly impacted by Hurricane Helene, the Company identified borrowers with approximately $755 million of loans outstanding. Given that the storm impacted the area just prior to September 30, 2024 and recovery continues in many communities, the Company performed analyses to identify possible impacts from the storm and has reserved accordingly based upon the information available at this time. The Company applied increased reserve rates based upon severe economic factors to the approximately $755 million of loans in the path of Helene. Additionally, the Company performed an initial evaluation of the largest commercial loans in its impacted markets and applied incremental reserves to those loans that were suspected of having higher potential property damage or economic impact from the storm The incremental provision related to the potential exposure from Hurricane Helene added 0.16% to the ACL as of September 30, 2024.
Current wording
Within the portions of Western North and South Carolina that were significantly impacted by Hurricane Helene, the Company identified borrowers with approximately $722 million of loans outstanding. The Company continues to evaluate possible impacts from the storm and has reserved accordingly based upon the information available at each reporting period since September 30, 2024. The Company applied increased reserve rates based upon severe economic factors to the approximately $722 million of loans in the path of Helene. Additionally, the Company performed an evaluation of the largest commercial loans in its impacted markets and applied incremental reserves to those loans that were suspected of having higher potential property damage or economic impact from the storm The incremental reserve related to the potential exposure from Hurricane Helene added 0.14% to the ACL as of March 31, 2025.
Previous wording
Our noninterest income amounted to $13.6 million and $15.2 million for the three months ended September 30, 2024 and 2023, respectively, and $41.1 million and $42.9 million for the nine months ended September 30, 2024 and 2023, respectively. The lower noninterest income in the current quarter as compared to the same prior year period is primarily the result of lower "Other income, net," partially offset by an increase in "Presold mortgage loan fees and gains on sale." The decreased noninterest income for the nine months ended September 30, 2024 as compared to the same period in 2023 is a result of "Securities losses, net" in 2024 and lower "Other income, net," partially offset by increased "SBA loan sale gains." Details of the more significant components of noninterest income are presented in the table below. For the three and nine months ended September 30, 2024, the change in "Other income, net" was related to the timing of the recognition of gain and loss from other investment activity, which does not include available for sale or held to maturity securities.
Current wording
Our noninterest income amounted to $12.9 million for the three months ended March 31, 2025 and 2024. Decreases of $0.8 million in SBA loan sale gains and $0.6 million in Other income were partially offset by the $1.0 million Securities losses, net in the first quarter of 2024. Details of the more significant components of noninterest income are presented in the table below.
Previous wording
We recorded income tax expense of $3.9 million and $7.8 million for the three months ended September 30, 2024 and 2023, respectively. Our effective tax rate was 17.2% and 20.6% for the three months ended September 30, 2024 and 2023, respectively. The lower effective tax rate for 2024 was attributable primarily to decreased pretax income driven by the potential impact of Hurricane Helene. For the nine months ended September 30, 2024 and 2023, we recorded tax expense of $18.6 million and $19.8 million, respectively. Our effective tax rate was 20.4% and 21.0% for the nine months ended September 30, 2024 and 2023, respectively.
Current wording
We recorded income tax expense of $10.4 million and $6.5 million for the three months ended March 31, 2025 and 2024, respectively. Our effective tax rate was 22.2% and 20.5% for the three months ended March 31, 2025 and 2024, respectively.
Previous wording
Total assets at September 30, 2024 amounted to $12.2 billion, a $38.5 million, or 0.3%, increase from December 31, 2023 and was primarily related to higher interest-bearing cash balances, partially offset by reductions in investment securities and loan balances.
Current wording
Total assets at March 31, 2025 amounted to $12.4 billion, a $288.6 million, or 2.4%, increase from December 31, 2024 and was primarily related to higher interest-bearing cash, investment securities and loan balances.
