Exhibit 99.4

THE FIRST BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS

($ in thousands)

	(Unaudited)
	March 31, 2024			December 31, 2023
ASSETS
Cash and due from banks	$	109,323		$	224,199
Interest-bearing deposits with banks		230,641			130,948
Total cash and cash equivalents		339,964			355,147
Securities available-for-sale, at fair value (amortized cost: $1,216,163 - 2024; $1,164,227 - 2023; allowance for credit losses: $0)		1,088,568			1,042,365
Securities held to maturity, net of allowance for credit losses of $0 (fair value: $577,343 - 2024; $615,944 - 2023)		622,574			654,539
Other securities		34,094			37,754
Total securities		1,745,236			1,734,658
Loans held for sale		4,241			2,914
Loans held for investment		5,139,952			5,170,042
Allowance for credit losses		(53,959	)		(54,032	)
Net loans held for investment		5,085,993			5,116,010
Interest receivable		34,954			33,300
Premises and equipment		173,225			174,309
Operating lease right-of-use assets		6,619			6,387
Finance lease right-of-use assets		1,350			1,466
Cash surrender value of bank-owned life insurance		135,148			134,249
Goodwill		272,520			272,520
Other real estate owned		6,743			8,320
Other assets		157,766			160,065
Total assets	$	7,963,759		$	7,999,345
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Noninterest-bearing	$	1,836,952		$	1,849,013
Interest-bearing		4,873,403			4,613,859
Total deposits		6,710,355			6,462,872
Interest payable		13,705			22,702
Borrowed funds		110,000			390,000
Subordinated debentures		123,472			123,386
Operating lease liabilities		6,783			6,550
Finance lease liabilities		1,693			1,739
Allowance for credit losses on off-balance sheet credit exposures		2,075			2,075
Other liabilities		35,764			40,987
Total liabilities		7,003,847			7,050,311
Shareholders’ equity:
Common stock, par value $1 per share, 80,000,000 shares authorized; 32,467,928 shares issued at March 31, 2024, and par value $1 per share, 80,000,000 shares authorized; 32,338,983 shares issued at December 31, 2023		32,468			32,339
Additional paid-in capital		775,442			775,232
Retained earnings		313,001			300,150
Accumulated other comprehensive (loss)		(119,888	)		(117,576	)
Treasury stock, at cost, 1,249,607 shares at March 31, 2024 and at December 31, 2023		(41,111	)		(41,111	)
Total shareholders’ equity		959,912			949,034
Total liabilities and shareholders’ equity	$	7,963,759		$	7,999,345

See Notes to Consolidated Financial Statements

THE FIRST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME

($ in thousands, except earnings and dividends per share)

	(Unaudited)
	Three Months Ended March 31,
	2024			2023
Interest and dividend income:
Interest and fees on loans	$	78,799		$	67,733
Interest and dividends on securities:
Taxable interest and dividends		8,302			8,759
Tax exempt interest		2,946			2,948
Interest on federal funds sold and interest-bearing deposits in other banks		1,616			898
Total interest income		91,663			80,338
Interest expense:
Interest on deposits		29,413			12,277
Interest on borrowed funds		4,909			3,135
Total interest expense		34,322			15,412
Net interest income		57,341			64,926
Provision for credit losses, LHFI		—			10,500
Provision for credit losses, OBSC exposures		—			500
Net interest income after provision for credit losses		57,341			53,926
Non-interest income:
Service charges on deposit accounts		3,367			3,657
Loss on securities		(48	)		—
Gain on sale of premises and equipment		—			662
Other		9,360			8,293
Total non-interest income		12,679			12,612
Non-interest expense:
Salaries and employee benefits		24,508			23,572
Occupancy and equipment		5,714			5,296
Acquisition expense/charter conversion		8			3,793
Other		13,195			13,009
Total non-interest expense		43,425			45,670
Income before income taxes		26,595			20,868
Income tax expense		5,967			4,597
Net income	$	20,628		$	16,271
Basic earnings per share	$	0.66		$	0.52
Diluted earnings per share		0.65			0.52

See Notes to Consolidated Financial Statements

THE FIRST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

($ in thousands)

	(Unaudited) Three Months Ended March 31,
	2024			2023
Net income	$	20,628		$	16,271
Other comprehensive (loss) income:
Unrealized holding (losses) gains arising during the period on available-for-sale securities		(3,237	)		24,249
Reclassification adjustment for (accretion) amortization of unrealized holdings gain/(loss) included in accumulated other comprehensive income from the transfer of securities available-for-sale to held-to-maturity		94			92
Reclassification adjustment for losses (gains) included in net income		48			—
Unrealized holding (losses) gains arising during the period on available-for-sale securities		(3,095	)		24,341
Income tax (expense) benefit		783			(6,158	)
Other comprehensive (loss) income		(2,312	)		18,183
Comprehensive income	$	18,316		$	34,454

See Notes to Consolidated Financial Statements

THE FIRST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

($ in thousands except per share data, unaudited)

	Common Stock						Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock						Total
	Shares			Amount												Shares			Amount
Balance, January 1, 2023		25,275,369		$	25,275		$	558,833		$	252,623		$	(148,957	)		(1,249,607	)	$	(41,111	)	$	646,663
Net income		—			—			—			16,271			—			—			—			16,271
Other comprehensive income		—			—			—			—			18,183			—			—			18,183
Dividends on common stock, $0.21 per share		—			—			—			(6,498	)		—			—			—			(6,498	)
Issuance of common shares for HSBI acquisition		6,920,422			6,920			214,602			—			—			—			—			221,522
Issuance of restricted stock grants		118,689			119			(119	)		—			—			—			—			—
Restricted stock grants forfeited		(500	)		(1	)		1			—			—			—			—			—
Repurchase of restricted stock for payment of taxes		(9,827	)		(9	)		(298	)		—			—			—			—			(307	)
Compensation expense		—			—			593			—			—			—			—			593
Balance, March 31, 2023		32,304,153		$	32,304		$	773,612		$	262,396		$	(130,774	)		(1,249,607	)	$	(41,111	)	$	896,427
Balance, January 1, 2024		32,338,983		$	32,339		$	775,232		$	300,150		$	(117,576	)		(1,249,607	)	$	(41,111	)	$	949,034
Net income		—			—			—			20,628			—			—			—			20,628
Other comprehensive loss		—			—			—			—			(2,312	)		—			—			(2,312	)
Dividends on common stock, $0.25 per share		—			—			—			(7,777	)		—			—			—			(7,777	)
Issuance of restricted stock grants		141,457			141			(141	)		—			—			—			—			—
Repurchase of restricted stock for payment of taxes		(12,512	)		(12	)		(302	)		—			—			—			—			(314	)
Compensation expense		—			—			653			—			—			—			—			653
Balance, March 31, 2024		32,467,928		$	32,468		$	775,442		$	313,001		$	(119,888	)		(1,249,607	)	$	(41,111	)	$	959,912

See Notes to Consolidated Financial Statements

5

THE FIRST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in thousands)

	(Unaudited)
	Three Months Ended March 31,
	2024			2023
Cash flows from operating activities:
Net income	$	20,628		$	16,271
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and accretion		3,700			3,336
Provision for credit loss		—			11,000
(Gain) loss on sale or write-down of ORE		(33	)		66
Securities loss		48			—
(Gain) loss on disposal of premises and equipment		—			(662	)
Restricted stock expense		653			593
Increase in cash value of life insurance		(899	)		(795	)
Federal Home Loan Bank stock dividends		(109	)		—
Residential loans originated and held for sale		(19,923	)		(21,900	)
Proceeds from sale of residential loans held for sale		18,596			22,270
Changes in:
Interest receivable		(1,654	)		2,089
Interest payable		(8,997	)		763
Operating lease liability		233			(1,186	)
Other, net		(2,009	)		(27,191	)
Net cash provided by operating activities		10,234			4,654
Cash flows from investing activities:
Available-for-sale securities:
Sales		—			170,625
Maturities, prepayments, and calls		75,302			31,173
Purchases		(128,487	)		—
Held-to-maturity securities:
Maturities, prepayments, and calls		32,658			14,044
Purchases of other securities		—			(7,631	)
Proceeds from other securities		3,769			7,979
Net decrease (increase) in loans		33,486			(33,405	)
Net changes in premises and equipment		(717	)		(1,066	)
Proceeds from sale of other real estate owned		768			456
Proceeds from the sale of premises and equipment		—			731
Cash received in excess of cash paid for acquisitions		—			106,973
Net cash provided by investing activities		16,779			289,879
Cash flows from financing activities:
Increase (decrease) in deposits		245,821			(219,484	)
Proceeds from borrowed funds		100,000			1,533,086

6

THE FIRST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED

($ in thousands)

Repayments of borrowed funds		(380,000	)		(1,413,186	)
Principal payments on finance lease liabilities		(46	)		(44	)
Dividends paid on common stock		(7,657	)		(6,422	)
Repurchase of restricted stock for payment of taxes		(314	)		(307	)
Net cash used in financing activities		(42,196	)		(106,357	)
Net change in cash and cash equivalents		(15,183	)		188,176
Beginning cash and cash equivalents		355,147			145,315
Ending cash and cash equivalents	$	339,964		$	333,491
	(Unaudited)
	Three Months Ended March 31,
	2024			2023
Supplemental disclosures:
Cash paid during the year for:
Interest	$	39,006		$	10,551
Income taxes, (net of refunds)		(162	)		(940	)
Non-cash activities:
Loans transferred to other real estate		842			—
Issuance of restricted stock grants		141			119
Dividends on restricted stock grants		120			76
Stock issued in connection with HSBI acquisition		—			221,522
Lease liabilities arising from obtaining right-of-use assets		482			—
Lease liabilities arising from HSBI acquisition		—			184

See Notes to Consolidated Financial Statements

THE FIRST BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

March 31, 2024

NOTE 1 – BASIS OF PRESENTATION

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements and the instructions to Form 10-Q of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2024, are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. For further information, please refer to the consolidated financial statements and footnotes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2023.