Previous wording
Total loans at September 30, 2024 amounted to $8.0 billion, a decrease of $136.6 million, or 1.7%, from December 31, 2023. The mix of our loan portfolio remained substantially the same at September 30, 2024 as compared to December 31, 2023, with the exception of "Construction, development & other land loans," which, as a percentage of the loan portfolio, fell from 12% at December 31, 2023 to 9% at September 30, 2024. The majority of our real estate loans were personal mortgages and commercial loans where real estate provides additional security for the loan. Note 4 to the consolidated financial statements presents additional detail regarding our mix of loans. At September 30, 2024, we had no notable concentrations in geographies or industries, including in office or hospitality categories. The Company's exposure to non-owner occupied commercial office loans represented approximately 5.7% of the total portfolio at September 30, 2024, with the largest loan being $26.6 million and the average loan outstanding balance being $1.3 million. Non-owner occupied office loans were generally in non-metro markets and the 10 largest loans in this category represented less than 2% of the total loan portfolio at September 30, 2024.
Current wording
Total loans at March 31, 2025 were $8.1 billion, an increase of $8.4 million, or 0.1%, from December 31, 2024. The mix of our loan portfolio remained substantially the same at March 31, 2025 as compared to December 31, 2024. The majority of our real estate loans were personal mortgages and commercial loans where real estate provides additional security for the loan. Note 3 to the consolidated financial statements presents additional detail regarding our mix of loans. At March 31, 2025, we had no notable concentrations in geographies or industries, including in office or hospitality categories. The Company's exposure to non-owner occupied commercial office loans represented approximately 6.0% of the total portfolio at March 31, 2025, with the largest loan being $26.3 million and the average outstanding loan balance being $1.3 million. Non-owner occupied office loans were generally in non-metro markets and the 10 largest loans in this category represented less than 2% of the total loan portfolio at March 31, 2025.
Previous wording
Total investment securities were $2.4 billion at September 30, 2024, a decrease of $293.8 million from December 31, 2023. During the three and nine months ended September 30, 2024, the Company made no purchases of investment securities. There were no sales of investment securities during the third quarter of 2024.
Current wording
Total investment securities were $2.6 billion at March 31, 2025, a decrease of $19.7 million from December 31, 2024. During the three months ended March 31, 2025, the Company purchased $10.0 million of investment
Previous wording
During the second quarter of 2024, the Company sold $142.9 million of available for sale investment securities at a $4.7 million loss that was substantially offset by the $4.5 million gain on sale of the VISA B shares during that quarter. The call of a security during the first quarter of 2024 resulted in a loss of $975 thousand related to the unamortized premium balance. In addition, the Company continues to utilize cash flows from investment securities to fund earning assets and repay borrowings and brokered deposits.
Current wording
securities. There were no sales of investment securities during the first quarter of 2025. The unanticipated call of a security during the first quarter of 2024 resulted in a loss of $975 thousand related to the unamortized premium balance. In addition, the Company continues to utilize cash flows from investment securities to fund other earning assets.
Previous wording
The composition of our investment portfolio remained substantially the same at September 30, 2024 as at December 31, 2023, with the exception of U.S. Treasuries, of which $175.9 million was sold or matured during the first nine months of 2024 and Mortgage-backed securities, of which $34.6 million and $169.3 million were sold, matured or were paid down during the three and nine months ended September 30, 2024, respectively. The composition of the investment portfolio continued to reflect our investment strategy of maintaining an appropriate level of liquidity while providing a stable source of income. The investment portfolio also provides a balance to interest rate risk and credit risk in other categories of the balance sheet while providing a vehicle for the investment of available funds, furnishing liquidity, and supplying securities to pledge as required collateral for certain deposits.
Current wording
The composition of our investment portfolio remained substantially the same at March 31, 2025 as at December 31, 2024, with the exception of Corporate bonds, which increased $10.0 million due to the aforementioned purchase.
Previous wording
The unrealized loss on available for sale securities totaled $331.5 million at September 30, 2024. Refer to Note 3 to the consolidated financial statements for additional detailed information regarding our mix of investments and the unrealized losses for each category. We evaluated the unrealized losses on individual securities at September 30, 2024 and determined them to be of a temporary nature due primarily to interest rate factors and not credit quality concerns. In arriving at this conclusion, we reviewed third-party credit ratings and considered the severity of the impairment.
Current wording
The unrealized loss on AFS securities totaled $321.2 million at March 31, 2025. Refer to Note 2 to the consolidated financial statements for additional detailed information regarding our mix of investments and the unrealized losses for each category. We evaluated the unrealized losses on individual securities at March 31, 2025 and determined them to be of a temporary nature due primarily to interest rate factors and not credit quality concerns. In arriving at this conclusion, we reviewed third-party credit ratings and considered the severity of the impairment.
Previous wording
We continue to have a diversified and granular deposit base which has remained stable with continued growth in customer deposits, primarily money market accounts. Our deposit mix has remained relatively consistent and has not changed significantly and there has been no notable shift in deposits from noninterest-bearing to interest-bearing.
Current wording
We continue to have a diversified and granular deposit base which has remained stable with continued growth in customer deposits, primarily money market accounts. Our deposit mix has remained relatively consistent and has not changed significantly.
Previous wording
As of September 30, 2024, the estimated insured deposits totaled $6.5 billion or 61.8% of total deposits. In addition, we had collateralized deposits at that date of $730.8 million such that approximately 68.7% of our total deposits were insured or collateralized at September 30, 2024.
Current wording
As of March 31, 2025, the estimated insured deposits totaled $6.5 billion or 60.2% of total deposits, while approximately $4.3 billion of the Company's total deposits were uninsured. In addition to insured deposits, there were deposits with a balance totaling $725.9 million at March 31, 2025 which were collateralized by investment securities such that approximately 66.9% of our total deposits were insured or collateralized at that date.
Previous wording
NPAs are defined as nonaccrual loans, modifications to borrowers in financial distress, loans past due 90 or more days and still accruing interest, and foreclosed real estate. NPAs are summarized as follows:
Current wording
NPAs are defined as nonaccrual loans, loans past due 90 or more days and still accruing interest, and foreclosed real estate. NPAs are summarized as follows:
Previous wording
As shown in the table above, total NPAs at September 30, 2024 increased slightly to $45.9 million from year end and related primarily to the $1.9 million increase in nonaccrual loans, partially offset by the $1.5 million decrease in modifications to borrowers in financial distress.
Current wording
As shown in the table above, total NPAs at March 31, 2025 decreased to $33.9 million from year end and related primarily to the $2.7 million decrease in nonaccrual loans.
Previous wording
"Commercial and industrial" is the largest category of nonaccrual loans, at $10.3 million, or 30.2%, of total nonaccrual loans, followed by "Commercial real estate - owner occupied" at $10.1 million, or 29.6%, of total nonaccrual loans. Included in various loan categories are nonaccrual SBA loans totaling $21.7 million at September 30, 2024, or 63.5% of total nonaccrual loans, and which have $11.8 million in guarantees from the SBA.
Current wording
Commercial and industrial is the largest category of nonaccrual loans, at $9.7 million, or 33.3%, of total nonaccrual loans, followed by Commercial real estate - owner occupied at $9.4 million, or 32.3% Included in various loan categories are nonaccrual SBA loans totaling $15.4 million at March 31, 2025, or 53.0% of total nonaccrual loans, and which have $6.7 million in guarantees from the SBA.
Previous wording
As reflected in Note 4 to the accompanying consolidated financial statements, total classified loans decreased 4.9% to $51.5 million at September 30, 2024 compared to $54.2 million at December 31, 2023. The decrease resulted primarily from improvements in "Home equity loans/lines of credit" loans of $1.9 million and "Commercial real estate - owner occupied" loans of $1.8 million, partially offset by an increase in "Residential 1-4 family real estate" of $2.0 million. Special mention loans increased 34.2% from $44.1 million at December 31, 2023 to $59.2 million at September 30, 2024. The majority of the increase was attributable to "Commercial real estate - owner occupied" loans, which increased $14.7 million.
Current wording
As reflected in Note 3 to the accompanying consolidated financial statements, total classified loans decreased 21.4% to $51.7 million at March 31, 2025 compared to $65.8 million at December 31, 2024. The decrease resulted primarily from improvements in Commercial real estate - owner occupied loans of $8.4 million and Commercial real estate - owner occupied loans of $3.7 million. Special mention loans decreased 14.37% to $31.8 million at March 31, 2025 compared to $37.1 million at December 31, 2024. The majority of the decrease was attributable to Commercial real estate - non owner occupied loans, which decreased $3.7 million.