NOTE 2 – SUMMARY OF ORGANIZATION

The First Bancshares, Inc., Hattiesburg, Mississippi (the “Company”), was incorporated June 23, 1995, under the laws of the State of Mississippi for the purpose of operating as a bank holding company. The Company’s primary asset is its interest in its wholly-owned subsidiary, The First Bank (the “Bank” or “The First”).

At March 31, 2024, the Company had approximately $7.964 billion in assets, $5.086 billion in net loans held for investment (“LHFI”), $6.710 billion in deposits, and $959.9 million in shareholders’ equity. For the three months ended March 31, 2024, the Company reported net income of $20.6 million.

On February 23, 2024, the Company paid a cash dividend in the amount of $0.25 per share to shareholders of record as of the close of business on February 7, 2024. On April 24, 2024, the Company announced that its Board of Directors declared a cash dividend of $0.25 per share to be paid on its common stock on May 23, 2024 to shareholders of record as of the close of business on May 7, 2024.

NOTE 3 – ACCOUNTING STANDARDS

Effect of Recently Adopted Accounting Standards

In March 2023, FASB issued ASU No. 2023-01, Leases (Topic 842) - “Common Control Arrangements.” This ASU requires entities to determine whether a related party arrangement between entities under common control is a lease. If the arrangement is determined to be a lease, an entity must classify and account for the lease on the same basis as an arrangement with a related party. The ASU requires all entities to amortize leasehold improvements associated with common control leases over the useful life to the common control group. This guidance is effective for the Company January 1, 2024, and did not have a material impact on the Company’s consolidated financial statements.

In March 2023, FASB issued ASU No. 2023-02, Investments - Equity Method and Joint Venture (Topic 323): “Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method.” These amendments allow reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. This guidance is effective for the Company January 1, 2024, and did not have a material impact on the Company’s consolidated financial statements.

8

New Accounting Standards That Have Not Yet Been Adopted

In October 2023, FASB issued ASU No. 2023-06, “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.” This ASU amends the ASC to incorporate certain disclosure requirements from SEC Release No. 33-10532 - Disclosure Update and Simplification that was issued in 2018. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-K becomes effective, with early adoption prohibited. This guidance is not expected to have a material impact on the Company’s consolidated financial statements.

In November 2023, FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This ASU amends the ASC to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The key amendments: 1. Require that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit or loss. 2. Require that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition. The other segment items category is the difference between segment revenue less the significant expenses disclosed and each reported measure of segment profit or loss. 3. Require that a public entity provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by FASB ASU Topic 280, Segment Reporting, in interim periods. 4. Clarify that if the CODM uses more than one measure of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit. However, at least one of the reported segment profit or loss measures (or the single reported measure, if only one is disclosed) should be the measure that is most consistent with the measurement principles used in measuring the corresponding amounts in the public entity’s consolidated financial statements. 5. Require that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. 6. Require that a public entity has a single reportable segment provide all the disclosures required by the amendments in the ASU and all existing segment disclosures in Topic 280. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. This guidance is not expected to have a material impact on the Company’s consolidated financial statements.

In December 2023, FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This ASU amendments require that a public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate). The amendments require that all entities disclose on an annual basis the following information about income taxes paid: 1. The amount of income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes. 2. The amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received). The amendments also require that all entities disclose the following information: 1. Income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign. 2. Income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign. This ASU is effective for annual periods beginning after December 15, 2024. This guidance is not expected to have a material impact on the Company’s consolidated financial statements.

In March 2024, FASB issued ASU No. 2024-02, Codification Improvements - Amendments to Remove References to the Concepts Statements: This ASU amends the Codification to remove references to various concepts statements and impacts a variety of topics in the Codification. The amendments apply to all reporting entities within the scope of the affected accounting guidance, but in most instances the references removed are extraneous and not required to understand or apply the guidance. Generally, the amendments in ASU 2024-02 are not intended to result in significant accounting changes for most entities. This ASU is effective for annual periods beginning after December 15, 2024. This guidance is not expected to have a material impact on the Company’s consolidated financial statements.

NOTE 4 – BUSINESS COMBINATIONS

Acquisitions

Heritage Southeast Bank

On January 1, 2023, the Company completed its acquisition of Heritage Southeast Bancorporation, Inc. (“HSBI”), pursuant to an Agreement and Plan of Merger dated July 27, 2022, by and between the Company and HSBI (the “HSBI Merger Agreement”). Upon the completion of the merger of HSBI with and into the Company, Heritage Southeast Bank (“Heritage Bank”), HSBI’s wholly-owned subsidiary, was merged with and into The First Bank. Under the terms of the HSBI Merger Agreement, each share of HSBI common stock was converted into the right to receive 0.965 of a share of Company common stock. The Company paid a total consideration of $221.5 million to the former HSBI shareholders as consideration in the acquisition, which included 6,920,422 shares of the Company’s common stock, and $16 thousand in cash in lieu of fractional shares. The HSBI acquisition provided the opportunity for the Company to expand its operations in Georgia and the Florida panhandle.

In connection with the acquisition of HSBI, the Company recorded $91.9 million of goodwill, of which $3.2 million funded the ACL for estimated losses on the acquired PCD loans, and $43.7 million core deposit intangible. Goodwill is not deductible for income taxes. The core deposit intangible will be amortized to expense over 10 years.

The following table summarizes the finalized fair values of the assets acquired and liabilities assumed including the goodwill generated from the transaction on January 1, 2023, along with valuation adjustments that have been made since initially reported.

($ in thousands)	As Initially Reported		Measurement Period Adjustments			As Adjusted
Identifiable assets:
Cash and due from banks	$	106,973	$	(180	)	$	106,793
Investments		172,775		—			172,775
Loans		1,155,712		—			1,155,712
Core deposit intangible		43,739		—			43,739
Personal and real property		35,963		—			35,963
Other real estate owned		857		332			1,189
Bank owned life insurance		35,579		—			35,579
Deferred taxes		6,761		(632	)		6,129
Interest receivable		4,349		—			4,349
Other assets		3,103		—			3,103
Total assets		1,565,811		(480	)		1,565,331
Liabilities and equity:
Deposits		1,392,432		—			1,392,432
Trust Preferred		9,015		—			9,015
Other liabilities		34,271		—			34,271
Total liabilities		1,435,718		—			1,435,718
Net assets acquired		130,093		(480	)		129,613
Consideration paid		221,538		—			221,538
Goodwill	$	91,445	$	480		$	91,925

During the fourth quarter of 2023, the Company finalized its analysis and valuation adjustments have been made to cash and due from banks, other real estate owned, and deferred taxes since initially reported.

Beach Bancorp, Inc.

On August 1, 2022, the Company completed its acquisition of Beach Bancorp, Inc. (“BBI”), pursuant to an Agreement and Plan of Merger dated April 26, 2022, by and between the Company and BBI (the “BBI Merger Agreement”). Upon the completion of the merger of BBI with and into the Company, Beach Bank, BBI’s wholly-owned subsidiary, was merged with and into The First Bank. Under the terms of the BBI Merger Agreement, each share of BBI common stock and each share of BBI preferred stock was converted into the right to receive 0.1711 of a share of Company common stock (the “BBI Exchange Ratio”), and all stock options awarded under the BBI equity plans were converted automatically into an option to purchase shares of Company common stock on the same terms and conditions as applicable to each such BBI option as in effect immediately prior to the effective time, with the number of shares underlying each such option and the applicable exercise price adjusted based on the BBI Exchange Ratio. The BBI merger provides the opportunity for the Company to expand its operations in the Florida panhandle and enter the Tampa market. The Company paid consideration of $101.5 million to the former BBI shareholders including 3,498,936 shares of the Company’s common stock and $1 thousand in cash in lieu of fractional shares, and also assumed options entitling the owners thereof to purchase an additional 310,427 shares of the Company’s common stock.

In connection with the acquisition of BBI, the Company recorded $23.7 million of goodwill, of which $1.3 million funded the ACL for estimated losses on the acquired PCD loans, and $9.8 million core deposit intangible. Goodwill is not deductible for income taxes. The core deposit intangible will be amortized to expense over 10 years.

The following table summarizes the finalized fair values of the assets acquired and liabilities assumed including the goodwill generated from the transaction on August 1, 2022, along with valuation adjustments that have been made since initially reported.

($ in thousands)	As Initially Reported		Measurement Period Adjustments			As Adjusted
Purchase price:
Cash and stock	$	101,470	$	—		$	101,470
Total purchase price		101,470		—			101,470
Identifiable assets:
Cash	$	23,939	$	—		$	23,939
Investments		22,907		(264	)		22,643
Loans		482,903		2,268			485,171
Other real estate		8,797		(580	)		8,217
Bank owned life insurance		10,092		—			10,092
Core deposit intangible		9,791		—			9,791
Personal and real property		13,825		(1,868	)		11,957
Deferred tax asset		28,105		(970	)		27,135
Other assets		9,649		(414	)		9,235
Total assets		610,008		(1,828	)		608,180
Liabilities and equity:
Deposits		490,588		3			490,591
Borrowings		25,000		—			25,000
Other liabilities		14,772		—			14,772
Total liabilities		530,360		3			530,363
Net assets acquired		79,648		(1,831	)		77,817
Goodwill	$	21,822	$	1,831		$	23,653

During the third quarter of 2023, the Company finalized its analysis and valuation adjustments that have been made to investments, loans, other real estate, personal and real property, deferred tax asset, other assets, and deposits.

NOTE 5 – EARNINGS APPLICABLE TO COMMON SHAREHOLDERS

Basic per share data is calculated based on the weighted-average number of common shares outstanding during the reporting period. Diluted per share data includes any dilution from potential common stock outstanding, such as restricted stock grants. There were no anti-dilutive common stock equivalents excluded in the calculations.

The following tables disclose the reconciliation of the numerators and denominators of the basic and diluted computations applicable to common shareholders.

($ in thousands, except per share amount)	Three Months Ended March 31, 2024						Three Months Ended March 31, 2023
	Net Income (Numerator)		Shares (Denominator)		Per Share Data		Net Income (Numerator)		Shares (Denominator)		Per Share Data
Basic earnings per share	$	20,628		31,475,254	$	0.66	$	16,271		31,309,458	$	0.52
Effect of dilutive shares:
Restricted stock grants				155,491						231,755
Diluted earnings per share	$	20,628		31,630,745	$	0.65	$	16,271		31,541,213	$	0.52

The Company granted 141,457 shares and 118,689 shares of restricted stock in the first quarter of 2024 and 2023, respectively.

NOTE 6 – COMPREHENSIVE INCOME

As presented in the Consolidated Statements of Comprehensive Income (Loss), comprehensive income includes net income and other comprehensive income. The Company’s sources of other comprehensive income are unrealized gains and losses on available-for-sale securities, which are also recognized as separate components of equity.

NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. At March 31, 2024, and December 31, 2023, these financial instruments consisted of the following:

($ in thousands)	March 31, 2024				December 31, 2023
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	35,854	$	116,668	$	34,380	$	50,226
Unused lines of credit		208,878		606,400		231,335		605,646
Standby letters of credit		14,845		14,621		15,573		13,114

Commitments to make loans are generally made for periods of 90 days or less. The fixed rate loan commitments have interest rates ranging from 0.0% to 18.0% and maturities ranging from approximately 1 year to 30 years.

ALLOWANCE FOR CREDIT LOSSES (“ACL”) ON OFF BALANCE SHEET CREDIT (“OBSC”) EXPOSURES

The Company maintains a separate ACL on OBSC exposures, including unfunded commitments and letters of credit, which is included on the accompanying consolidated balance sheet as of March 31, 2024 and December 31, 2023. The ACL on OBSC 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.

Changes in the ACL on OBSC exposures were as follows for the presented periods:

($ in thousands)	Three Months Ended March 31,
	2024		2023
Balance at beginning of period	$	2,075	$	1,325
Credit loss expense related to OBSC exposures		—		500
Balance at end of period	$	2,075	$	1,825

Adjustments to the ACL on OBSC exposures are recorded to provision for credit losses related to OBSC exposures. The Company recorded no ACL provision for the three months period ended March 31, 2024 and a $500 thousand ACL provision for the three months period ended March 31, 2023. The ACL on OBSC exposures for the three months ended March 31, 2023 includes the day one provision for unfunded commitments related to the HSBI acquisition and an increase in unfunded commitments.

No credit loss estimate is reported for OBSC exposures that are unconditionally cancellable by the Company or for undrawn amounts under such arrangements that may be drawn prior to the cancellation on the arrangement.

NOTE 8 – FAIR VALUE DISCLOSURES AND REPORTING, THE FAIR VALUE OPTION AND FAIR VALUE MEASUREMENTS

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the assets 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 values:

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

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

Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the factors that market participants would likely consider in pricing an asset or liability.

The following methods and assumptions were used by the Company to estimate its financial instrument fair values disclosed at March 31, 2024 and December 31, 2023:

• Investment Securities: The fair value for investment securities is determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2), using matrix pricing. Matrix pricing is a mathematical technique commonly used to price debt securities that are not actively traded, valuing 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 (Level 2 inputs). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).

• Loans Held for Sale - Loans held for sale are carried at fair value in the aggregate as determined by the outstanding commitments from investors. As such, we classify those loans subjected to recurring fair value adjustments as Level 2 of the fair value hierarchy.

• Collateral Dependent Loans: Loans for which it is probable that the Company will not collect all principal and interest due according to contractual terms are measured for impairment. If the impaired loan is identified as

collateral dependent, then the fair value method of measuring the amount of impairment is utilized. This method requires obtaining a current independent appraisal of the collateral. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by independent appraisers to adjust for differences between the comparable sales and income data available for similar loans and collateral underlying such loans. Such adjustments, if any, result in a Level 3 classification of the inputs for determining fair value. The Company generally adjusts the appraisal down by approximately 10 percent to account for cost associated with litigation and collection. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment.

• Other Real Estate Owned: Other real estate owned consists of properties obtained through foreclosure. The adjustment at the time of foreclosure is recorded through the allowance for credit losses. Fair value of other real estate owned is based on current independent appraisals of the collateral less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals, which are updated no less frequently than annually. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach with data from comparable properties. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments, if any, result in a Level 3 classification of the inputs for determining fair value. In the determination of fair value subsequent to foreclosure, management also considers other factors or recent developments, such as changes in market conditions from the time of valuation and anticipated sales values considering plans for disposition, which could result in an adjustment to lower the collateral value estimates indicated in the appraisals. The Company generally adjusts the appraisal down by approximately 10 percent to account for carrying costs. Periodic revaluations are classified as Level 3 in the fair value hierarchy since assumptions are used that may not be observable in the market. Due to the subjective nature of establishing the fair value when the asset is acquired, the actual fair value of the other real estate owned or foreclosed asset could differ from the original estimate. If it is determined the fair value declines subsequent to foreclosure, a valuation allowance is recorded through other non-interest income. Operating costs associated with the assets after acquisition are also recorded as non-interest expense. Gains and losses on the disposition of other real estate owned and foreclosed assets are netted and recorded in other non-interest income. Other real estate owned is classified within Level 3 of the fair value hierarchy.

• Interest Rate Swaps: The Company offers interest rate swaps to certain commercial loan customers to allow them to hedge the risk of rising interest rates on their variable rate loans. The Company originates a variable rate loan and enters into a variable to fixed interest rate swap with the customer. The Company also enters into an offsetting swap with a correspondent bank. These back-to-back agreements are intended to offset each other and allow the Company to originate a variable rate loan, while providing the contract or fixed interest payments for the customer. In addition, the Company will enter into risk participation agreements (“RPA”). Under an RPA-in agreement, a derivative liability, the Company assumes, or participates in, a portion of the credit risk associated with the interest rate swap position with the commercial borrower, for a fee received from the other bank. Under an RPA-out agreement, a derivative asset, the Company participates out a portion of the credit risk associated with the interest rate swap position executed with the commercial borrower, for a fee paid to the participating bank. RPAs are derivative financial instruments recorded at fair value. Although we have determined that a majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit assumptions associated with our risk participation agreements utilize Level 3 inputs.

Estimated fair values for the Company’s financial instruments are as follows, as of the dates noted:

March 31, 2024					Fair Value Measurements
($ in thousands)
	Carrying Amount		Estimated Fair Value		Quoted Prices  (Level 1)		Significant Other Observable Inputs (Level 2)		Significant  Unobservable  Inputs (Level 3)
Financial Instruments:
Assets:
Cash and cash equivalents	$	339,964	$	339,964	$	339,964	$	—	$	—
Securities available-for-sale		1,088,568		1,088,568		6,742		1,056,214		25,612
Securities held-to-maturity		622,574		577,343		—		577,343		—
Loans held for sale		4,241		4,241		—		4,241		—
Loans, net		5,085,993		4,841,681		—		—		4,841,681
Accrued interest receivable		34,954		34,954		—		7,604		27,350
Interest rate swaps		11,987		11,987		—		11,957		30
Liabilities:
Noninterest-bearing deposits	$	1,836,952	$	1,836,952	$	—	$	1,836,952	$	—
Interest-bearing deposits		4,873,403		4,690,163		—		4,690,163		—
Subordinated debentures		123,472		106,946		—		—		106,946
FHLB and other borrowings		110,000		110,000		—		110,000		—
Accrued interest payable		13,705		13,705		—		13,705		—
Interest rate swaps		11,988		11,988		—		11,957		31

December 31, 2023					Fair Value Measurements
($ in thousands)
	Carrying Amount		Estimated Fair Value		Quoted Prices    (Level 1)		Significant Other Observable Inputs (Level 2)		Significant  Unobservable  Inputs (Level 3)
Financial Instruments:
Assets:
Cash and cash equivalents	$	355,147	$	355,147	$	355,147	$	—	$	—
Securities available-for-sale		1,042,365		1,042,365		16,675		1,007,477		18,213
Securities held-to-maturity		654,539		615,944		—		615,944		—
Loans held for sale		2,914		2,914		—		2,914		—
Loans, net		5,116,010		4,877,935		—		—		4,877,935
Accrued interest receivable		33,300		33,300		—		8,632		24,668
Interest rate swaps		12,170		12,170		—		12,129		41
Liabilities:
Non-interest-bearing deposits	$	1,849,013	$	1,849,013	$	—	$	1,849,013	$	—
Interest-bearing deposits		4,613,859		4,430,227		—		4,430,227		—
Subordinated debentures		123,386		109,426		—		—		109,426
FHLB and other borrowings		390,000		390,000		—		390,000		—
Accrued interest payable		22,702		22,702		—		22,702		—
Interest rate swaps		12,175		12,175		—		12,129		46

Assets measured at fair value on a recurring basis are summarized below:

March 31, 2024
($ in thousands)			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets For  Identical  Assets  (Level 1)		Significant Other   Observable   Inputs (Level 2)		Significant  Unobservable  Inputs (Level 3)
Assets:
Available-for-sale
U.S. Treasury	$	6,742	$	6,742	$	—	$	—
Obligations of U.S. Government agencies and sponsored entities		99,787		—		99,787		—
Municipal securities		428,995		—		403,413		25,582
Mortgage-backed securities		515,517		—		515,517		—
Corporate obligations		34,476		—		34,446		30
Other		3,051		—		3,051		—
Total available-for-sale	$	1,088,568	$	6,742	$	1,056,214	$	25,612
Loans held for sale	$	4,241	$	—	$	4,241	$	—
Interest rate swaps	$	11,987	$	—	$	11,957	$	30
Liabilities:
Interest rate swaps	$	11,988	$	—	$	11,957	$	31
December 31, 2023
($ in thousands)			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale
U.S. Treasury	$	16,675	$	16,675	$	—	$	—
Obligations of U.S. Government agencies and sponsored entities		104,923		—		104,923		—
Municipal securities		438,466		—		420,283		18,183
Mortgage-backed securities		441,661		—		441,661		—
Corporate obligations		37,597		—		37,567		30
Other		3,043		—		3,043		—
Total available-for-sale	$	1,042,365	$	16,675	$	1,007,477	$	18,213
Loans held for sale	$	2,914	$	—	$	2,914	$	—
Interest rate swaps	$	12,170	$	—	$	12,129	$	41
Liabilities:
Interest rate swaps	$	12,175	$	—	$	12,129	$	46

The following is a reconciliation of activity for assets measured at fair value based on significant unobservable inputs (Level 3) information.

	Bank-Issued Trust     Preferred  Securities
($ in thousands)	2024		2023
Balance, January 1	$	30	$	31
Balance at March 31	$	30	$	31
	Municipal Securities
($ in thousands)	2024		2023
Balance, January 1	$	18,183	$	15,117
Maturities, calls and paydowns		(221)		(216)
Transfer from level 2 to level 3		7,629		—
Unrealized gain (loss) included in comprehensive income		(9)		726
Balance at March 31	$	25,582	$	15,627

	Interest Rate Swaps - Risk  Participations
($ in thousands)	2024
Balance, January 1	$	(5)
RPA-in		15
RPA-out		(11)
Balance at March 31	$	(1)

The following methods and assumptions were used to estimate the fair values of the Company’s assets measured at fair value on a recurring basis at March 31, 2024 and December 31, 2023. The following tables present quantitative information about recurring Level 3 fair value measurements.

($ in thousands)
Trust Preferred Securities	Fair Value		Valuation Technique	Significant Unobservable  Inputs	Range of Inputs
March 31, 2024	$	30	Discounted cash flow	Probability of default	7.71% - 7.82%
December 31, 2023	$	30	Discounted cash flow	Probability of default	7.81% - 7.89%
Municipal Securities	Fair Value		Valuation Technique	Significant Unobservable Inputs	Range of Inputs
March 31, 2024	$	25,582	Discounted cash flow	Discount Rate	3.59% - 7.59%
December 31, 2023	$	18,183	Discounted cash flow	Discount Rate	2.34% - 5.50%

Interest Rate Swaps - Risk Participations	Fair Value		Valuation Technique	Significant  Unobservable Inputs	Range of Inputs
March 31, 2024	$	(1)	Credit Value Adjustment	Credit Spread	225 bps - 300 bps
				Recovery Rate	70%
December 31, 2023	$	(5)	Credit Value Adjustment	Credit Spread	225 bps - 300 bps
				Recovery Rate	70%

The following table presents the fair value measurement of assets measured at fair value on a non-recurring basis and the level within the fair value hierarchy in which the fair value measurements were classified at March 31, 2024 and December 31, 2023.

March 31, 2024
($ in thousands)			Fair Value Measurements Using
	Fair Value		Quoted Prices in  Active Markets For Identical Assets (Level 1)		Significant   Other Observable Inputs (Level 2)		Significant  Unobservable  Inputs (Level 3)
Collateral dependent loans	$	2,285	$	—	$	—	$	2,285
Other real estate owned		6,743		—		—		6,743
December 31, 2023
($ in thousands)			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Collateral dependent loans	$	2,494	$	—	$	—	$	2,494
Other real estate owned		8,320		—		—		8,320

NOTE 9 - SECURITIES

The following table summarizes the amortized cost, gross unrealized gains and losses, and estimated fair values of securities available-for-sale (“AFS”) and securities held-to-maturity at March 31, 2024 and December 31, 2023.

($ in thousands)	March 31, 2024
	Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Estimated Fair Value
Available-for-sale securities:
U.S. Treasury	$	6,989		$	—		$	247		$	6,742
Obligations of U.S. government agencies and sponsored entities		114,588			—			14,801			99,787
Tax-exempt and taxable obligations of states and municipal subdivisions		480,597			360			51,962			428,995
Mortgage-backed securities - residential		337,963			11			36,034			301,940
Mortgage-backed securities - commercial		234,691			326			21,440			213,577
Corporate obligations		38,258			—			3,782			34,476
Other		3,077			—			26			3,051
Total available-for-sale	$	1,216,163		$	697		$	128,292		$	1,088,568
Held-to-maturity:
U.S. Treasury	$	62,189		$	—		$	2,556		$	59,633
Obligations of U.S. government agencies and sponsored entities		33,615			—			1,881			31,734
Tax-exempt and taxable obligations of states and municipal subdivisions		246,266			6,108			14,816			237,558
Mortgage-backed securities - residential		138,366			—			16,060			122,306
Mortgage-backed securities - commercial		132,138			—			13,609			118,529
Corporate obligations		10,000			—			2,417			7,583
Total held-to-maturity	$	622,574		$	6,108		$	51,339		$	577,343

($ in thousands)	December 31, 2023
	Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Estimated Fair Value
Available-for-sale securities:
U.S. Treasury	$	16,985		$	—		$	310		$	16,675
Obligations of U.S. government agencies sponsored entities		119,868			1			14,946			104,923
Tax-exempt and taxable obligations of states and municipal subdivisions		486,293			449			48,276			438,466
Mortgage-backed securities - residential		297,735			11			34,430			263,316
Mortgage-backed securities - commercial		198,944			76			20,675			178,345
Corporate obligations		41,347			—			3,750			37,597
Other		3,055			—			12			3,043
Total available-for-sale	$	1,164,227		$	537		$	122,399		$	1,042,365
Held-to-maturity:
U.S. Treasury	$	89,688		$	—		$	2,804		$	86,884
Obligations of U.S. government agencies and sponsored entities		33,659			—			1,803			31,856
Tax-exempt and taxable obligations of states and municipal subdivisions		246,908			9,566			14,697			241,777
Mortgage-backed securities - residential		141,573			—			14,237			127,336
Mortgage-backed securities - commercial		132,711			—			12,334			120,377
Corporate obligations		10,000			—			2,286			7,714
Total held-to-maturity	$	654,539		$	9,566		$	48,161		$	615,944

ACL on Securities

Securities Available for Sale

Quarterly, the Company evaluates if a security has a fair value less than its amortized cost. Once these securities are identified, in order to determine whether a decline in fair value resulted from a credit loss or other factors, the Company performs further analysis as outlined below:

• Review the extent to which the fair value is less than the amortized cost and determine if the decline is indicative of credit loss or other factors.

• The securities that violate the credit loss trigger above would be subjected to additional analysis.

• If the Company determines that a credit loss exists, the credit portion of the allowance will be measured using the discounted cash flow (“DCF”) analysis using the effective interest rate. The amount of credit loss the Company records will be limited to the amount by which the amortized cost exceeds the fair value. The allowance for the calculated credit loss will be monitored going forward for further credit deterioration or improvement.

At both March 31, 2024 and December 31, 2023, the results of the analysis did not identify any securities where the decline was indicative of credit loss factors; therefore, no credit loss was recognized on any of the securities AFS.

Accrued interest receivable is excluded from the estimate of credit losses for securities AFS. Accrued interest receivable totaled $4.6 million and $5.2 million at March 31, 2024 and December 31, 2023, respectively and was reported in interest receivable on the accompanying Consolidated Balance Sheet.

All AFS securities were current with no securities past due or on nonaccrual as of March 31, 2024 and December 31, 2023.

Securities Held to Maturity

At March 31, 2024 and December 31, 2023, the potential credit loss exposure was $226 thousand and $205 thousand, respectively and consisted of tax-exempt and taxable obligations of states and municipal subdivisions and corporate obligations securities. After applying appropriate probability of default (“PD”) and loss given default (“LGD”) assumptions, the total amount of current expected credit losses was deemed immaterial. Therefore, no reserve was recorded at March 31, 2024.

Accrued interest receivable is excluded from the estimate of credit losses for securities held-to-maturity. Accrued interest receivable totaled $2.7 million and $3.4 million at March 31, 2024 and December 31, 2023, respectively and was reported in interest receivable on the accompanying Consolidated Balance Sheet.

At both March 31, 2024 and December 31, 2023, the Company had no securities held-to-maturity that were past due 30 days or more as to principal or interest payments. The Company had no securities held-to-maturity classified as nonaccrual at both March 31, 2024 and December 31, 2023.

The Company monitors the credit quality of the debt securities held-to-maturity through the use of credit ratings. The Company monitors the credit ratings on a quarterly basis. The following table summarizes the amortized cost of debt securities held-to-maturity at March 31, 2024 and December 31, 2023, aggregated by credit quality indicators.

($ in thousands)	March 31, 2024			December 31, 2023
Aaa	$	400,229		$	431,527
Aa1/Aa2/Aa3		129,834			129,751
A1/A2		13,940			13,902
BBB		10,000			10,000
Not rated		68,571			69,359
Total	$	622,574		$	654,539

The amortized cost and fair value of debt securities are shown by contractual maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

($ in thousands)	March 31, 2024
	Amortized Cost		Fair Value
Available-for-sale:
Due less than one year	$	35,451	$	35,045
Due after one year through five years		148,780		141,077
Due after five years through ten years		322,402		280,601
Due greater than ten years		136,876		116,328
Mortgage-backed securities - residential		337,963		301,940
Mortgage-backed securities - commercial		234,691		213,577
Total	$	1,216,163	$	1,088,568
Held-to-maturity:
Due less than one year	$	29,130	$	28,536
Due after one year through five years		54,788		52,372
Due after five years through ten years		58,556		53,344
Due greater than ten years		209,596		202,256
Mortgage-backed securities - residential		138,366		122,306
Mortgage-backed securities - commercial		132,138		118,529
Total	$	622,574	$	577,343

Total securities pledged as collateral, to secure public deposits and for other purposes, was $1.321 billion at March 31, 2024 and $1.095 billion at December 31, 2023, respectively.

The following table summarizes securities in an unrealized loss position for which an allowance for credit losses has not been recorded at March 31, 2024 and December 31, 2023. The securities are aggregated by major security type and length of time in a continuous unrealized loss position:

($ in thousands)	March 31, 2024
	Losses < 12 Months				Losses 12 Months or >				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Available-for-sale:
U.S. Treasury	$	—	$	—	$	6,742	$	247	$	6,742	$	247
Obligations of U.S. government agencies and sponsored entities		258		—		99,374		14,801		99,632		14,801
Tax-exempt and taxable obligations of state and municipal subdivisions		38,338		3,528		372,292		48,434		410,630		51,962
Mortgage-backed securities - residential		49,355		311		251,328		35,723		300,683		36,034
Mortgage-backed securities - commercial		3,699		25		164,761		21,415		168,460		21,440
Corporate obligations		—		—		33,976		3,782		33,976		3,782
Other		3,051		26		—		—		3,051		26
Total	$	94,701	$	3,890	$	928,473	$	124,402	$	1,023,174	$	128,292
Held-to-maturity:
U.S. Treasury	$	—	$	—	$	59,633	$	2,556	$	59,633	$	2,556
Obligations of U.S. government agencies and sponsored entities		743		17		30,991		1,864		31,734		1,881
Tax-exempt and taxable obligations of state and municipal subdivisions		10,178		216		100,427		14,600		110,605		14,816
Mortgage-backed securities - residential		—		—		122,306		16,060		122,306		16,060
Mortgage-backed securities - commercial		902		20		117,627		13,589		118,529		13,609
Corporate obligations		—		—		7,583		2,417		7,583		2,417
Total	$	11,823	$	253	$	438,567	$	51,086	$	450,390	$	51,339

($ in thousands)	December 31, 2023
	Losses < 12 Months				Losses 12 Months or >				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Available-for-sale:
U.S. Treasury	$	—	$	—	$	16,675	$	310	$	16,675	$	310
Obligations of U.S. government agencies and sponsored entities		123		—		104,495		14,946		104,618		14,946
Tax-exempt and taxable obligations of state and municipal subdivisions		20,879		1,479		389,113		46,797		409,992		48,276
Mortgage-backed securities - residential		222		2		262,012		34,428		262,234		34,430
Mortgage-backed securities - commercial		2,896		52		170,256		20,623		173,152		20,675
Corporate obligations		—		—		37,597		3,750		37,597		3,750
Other		3,055		12		—		—		3,055		12
Total	$	27,175	$	1,545	$	980,148	$	120,854	$	1,007,323	$	122,399
Held-to-maturity:
U.S. Treasury	$	—	$	—	$	86,884	$	2,804	$	86,884	$	2,804
Obligations of U.S. government agencies and sponsored entities		747		5		31,109		1,798		31,856		1,803
Tax-exempt and taxable obligations of state and municipal subdivisions		10,472		3,949		91,480		10,748		101,952		14,697
Mortgage-backed securities - residential		—		—		127,336		14,237		127,336		14,237
Mortgage-backed securities - commercial		920		2		119,457		12,332		120,377		12,334
Corporate obligations		—		—		7,714		2,286		7,714		2,286
Total	$	12,139	$	3,956	$	463,980	$	44,205	$	476,119	$	48,161

At March 31, 2024 and December 31, 2023, the Company’s securities portfolio consisted of 1,138 and 1,125 securities, respectively, which were in an unrealized loss position. Securities in unrealized loss positions are evaluated for impairment related to credit losses at least quarterly. The unrealized losses shown above are due to increases in market rates over the yields available at the time of purchase of the underlying securities and not credit quality. As of March 31, 2024 and December 31, 2023, the Company determined that it does not intend to sell and is not currently aware of any circumstances which will require it to sell any of the securities that are in an unrealized loss position prior to recovery of their amortized cost basis. As such, no allowance for credit losses was needed at March 31, 2024 and December 31, 2023.

NOTE 10 – LOANS AND ALLOWANCE FOR CREDIT LOSSES

The Company uses four different categories to classify loans in its portfolio based on the underlying collateral securing each loan. The loans grouped together in each category have been determined to share similar risk characteristics with respect to credit quality. Those four categories are commercial, financial and agriculture, commercial real estate, consumer real estate, consumer installment;

Commercial, financial and agriculture – Commercial, financial and agriculture loans include loans to business entities issued for commercial, industrial, or other business purposes. This type of commercial loan shares a similar risk characteristic in that unlike commercial real estate loans, repayment is largely dependent on cash flow generated from the operation of the business.

Commercial real estate – Commercial real estate loans are grouped as such because repayment is mainly dependent upon either the sale of the real estate, operation of the business occupying the real estate, or refinance of the debt obligation. This includes both owner-occupied and non-owner occupied CRE secured loans, because they share similar risk characteristics related to these variables.

Consumer real estate – Consumer real estate loans consist primarily of loans secured by 1-4 family residential properties and/or residential lots. This includes loans for the purpose of constructing improvements on the residential property, as well as home equity lines of credit.

Consumer installment – Installment and other loans are all loans issued to individuals that are not for any purpose related to operation of a business, and not secured by real estate. Repayment on these loans is mostly dependent on personal income, which may be impacted by general economic conditions.

The following table shows the composition of the loan portfolio:

($ in thousands)	March 31, 2024			December 31, 2023
Loans held for sale
Mortgage loans held for sale	$	4,241		$	2,914
Total LHFS	$	4,241		$	2,914
Loans held for investment
Commercial, financial and agriculture (1)	$	772,124		$	800,324
Commercial real estate		3,059,784			3,059,155
Consumer real estate		1,254,397			1,252,795
Consumer installment		53,647			57,768
Total loans		5,139,952			5,170,042
Less allowance for credit losses		(53,959	)		(54,032	)
Net LHFI	$	5,085,993		$	5,116,010

(1) Loan balance includes $320 thousand and $386 thousand in Paycheck Protection Program (“PPP”) loans as of March 31, 2024 and December 31, 2023, respectively.

Accrued interest receivable is not included in the amortized cost basis of the Company’s LHFI. At March 31, 2024 and December 31, 2023, accrued interest receivable for LHFI totaled $27.4 million and $24.7 million, respectively, with no related ACL and was reported in interest receivable on the accompanying consolidated balance sheet.

Nonaccrual and Past Due LHFI

Past due LHFI are loans contractually past due 30 days or more as to principal or interest payments. Generally, the Company will place a delinquent loan in nonaccrual status when the loan becomes 90 days or more past due. At the time a loan is placed in nonaccrual status, all interest which has been accrued on the loan but remains unpaid is reversed and deducted from earnings as a reduction of reported interest income. No additional interest is accrued on the loan balance until the collection of both principal and interest becomes reasonably certain.

The following tables present the aging of the amortized cost basis in past due loans in addition to those loans classified as nonaccrual including purchase credit deteriorated (“PCD”) loans:

($ in thousands)	March 31, 2024
	Past Due 30 to 89 Days		Past Due 90 Days or More and Still Accruing		Nonaccrual		PCD		Total Past Due, Nonaccrual and PCD		Total LHFI		Nonaccrual and PCD with No ACL
Commercial, financial and agriculture (1)	$	1,768	$	24	$	991	$	691	$	3,474	$	772,124	$	468
Commercial real estate		2,714		455		3,650		660		7,479		3,059,784		300
Consumer real estate		4,631		137		1,987		2,942		9,697		1,254,397		789
Consumer installment		398		71		40		—		509		53,647		11
Total	$	9,511	$	687	$	6,668	$	4,293	$	21,159	$	5,139,952	$	1,568

(1) Total loan balance includes $320 thousand in PPP loans as of March 31, 2024.

	December 31, 2023
($ in thousands)	Past Due 30 to 89 Days		Past Due 90 Days or More and Still Accruing		Nonaccrual		PCD		Total Past Due, Nonaccrual and PCD		Total LHFI		Nonaccrual and PCD with No ACL
Commercial, financial and agriculture (1)	$	2,043	$	313	$	353	$	965	$	3,674	$	800,324	$	465
Commercial real estate		1,698		630		3,790		647		6,765		3,059,155		410
Consumer real estate		3,992		220		1,806		3,098		9,116		1,252,795		680
Consumer installment		180		—		31		—		211		57,768		—
Total	$	7,913	$	1,163	$	5,980	$	4,710	$	19,766	$	5,170,042	$	1,555

(1) Total loan balance includes $386 thousand in PPP loans as of December 31, 2023.

Acquired Loans

In connection with the acquisitions of HSBI and BBI, the Company acquired loans both with and without evidence of credit quality deterioration since origination. Acquired loans are recorded at their fair value at the time of acquisition with no carryover from the acquired institution’s previously recorded allowance for credit losses. Acquired loans are accounted for following ASC 326, Financial Instruments - Credit Losses.

The fair value for acquired loans recorded at the time of acquisition is based upon several factors including the timing and payment of expected cash flows, as adjusted for estimated credit losses and prepayments, and then discounting these cash flows using comparable market rates. The resulting fair value adjustment is recorded in the form of premium or discount to the unpaid principal balance of each acquired loan. As it relates to acquired PCD loans, the net premium or net discount is adjusted to reflect the Company’s allowance for credit losses (“ACL”) recorded for PCD loans at the time of acquisition, and the remaining fair value adjustment is accreted or amortized into interest income over the remaining life of the loan. As it relates to acquired loans not classified as PCD (“non-PCD”) loans, the credit loss and yield components of the fair value adjustments are aggregated, and the resulting net premium or net discount is accreted or amortized into interest income over the average remaining life of those loans. The Company records an ACL for non-PCD loans at the time of acquisition through provision expense, and therefore, no further adjustments are made to the net premium or net discount for non-PCD loans.

The estimated fair value of the non-PCD loans acquired in the BBI acquisition was $460.0 million, which is net of a $8.8 million discount. The gross contractual amounts receivable of the acquired non-PCD loans at acquisition was approximately $468.8 million, of which $6.4 million is the amount of contractual cash flows not expected to be collected.

The estimated fair value of the non-PCD acquired in the HSBI acquisition was $1.091 billion, which is net of a $33.7 million discount. The gross contractual amounts receivable of the acquired non-PCD loans at acquisition was approximately $1.125 billion, of which $16.5 million is the amount of contractual cash flows not expected to be collected.

The following table shows the carrying amount of loans acquired in the BBI and HSBI acquisitions for which there was, at the date of acquisition, more than insignificant deterioration of credit quality since origination:

($ in thousands)	BBI		HSBI
Purchase price of loans at acquisition	$	27,669	$	52,356
Allowance for credit losses at acquisition		1,303		3,176
Non-credit discount (premium) at acquisition		530		2,325
Par value of acquired loans at acquisition	$	29,502	$	57,857

As of March 31, 2024, and December 31, 2023 the amortized cost of the Company’s PCD loans totaled $54.7 million and $57.8 million, respectively, which had an estimated ACL of $3.2 million and $3.7 million, respectively.

Loan Modifications

The Company adopted ASU No. 2022-02 effective January 1, 2023. These amendments eliminate the TDR recognition and measurement guidance and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty.

Occasionally, the Company modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, and other-than-insignificant payment delay or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.

In some cases, the Company provides multiple types of concessions on one loan. Typically, one type of concession, such as term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. For loans included in the “combination” columns below, multiple types of modifications have been made on the same loan within the current reporting period. The combination is at least two of the following: a term extension, principal forgiveness, an other-than-insignificant payment delay and/or an interest rate reduction.

The following table presents the amortized cost basis of loans that were both experiencing financial difficulty and modified during the three months ended March 31, 2024 and March 31, 2023, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below:

($ in thousands)
March 31, 2024	Term Extension		Combination Payment Deferral and Payment Modification		Percentage of Total Loans Held for Investment
Commercial real estate	$	578	$	—		0.05	%
Total	$	578	$	—		0.05	%
March 31, 2023	Term Extension		Combination Payment Deferral and Payment Modification		Percentage of Total Loans Held for Investment
Commercial real estate	$	—	$	301		0.01	%
Total	$	—	$	301		0.01	%

The Company has not committed to lend additional amounts to the borrowers included in the previous table.

Collateral Dependent Loans

The following table presents the amortized cost basis of collateral dependent individually evaluated loans by class of loans as of March 31, 2024 and December 31, 2023:

($ in thousands)
March 31, 2024	Real Property		Equipment		Miscellaneous		Total
Commercial, financial and agriculture	$	805	$	186	$	247	$	1,238
Commercial real estate		599		—		—		599
Consumer real estate		789		—		—		789
Consumer installment		—		82		—		82
Total	$	2,193	$	268	$	247	$	2,708
December 31, 2023	Real Property		Equipment		Miscellaneous		Total
Commercial, financial and agriculture	$	—	$	496	$	918	$	1,414
Commercial real estate		710		—		—		710
Consumer real estate		778		—		—		778
Total	$	1,488	$	496	$	918	$	2,902

A loan is collateral dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be provided substantially through the sale of the collateral. The following provides a qualitative description by class of loan of the collateral that secures the Company’s collateral dependent LHFI:

• Commercial, financial and agriculture – Loans within these loan classes are secured by equipment, inventory, accounts receivable, and other non-real estate collateral.

• Commercial real estate – Loans within these loan classes are secured by commercial real property.

• Consumer real estate - Loans within these loan classes are secured by consumer real property.

• Consumer installment - Loans within these loan classes are secured by consumer goods, equipment, and non-real estate collateral.

There have been no significant changes to the collateral that secures these financial assets during the period.

Loan Participations

The Company has loan participations, which qualify as participating interest, with other financial institutions. As of March 31, 2024, these loans totaled $311.5 million, of which $174.9 million had been sold to other financial institutions and $136.5 million was purchased by the Company. As of December 31, 2023, these loans totaled $304.0 million, of which $165.9 million had been sold to other financial institutions and $138.1 million was purchased by the Company. The loan participations convey proportionate ownership rights with equal priority to each participating interest holder; involving no recourse (other than ordinary representations and warranties) to, or subordination by, any participating interest holder; all cash flows are divided among the participating interest holders in proportion to each holder’s share of ownership; and no holder has the right to pledge the entire financial asset unless all participating interest holders agree.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually to classify the loans as to credit risk. The Company uses the following definitions for risk ratings:

Pass: Loans classified as pass are deemed to possess average to superior credit quality, requiring no more than normal attention.

Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company’s credit position at some future date.

Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

These above classifications were the most current available as of March 31, 2024, and were generally updated within the prior year.

The tables below present the amortized cost basis of loans by credit quality indicator and class of loans based on the most recent analysis performed at March 31, 2024 and December 31, 2023. Revolving loans converted to term as of the three months ended March 31, 2024 and December 31, 2023 were not material to the total loan portfolio.

As of March 31, 2024	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans		Total
($ in thousands)	2024		2023		2022		2021		2020		Prior
Commercial, financial and agriculture:
Risk Rating
Pass	$	15,750	$	97,084	$	140,290	$	106,519	$	40,841	$	91,445	$	270,636	$	762,565
Special mention		—		7		—		635		3,128		1,085		10		4,865
Substandard		75		449		714		610		255		2,182		409		4,694
Doubtful		—		—		—		—		—		—		—		—
Total commercial, financial and agriculture	$	15,825	$	97,540	$	141,004	$	107,764	$	44,224	$	94,712	$	271,055	$	772,124
Current period gross write offs	$	—	$	20	$	114	$	25	$	—	$	236	$	—	$	395
Commercial real estate:
Risk Rating
Pass	$	48,444	$	400,705	$	827,718	$	532,658	$	368,103	$	788,127	$	5,394	$	2,971,149
Special mention		—		68		690		8,506		3,016		33,898		—		46,178
Substandard		—		603		8,232		1,572		535		31,515		—		42,457
Doubtful		—		—		—		—		—		—		—		—
Total commercial real estate	$	48,444	$	401,376	$	836,640	$	542,736	$	371,654	$	853,540	$	5,394	$	3,059,784
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Consumer real estate:
Risk Rating
Pass	$	32,803	$	175,955	$	324,453	$	214,401	$	124,065	$	211,149	$	151,830	$	1,234,656
Special mention		—		—		1,342		—		—		3,801		697		5,840
Substandard		—		907		385		590		1,543		7,290		3,186		13,901
Doubtful		—		—		—		—		—		—		—		—
Total consumer real estate	$	32,803	$	176,862	$	326,180	$	214,991	$	125,608	$	222,240	$	155,713	$	1,254,397
Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Consumer installment:
Risk Rating
Pass	$	4,616	$	20,143	$	10,652	$	6,110	$	2,490	$	1,930	$	7,394	$	53,335
Special mention		—		—		—		—		—		—		—		—
Substandard		—		143		20		15		37		90		7		312
Doubtful		—		—		—		—		—		—		—		—
Total consumer installment	$	4,616	$	20,286	$	10,672	$	6,125	$	2,527	$	2,020	$	7,401	$	53,647
Current period gross write offs	$	3	$	106	$	73	$	25	$	18	$	100	$	20	$	345
Total
Pass	$	101,613	$	693,887	$	1,303,113	$	859,688	$	535,499	$	1,092,651	$	435,254	$	5,021,705
Special mention		—		75		2,032		9,141		6,144		38,784		707		56,883
Substandard		75		2,102		9,351		2,787		2,370		41,077		3,602		61,364
Doubtful		—		—		—		—		—		—		—		—
Total	$	101,688	$	696,064	$	1,314,496	$	871,616	$	544,013	$	1,172,512	$	439,563	$	5,139,952
Current period gross write offs	$	3	$	126	$	187	$	50	$	18	$	336	$	20	$	740

As of December 31, 2023 ($ in thousands)	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans		Total
	2023		2022		2021		2020		2019		Prior
Commercial, financial and: agriculture
Risk Rating
Pass	$	102,263	$	150,420	$	113,487	$	47,313	$	36,065	$	64,020	$	281,646	$	795,214
Special mention		—		—		—		141		797		3		10		951
Substandard		451		330		121		185		550		1,894		628		4,159
Doubtful		—		—		—		—		—		—		—		—
Total commercial, financial and agriculture	$	102,714	$	150,750	$	113,608	$	47,639	$	37,412	$	65,917	$	282,284	$	800,324
Current period gross write offs	$	14	$	51	$	225	$	139	$	206	$	110	$	—	$	745
Commercial real estate:
Risk Rating
Pass	$	385,954	$	825,505	$	558,742	$	377,085	$	253,746	$	569,428	$	6,397	$	2,976,857
Special mention		—		660		6,118		3,111		9,545		22,648		—		42,082
Substandard		136		7,293		393		566		5,427		26,401		—		40,216
Doubtful		—		—		—		—		—		—		—		—
Total commercial real estate	$	386,090	$	833,458	$	565,253	$	380,762	$	268,718	$	618,477	$	6,397	$	3,059,155
Current period gross write offs	$	—	$	—	$	193	$	—	$	—	$	57	$	—	$	250
Consumer real estate:
Risk Rating
Pass	$	176,144	$	334,056	$	219,071	$	127,539	$	59,615	$	163,464	$	153,821	$	1,233,710
Special mention		—		1,081		—		—		643		3,246		412		5,382
Substandard		502		404		511		1,559		514		6,988		3,225		13,703
Doubtful		—		—		—		—		—		—		—		—
Total consumer real estate	$	176,646	$	335,541	$	219,582	$	129,098	$	60,772	$	173,698	$	157,458	$	1,252,795
Current period gross write offs	$	5	$	19	$	—	$	—	$	—	$	25	$	—	$	49
Consumer installment:
Risk Rating
Pass	$	24,482	$	12,408	$	7,316	$	2,919	$	1,213	$	1,195	$	8,156	$	57,689
Special mention		—		—		—		—		—		—		—		—
Substandard		—		8		17		42		11		—		1		79
Doubtful		—		—		—		—		—		—		—		—
Total consumer installment	$	24,482	$	12,416	$	7,333	$	2,961	$	1,224	$	1,195	$	8,157	$	57,768
Current period gross write offs	$	226	$	567	$	223	$	179	$	156	$	576	$	121	$	2,048
Total
Pass	$	688,843	$	1,322,389	$	898,616	$	554,856	$	350,639	$	798,107	$	450,020	$	5,063,470
Special mention		—		1,741		6,118		3,252		10,985		25,897		422		48,415
Substandard		1,089		8,035		1,042		2,352		6,502		35,283		3,854		58,157
Doubtful		—		—		—		—		—		—		—		—
Total	$	689,932	$	1,332,165	$	905,776	$	560,460	$	368,126	$	859,287	$	454,296	$	5,170,042
Current period gross write offs	$	245	$	637	$	641	$	318	$	362	$	768	$	121	$	3,092

Allowance for Credit Losses

The ACL is a valuation account that is deducted from loans’ amortized cost basis to present the net amount expected to be collected on the loans. It is comprised of a general allowance for loans that are collectively assessed in pools with similar risk characteristics and a specific allowance for individually assessed loans. The allowance is continuously monitored by management to maintain a level adequate to absorb expected losses inherent in the loan portfolio.

The ACL represents the estimated losses for financial assets accounted for on an amortized cost basis. Expected losses are calculated using relevant information, from internal and external sources, about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environment conditions, such as changes in unemployment rates, property values, or other relevant factors. Management may selectively apply external market data to subjectively adjust the Company’s own loss history including index or peer data. Expected losses are estimated over the contractual term of the loans, adjusted for expected prepayments. The contractual term excludes expected extensions, renewals, and modifications. Loans are charged-off against the allowance when management believes the uncollectibility of a loan balance is confirmed and recoveries are credited to the allowance when received. Expected recovery amounts may not exceed the aggregate of amounts previously charged-off.

The ACL is measured on a collective basis when similar risk characteristics exist. Generally, collectively assessed loans are grouped by call code (segments). Segmenting loans by call code will group loans that contain similar types of collateral and purposes and are usually structured with similar terms making each loan’s risk profile very similar to the rest in that segment. Each of these segments then flows up into one of the four bands, Commercial, Financial, and Agriculture, Commercial Real Estate, Consumer Real Estate, and Consumer Installment. In accordance with the guidance in ASC 326, the Company redefined its LHFI portfolio segments and related loan classes based on the level at which risk is monitored within the ACL methodology. Construction loans for 1-4 family residential properties with a call code 1A1, and other construction, all land development and other land loans with a call code 1A2 were previously separated between the Commercial Real Estate or Consumer Real Estate bands based on loan type code. Under our ASC 326 methodology 1A1 loans are all defined as part of the Consumer Real Estate band and 1A2 loans are all defined as part of the Commercial Real Estate Band.

The PD calculation analyzes the historical loan portfolio over the given lookback period to identify, by segment, loans that have defaulted. A default is defined as a loan that has moved to past due 90 days and greater, nonaccrual status, or experienced a charge-off during the period. The model observes loans over a 12-month window, detecting any events previously defined. This information is then used by the model to calculate annual iterative count-based PD rates for each segment. This process is then repeated for all dates within the historical data range. These averaged PD’s are used for an immediate reversion back to the historical mean. The historical data used to calculate this input was captured by the Company from 2009 through the most recent quarter end.

The Company utilizes reasonable and supportable forecasts of future economic conditions when estimating the ACL on loans. The model’s calculation also includes a 24-month forecasted PD based on a regression model that calculated a comparison of the Company’s historical loan data to various national economic metrics during the same periods. The results showed the Company’s past losses having a high rate of correlation to unemployment, both regionally and nationally. Using this information, along with the most recently published Wall Street Journal survey of sixty economists’ forecasts predicting unemployment rates out over the next eight quarters, a corresponding future PD can be calculated for the forward-looking 24-month period. This data can also be used to predict loan losses at different levels of stress, including a baseline, adverse and severely adverse economic condition. After the forecast period, PD rates revert to the historical mean of the entire data set.

The LGD calculation is based on actual losses (charge-offs, net recoveries) at a loan level experienced over the entire lookback period aggregated to get a total for each segment of loans. The aggregate loss amount is divided by the exposure at default to determine an LGD rate. Defaults occurring during the lookback period are included in the denominator, whether a loss occurred or not and exposure at default is determined by the loan balance immediately preceding the default event. If there is not a minimum of five past defaults in a loan segment, or less than 15.0% calculated LGD rate, or the total balance at default is less than 1% of the balance in the respective call code as of the model run date, a proxy index is used. This index is proprietary to the Company’s ACL modeling vendor derived from loss data of other client institutions similar in organization structure to the Company. The vendor also provides a “crisis” index derived from loss data between the post-recessionary years of 2008-2013 that the Company uses.

The model then uses these inputs in a non-discounted version of DCF methodology to calculate the quantitative portion of estimated losses. The model creates loan level amortization schedules that detail out the expected monthly payments for a loan including estimated prepayments and payoffs. These expected cash flows are discounted back to present value using the loan’s coupon rate instead of the effective interest rate.

On a quarterly basis, the Company uses internal credit portfolio data, such as changes in portfolio volume and composition, underwriting practices, and levels of past due loans, nonaccruals and classified assets along with other external information not used in the quantitative calculation to determine if any subjective qualitative adjustments are required so that all significant risks are incorporated to form a sufficient basis to estimate credit losses.

The following table presents the activity in the allowance for credit losses by portfolio segment for the three months ended March 31, 2024 and 2023:

($ in thousands)	Three Months Ended March 31, 2024
	Commercial, Financial and Agriculture			Commercial Real Estate		Consumer Real Estate		Consumer Installment			Total
Allowance for credit losses:
Beginning balance	$	8,844		$	29,125	$	15,260	$	803		$	54,032
Provision for credit losses		—			—		—		—			—
Loans charged-off		(395	)		—		—		(345	)		(740	)
Recoveries		6			432		20		209			667
Total ending allowance balance	$	8,455		$	29,557	$	15,280	$	667		$	53,959

($ in thousands)	Three Months Ended March 31, 2023
	Commercial, Financial and Agriculture			Commercial Real Estate		Consumer Real Estate		Consumer Installment			Total
Allowance for credit losses:
Beginning balance	$	6,349		$	20,389	$	11,599	$	580		$	38,917
Initial allowance on PCD loans		727			2,260		182		7			3,176
Provision for credit losses		2,327			5,388		2,402		383			10,500
Loans charged-off		(3	)		—		—		(338	)		(341	)
Recoveries		43			15		18		122			198
Total ending allowance balance	$	9,443		$	28,052	$	14,201	$	754		$	52,450

Due to a decrease in loans for the first quarter of 2024, the Company recorded no provision for credit losses for the three months ended March 31, 2024, compared to $10.5 million provision for the same period in 2023. During January 2023, loans totaling $1.159 billion, net of purchase accounting adjustments, were acquired in the HSBI acquisition. The initial ACL on PCD loans recorded in March 2023, of $3.2 million was related to the HSBI acquisition. The 2023 provision for credit losses includes $10.7 million associated with day one post-merger accounting provision recorded for non-PCD loans and unfunded commitments acquired in the HSBI acquisition.

The following table provides the ending balance in the Company’s LHFI and the ACL, broken down by portfolio segment as of March 31, 2024 and December 31, 2023.

($ in thousands)
March 31, 2024	Commercial, Financial and Agriculture		Commercial Real Estate		Consumer Real Estate		Consumer Installment		Total
LHFI
Individually evaluated	$	1,238	$	599	$	789	$	82	$	2,708
Collectively evaluated		770,886		3,059,185		1,253,608		53,565		5,137,244
Total	$	772,124	$	3,059,784	$	1,254,397	$	53,647	$	5,139,952
Allowance for Credit Losses
Individually evaluated	$	340	$	12	$	—	$	71	$	423
Collectively evaluated		8,115		29,545		15,280		596		53,536
Total	$	8,455	$	29,557	$	15,280	$	667	$	53,959

($ in thousands)
December 31, 2023	Commercial, Financial and Agriculture		Commercial Real Estate		Consumer Real Estate		Consumer Installment		Total
LHFI
Individually evaluated	$	1,414	$	710	$	778	$	—	$	2,902
Collectively evaluated		798,910		3,058,445		1,252,017		57,768		5,167,140
Total	$	800,324	$	3,059,155	$	1,252,795	$	57,768	$	5,170,042
Allowance for Credit Losses
Individually evaluated	$	408	$	—	$	—	$	—	$	408
Collectively evaluated		8,436		29,125		15,260		803		53,624
Total	$	8,844	$	29,125	$	15,260	$	803	$	54,032

NOTE 11 - DERIVATIVE FINANCIAL INSTRUMENTS

Interest Rate Swaps

The Company enters into interest rate swap agreements primarily to facilitate the risk management strategies of certain commercial customers. The interest rate swap agreements entered into by the Company are entered into under what is referred to as a back-to-back interest rate swap, as such, the net positions are offsetting assets and liabilities, as well as income and expenses and risk participation.

Under a back-to-back interest rate swap program, all derivative instruments are recorded in the consolidated statement of financial condition at their respective fair values, as components of other assets and other liabilities. The Company enters into an interest rate swap with the customer and another offsetting swap with a counterparty. The result is two mirrored interest rate swaps, absent a credit event, which will offset in the financial statements. These swaps are not designated as hedging instruments and are recorded at fair value in other assets and other liabilities. The change in fair value is recognized in the income statement as other income and fees.

Risk participation agreements are derivative financial instruments and are recorded at fair value. These derivatives are not designated as hedges and therefore, changes in fair value are recorded directly through earnings at each reporting period. Under a risk participation-out agreement, a derivative asset, the Company participates out a portion of the credit risk associated with the interest rate swap position executed with the commercial borrower, for a fee paid to the participating bank. Under a risk participation-in agreement, a derivative liability, the Company assumes, or participates in, a portion of the credit risk associated with the interest rate swap position with the commercial borrower, for a fee received from the other bank. The Company has two risk participation-in swaps and one risk participation-out swap at March 31, 2024.

The following table provides outstanding interest rate swaps as of March 31, 2024 and December 31, 2023.

($ in thousands)
	March 31, 2024			December 31, 2023
Notional amount	$	475,321		$	493,290
Weighted average pay rate		5.3	%		5.2	%
Weighted average receive rate		5.3	%		5.2	%
Weighted average maturity in years		5.44			5.39

The following table provides the fair value of interest rate swap contracts at March 31, 2024 and December 31, 2023 included in other assets and other liabilities.

($ in thousands)
	March 31, 2024				December 31, 2023
	Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
Interest rate swap contracts	$	11,987	$	11,988		12,170	$	12,175

The Company also enters into a collateral agreement with the counterparty requiring the Company to post cash or cash equivalent collateral to mitigate the credit risk in the transaction. At March 31, 2024 and December 31, 2023, the Company had $500 thousand of collateral posted with its counterparties, which is included in the consolidated statement of financial condition as cash and cash equivalents as “restricted cash”. The Company also receives a swap spread to compensate it for the credit exposure it takes on the customer-facing portion of the transaction and this upfront cash payment from the counterparty is recorded in other income, net of any transaction execution expenses, in the consolidated statement of operations. For the three months ended March 31, 2024, net swap spread income included in other income was $162 thousand compared to $169 thousand for the same period in 2023.

Entering into derivative contracts potentially exposes the Company to the risk of counterparties’ failure to fulfill their legal obligations, including, but not limited to, potential amounts due or payable under each derivative contract. Notional principal amounts are often used to express the volume of these transactions, but the amounts potentially subject to credit risk are much smaller. The Company assesses the credit risk of its dealer counterparties by regularly monitoring publicly available credit rating information, evaluating other market indicators, and periodically reviewing detailed financials.

The Company records the fair value of its interest rate swap contracts separately within other assets and other liabilities as current accounting rules do not permit the netting of customer and counterparty fair value amounts in the consolidated statement of financial condition.

NOTE 12 – RECLASSIFICATION

Certain amounts in the 2023 financial statements have been reclassified for comparative purposes to conform to the current period financial statement presentation.