Previous wording
The total allowance for credit losses amounted to $122.7 million at September 30, 2024 compared to $109.9 million at December 31, 2023. Fluctuations in the ACL are based on loan mix and growth, changes in the levels of
Current wording
The total allowance for credit losses amounted to $120.6 million at March 31, 2025 compared to $122.6 million at December 31, 2024. Fluctuations in the ACL are based on loan mix and growth, changes in the levels of
Previous wording
and as occurred in 2023, adjustments for acquired loan portfolios. As discussed previously in the "Provision for Credit Losses and Provision for Unfunded Commitments" section, much of the change to the level of ACL during the period ended September 30, 2024 was primarily related to the provision of $13.0 million related to potential impact from Hurricane Helene, slower prepayment assumptions and updated economic forecasts which are a key assumption in the CECL model and which indicated improvement in some factors, but also to a continued reduction of the commercial real estate pricing index, thus projecting a higher allowance for credit losses balance, partially offset by reductions in loan balances during the period. The ACL as a percent of loans at September 30, 2024 was 1.53%, 16 basis points of which was attributable to the potential impact from Hurricane Helene.
Current wording
nonperforming loans, economic forecasts impacting loss drivers, and other assumptions and inputs to the CECL model. As discussed previously in the "Provision for Credit Losses and Provision for Unfunded Commitments" section, much of the change to the level of ACL during the period ended March 31, 2025 was primarily related to the release of $2.0 million of the credit reserves arising from Hurricane Helene. The ACL as a percent of loans at March 31, 2025 was 1.49%, 14 basis points of which was attributable to the potential impact from Hurricane Helene.
Previous wording
Within the portions of Western North and South Carolina that were significantly impacted by Hurricane Helene, the Company identified borrowers with approximately $755 million of loans outstanding. The following is a summary of the categories of those loans outstanding as of September 30, 2024:
Current wording
Within the portions of Western North and South Carolina that were significantly impacted by Hurricane Helene, the Company identified borrowers with approximately $722 million of loans outstanding. The following is a summary of the categories of those loans outstanding as of March 31, 2025:
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Previous report — wording carried elsewhere
Overview and Highlights at and for Nine Months Ended September 30, 2024
Previous report — wording carried elsewhere
information, changes in the economic climate and/or market interest rates, etc.) could have a significant effect on our financial statements. See the "Allowance for Credit Losses, Allowance for Unfunded Commitments, and Loan Loss Experience" discussion in the Financial Condition section of Management's Discussion and Analysis.
Previous report — wording carried elsewhere
The following is a reconciliation of reported net interest income to tax-equivalent net interest income and the resulting NIM as reported and on a tax-equivalent basis.
Previous report — wording carried elsewhere
The following table presents an analysis of net interest income for the nine months ended September 30, 2024 and 2023.
Previous report — wording carried elsewhere
(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 (cost)/fee amortization (including deferred PPP fees), in the amounts of $(716,000), and $458,000 for nine months ended September 30, 2024 and 2023, respectively.
Previous report — wording carried elsewhere
•Primarily due to higher market rates as well as the increase in average balances, deposit interest expense for the nine months ended September 30, 2024 increased $51.4 million compared to the same period in 2023. Average interest-bearing deposit balances increased $467.0 million while rates on those deposits increased 87 basis points as compared to the same period in the prior year.
Previous report — wording carried elsewhere
loan discount accretion will fluctuate relative to the SBA loan portfolio balances. At September 30, 2024 and 2023, the unaccreted loan discounts on SBA loans amounted to $3.3 million and $4.0 million, respectively.
Previous report — wording carried elsewhere
nonperforming loans, economic forecasts impacting loss drivers, other assumptions and inputs to the CECL model,
Previous report — wording carried elsewhere
sheet arrangements of this kind other than letters of credit and repayment guarantees associated with our trust preferred securities and subordinated debentures.
Previous report — wording carried elsewhere
The following table presents the capital ratios for the Company and the regulatory minimums discussed above for the periods indicated: