UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2020~~2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-37875

FB FINANCIAL CORPORATION

(Exact name of Registrant as specified in its Charter)


Tennessee			62-1216058
( State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
211 Commerce Street, Suite 300 Nashville, Tennessee			37201
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (615) 564-1212

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

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, Par Value $1.00 Per Share

FBK

New York Stock Exchange

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

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

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

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Small reporting company

☐

Emerging growth company

☒

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

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

The number of shares of Registrant’s Common Stock outstanding as of ~~October 31, 2020~~July 30, 2021 was ~~47,198,737.~~

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

~~Title of each class~~

~~Trading Symbol~~

~~Name of each exchange on which registered~~

~~Common Stock, Par Value $1.00 Per Share~~

~~FBK~~

~~New York Stock Exchange~~

47,363,275.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION
	Glossary Of Abbreviations And Acronyms	3
Item 1.	Consolidated Financial Statements	34
	Consolidated Balance Sheets as of ~~September~~J une 30 ~~2020~~, 2021 (Unaudited) and December 31, ~~2019~~	3
	~~Consolidated Statements of Income (Unaudited) for the three and~~ ~~nine~~ ~~months endedSeptember~~ ~~30,~~ 2020 ~~and 2019~~	4
	Consolidated Statements of ~~Comprehensive~~ Income (Unaudited) for the three and six months ended June 30, 202 ~~nine~~1 ~~months~~and ~~ended~~ ~~September~~ ~~30,~~ 2020 ~~and 2019~~	5
	Consolidated Statements of Comprehensive Income (Unaudited) for the three and six months ended June 30, 202 1 and 2020	6
	Consolidated Statements of Changes in Shareholders' Equity (Unaudited) for the three and ~~nin~~esix months ended June 30, 202 ~~September~~1 ~~30, 2020~~ and ~~2019~~2020	67
	Consolidated Statements of Cash Flows (Unaudited) for the ~~nine~~six months ended June 30, 2 ~~September~~021 and ~~30,~~2020 ~~and 2019~~	89
	Notes to Consolidated Financial Statements (Unaudited)	910
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of ~~Operations~~Operation	5654
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	~~101~~98
Item 4.	Controls and Procedures	~~103~~100
~~PART~~Part II.	OTHER INFORMATION
~~Item1.~~Item 1.	Legal Proceedings	~~104~~101
Item 1A.	Risk Factors	~~104~~101
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	~~105~~101

Item 6.	Exhibits	~~106~~102
~~Signatures~~SIGNATURES			~~107~~103

GLOSSARY OF ABBREVIATIONS AND ACRONYMS

As used in this report, references to “we,” “our,” “us,” “FB Financial,” or “the Company” refer to FB Financial Corporation, a Tennessee corporation, and our wholly owned banking subsidiary, FirstBank, a Tennessee state-chartered bank, unless otherwise indicated or the context otherwise requires. References to “Bank” or “FirstBank” refer to FirstBank, our wholly owned banking subsidiary.

The acronyms and abbreviations identified below are used in the Notes to Consolidated Financial Statements (Unaudited) as well as in the Management’s Discussion and Analysis of Financial Condition and Results of Operations. You may find it helpful to refer to this page as you read this report.

ACL

Allowance For Credit Losses

GAAP

U.S. generally accepted accounting principles

AFS

Available-for-Sale

GNMA

Government National Mortgage Association

ALCO

Asset Liability Management Committee

IPO

Initial Public Offering

ASC

Accounting Standard Codification

IRC

Internal Revenue Code

ASU

Accounting Standard Update

MSR

Mortgage Servicing Rights

CAA

Consolidated Appropriations Act

JOBS Act

Jumpstart Our Business Startups Act

CARES

Coronavirus Aid, Relief, and Economic Security Act

LIBOR

London Interbank Offered Rate

CECL

Current Expected Credit Losses

LTIP

Long-Term Incentive Plan

CEO

Chief Executive Officer

MSA

Metropolitan Statistical Areas

CET1

Common Equity Tier 1

MSR

Mortgage Servicing Rights

CMA

Cash Management Advances

NIM

Net Interest Margin

CPR

Conditional Prepayment Rate

OCC

Office of the Comptroller of the Currency

CRE

Commercial Real Estate

OREO

Other Real Estate Owned

EPS

Earnings per Share

PCD

Purchased Credit Deteriorated

ESPP

Employee Stock Purchase Plan

PPP

Paycheck Protection Program

EVE

Economic Value of Equity

PSU

Performance-based Restricted Stock Units

FASB

Financial Accounting Standards Board

REIT

Real Estate Investment Trust

FBIN

FirstBank Investments of Nevada, Inc.

ROAA

Return on Average Total Assets

FBIT

FirstBank Investments of Tennessee, Inc.

ROAE

Return on Average Shareholders' Equity

FBPC

FirstBank Preferred Capital, Inc.

ROATCE

Return on Average Tangible Common Equity

FBRM

FirstBank Risk Management

ROU

Right-of-use

FDIC

Federal Deposit Insurance Corporation

RSU

Restricted Stock Units

FHLB

Federal Home Loan Bank

SBA

Small Business Administration

FHLMC

Federal Home Loan Mortgage Corporation

SEC

U.S. Securities and Exchange Commission

FNB

Farmers National

TDFI

Tennessee Department of Financial Institutions

FNMA

Federal National Mortgage Association

TDR

Troubled Debt Restructuring

FTE

Full Time Equivalent

PART I - FINANCIAL INFORMATION

ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS

FB Financial Corporation and subsidiaries

Consolidated balance sheets

(Amounts are in thousands except share and per share amounts)


		September 30,		December 31,			June 30,		December 31,
		2020 (Unaudited)		2019			2021 (Unaudited)		2020
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	69,798	$	48,806	Cash and due from banks	$	60,908	$	110,991
Federal funds sold		118,588		131,119
Federal funds sold and reverse repurchase agreements						Federal funds sold and reverse repurchase agreements	59,321		121,153
Interest-bearing deposits in financial institutions	Interest-bearing deposits in financial institutions	874,005		52,756		Interest-bearing deposits in financial institutions	1,596,868		1,085,754
Cash and cash equivalents	Cash and cash equivalents	1,062,391		232,681		Cash and cash equivalents	1,717,097		1,317,898
Investments:	Investments:					Investments:
Available-for-sale debt securities, at fair value	Available-for-sale debt securities, at fair value	1,160,521		688,381		Available-for-sale debt securities, at fair value	1,404,372		1,172,400
Equity securities, at fair value	Equity securities, at fair value	4,389		3,295		Equity securities, at fair value	4,803		4,591
Federal Home Loan Bank stock, at cost	Federal Home Loan Bank stock, at cost	31,232		15,976		Federal Home Loan Bank stock, at cost	29,411		31,232
Loans held for sale, at fair value	Loans held for sale, at fair value	851,951		262,518		Loans held for sale, at fair value	821,529		899,173
Loans	Loans	7,213,538		4,409,642		Loans	7,198,954		7,082,959
Less: allowance for credit losses	Less: allowance for credit losses	183,973		31,139		Less: allowance for credit losses	144,663		170,389
Net loans	Net loans	7,029,565		4,378,503		Net loans	7,054,291		6,912,570
Premises and equipment, net	Premises and equipment, net	136,774		90,131		Premises and equipment, net	142,596		145,115
Other real estate owned, net	Other real estate owned, net	12,748		18,939		Other real estate owned, net	11,986		12,111
Operating lease right-of-use assets	Operating lease right-of-use assets	52,410		32,539		Operating lease right-of-use assets	45,423		49,537
Interest receivable	Interest receivable	47,120		17,083		Interest receivable	42,083		43,603
Mortgage servicing rights, at fair value	Mortgage servicing rights, at fair value	71,535		75,521		Mortgage servicing rights, at fair value	101,615		79,997
Goodwill	Goodwill	236,086		169,051		Goodwill	242,561		242,561
Core deposit and other intangibles, net	Core deposit and other intangibles, net	23,924		17,589		Core deposit and other intangibles, net	19,592		22,426
Other assets	Other assets	289,792		122,714		Other assets	281,008		274,116
Total assets	Total assets	$	11,010,438	$	6,124,921	Total assets	$	11,918,367	$	11,207,330
LIABILITIES	LIABILITIES					LIABILITIES
Deposits	Deposits					Deposits
Noninterest-bearing	Noninterest-bearing	$	2,287,911	$	1,208,175	Noninterest-bearing	$	2,484,982	$	2,274,103
Interest-bearing checking	Interest-bearing checking	2,005,536		1,014,875		Interest-bearing checking	3,015,253		2,491,765
Money market and savings	Money market and savings	3,236,670		1,520,035		Money market and savings	3,421,281		3,254,915
Customer time deposits	Customer time deposits	1,471,556		1,171,502		Customer time deposits	1,241,540		1,375,695
Brokered and internet time deposits	Brokered and internet time deposits	92,074		20,351		Brokered and internet time deposits	40,900		61,559
Total deposits	Total deposits	9,093,747		4,934,938		Total deposits	10,203,956		9,458,037
Borrowings	Borrowings	438,838		304,675		Borrowings	183,962		238,324
Operating lease liabilities	Operating lease liabilities	56,705		35,525		Operating lease liabilities	50,396		55,187
Accrued expenses and other liabilities	Accrued expenses and other liabilities	176,057		87,454		Accrued expenses and other liabilities	108,239		164,400
Total liabilities	Total liabilities	9,765,347		5,362,592		Total liabilities	10,546,553		9,915,948
Commitments and contingencies (Note 9)						Commitments and contingencies (Note 9)	0		0
SHAREHOLDERS' EQUITY	SHAREHOLDERS' EQUITY					SHAREHOLDERS' EQUITY
Common stock, $1 par value per share; 75,000,000 shares authorized; 47,191,677 and 31,034,315 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		47,192		31,034
Common stock, $1 par value per share; 75,000,000 shares authorized; 47,360,950 and 47,220,743 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively						Common stock, $1 par value per share; 75,000,000 shares authorized; 47,360,950 and 47,220,743 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively	47,361		47,222
Additional paid-in capital	Additional paid-in capital	896,158		425,633		Additional paid-in capital	902,782		898,847
Retained earnings	Retained earnings	276,361		293,524		Retained earnings	403,173		317,625
Accumulated other comprehensive income, net	Accumulated other comprehensive income, net	25,287		12,138		Accumulated other comprehensive income, net	18,405		27,595
Total common shareholders' equity		1,244,998		762,329
Noncontrolling interests		93		0
Total shareholders' equity		1,245,091		762,329
Total FB Financial Corporation common shareholders' equity						Total FB Financial Corporation common shareholders' equity	1,371,721		1,291,289
Noncontrolling interest						Noncontrolling interest	93		93
Total equity						Total equity	1,371,814		1,291,382
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	11,010,438	$	6,124,921	Total liabilities and shareholders' equity	$	11,918,367	$	11,207,330

See the accompanying notes to the consolidated financial statements.

FB Financial Corporation and subsidiaries

Consolidated statements of income

(Unaudited)

(Amounts are in thousands except share and per share amounts)


		Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019				2021		2020		2021		2020
Interest income:	Interest income:										Interest income:
Interest and fees on loans	Interest and fees on loans	$	76,504	$	67,639	$	201,350	$	194,363		Interest and fees on loans	$	89,861	$	61,092	$	179,273	$	124,846
Interest on securities	Interest on securities										Interest on securities
Taxable	Taxable	2,286		3,137		7,961		10,254			Taxable	3,844		2,619		6,663		5,675
Tax-exempt	Tax-exempt	1,933		1,174		4,956		3,478			Tax-exempt	1,933		1,590		3,889		3,023
Other	Other	404		1,292		2,141		2,799			Other	691		306		1,289		1,737
Total interest income	Total interest income	81,127		73,242		216,408		210,894			Total interest income	96,329		65,607		191,114		135,281

Interest expense:	Interest expense:										Interest expense:
Deposits	Deposits	10,573		13,522		32,050		38,865			Deposits	7,919		9,309		17,745		21,477
Borrowings	Borrowings	1,726		1,415		3,944		3,685			Borrowings	1,847		961		4,230		2,218
Total interest expense	Total interest expense	12,299		14,937		35,994		42,550			Total interest expense	9,766		10,270		21,975		23,695
Net interest income	Net interest income	68,828		58,305		180,414		168,344			Net interest income	86,563		55,337		169,139		111,586
Provision for credit losses	Provision for credit losses	45,834		1,831		97,837		4,103			Provision for credit losses	(12,885)		24,039		(24,517)		52,003
Provision for credit losses on unfunded commitments	Provision for credit losses on unfunded commitments	9,567		0		13,050		0			Provision for credit losses on unfunded commitments	(954)		1,882		(3,176)		3,483
Net interest income after provisions for credit losses	Net interest income after provisions for credit losses	13,427		56,474		69,527		164,241			Net interest income after provisions for credit losses	100,402		29,416		196,832		56,100

Noninterest income:	Noninterest income:										Noninterest income:
Mortgage banking income	Mortgage banking income	84,686		29,193		189,599		74,740			Mortgage banking income	35,499		72,168		90,831		104,913
Service charges on deposit accounts	Service charges on deposit accounts	2,162		2,416		6,583		6,822			Service charges on deposit accounts	2,266		1,858		4,605		4,421
ATM and interchange fees	ATM and interchange fees	3,913		3,188		10,653		8,846			ATM and interchange fees	5,381		3,606		9,722		6,740
Investment services and trust income	Investment services and trust income	1,828		1,336		4,893		3,918			Investment services and trust income	2,999		1,368		5,007		3,065
Gain (loss) from securities, net	Gain (loss) from securities, net	583		(20)		618		75			Gain (loss) from securities, net	144		(28)		227		35
(Loss) gain on sales or write-downs of other real estate owned	(Loss) gain on sales or write-downs of other real estate owned	(1,505)		(126)		(1,368)		112			(Loss) gain on sales or write-downs of other real estate owned	(23)		86		473		137
Gain (loss) from other assets		226		44		(156)		52
Loss from other assets											Loss from other assets	(4)		(54)		(15)		(382)
Other income	Other income	5,133		2,114		10,395		5,598			Other income	3,038		2,487		5,180		5,262
Total noninterest income	Total noninterest income	97,026		38,145		221,217		100,163			Total noninterest income	49,300		81,491		116,030		124,191

Noninterest expenses:	Noninterest expenses:										Noninterest expenses:
Salaries, commissions and employee benefits	Salaries, commissions and employee benefits	67,676		40,880		166,556		112,495			Salaries, commissions and employee benefits	62,367		55,258		126,938		98,880
Occupancy and equipment expense	Occupancy and equipment expense	4,892		4,058		13,166		12,107			Occupancy and equipment expense	5,356		4,096		11,205		8,274
Legal and professional fees	Legal and professional fees	1,917		1,993		5,427		5,412			Legal and professional fees	2,090		1,952		4,524		3,510
Data processing	Data processing	2,994		2,816		8,229		7,843			Data processing	2,542		2,782		4,861		5,235
Merger costs	Merger costs	20,730		295		25,366		4,699			Merger costs	0		1,586		0		4,636
Amortization of core deposit and other intangibles	Amortization of core deposit and other intangibles	1,417		1,197		3,825		3,180			Amortization of core deposit and other intangibles	1,394		1,205		2,834		2,408

Advertising	Advertising	2,256		1,895		7,236		7,066			Advertising	3,559		2,591		5,812		4,980
Other expense	Other expense	16,210		9,801		37,425		29,353			Other expense	15,652		11,109		31,484		21,215
Total noninterest expense	Total noninterest expense	118,092		62,935		267,230		182,155			Total noninterest expense	92,960		80,579		187,658		149,138

(Loss) income before income taxes		(7,639)		31,684		23,514		82,249
Income tax (benefit) expense		(2,040)		7,718		5,495		20,007
Net (loss) income		(5,599)		23,966		18,019		62,242
Net income applicable to noncontrolling interests		0		0		0		0
Net (loss) income applicable to FB Financial Corporation		$	(5,599)	$	23,966	$	18,019	$	62,242
Income before income taxes											Income before income taxes	56,742		30,328		125,204		31,153
Income tax expense											Income tax expense	13,440		7,455		29,028		7,535
Net income applicable to FB Financial Corporation and noncontrolling interest											Net income applicable to FB Financial Corporation and noncontrolling interest	43,302		22,873		96,176		23,618
Net income applicable to noncontrolling interest											Net income applicable to noncontrolling interest	8		0		8		0
Net income applicable to FB Financial Corporation											Net income applicable to FB Financial Corporation	$	43,294	$	22,873	$	96,168	$	23,618

(Loss) earnings per common share
Earnings per common share											Earnings per common share
Basic	Basic	$	(0.14)	$	0.77	$	0.52	$	2.01		Basic	$	0.91	$	0.71	$	2.03	$	0.75
Diluted	Diluted	(0.14)		0.76		0.52		1.97			Diluted	0.90		0.70		2.00		0.74

See the accompanying notes to the consolidated financial statements.

FB Financial Corporation and subsidiaries

Consolidated statements of comprehensive income

(Unaudited)

(Amounts are in thousands)

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Net (loss) income $ (5,599) $ 23,966 $ 18,019 $ 62,242
Other comprehensive income, net of tax:
Net change in unrealized gain in available-for-sale
securities, net of taxes of $521, $1,296, $5,225, and $6,430
1,788 3,762 15,091 18,265
Reclassification adjustment for (gain) loss on sale of securities
included in net income, net of taxes of $(137), $20, $(137), and $20
(387) 55 (387) 56
Net change in unrealized gain (loss) in hedging activities, net of
taxes of $40, $(90), $(403), and $(407)
112 (256) (1,145) (1,151)
Reclassification adjustment for gain on hedging activities,
net of taxes of $(41), $(46), $(145), and $(121)
(115) (130) (410) (343)
Total other comprehensive income, net of tax 1,398 3,431 13,149 16,827
Comprehensive (loss) income (4,201) 27,397 31,168 79,069
Comprehensive (loss) income applicable to noncontrolling interests 0 0 0 0
Comprehensive (loss) income applicable to FB Financial Corporation $ (4,201) $ 27,397 $ 31,168 $ 79,069


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net income	$	43,302	$	22,873	$	96,176	$	23,618
Other comprehensive income (loss), net of tax:
Net change in unrealized gain in available-for-sale securities, net of tax expenses (benefits) of $798, $429, $(2,654) and $4,704	2,286		1,209		(9,562)		13,303
Reclassification adjustment for gain on sale of securities included in net income, net of tax expenses of $2, $0, $4 and $0	(6)		0		(11)		0
Net change in unrealized loss in hedging activities, net of tax expenses (benefits) of $23, $(40), $135 and $(443)	67		(112)		383		(1,257)
Reclassification adjustment for gain on hedging activities, net of tax expenses of $0, $52, $0 and $104	0		(148)		0		(295)
Total other comprehensive income (loss), net of tax	2,347		949		(9,190)		11,751
Comprehensive income	45,649		23,822		86,986		35,369
Comprehensive income applicable to noncontrolling interests	8		0		8		0
Comprehensive income applicable to FB Financial Corporation	$	45,641	$	23,822	$	86,978	$	35,369

See the accompanying notes to the consolidated financial statements.

FB Financial Corporation and subsidiaries

Consolidated statements of changes in shareholders’ equity

(Unaudited)

(Amounts are in thousands except per share amounts)

Common
stock Additional
paid-in
capital Retained
earnings Accumulated
other
comprehensive
income, net Total common
shareholders' equity Noncontrolling interests Total shareholders' equity
Balance at June 30, 2020 $ 32,101 $ 462,930 $ 286,296 $ 23,889 $ 805,216 $ — $ 805,216
Net (loss) income — — (5,599) — (5,599) — (5,599)
Other comprehensive income, net of taxes — — — 1,398 1,398 — 1,398
Common stock issued in connection
with acquisition of Franklin Financial
Network, Inc., net of registration costs (See Note 2)
15,058 429,815 — — 444,873 93 444,966
Stock based compensation expense 6 3,014 — — 3,020 — 3,020
Restricted stock units vested and
distributed, net of shares withheld
9 (115) — — (106) — (106)
Shares issued under employee stock
purchase program 18 514 — — 532 — 532
Dividends declared ($0.09 per share) — — (4,336) — (4,336) — (4,336)
Balance at September 30, 2020 $ 47,192 $ 896,158 $ 276,361 $ 25,287 $ 1,244,998 $ 93 $ 1,245,091
Balance at December 31, 2019 $ 31,034 $ 425,633 $ 293,524 $ 12,138 $ 762,329 $ — $ 762,329
Cumulative effect of change in
accounting principle (See Note 1)
— — (25,018) — (25,018) — (25,018)
Balance at January 1, 2020 31,034 425,633 268,506 12,138 737,311 — 737,311
Net income — — 18,019 — 18,019 — 18,019
Other comprehensive income, net of taxes — — — 13,149 13,149 — 13,149
Common stock issued in connection
with acquisition of FNB Financial Corp., net of registration costs (See Note 2)
955 33,892 — — 34,847 — 34,847
Common stock issued in connection with acquisition of Franklin Financial Network, Inc., net of registration costs (See Note 2) 15,058 429,815 — — 444,873 93 444,966
Stock based compensation expense 17 7,236 — — 7,253 — 7,253
Restricted stock units vested and
distributed, net of shares withheld
98 (1,366) — — (1,268) — (1,268)
Shares issued under employee stock
purchase program
30 948 — — 978 — 978
Dividends declared ($0.27 per share) — — (10,164) — (10,164) — (10,164)
Balance at September 30, 2020 $ 47,192 $ 896,158 $ 276,361 $ 25,287 $ 1,244,998 $ 93 $ 1,245,091


	Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive income, net		Total common shareholders' equity		Noncontrolling interests		Total shareholders' equity
Balance at March 31, 2021	$	47,332	$	900,521	$	365,192	$	16,058	$	1,329,103	$	93	$	1,329,196

Net income attributable to FB Financial Corporation and noncontrolling interest	—		—		43,294		—		43,294		8		43,302
Other comprehensive income, net of taxes	—		—		—		2,347		2,347		—		2,347


Stock based compensation expense	2		2,513		—		—		2,515		—		2,515
Restricted stock units vested and distributed, net of shares withheld	27		(252)		—		—		(225)		—		(225)
Shares issued under employee stock purchase program	—		—		—		—		—		—		0
Dividends declared ($0.11 per share)	—		—		(5,313)		—		(5,313)		—		(5,313)
Noncontrolling interest distribution	—		—		—		—		—		(8)		(8)
Balance at June 30, 2021	$	47,361	$	902,782	$	403,173	$	18,405	$	1,371,721	$	93	$	1,371,814


Balance at December 31, 2020	$	47,222	$	898,847	$	317,625	$	27,595	$	1,291,289	$	93	$	1,291,382


Net income attributable to FB Financial Corporation and noncontrolling interest	—		—		96,168		—		96,168		8		96,176
Other comprehensive income, net of taxes	—		—		—		(9,190)		(9,190)		—		(9,190)


Stock based compensation expense	5		5,176		—		—		5,181		—		5,181
Restricted stock units vested and distributed, net of shares withheld	112		(2,052)		—		—		(1,940)		—		(1,940)
Shares issued under employee stock purchase program	22		811		—		—		833		—		833
Dividends declared ($0.22 per share)	—		—		(10,620)		—		(10,620)		—		(10,620)
Noncontrolling interest distribution	—		—		—		—		—		(8)		(8)
Balance at June 30, 2021	$	47,361	$	902,782	$	403,173	$	18,405	$	1,371,721	$	93	$	1,371,814

FB Financial Corporation and subsidiaries

Consolidated statements of changes in shareholders’ equity

(Unaudited)

(Amounts are in thousands except per share amounts)

Common
stock Additional
paid-in
capital Retained
earnings Accumulated
other
comprehensive
income, net Total common
shareholders' equity Noncontrolling interests Total shareholders' equity
Balance at June 30, 2019 $ 30,866 $ 425,644 $ 253,080 $ 9,169 $ 718,759 $ — $ 718,759
Net income — — 23,966 — 23,966 — 23,966
Other comprehensive income, net of taxes — — — 3,431 3,431 — 3,431
Stock based compensation expense 3 1,833 — — 1,836 — 1,836
Restricted stock units vested and distributed, net of shares withheld 47 (1,089) — — (1,042) — (1,042)
Shares issued under employee stock purchase program 12 428 — — 440 — 440
Dividends declared ($0.08 per share) — — (2,555) — (2,555) — (2,555)
Balance at September 30, 2019 $ 30,928 $ 426,816 $ 274,491 $ 12,600 $ 744,835 $ — $ 744,835
Balance at December 31, 2018 $ 30,725 $ 424,146 $ 221,213 $ (4,227) $ 671,857 $ — $ 671,857
Cumulative effect of change in accounting principle — — (1,309) — (1,309) — (1,309)
Balance at January 1, 2019 30,725 424,146 219,904 (4,227) 670,548 — 670,548
Net income — — 62,242 — 62,242 — 62,242
Other comprehensive income, net of taxes — — — 16,827 16,827 — 16,827
Stock based compensation expense 9 5,612 — — 5,621 — 5,621
Restricted stock units vested and distributed, net of shares withheld 171 (3,723) — — (3,552) — (3,552)
Shares issued under employee stock purchase program 23 781 — — 804 — 804
Dividends declared ($0.24 per share) — — (7,655) — (7,655) — (7,655)
Balance at September 30, 2019 $ 30,928 $ 426,816 $ 274,491 $ 12,600 $ 744,835 $ — $ 744,835


	Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive income, net		Total common shareholders' equity		Noncontrolling interests		Total shareholders' equity
Balance at March 31, 2020	$	32,067	$	460,938	$	266,385	$	22,940	$	782,330	$	0	$	782,330

Net income	—		—		22,873		—		22,873		—		22,873
Other comprehensive loss, net of taxes	—		—		—		949		949		—		949
Stock based compensation expense	6		2,344		—		—		2,350		—		2,350
Restricted stock units vested and distributed, net of shares withheld	28		(352)		—		—		(324)		—		(324)



Dividends declared ($0.09 per share)	—		—		(2,962)		—		(2,962)		—		(2,962)
Balance at June 30, 2020	$	32,101	$	462,930	$	286,296	$	23,889	$	805,216	$	0	$	805,216

Balance at December 31, 2019	$	31,034	$	425,633	$	293,524	$	12,138	$	762,329	$	0	$	762,329
Cumulative effect of change in accounting principle	—		—		(25,018)		—		(25,018)		—		(25,018)
Balance at January 1, 2020	31,034		425,633		268,506		12,138		737,311		0		737,311
Net income	—		—		23,618		—		23,618		—		23,618
Other comprehensive income, net of taxes	—		—		—		11,751		11,751		—		11,751
Common stock issued in connection with acquisition of the FNB Financial Corp., net of registration costs (See Note 2)	955		33,892		—		—		34,847		—		34,847
Stock based compensation expense	11		4,222		—		—		4,233		—		4,233
Restricted stock units vested and distributed, net of shares withheld	89		(1,251)		—		—		(1,162)		—		(1,162)
Shares issued under employee stock purchase program	12		434		—		—		446		—		446
Dividends declared ($0.18 per share)	—		—		(5,828)		—		(5,828)		—		(5,828)
Balance at June 30, 2020	$	32,101	$	462,930	$	286,296	$	23,889	$	805,216	$	0	$	805,216

See the accompanying notes to the consolidated financial statements.

FB Financial Corporation and subsidiaries

Consolidated statements of cash flows

(Unaudited)

(Amounts are in thousands)


		Nine Months Ended September 30,					Six Months Ended June 30,
		2020		2019			2021		2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	18,019	$	62,242	Net income	$	96,176	$	23,618
Adjustments to reconcile net income to net cash used in operating activities:	Adjustments to reconcile net income to net cash used in operating activities:					Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization of fixed assets	Depreciation and amortization of fixed assets	4,924		3,830		Depreciation and amortization of fixed assets	4,148		3,231
Amortization of core deposit and other intangibles	Amortization of core deposit and other intangibles	3,825		3,180		Amortization of core deposit and other intangibles	2,834		2,408
Capitalization of mortgage servicing rights	Capitalization of mortgage servicing rights	(33,415)		(30,319)		Capitalization of mortgage servicing rights	(22,167)		(20,063)
Net change in fair value of mortgage servicing rights	Net change in fair value of mortgage servicing rights	42,251		23,832		Net change in fair value of mortgage servicing rights	549		35,076
Stock-based compensation expense	Stock-based compensation expense	7,253		5,621		Stock-based compensation expense	5,181		4,233
Provision for credit losses	Provision for credit losses	97,837		4,103		Provision for credit losses	(24,517)		52,003
Provision for credit losses on unfunded commitments	Provision for credit losses on unfunded commitments	13,050		0		Provision for credit losses on unfunded commitments	(3,176)		3,483
Provision for mortgage loan repurchases	Provision for mortgage loan repurchases	2,128		255		Provision for mortgage loan repurchases	(266)		1,227
Accretion of yield on purchased loans		(3,080)		(6,030)
Amortization (accretion) of premiums and discounts on acquired loans, net						Amortization (accretion) of premiums and discounts on acquired loans, net	284		(2,554)
Accretion of discounts and amortization of premiums on securities, net	Accretion of discounts and amortization of premiums on securities, net	4,431		2,113		Accretion of discounts and amortization of premiums on securities, net	4,390		2,077
Gain from securities, net	Gain from securities, net	(618)		(75)		Gain from securities, net	(227)		(35)
Originations of loans held for sale	Originations of loans held for sale	(4,739,497)		(3,477,658)		Originations of loans held for sale	(3,308,882)		(2,807,047)
Repurchases of loans held for sale		0		(9,919)

Proceeds from sale of loans held for sale	Proceeds from sale of loans held for sale	4,690,135		3,527,632		Proceeds from sale of loans held for sale	3,355,152		2,739,933
Gain on sale and change in fair value of loans held for sale	Gain on sale and change in fair value of loans held for sale	(202,336)		(72,749)		Gain on sale and change in fair value of loans held for sale	(86,031)		(113,888)

Net loss (gain) or write-downs of other real estate owned		1,368		(112)
Loss (gain) on other assets		156		(52)
Relief of goodwill		0		100
Net gain or write-downs of other real estate owned						Net gain or write-downs of other real estate owned	(473)		(137)
Loss on other assets						Loss on other assets	15		382

Provision for deferred income taxes	Provision for deferred income taxes	(31,543)		(5,900)		Provision for deferred income taxes	13,538		(16,380)
Changes in:	Changes in:					Changes in:
Operating leases		1,309		0

Other assets and interest receivable	Other assets and interest receivable	(77,566)		(50,509)		Other assets and interest receivable	(14,488)		(102,382)
Accrued expenses and other liabilities	Accrued expenses and other liabilities	59,325		4,243		Accrued expenses and other liabilities	(97,146)		47,077
Net cash used in operating activities	Net cash used in operating activities	(142,044)		(16,172)		Net cash used in operating activities	(75,106)		(147,738)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Activity in available-for-sale securities:	Activity in available-for-sale securities:					Activity in available-for-sale securities:
Sales		28,257		24,498

Maturities, prepayments and calls	Maturities, prepayments and calls	140,246		78,861		Maturities, prepayments and calls	147,906		72,360
Purchases	Purchases	(214,285)		(92,059)		Purchases	(354,762)		(59,984)
Net change in loans	Net change in loans	(133,893)		(295,791)		Net change in loans	(4,146)		(196,303)
Purchases of FHLB stock		(515)		(2,544)
Proceeds from sale of mortgage servicing rights		0		29,160
Sales (purchases) of FHLB stock						Sales (purchases) of FHLB stock	1,821		(1,176)

Purchases of premises and equipment	Purchases of premises and equipment	(2,652)		(4,052)		Purchases of premises and equipment	(1,168)		(4,827)
Proceeds from the sale of premises and equipment		0		1,275

Proceeds from the sale of other real estate owned	Proceeds from the sale of other real estate owned	5,561		2,718		Proceeds from the sale of other real estate owned	4,661		4,150

Net cash paid in business combinations (See Note 2)		248,439		171,032
Net cash provided by (used in) investing activities		71,158		(86,902)
Net cash paid in business combinations						Net cash paid in business combinations	0		(4,227)
Net cash used in investing activities						Net cash used in investing activities	(205,688)		(190,007)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Net increase in demand deposits	Net increase in demand deposits	1,043,928		231,763		Net increase in demand deposits	900,733		891,237
Net decrease in time deposits	Net decrease in time deposits	(201,659)		(70,594)		Net decrease in time deposits	(154,814)		(82,909)
Net increase in securities sold under agreements to repurchase	Net increase in securities sold under agreements to repurchase	5,532		1,546		Net increase in securities sold under agreements to repurchase	857		5,795
Net (decrease) increase in FHLB advances		(50,000)		68,235
Issuance of subordinated debt		100,000		0
Payments for issuance costs associated with subordinated debt		(1,890)		0
Proceeds from other borrowings		15,000		0

Payment of subordinated debt						Payment of subordinated debt	(40,000)		0

Accretion of subordinated debt fair value premium and amortization of issuance costs, net						Accretion of subordinated debt fair value premium and amortization of issuance costs, net	(176)		0
(Payments on) proceeds from other borrowings						(Payments on) proceeds from other borrowings	(15,000)		15,000
Share based compensation withholding payments	Share based compensation withholding payments	(1,268)		(3,552)		Share based compensation withholding payments	(1,940)		(1,162)
Net proceeds from sale of common stock under employee stock purchase program	Net proceeds from sale of common stock under employee stock purchase program	978		804		Net proceeds from sale of common stock under employee stock purchase program	833		446
Dividends paid	Dividends paid	(10,025)		(7,487)		Dividends paid	(10,492)		(5,751)
Noncontrolling interest distribution						Noncontrolling interest distribution	(8)		0
Net cash provided by financing activities	Net cash provided by financing activities	900,596		220,715		Net cash provided by financing activities	679,993		822,656
Net change in cash and cash equivalents	Net change in cash and cash equivalents	829,710		117,641		Net change in cash and cash equivalents	399,199		484,911
Cash and cash equivalents at beginning of the period	Cash and cash equivalents at beginning of the period	232,681		125,356		Cash and cash equivalents at beginning of the period	1,317,898		232,681
Cash and cash equivalents at end of the period	Cash and cash equivalents at end of the period	$	1,062,391	$	242,997	Cash and cash equivalents at end of the period	$	1,717,097	$	717,592
Supplemental cash flow information:	Supplemental cash flow information:					Supplemental cash flow information:
Interest paid	Interest paid	$	36,498	$	41,463	Interest paid	$	24,611	$	23,081
Taxes paid	Taxes paid	16,449		21,377		Taxes paid	45,335		1,590
Supplemental noncash disclosures:	Supplemental noncash disclosures:					Supplemental noncash disclosures:
Transfers from loans to other real estate owned	Transfers from loans to other real estate owned	$	1,579	$	3,565	Transfers from loans to other real estate owned	$	4,596	$	1,006

Transfers from other real estate owned to premises and equipment		841		0

Transfers from premises and equipment to other real estate owned	Transfers from premises and equipment to other real estate owned	0		2,640		Transfers from premises and equipment to other real estate owned	0		841
Loans provided for sales of other real estate owned	Loans provided for sales of other real estate owned	0		166		Loans provided for sales of other real estate owned	533		0
Transfers from loans to loans held for sale	Transfers from loans to loans held for sale	9,304		5,460		Transfers from loans to loans held for sale	3,709		6,317
Transfers from loans held for sale to loans	Transfers from loans held for sale to loans	(49,508)		11,476		Transfers from loans held for sale to loans	29,322		14,358

Stock consideration paid in business combination	Stock consideration paid in business combination	480,867		0		Stock consideration paid in business combination	0		35,041

Trade date payable - securities	Trade date payable - securities	1,214		3,671		Trade date payable - securities	41,722		5,431
Trade date receivable - securities		0		0

Dividends declared not paid on restricted stock units	Dividends declared not paid on restricted stock units	139		168		Dividends declared not paid on restricted stock units	128		77

Decrease to retained earnings for adoption of new accounting standards (See Note 1)		25,018		1,309
Decrease to retained earnings for adoption of new accounting standard						Decrease to retained earnings for adoption of new accounting standard	0		25,018
Right-of-use assets obtained in exchange for operating lease liabilities	Right-of-use assets obtained in exchange for operating lease liabilities	806		39,011		Right-of-use assets obtained in exchange for operating lease liabilities	670		806

See the accompanying notes to the consolidated financial statements.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

Note (1)—Basis of presentation:

Overview and presentation

FB Financial Corporation (the “Company”) is a financial holding company headquartered in Nashville, Tennessee. The Company operates through its wholly-owned subsidiary, FirstBank (the "Bank"). As of ~~September~~June 30, ~~2020,~~2021, the Bank had 8781 full-service branches throughout Tennessee, ~~north~~ Alabama, southern Kentucky and north Georgia, and a national mortgage business with office locations across the Southeast, which primarily originates loans to be sold in the secondary market.

The unaudited consolidated financial statements, including the notes thereto, have been prepared in accordance with United States generally accepted accounting principles ~~(“GAAP”)~~ interim reporting requirements and general banking industry guidelines, and therefore, do not include all information and notes included in the annual consolidated financial statements in conformity with GAAP. These interim consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K.

The unaudited consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods. The results for interim periods are not necessarily indicative of results for a full year.

In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and the reported results of operations for the periods then ended. Actual results could differ significantly from those estimates.

Certain prior period amounts have been reclassified to conform to the current period presentation without any impact on the reported amounts of net income or shareholders’ equity.

~~The~~As of June 30, 2021, the Company continues to qualify as an emerging growth company as defined by the "Jumpstart Our Business Startups ~~Act" ("JOBS Act").~~Act," however beginning on December 31, 2021, the Company will cease to qualify.

~~Coronavirus Disease 2019 ("COVID-19")~~Risks and ~~related relief programs~~uncertainties

The COVID-19 health pandemic that ~~appeared~~arose in ~~the United States in the first quarter of~~ 2020 ~~has~~ created a ~~health and economic~~ crisis ~~that has resulted~~resulting in volatility in financial markets, sudden, unprecedented job losses, and disruption in consumer and commercial behavior, ~~and sudden, unprecedented job losses and action taken by~~resulting in governments in the United States and ~~globally. The duration~~globally to intervene with varying levels of direct monetary support and fiscal stimulus packages. All industries, municipalities and consumers have been impacted by the health crisis to some degree, including the markets that we serve. In attempts to “flatten the curve,” businesses not deemed essential were closed or constrained to capacity limitations, individuals were asked to restrict their movements, observe social distancing and shelter in place. These actions resulted in rapid decreases in commercial and consumer activity, temporary closures of many businesses, leading to a loss of revenues and a rapid increase in unemployment, widening of credit spreads, dislocation of bond markets, disruption of global supply chains and changes in consumer spending behavior. Although most restrictions were lifted and vaccines became widely available during the first half of 2021, during the three months ended June 30, 2021, concern began building regarding the potential ~~financial~~ impact the new Delta variant of ~~COVID-19 is currently unknown, however if these conditions are sustained without additional mitigating factors~~the virus may have on the global economy and the efficacy of available vaccines to protect against widespread infection. As such, ~~as additional or extended government assistance programs, legislation or stimulus measures, it may impact borrowers' ability~~there continues to ~~repay loans,~~be uncertainty regarding the long term effects on the global economy, which could ~~cause~~have a material adverse ~~effect~~impact on the Company's business operations, asset valuations, financial condition, and ~~lead to valuation impairments on the Company's intangible assets, loans, investments, mortgage servicing rights, and derivative instruments.~~

The Coronavirus Aid, Relief and Economic Security ("CARES") Act, enacted on March 27, 2020, by the US Government to counteract the sudden economic hardship caused by the COVID-19 health pandemic included the creationresults of the Paycheck Protection Program (“PPP”). The PPP, a nearly $670 billion program, as amended, was designed to aid small- and medium-sized businesses through federally guaranteed loans distributed through banks, for which the Company participated as a lender. These loans were intended to provide for payroll and other operating costs, helping recipient businesses remain viable and retain employees. Additionally, Section 4013 of the CARES Act further stipulated that a qualified loan modification was exempt by law from classification as a troubled debt restructuring (“TDR”), from the period beginning March 1, 2020 until the earlier of December 31, 2020, or the date that is 60 days after the date on which the national emergency concerning the COVID-19 pandemic is terminated. In accordance with this guidance, the Company introduced a payment deferral program for borrowers who are current and otherwise not past due. See Note 4, “Loans and allowance for credit losses” for additional information.

~~Subsequent events~~

The Company has evaluated, for consideration of recognition or disclosure, subsequent events that occurred through the date of issuance of these financial statements. The Company has determined that there were no subsequent events other

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

~~(Dollar amounts are in thousands, except share and per share amounts)~~

than described below that occurred after September 30, 2020, but prior to the issuance of these financial statements that would have a material impact on the Company’s consolidated financial statements.

Subsequent to September 30, 2020, the Company elected to not renew $100,000 in outstanding FHLB 90 day fixed rate advances, included in 'Borrowings' on the consolidated balance sheets at September 30, 2020 and December 31, 2019. In addition to the $100,000 repayment, the Company also reclassified the remaining unamortized gain from the legacy cash flow hedge associated with this borrowing from accumulated other comprehensive income to earnings, totaling approximately $545, net of taxes.operations.

Earnings per share

Basic ~~earnings per common share ("EPS")~~EPS excludes dilution and is computed by dividing earnings available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS includes the dilutive effect of additional potential common shares issuable under the restricted stock units granted but not yet vested and distributable. Diluted EPS is computed by dividing earnings available to common shareholders by the weighted average number of common shares outstanding for the period, plus an incremental number of common-equivalent shares computed using the treasury stock method.

Unvested share-based payment awards, which include the right to receive non-forfeitable dividends or dividend equivalents, are considered to participate with common shareholders in undistributed earnings for purposes of computing EPS. Companies that have such participating securities are required to calculate basic and diluted EPS using the two-class method. Certain restricted stock awards granted by the Company include non-forfeitable dividend equivalents and

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

are considered participating securities. Calculations of EPS under the two-class method (i) exclude from the numerator any dividends paid or owed on participating securities and any undistributed earnings considered to be attributable to participating securities and (ii) exclude from the denominator the dilutive impact of the participating securities.

The following is a summary of the basic and diluted earnings per common share calculation for each of the periods presented:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,			Six Months Ended June 30,
		2020		2019		2020		2019				2021		2020		2021		2020
Basic earnings per common share calculation:	Basic earnings per common share calculation:									Basic earnings per common share calculation:
Net (loss) income applicable to FB Financial Corporation		$	(5,599)	$	23,966	$	18,019	$	62,242
Net income applicable to FB Financial Corporation										Net income applicable to FB Financial Corporation		$	43,294	$	22,873	$	96,168	$	23,618
Dividends paid on and undistributed earnings allocated to participating securities	Dividends paid on and undistributed earnings allocated to participating securities	0		(128)		0		(333)		Dividends paid on and undistributed earnings allocated to participating securities		0		0		0		0
(Loss) earnings available to common shareholders		$	(5,599)	$	23,838	$	18,019	$	61,909
Earnings available to common shareholders										Earnings available to common shareholders		$	43,294	$	22,873	$	96,168	$	23,618
Weighted average basic shares outstanding	Weighted average basic shares outstanding	40,154,841		30,899,583		34,404,064		30,849,035		Weighted average basic shares outstanding		47,351,969		32,094,274		47,312,312		$	31,676,004
Basic (loss) earnings per common share		$	(0.14)	$	0.77	$	0.52	$	2.01
Basic earnings per common share										Basic earnings per common share		$	0.91	$	0.71	$	2.03	$	0.75
Diluted earnings per common share:	Diluted earnings per common share:									Diluted earnings per common share:
(Loss) earnings available to common shareholders		$	(5,599)	$	23,838	$	18,019	$	61,909
Earnings available to common shareholders										Earnings available to common shareholders		$	43,294	$	22,873	$	96,168	$	23,618
Weighted average basic shares outstanding	Weighted average basic shares outstanding	40,154,841		30,899,583		34,404,064		30,849,035		Weighted average basic shares outstanding		47,351,969		32,094,274		47,312,312		31,676,004
Weighted average diluted shares contingently issuable(1)	Weighted average diluted shares contingently issuable(1)	482,904		525,990		436,228		529,751		Weighted average diluted shares contingently issuable(1)		641,804		412,143		664,221		433,190
Weighted average diluted shares outstanding	Weighted average diluted shares outstanding	40,637,745		31,425,573		34,840,292		31,378,786		Weighted average diluted shares outstanding		47,993,773		32,506,417		47,976,533		32,109,194
Diluted (loss) earnings per common share(2)		$	(0.14)	$	0.76	$	0.52	$	1.97
Diluted earnings per common share										Diluted earnings per common share		$	0.90	$	0.70	$	2.00	$	0.74

(1)Excludes ~~332,347~~164,472 and ~~536,908~~250,776 restricted stock units outstanding considered to be antidilutive for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020, respectively.~~

~~(2)Diluted EPS is calculated using the basic weighted average number of common shares outstanding~~2021, respectively and 352,888 for ~~periods in which a loss is incurred.~~three and six months ended June 30, 2020.

Recently adopted accounting policies:

The Company ~~modified~~did not modify or ~~adopted the following~~adopt any new accounting policies during the ~~nine~~three and six months ended ~~September~~June 30, 2021 that were not disclosed in the Company's 2020 ~~primarily~~audited consolidated financial statements included on Form 10-K, other than as ~~a result~~described below.

As previously disclosed, during the three months March 31, 2021, the Company reevaluated its business segments to align all retail mortgage activities with the Mortgage segment. Previously, the Company assigned retail mortgage activities within the Banking geographical footprint to the Banking segment. See Note 12, "Segment reporting" for additional information on this change.

Recently adopted accounting standards:

Except as set forth below, the Company did not adopt any new accounting standards that were not disclosed in the Company's 2020 audited consolidated financial statements included on Form 10-K.

In January 2021, Financial Accounting Standards Board issued ASU 2021-01, "Reference Rate Reform (Topic 848): Scope". This ASU clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The ASU also amends the expedients and exceptions in Topic 848 to capture the incremental consequences of the ~~implementation~~scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. The Company early adopted ASU 2021-01 upon issuance effective January 7, 2021. No contract modifications have been made under the new guidance, therefore the adoption of ~~FASB Accounting Standards Update ("ASU") 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” ("CECL"):~~

~~Investment securities:~~

~~Debt securities are classified as held to maturity and carried at amortized cost, excluding accrued interest, when management has~~this update did not impact the positive intent and ability to hold them to maturity. Debt securities are classified as available-for-sale when they might be sold before maturity. Available-for-sale debt securities are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of applicable taxes. Beginning January 1, 2020, unrealized losses resulting from credit losses for available-for-sale debt securities are recognized in earnings as a provision for credit

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated~~Company's financial statements or disclosures.

~~(Unaudited)~~

~~(Dollar amounts are in thousands, except share and per share amounts)~~

~~losses. Unrealized losses that do~~Newly issued not result from credit losses are excluded from earnings and reported as accumulated other comprehensive income, net of applicable taxes, which is included in equity. Accrued interest receivable is separated from other components of amortized cost and presented separately on the consolidated balance sheets.

Equity securities with readily determinable market values are carried at fair value on the balance sheet with any periodic changes in value made through adjustments to the statement of income. Equity securities without readily determinable market values are carried at cost less impairment and included in other assets on the consolidated balance sheets.

Interest income includes the amortization and accretion of purchase premium and discount. Premiums and discounts on securities are amortized on the level-yield method anticipating prepayments based upon the prior three month average monthly prepayments when available. Gains and losses on sales are recorded on the trade date and determined using the specific identification method.yet effective accounting standards:

The Company ~~evaluates available-for-sale securities for expected credit losses at least on a quarterly basis,~~has reviewed newly issued not yet effective accounting standards and ~~more frequently when economic or market concerns warrant such evaluation. For securities in an unrealized loss position, consideration is given~~concluded as of June 30, 2021, there are none that are likely to the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuer’s financial condition, the Company considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition.

~~When credit losses are expected to occur, the amount of the expected credit loss recognized in earnings depends on~~impact the Company's ~~intention to sell the security~~financial statements or if it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If the Company intends to sell the security or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis, the expected credit loss recognized in earnings is equal to the entire difference between its amortized cost basis and its fair value at the date it was determined to be impaired due to credit losses or other factors. The previous amortized cost basis less the impairment recognized in earnings becomes the new amortized cost basis of the investment.disclosures.

However, if the Company does not intend to sell the security and it is not more likely than not to be required to sell the security before recovery of its amortized cost basis, the difference between the amortized cost and the fair value is separated into the amount representing the credit loss and the amount related to all other factors. If the Company determines a decline in fair value below the amortized cost basis of an available-for-sale investment security has resulted from credit related factors, beginning January 1, 2020 with the adoption of CECL, the Company records a credit loss through an allowance for credit losses. The allowance for credit losses is limited by the amount that the fair value is less than amortized cost. The amount of the allowance for credit losses is determined based on the present value of cash flows expected to be collected and is recognized as a charge to earnings. The amount of the impairment related to other, non-credit related, factors is recognized in other comprehensive income, net of applicable taxes.

The Company did not record any provision for credit losses for its available-for-sale debt securities during the three and nine months ended September 30, 2020, as the majority of the investment portfolio is government guaranteed and declines in fair value below amortized cost were determined to be non-credit related.

~~Loans:~~

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are stated at amortized cost, which is the principal amount outstanding less any purchase accounting discount net of any accretion recognized to date. Interest on loans is recognized as income by using the simple interest method on daily balances of the principal amount outstanding plus any accretion of purchase accounting discounts. Accrued interest receivable is separated from other components of amortized cost and presented separately on the consolidated balance sheets.

Loans on which the accrual of interest has been discontinued are designated as nonaccrual loans. Accrual of interest is discontinued on loans past due 90 days or more unless the credit is well secured and in the process of collection. Also, a loan may be placed on nonaccrual status prior to becoming past due 90 days if management believes, after considering economic and business conditions and collection efforts, that the borrower’s financial condition is such that collection of principal or interest is doubtful. The decision to place a loan on nonaccrual status prior to becoming past due 90 days is based on an evaluation of the borrower’s financial condition, collateral liquidation value, economic and business conditions and other factors that affect the borrower’s ability to pay. When a loan is placed on nonaccrual status, the accrued but unpaid interest is charged against current period operations through a reversal of interest income. Thereafter, interest on nonaccrual loans is recognized only as received if future collection of principal is probable. If the collectibility of

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

outstanding principal is doubtful, interest received is applied as a reduction of principal. A loan may be restored to accrual status when principal and interest are no longer past due or it otherwise becomes both well secured and collectability is reasonably assured. The nonaccrual policy results in timely reversal of accrued interest receivable, so an allowance for credit losses is not required on accrued interest receivable.

~~Allowance for credit losses:~~

The allowance for credit losses represents the portion of the loan's amortized cost basis that the Company does not expect to collect due to credit losses over the loan's life, considering past events, current conditions, and reasonable and supportable forecasts of future economic conditions considering macroeconomic forecasts. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance for credit losses is based on the loan's amortized cost basis, excluding accrued interest receivable, as the Company promptly charges off uncollectible accrued interest receivable. Management’s determination of the appropriateness of the allowance is based on periodic evaluation of the loan portfolio, lending-related commitments and other relevant factors, including macroeconomic forecasts and historical loss rates. In future quarters, the Company may update information and forecasts that may cause significant changes in the estimate in those future quarters.

As of January 1, 2020, the Company’s policy for the allowance for credit losses changed with the adoption of CECL. As permitted, the new guidance was implemented using a modified retrospective approach with the impact of the initial adoption being recorded through retained earnings at January 1, 2020, with no restatement of prior periods. Prior to adopting CECL, the Company calculated the allowance using an incurred loss approach. Beginning January 1, 2020, the Company calculates the allowance using a lifetime expected credit loss approach as described in the previous paragraph. See Note 4 for additional details related to the Company's specific calculation methodology.

The allowance for credit losses is the Company’s best estimate. Actual losses may differ from the September 30, 2020 allowance for credit loss as the CECL estimate is sensitive to economic forecasts and management judgment. There have been no changes to portfolio segments as described in the accounting policies within the Company's Annual Report on Form 10-K.

~~Business combinations and accounting for loans purchased with credit deterioration:~~

Business combinations are accounted for by applying the acquisition method in accordance with Accounting Standards Codification ("ASC") 805, “Business Combinations” (“ASC 805”). Under the acquisition method, identifiable assets acquired and liabilities assumed and any non-controlling interest in the acquiree at the acquisition date are measured at their fair values as of that date. Any excess of the purchase price over fair value of net assets acquired is recorded as goodwill. To the extent the fair value of net assets acquired, including any other identifiable intangible assets, exceed the purchase price, a bargain purchase gain is recognized. Results of operations of acquired entities are included in the consolidated statements of income from the date of acquisition.

Beginning January 1, 2020, loans acquired in business combinations with evidence of more-than-insignificant credit deterioration since origination are considered to be Purchased Credit Deteriorated ("PCD"). The Company developed multiple criteria to assess the presence of more–than–insignificant credit deterioration in acquired loans, mainly focused on changes in credit quality and payment status. While general criteria have been established, each acquisition will vary in its specific facts and circumstances and the Company will apply judgment around PCD identification for each individual acquisition based on their unique portfolio mix and risks identified.

The Company adopted ASC 326 using the prospective transition approach for loans previously classified as purchased credit impaired ("PCI") and accounted for under ASC 310-30. In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption and all PCI loans were transitioned to PCD loans upon adoption. Under PCD accounting,the amount of expected credit losses as of the acquisition date is added to the purchase price of the PCD loan. This establishes the amortized cost basis of the PCD loan. The difference between the unpaid principal balance of the PCD loan and the amortized cost basis of the PCD loan as of the acquisition date is the non-credit discount. Interest income for a PCD loan is recognized by accreting the amortized cost basis of the PCD loan to its contractual cash flows. The discount related to estimated credit losses on acquisition recorded as an allowance for credit losses will not be accreted into interest income. Only the noncredit-related discount will be accreted into interest income and subsequent adjustments to expected credit losses will flow through the provision for credit losses on the income statement.

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

~~(Dollar amounts are in thousands, except share and per share amounts)~~

~~Off-balance sheet financial instruments:~~

Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded, unless considered derivatives.

For loan commitments that are not accounted for as derivatives and when the obligation is not unconditionally cancelable by the Company, the Company applies the CECL methodology to estimate the expected credit loss on off-balance-sheet commitments. The estimate of expected credit losses for off-balance-sheet credit commitments is recognized as a liability. When the loan is funded, an allowance for expected credit losses is estimated for that loan using the CECL methodology, and the liability for off-balance-sheet commitments is reduced. When applying the CECL methodology to estimate the expected credit loss, the Company considers the likelihood that funding will occur, the contractual period of exposure to credit loss, the risk of loss, historical loss experience, and current conditions along with expectations of future economic conditions.

~~Recently adopted accounting standards:~~

~~Except as set forth below, the Company did not adopt any new accounting standards that were not disclosed in the Company's 2019 audited consolidated financial statements included on Form 10-K.~~

In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 and its subsequent amendments issued by the FASB requires the measurement of all current expected credit losses for financial assets (including off-balance sheet credit exposures) held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Additionally, the update requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. The new methodology requires institutions to calculate all probable and estimable losses that are expected to be incurred through the financial asset's entire life through a provision for credit losses, including certain loans obtained as a result of any acquisition. For available-for-sale debt securities that have experienced a deterioration in credit, Topic 326 requires an allowance for credit losses to be recognized, instead of a direct write-down, which was previously required under the other-than-temporary impairment ("OTTI") model. Topic 326 eliminates the concept of “other-than-temporary” impairment and instead focuses on determining whether any impairment is a result of a credit loss or other factors. As a result, the standard says the Company may not use the length of time a debt security has been in an unrealized loss position as a factor, either by itself or in combination with other factors, to conclude that a credit loss does not exist, as the Company was previously allowed under the OTTI model.

ASU 2016-13 eliminates the existing guidance for PCI loans, but requires an allowance for purchased financial assets with more than insignificant deterioration since origination to be determined in a manner similar to that of other financial assets measured at amortized cost; however, the initial allowance will be added to the purchase price rather than recorded as provision expense referred herein as the PCD asset gross-up approach. The Company applied the new PCD asset gross-up approach at transition to all assets that were accounted for as PCI prior to adoption. Any change in the allowance for credit losses for these assets as a result of applying the new guidance is accounted for as an adjustment to the asset’s amortized cost basis and not as a cumulative-effect adjustment to beginning retained earnings. Additionally, ASU 2016-13 requires additional disclosures related to loans and debt securities. See Note 3, “Investment securities” and Note 4, “Loans and allowance for credit losses” for these disclosures.

The Company formed a cross–functional working group to oversee the adoption of CECL at the effective date. The working group developed a project plan focused on understanding the new standard, researching issues, identifying data needs for modeling inputs, technology requirements, modeling considerations, and ensuring overarching governance was achieved for each objective and milestone. The key data driver for each model was identified, populated, and internally validated. The Company also completed data and model validation testing. The Company has performed model sensitivity analysis, developed a framework for qualitative adjustments, created supporting analytics, and executed the enhanced governance and approval process. Internal controls related to the CECL process were finalized prior to adoption.

ASU 2016-13 was adopted effective January 1, 2020 using a modified retrospective approach with no adjustments to prior period comparative financial statements. Upon adoption, the Company recorded a cumulative effective adjustment to decrease retained earnings by $25,018, with corresponding adjustments to the allowance for credit losses on loans and unfunded commitments in addition to recording a deferred tax asset on its consolidated balance sheet.

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

~~(Dollar amounts are in thousands, except share and per share amounts)~~

As of that date, the Company also recorded a cumulative effective adjustment to gross-up the amortized cost amount of its PCD loans by $558, with a corresponding adjustment to the allowance for credit losses on its consolidated balance sheet.

~~A summary of the impact to the consolidated balance sheet as of the adoption date is presented in the table below:~~

Balance before adoption of ASC 326 Cumulative effective adjustment to adopt ASC 326 Impact of the adjustment to adopt ASC 326 Balance at January 1, 2020 (post ASC 326 adoption)
ASSETS:
   Loans $ 4,409,642 $ 558 Increase $ 4,410,200
   Allowance for credit losses (31,139) (31,446) Increase (62,585)
      Total impact to assets $ (30,888) Net decrease
LIABILITIES AND EQUITY:
Allowance for credit losses on unfunded commitments $ 0 $ 2,947 Increase $ 2,947
   Net deferred tax liability 20,490 (8,817) Decrease 11,673
   Retained earnings 293,524 (25,018) Decrease 268,506
      Total impact to liabilities and equity $ (30,888) Net decrease

In December 2018, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC approved a final rule to address changes to credit loss accounting under GAAP, including banking organizations’ implementation of CECL. The final rule provides banking organizations the option to phase in over a three-year period the day-one adverse effects on regulatory capital that may result from the adoption of the new accounting standard. In March 2020, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC announced an interim final rule to delay the estimated impact on regulatory capital stemming from the implementation of CECL. The interim final rule maintains the three-year transition option in the previous rule and provides banks the option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period (five-year transition option). The Company elected the five-year capital transition relief option.

In January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment.” ASU 2017-04 eliminates step two from the goodwill impairment test. Instead, an entity may perform only step one of its quantitative goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and then recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Entities have the option to perform a qualitative assessment for a reporting unit to determine if the quantitative step one impairment test is necessary. ASU 2017-04 became effective for the Company on January 1, 2020. The adoption of this standard did not have any impact on the Company's consolidated financial statements or disclosures.

In August 2018, the FASB issued "Accounting Standards Update 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurements." This update is part of the disclosure framework project and eliminates certain disclosure requirements for fair value measurements, requires entities to disclose new information, and modifies existing disclosure requirements. The update became effective on January 1, 2020 and did not have an impact on the Company's consolidated financial statements or disclosures.

In March 2019, FASB issued ASU 2019-01, "Leases (Topic 842): Codification Improvements", which aligns the guidance for fair value of the underlying assets by lessors that are not manufacturers or dealers in Topic 842 with that of existing guidance. As a result, the fair value of the underlying asset at lease commencement is its cost, reflecting any volume or trade discounts that may apply. However, if there has been a significant lapse of time between when the underlying asset is acquired and when the lease commences, the definition of fair value in Topic 820, Fair Value Measurement should be applied. ASU No. 2019-01 also requires lessors within the scope of Topic 942, "Financial Services—Depository and Lending", to present all “principal payments received under leases” within investing activities. The adoption of this standard on January 1, 2020 did not have a material impact on the Company's consolidated financial statements or disclosures.

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

~~(Dollar amounts are in thousands, except share and per share amounts)~~

~~In April 2019, the FASB issued ASU No. 2019-04, "Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments".~~ The amendments related to Topic 326 address accrued interest, transfers between classifications or categories for loans and debt securities, recoveries, vintage disclosures, and contractual extensions and renewal options and became effective for annual periods and interim periods within those annual periods beginning after December 15, 2019. The improvements and clarifications related to Topic 815 address partial-term fair value hedges of interest-rate risk, amortization, and disclosure of fair value hedge basis adjustments and consideration of hedged contractually specified interest rates under the hypothetical method and became effective for the annual reporting period beginning January 1, 2020. The amendments related to Topic 825 contain various improvements to ASU 2016-01, including scope; held-to-maturity debt securities fair value disclosures; and remeasurement of equity securities at historical exchange rates and became effective as of January 1, 2020. The amendments in this update did not have a material impact on the financial statements.

~~Newly issued not yet effective accounting standards:~~

In June 2018, FASB issued ASU 2018-07, "Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting", which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. Consistent with the accounting for employee share-based payment awards, nonemployee share-based payment awards will be measured at grant-date fair value of the equity instruments obligated to be issued when the good has been delivered or the service rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied. This ASU is effective for all entities for fiscal years beginnings after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company does not expect adoption of this standard to have a significant impact on the consolidated financial statements or disclosures.

Note (2)—Mergers and acquisitions:

The following mergers and acquisitions were accounted for pursuant to ~~FASB ASC 805.~~Accounting Standards Codification 805, "Business Combinations". Accordingly, the purchase price of each acquisition was allocated to the acquired assets and liabilities assumed based on ~~their~~ estimated fair values as of the respective acquisition dates. The excess of the purchase price over the net assets acquired was recorded as goodwill.

Franklin Financial Network, Inc. merger

Effective August 15, 2020, the Company completed its previously announced merger with Franklin Financial Network, ~~Inc ("Franklin"),~~Inc. and its wholly owned subsidiaries, with FB Financial Corporation continuing as the surviving entity. ~~The~~After consolidating duplicative locations the merger added 1510 branches and expanded the Company's footprint in middle Tennessee and the Nashville metropolitan statistical ~~area, with 6 branches to be closed and consolidated.~~area. Under the terms of the agreement, the Company acquired total assets of ~~$3,624,830,~~$3.63 billion, loans of ~~$2,794,569~~$2.79 billion and assumed total deposits of ~~$3,107,005.~~$3.12 billion. Total loans acquired includes a ~~non-stratgegic~~non-strategic institutional portfolio with a fair value of ~~$318,365~~$326,206 the Company classified as held for sale. Franklin common shareholders received 15,058,181 shares of the Company's common stock, net of the equivalent value of 44,311 shares withheld on certain Franklin employee equity awards that vested upon change in control, as consideration in connection with the merger, in addition to $31,330 in cash consideration. Also included in the purchase price, the Company issued replacement restricted stock units for awards initially granted by Franklin during 2020 that did not vest upon change in control, with a total fair value of $674 attributed to pre-combination service. Based on the closing price of the Company's common stock on the New York Stock Exchange of $29.52 on August 15, 2020, the merger consideration represented approximately $477,830 in aggregate consideration.

~~The calculation~~Goodwill of goodwill is subject to change for up to one year after the date of acquisition as additional information relative to the closing date estimates and uncertainties become available. As such, goodwill recorded in connection with the Franklin transaction is not final. Preliminary goodwill of $60,645$67,191 recorded in connection with the transaction resulted from the ongoing business contribution, reputation, operating model and expertise of Franklin. The goodwill is not deductible for income tax purposes. Goodwill is ~~preliminarily~~ included in the Banking segment as substantially all of the operations resulting from the acquisition of Franklin are in alignment with the Company's ~~core~~ banking business.

The Company incurred $20,489 and $22,896 in merger expenses during the three and nine months ended September 30, 2020, respectively, in connection with this transaction. These expenses are primarily comprised of professional services, employee-related costs, costs associated with branch consolidation, and integration costs.

1512

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

The following table presents an allocation of the consideration to net assets acquired:


Purchase Price:
Equity consideration
Franklin shares outstanding(1)	15,588,337
Franklin options converted to net shares	62,906
	15,651,243
Exchange ratio to FB Financial shares	0.965
FB Financial shares to be issued as merger consideration(2)	15,102,492
Issuance price as of August 15, 2020	$	29.52
Value of FB Financial stock to be issued as merger consideration	$	445,826
Less: tax withholding on vested restricted stock awards, units and options(3)	(1,308)
Value of FB Financial stock issued	$	444,518
FB Financial shares issued	15,058,181

Franklin restricted stock units that do not vest on change in control	114,915
Replacement awards issued to Franklin employees	118,776
Fair value of replacement awards	$	3,506
Fair value of replacement awards attributable to pre-combination service	$	674

Cash consideration
Total Franklin shares and net shares outstanding	15,651,243
Cash consideration per share	$	2.00
Total cash to be paid to Franklin(4)	$	31,330
Total purchase price			$	477,830
~~Preliminary fair~~Fair value of net assets acquired			~~417,185~~410,639
~~Preliminary goodwill~~Goodwill resulting from merger			$	~~60,645~~67,191

(1)Franklin shares outstanding includes restricted stock awards and restricted stock units that vested upon change in control.

(2)Only factors in whole share issuance. Cash was paid in lieu of fractional shares.

(3)Represents the equivalent value of approximately 44,311 shares of FB Financial Corporation stock on August 15, 2020.

(4)Includes $28 of cash paid in lieu of fractional shares.

FNB Financial Corp. merger

Effective February 14, 2020, the Company completed its previously announced acquisition of FNB Financial Corp. and its wholly owned subsidiary, Farmers National Bank of Scottsville (collectively, "Farmers National"). Following the acquisition, Farmers National was merged into the Company with FB Financial Corporation continuing as the surviving entity. The transaction added 4 branches and expanded the Company's footprint into Kentucky. Under the terms of the agreement, the Company acquired total assets of $258,218, loans of $182,171 and assumed total deposits of $209,535. Farmers National shareholders received 954,797 shares of the Company's common stock as consideration in connection with the merger, in addition to $15,001 in cash consideration. Based on the closing price of the Company's common stock on the New York Stock Exchange of $36.70 on February 14, 2020, the merger consideration represented approximately $50,042 in aggregate consideration.

~~The Company is finalizing the fair value of acquired assets and liabilities assumed and as such, purchase accounting is not yet complete.~~ Goodwill of ~~$6,390~~$6,319 recorded in connection with the transaction resulted from the ongoing business contribution of Farmers National and anticipated synergies arising from the combination of certain operational areas of the Company. Goodwill resulting from this transaction is not deductible for income tax purposes. Goodwill is included in the Banking segment as substantially all of the operations resulting from the acquisition of Farmers National are in alignment with the Company's core banking business.

The Company incurred $196 and $2,293 in merger expenses during the three and nine months ended September 30, 2020, respectively, in connection with this transaction. These expenses are primarily comprised of professional services, employee-related costs, and integration costs. The following table presents the total purchase price, fair value of net assets acquired, and the goodwill as of the acquisition date.

1613

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

The following table presents the total purchase price, fair value of net assets acquired, and the goodwill as of the acquisition date.


Consideration:
Net shares issued	954,797
Purchase price per share on February 14, 2020	$	36.70
Value of stock consideration			$	35,041
Cash consideration paid			15,001
Total purchase price			$	50,042
~~Preliminary fair~~Fair value of net assets acquired			~~43,652~~43,723
~~Preliminary goodwill~~Goodwill resulting from merger			$	~~6,390~~6,319

~~Atlantic Capital Bank, N.A. Branches~~

On April 5, 2019, the Bank completed its branch acquisition to purchase 11 Tennessee and 3 Georgia branch locations (the "Branches") from Atlantic Capital Bank, N.A., a national banking association and a wholly owned subsidiary of Atlantic Capital Bancshares, Inc., a Georgia corporation (collectively, "Atlantic Capital") in a transaction valued at $36,790, further increasing market share in existing markets and expanding the Company's footprint into new locations. The branch acquisition added $588,877 in customer deposits at a premium of 6.25% and $374,966 in loans at 99.32% of principal outstanding. All of the operations of the Branches are included in the Banking segment.

Net assets acquired

The following table summarizes the estimated fair values of assets acquired and liabilities assumed as of the respective acquisition dates:


		As of August 15, 2020		As of February 14, 2020			As of August 15, 2020		As of February 14, 2020
		Franklin Financial Network, Inc.		FNB Financial Corp.			Franklin Financial Network, Inc.		FNB Financial Corp.
ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	283,996	$	10,774	Cash and cash equivalents	$	284,004	$	10,774
Investments	Investments	373,459		50,594		Investments	373,462		50,594
Mortgage loans held for sale, at fair value	Mortgage loans held for sale, at fair value	39,525		0		Mortgage loans held for sale, at fair value	38,740		0
Commercial loans held for sale, at fair value	Commercial loans held for sale, at fair value	318,365		0		Commercial loans held for sale, at fair value	326,206		0
Loans held for investment, net of fair value adjustments	Loans held for investment, net of fair value adjustments	2,436,679		182,171		Loans held for investment, net of fair value adjustments	2,427,527		182,171
Allowance for credit losses on PCD loans		(24,831)		(669)
Allowance for credit losses on purchased credit deteriorated loans						Allowance for credit losses on purchased credit deteriorated loans	(24,831)		(669)
Premises and equipment	Premises and equipment	39,691		8,049		Premises and equipment	45,471		8,049
Operating lease right-of-use assets	Operating lease right-of-use assets	24,330		14		Operating lease right-of-use assets	23,958		14
Mortgage servicing rights	Mortgage servicing rights	4,850		0		Mortgage servicing rights	5,111		0
Core deposit intangible	Core deposit intangible	7,670		2,490		Core deposit intangible	7,670		2,490
Other assets	Other assets	121,096		4,795		Other assets	124,571		4,795
Total assets	Total assets	$	3,624,830	$	258,218	Total assets	$	3,631,889	$	258,218
LIABILITIES	LIABILITIES					LIABILITIES
Deposits:	Deposits:					Deposits:
Noninterest-bearing	Noninterest-bearing	$	505,401	$	63,531	Noninterest-bearing	$	505,374	$	63,531
Interest-bearing		1,783,379		26,451
Interest-bearing checking						Interest-bearing checking	1,783,379		26,451
Money market and savings	Money market and savings	327,340		37,002		Money market and savings	342,093		37,002
Customer time deposits	Customer time deposits	383,433		82,551		Customer time deposits	383,433		82,551
Brokered and internet time deposits	Brokered and internet time deposits	107,452		0		Brokered and internet time deposits	107,452		0
Total deposits	Total deposits	3,107,005		209,535		Total deposits	3,121,731		209,535

Borrowings	Borrowings	62,435		3,192		Borrowings	62,435		3,192
Operating lease liabilities	Operating lease liabilities	24,330		14		Operating lease liabilities	24,330		14
Accrued expenses and other liabilities	Accrued expenses and other liabilities	13,782		1,825		Accrued expenses and other liabilities	12,661		1,754
Total liabilities assumed	Total liabilities assumed	3,207,552		214,566		Total liabilities assumed	3,221,157		214,495
Noncontrolling interests acquired	Noncontrolling interests acquired	93		0		Noncontrolling interests acquired	93		0
Net assets acquired	Net assets acquired	$	417,185	$	43,652	Net assets acquired	$	410,639	$	43,723

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

Purchased credit-deteriorated loans

Under the CECL methodology, the Company is required to determine whether purchased loans held for investment have experienced more-than-insignificant deterioration in credit quality since origination. Loans that have experienced this level of deterioration in credit quality are subject to special accounting at initial recognition and measurement. The Company

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

~~(Dollar amounts are in thousands, except share and per share amounts)~~

initially measures the amortized cost of a PCD loan by adding the acquisition date estimate of expected credit losses to the loan's purchase price (i.e. the "gross up" approach). There is no provision for credit loss recognized upon acquisition of a PCD loan because the initial allowance is established through gross-up of the loans' amortized cost.

The Company determined that ~~28.2%~~27.9% of the Franklin loan portfolio had more-than-insignificant deterioration in credit quality since origination as of the acquisition date. This included deterioration in credit metrics, such as delinquency, nonaccrual status or risk ratings as well as certain loans within designated industries of concern that have been negatively impacted by COVID-19. ~~Additionally, it~~It was determined that 10.1% of the Farmers National loan portfolio had more-than-insignificant deterioration in credit quality since origination as of the February acquisition date. These were primarily delinquent loans ~~as of February 14, 2020,~~ or loans that Farmers National had classified as nonaccrual or ~~TDR~~troubled debt restructuring prior to the Company's acquisition.


		As of August 15, 2020		As of February 14, 2020			As of August 15, 2020		As of February 14, 2020
		Franklin Financial Network, Inc.		FNB Financial Corp.			Franklin Financial Network, Inc.		FNB Financial Corp.
Purchased credit-deteriorated loans	Purchased credit-deteriorated loans					Purchased credit-deteriorated loans
Principal balance	Principal balance	$	703,143	$	18,964	Principal balance	$	693,999	$	18,964
Allowance for credit losses at acquisition	Allowance for credit losses at acquisition	(24,831)		(669)		Allowance for credit losses at acquisition	(24,831)		(669)
Net premium attributable to other factors	Net premium attributable to other factors	8,530		63		Net premium attributable to other factors	8,810		63
Loans purchased credit-deteriorated fair value	Loans purchased credit-deteriorated fair value	$	686,842	$	18,358	Loans purchased credit-deteriorated fair value	$	677,978	$	18,358

Loans recognized through ~~the~~ acquisition ~~of Franklin and Farmers National~~ that have not experienced more-than-insignificant credit deterioration since origination are initially recognized at the purchase price. Expected credit losses are measured under CECL through the provision for credit losses. The Company recorded provisions for credit losses in the amounts of $52,822 and $2,885 as of August 15, 2020 and February 14, 2020, respectively, in the income statement related to estimated credit losses on non-PCD loans from Franklin and Farmers National, respectively. Additionally, the Company estimates expected credit losses on off-balance sheet loan commitments that are not accounted for as derivatives. The Company recorded an increase in provision for credit losses from unfunded commitments of $10,499 as of August 15, 2020 related to the Franklin acquisition.

Pro forma financial information (unaudited)

The results of operations of the acquisitions have been included in the Company's consolidated financial statements prospectively beginning on the date of each acquisition. The acquisitions have been fully integrated with the Company's existing operations. Accordingly, post-acquisition net interest income, total revenues, and net income are not ~~discernible.The~~discernible. The following unaudited pro forma condensed consolidated financial information presents the results of operations for the three and ~~nine~~six months ended ~~September~~June 30, 2020, ~~and 2019, respectively,~~ as though the Franklin ~~merger~~ and Farmers National ~~acquisition~~acquisitions had been completed as of January 1, ~~2019, and the Atlantic Capital acquisition had been completed as of January 1, 2018.~~2019. The unaudited estimated pro forma information combines the historical results of the mergers with the Company’s historical consolidated results and includes certain adjustments reflecting the estimated impact of certain fair value adjustments for the periods presented. Merger expenses are reflected in the ~~periods~~period they were incurred. The pro forma information is not indicative of what would have occurred had the ~~merger and acquisitions~~transactions taken place on January 1, 2019 ~~and January 1, 2018,~~ and does not include the effect of cost-saving or revenue-enhancing strategies.


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,		Six Months Ended June 30,
		2020		2019		2020		2019			2020		2020
Net interest income	Net interest income	$	83,641	$	90,195	$	252,849	$	260,353	Net interest income	$	84,610	$	169,352
Total revenues	Total revenues	71,214		126,918		272,375		343,425		Total revenues	$	176,657	$	310,254
Net income		(12,428)		36,723		19,526		83,072
Net income applicable to FB Financial Corporation										Net income applicable to FB Financial Corporation	$	32,623	$	32,149

1815

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

Note (3)—Investment securities:

The following tables summarize the amortized cost, allowance for credit losses and fair value of the available-for-sale debt securities and the corresponding amounts of unrealized gains and losses recognized in accumulated other comprehensive income at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


		September 30, 2020											June 30, 2021
		Amortized cost		Gross unrealized gains		Gross unrealized losses		Allowance for credit losses for investments		Fair Value			Amortized cost		Gross unrealized gains		Gross unrealized losses		Allowance for credit losses for investments		Fair Value
Investment Securities	Investment Securities											Investment Securities
Available-for-sale debt securities	Available-for-sale debt securities											Available-for-sale debt securities
U.S. government agency securities	U.S. government agency securities	$	2,000	$	0	$	(6)	$	0	$	1,994	U.S. government agency securities	$	8,255	$	1	$	(1)	$	0	$	8,255
Mortgage-backed securities - residential	Mortgage-backed securities - residential	723,333		15,093		(320)		0		738,106		Mortgage-backed securities - residential	1,031,233		9,507		(5,737)		0		1,035,003
Mortgage-backed securities - commercial	Mortgage-backed securities - commercial	20,478		1,376		0		0		21,854		Mortgage-backed securities - commercial	14,715		446		0		0		15,161
Municipals, tax exempt		359,761		15,813		(694)		0		374,880
Treasury securities		21,482		218		0		0		21,700
Municipal securities												Municipal securities	314,862		18,088		(67)		0		332,883
U.S. Treasury securities												U.S. Treasury securities	10,486		48		0		0		10,534
Corporate securities	Corporate securities	1,999		3		(15)		0		1,987		Corporate securities	2,500		42		(6)		0		2,536
Total	Total	$	1,129,053	$	32,503	$	(1,035)	$	0	$	1,160,521	Total	$	1,382,051	$	28,132	$	(5,811)	$	0	$	1,404,372


		December 31, 2019									December 31, 2020
		Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair Value			Amortized cost		Gross unrealized gains		Gross unrealized losses		Allowance for credit losses for investments		Fair Value
Investment Securities	Investment Securities									Investment Securities
Available-for-sale debt securities	Available-for-sale debt securities									Available-for-sale debt securities

U.S. government agency securities										U.S. government agency securities	$	2,000	$	3	$	0	$	0	$	2,003
Mortgage-backed securities - residential	Mortgage-backed securities - residential	$	474,144	$	4,829	$	(1,661)	$	477,312	Mortgage-backed securities - residential	760,099		14,040		(803)		0		773,336
Mortgage-backed securities - commercial	Mortgage-backed securities - commercial	12,957		407		0		13,364		Mortgage-backed securities - commercial	20,226		1,362		0		0		21,588
Municipals, tax exempt		181,178		8,287		(230)		189,235
Treasury securities		7,426		22		0		7,448
Municipal securities										Municipal securities	336,543		19,806		(20)		0		356,329
U.S. Treasury securities										U.S. Treasury securities	16,480		148		0		0		16,628
Corporate securities	Corporate securities	1,000		22		0		1,022		Corporate securities	2,500		17		(1)		0		2,516
Total	Total	$	676,705	$	13,567	$	(1,891)	$	688,381	Total	$	1,137,848	$	35,376	$	(824)	$	0	$	1,172,400

The components of amortized cost for debt securities on the consolidated balance sheets excludes accrued interest receivable since the Company elected to present accrued interest receivable separately on the consolidated balance sheets. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, total accrued interest receivable on debt securities was ~~$4,753~~$4,630 and ~~$2,843,~~$4,540, respectively.

As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had ~~$4,389~~$4,803 and ~~$3,295~~$4,591, in marketable equity securities recorded at fair value, respectively.

Securities pledged at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 had carrying amounts of ~~$607,304~~$998,047 and ~~$373,674,~~$804,821, respectively, and were pledged to secure a Federal Reserve Bank line of credit, public deposits and repurchase agreements.

There were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders' equity during any period presented.

At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, there were ~~$1,214~~0 trade date receivables that related to sales settled after period end. At June 30, 2021 and December 31, 2020, there were $41,722 and $0 respectively, in trade date payables that related to purchases settled after period end.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

The amortized cost and fair value of debt securities by contractual maturity at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 are shown below. Maturities may differ from contractual maturities in mortgage-backed securities because the mortgage underlying the security may be called or repaid without any penalties. Therefore, mortgage-backed securities are not included in the maturity categories in the following maturity summary.


	June 30,				December 31,
	2021				2020
	Available-for-sale				Available-for-sale
	Amortized cost		Fair value		Amortized cost		Fair value
Due in one year or less	$	18,861	$	18,971	$	35,486	$	35,662
Due in one to five years	21,955		22,387		24,278		24,684
Due in five to ten years	44,248		45,746		40,038		41,332
Due in over ten years	251,039		267,104		257,721		275,798
	336,103		354,208		357,523		377,476
Mortgage-backed securities - residential	1,031,233		1,035,003		760,099		773,336
Mortgage-backed securities - commercial	14,715		15,161		20,226		21,588
Total debt securities	$	1,382,051	$	1,404,372	$	1,137,848	$	1,172,400

Sales and other dispositions of available-for-sale securities were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Proceeds from sales	$	0	$	0	$	0	$	0
Proceeds from maturities, prepayments and calls	86,866		44,703		147,906		72,360
Gross realized gains	8		0		15		0
Gross realized losses	0		0		0		0

Additionally, net unrealized gains on equity securities of $136 and $212 were recognized in the three and six months ended June 30, 2021, respectively, and $28 net loss and $35 net gain were recognized in the three and six months ended June 30, 2020, respectively.

The following tables show gross unrealized losses for which an allowance for credit losses has 0t been recorded at June 30, 2021 and December 31, 2020, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:


	June 30, 2021
	Less than 12 months				12 months or more				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
U.S. government agency securities	$	1,250	$	(1)	$	0	$	0	$	1,250	$	(1)
Mortgage-backed securities - residential	449,834		(5,737)		0		0		449,834		(5,737)

Municipal securities	7,979		(67)		0		0		7,979		(67)

Corporate securities	494		(6)		0		0		494		(6)
Total	$	459,557	$	(5,811)	$	0	$	0	$	459,557	$	(5,811)


	December 31, 2020
	Less than 12 months				12 months or more				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized loss

Mortgage-backed securities - residential	$	182,012	$	(803)	$	0	$	0	$	182,012	$	(803)
Municipal securities	3,184		(20)		0		0		3,184		(20)
Corporate Securities	499		(1)		0		0		499		(1)

Total	$	185,695	$	(824)	$	0	$	0	$	185,695	$	(824)

As of June 30, 2021 and December 31, 2020, the Company’s securities portfolio consisted of 508 and 514 securities, 32 and 16 of which were in an unrealized loss position, respectively.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

September 30, December 31,
2020 2019
Available-for-sale Available-for-sale
Amortized cost Fair value Amortized cost Fair value
Due in one year or less $ 18,861 $ 19,009 $ 1,148 $ 1,152
Due in one to five years 29,353 29,811 11,553 11,676
Due in five to ten years 30,513 31,676 18,287 18,887
Due in over ten years 306,515 320,065 158,616 165,990
385,242 400,561 189,604 197,705
Mortgage-backed securities - residential 723,333 738,106 474,144 477,312
Mortgage-backed securities - commercial 20,478 21,854 12,957 13,364
Total debt securities $ 1,129,053 $ 1,160,521 $ 676,705 $ 688,381

~~Sales and other dispositions of available-for-sale securities were as follows:~~

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Proceeds from sales $ 28,257 $ 22,740 $ 28,257 $ 24,498
Proceeds from maturities, prepayments and calls 67,886 28,694 140,246 78,861
Gross realized gains 563 1 563 7
Gross realized losses 39 76 39 83

Additionally, net gains on the change in fair value of equity securities of $59 and $94 were recognized in the three and nine months ended September 30, 2020, respectively and $55 and $151 were recognized in the three and nine months ended September 30, 2019, respectively.

The following tables show gross unrealized losses for which an allowance for credit losses has not been recorded at September 30, 2020 and December 31, 2019, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

September 30, 2020
Less than 12 months 12 months or more Total
Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss
U.S. government agency securities $ 1,994 $ (6) $ 0 $ 0 $ 1,994 $ (6)
Mortgage-backed securities - residential 107,236 (320) 0 0 107,236 (320)
Municipals, tax exempt 56,923 (694) 0 0 56,923 (694)
Corporate securities 985 (15) 0 0 985 (15)
Total $ 167,138 $ (1,035) $ 0 $ 0 $ 167,138 $ (1,035)

December 31, 2019
Less than 12 months 12 months or more Total
Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized loss
Mortgage-backed securities - residential $ 47,641 $ (164) $ 175,730 $ (1,497) $ 223,371 $ (1,661)
Municipals, tax exempt 15,433 (230) 0 0 15,433 (230)
Total $ 63,074 $ (394) $ 175,730 $ (1,497) $ 238,804 $ (1,891)

As of ~~September~~June 30, 2021 and 2020, ~~and December 31, 2019,~~ the ~~Company’s securities portfolio consisted of 553 and 365 securities, 33 and 58 of which were in an unrealized loss position, respectively.~~

~~As of September 30, 2020,~~ Company evaluated available-for-sale debt securities with unrealized losses for expected credit loss and recorded 0 allowance for credit loss as the majority of the investment portfolio was either government guaranteed or an issuance of a government sponsored entity, was highly rated by major credit rating agencies and have a long history of zero losses. As such, 0 provision for credit losses was recorded during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020.~~

~~FB Financial Corporation~~2021 and ~~subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

~~(Dollar amounts are in thousands, except share and per share amounts)~~

~~Prior to the adoption of ASC 326, the Company evaluated available-for-sale debt securities with unrealized losses for OTTI and recorded 0 OTTI for the three and nine months ended September 30, 2019.~~2020.

Note (4)—Loans and allowance for credit losses:

Loans outstanding at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, by class of financing receivable are as follows:


		September 30,		December 31,			June 30,		December 31,
		2020		2019			2021		2020
Commercial and industrial (1)	Commercial and industrial (1)	$	1,417,671	$	1,034,036	Commercial and industrial (1)	$	1,238,940	$	1,346,122
Construction	Construction	1,190,878		551,101		Construction	1,145,165		1,222,220
Residential real estate:	Residential real estate:					Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	1,140,611		710,454		1-to-4 family mortgage	1,126,623		1,089,270
Residential line of credit	Residential line of credit	420,318		221,530		Residential line of credit	401,343		408,211
Multi-family mortgage	Multi-family mortgage	165,937		69,429		Multi-family mortgage	363,600		175,676
Commercial real estate:	Commercial real estate:					Commercial real estate:
Owner occupied	Owner occupied	924,987		630,270		Owner occupied	923,605		924,841
Non-owner occupied	Non-owner occupied	1,644,400		920,744		Non-owner occupied	1,675,214		1,598,979
Consumer and other	Consumer and other	308,736		272,078		Consumer and other	324,464		317,640
Gross loans	Gross loans	7,213,538		4,409,642		Gross loans	7,198,954		7,082,959
Less: Allowance for credit losses	Less: Allowance for credit losses	(183,973)		(31,139)		Less: Allowance for credit losses	(144,663)		(170,389)
Net loans	Net loans	$	7,029,565	$	4,378,503	Net loans	$	7,054,291	$	6,912,570

(1)Includes ~~$310,719~~$57,406 and $212,645 of loans originated as part of the ~~PPP at September~~Paycheck Protection Program as of June 30, 2021 and December 31, 2020, established by the CARES Act, in response to the COVID-19 pandemic. The PPP is administered by the SBA; loans originated as part of the PPP may be forgiven by the SBA under a set of defined rules. An allowance for credit losses of $49 at September 30, 2020, has been calculated for these loans.respectively. PPP loans are federally guaranteed as part of the CARES Act, provided PPP loan recipients receive loan forgiveness under the SBA regulations. As such, there is minimal credit risk associated with these loans.

As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019, $1,083,393~~2020, $1,256,344 and ~~$412,966,~~$1,248,857, respectively, of qualifying residential mortgage loans (including loans held for sale) $1,542,531 and ~~$996,582 and $545,540,~~$1,532,749, respectively, of qualifying commercial mortgage loans were pledged to the Federal Home Loan Bank of Cincinnati securing advances against the Bank’s line of credit. Additionally, as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019, $1,378,968~~2020, $2,290,661 and ~~$1,407,662,~~$2,463,281, respectively, of qualifying loans were pledged to the Federal Reserve Bank under the Borrower-in-Custody program.

The components of amortized cost for loans on the consolidated balance sheet excludes accrued interest receivable as the Company elected to present accrued interest receivable separately on the balance sheet. As of ~~September~~June 30, 2021 and December 31, 2020, total accrued interest receivable on loans held for investment was ~~$41,797.~~$35,892 and $38,316, respectively.

Allowance for Credit Losses

~~As of January 1, 2020, the Company’s policy for~~The Company estimated the allowance ~~changed with the adoption of CECL. As permitted, the new guidance was implemented using~~for credit losses under a modified retrospective approach with the impact of the initial adoption being recorded through retained earnings at January 1, 2020, with no restatement of prior periods. Before January 1, 2020, the Company calculated the allowance on an incurred loss approach. As of January 1, 2020, the Company calculated ancurrent expected credit loss ~~using a lifetime loss rate methodology. As a result~~model as of ~~the difference in methodology between periods, disclosures presented below may not be comparative in nature.~~

June 30, 2021 and December 31, 2020. The Company utilizes probability-weighted forecasts, which consider multiple macroeconomic variables from a third-party vendor that are applicable to the type of loan. The weighting of the economic forecast scenarios, macroeconomic variables, and the reasonable and supportable forecast period at the macroeconomic variable-level were reviewed and approved by the Company's forecast governance committee based on expectations of future economic conditions. Each of the Company's loss rate models incorporate forward-looking macroeconomic projections throughout the reasonable and supportable forecast period and the subsequent historical reversion at the macroeconomic variable input level. In order to estimate the life of a loan, the contractual term of the loan is adjusted for estimated prepayments based on market information and the Company’s prepayment history.

The Company's loss rate models estimate the lifetime loss rate for pools of loans by combining the calculated loss rate based on each variable within the model (including the macroeconomic variables). The lifetime loss rate for the pool is then multiplied by the loan balances to determine the expected credit losses on the pool.

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

~~(Dollar amounts are in thousands, except share and per share amounts)~~

The Company considers the need to qualitatively adjust its modeled quantitative expected credit loss estimate for information not already captured in the model loss estimation process. These qualitative factor adjustments may increase or decrease the Company’s estimate of expected credit losses. The Company reviews the qualitative adjustments so as to validate that information that has already been considered and included in the modeled quantitative loss estimation process is not also included in the qualitative adjustment. The Company considers the qualitative factors that are relevant to the institution as of the reporting date, which may include, but are not limited to: levels of and trends in delinquencies

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

and performance of loans; levels of and trends in write-offs and recoveries collected; trends in volume and terms of loans; effects of any changes in reasonable and supportable economic forecasts; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and expertise; available relevant information sources that contradict the Company’s own forecast; effects of changes in prepayment expectations or other factors affecting assessments of loan contractual terms; industry conditions; and effects of changes in credit concentrations.

The quantitative models require loan data and macroeconomic variables based on the inherent credit risks in each portfolio to more accurately measure the credit risks associated with each. Each of the quantitative models pools loans with similar risk characteristics and collectively assesses the lifetime loss rate for each pool to estimate its expected credit loss.

When a loan no longer shares similar risk characteristics with other loans in any given pool, the loan is individually assessed. The Company has determined the following circumstances in which a loan may require an individual evaluation: collateral dependent loans; loans for which foreclosure is probable; TDRs and reasonably expected TDRs. A loan is deemed collateral dependent when 1) the borrower is experiencing financial difficulty and 2) the repayment is expected to be primarily through sale or operation of the collateral. The allowance for credit losses for collateral dependent loans as well as loans where foreclosure is probable is calculated as the amount for which the loan’s amortized cost basis exceeds fair value. Fair value is determined based on appraisals performed by qualified appraisers and reviewed by qualified personnel. In cases where repayment is to be provided substantially through the sale of collateral, the Company reduces the fair value by the estimated costs to sell. Loans experiencing financial difficulty for which a concession has not yet been provided may be identified as reasonably expected TDRs.

Reasonably expected TDRs use the same methodology as TDRs. In cases where the expected credit loss can only be captured through a discounted cash flow analysis (such as an interest rate modification for a TDR loan), the allowance is measured by the amount which the loan’s amortized cost exceeds the discounted cash flow analysis. The allowance for credit losses on a TDR or a reasonably expected TDR is calculated individually using a discounted cash flow methodology, unless the loan is deemed to be collateral dependent or foreclosure is probable.

The Company’s acquisitions and changes in reasonable and supportable forecasts of macroeconomic variables, primarily due to the impact of the COVID-19 pandemic, resulted in projected credit deterioration requiring the Company to recognize significant increases in the provision for credit losses during the nine months ended September 30, 2020. Specifically, the Company performed ~~additional~~ qualitative evaluations ~~by class of financing receivable in line with~~within the Company's established qualitative framework, weighting the impact of the current economic outlook, status of federal government stimulus programs, and other considerations, in order to identify specific industries or borrowers seeing credit improvement or deterioration specific to the COVID-19 pandemic.

~~Loans acquired~~ The decrease in estimated required reserve during the ~~period from Franklin increased~~three and six months ended June 30, 2021 was a result of improving macroeconomic variables incorporated into the Company's reasonable and supportable forecasts when compared to both March 31, 2021 and December 31, 2020.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

The following provide the changes in the allowance for credit losses by ~~$77,653 as~~class of financing receivable for the ~~August 15, 2020 acquisition date~~three and ~~Farmers National increased~~six months ended June 30, 2021 and 2020:


	Commercial and industrial		Construction		1-to-4 family residential mortgage		Residential line of credit		Multi-family residential mortgage		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Consumer and other		Total
Three Months Ended June 30, 2021
Beginning balance - March 31, 2021	$	14,643	$	38,622	$	19,572	$	9,268	$	11,657	$	3,609	$	50,179	$	10,404	$	157,954
Provision for credit losses	(579)		(5,784)		75		(2,558)		1,818		972		(7,323)		494		(12,885)
Recoveries of loans previously charged-off	87		0		41		9		0		126		0		190		453
Loans charged off	(360)		0		(16)		(3)		0		0		0		(480)		(859)


Ending balance - June 30, 2021	$	13,791	$	32,838	$	19,672	$	6,716	$	13,475	$	4,707	$	42,856	$	10,608	$	144,663
Six Months Ended June 30, 2021
Beginning balance - December 31, 2020	$	14,748	$	58,477	$	19,220	$	10,534	$	7,174	$	4,849	$	44,147	$	11,240	$	170,389


Provision for credit losses	(536)		(25,610)		536		(3,815)		6,301		(281)		(1,291)		179		(24,517)
Recoveries of loans previously charged-off	216		0		65		15		0		139		0		385		820
Loans charged off	(637)		(29)		(149)		(18)		0		0		0		(1,196)		(2,029)


Ending balance - June 30, 2021	$	13,791	$	32,838	$	19,672	$	6,716	$	13,475	$	4,707	$	42,856	$	10,608	$	144,663


	Commercial and industrial		Construction		1-to-4 family residential mortgage		Residential line of credit		Multi-family residential mortgage		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Consumer and other		Total
Three Months Ended June 30, 2020
Beginning balance - March 31, 2020	$	10,881	$	22,842	$	13,006	$	6,213	$	2,328	$	9,047	$	18,005	$	6,819	$	89,141
Provision for loan losses	(2,663)		12,624		(446)		595		2,171		(1,630)		12,984		404		24,039
Recoveries of loans previously charged-off	807		151		26		24		0		3		0		103		1,114
Loans charged off	(147)		(18)		(123)		(21)		0		0		(545)		(311)		(1,165)
Ending balance - June 30, 2020	$	8,878	$	35,599	$	12,463	$	6,811	$	4,499	$	7,420	$	30,444	$	7,015	$	113,129
Six Months Ended June 30, 2020
Beginning balance - December 31, 2019	$	4,805	$	10,194	$	3,112	$	752	$	544	$	4,109	$	4,621	$	3,002	$	31,139
Impact of adopting ASC 326 on non-purchased credit deteriorated loans	5,300		1,533		7,920		3,461		340		1,879		6,822		3,633		30,888
Impact of adopted ASC 326 on purchased credit deteriorated loans	82		150		421		(3)		0		162		184		(438)		558
Provision for loan losses	(834)		23,578		1,218		2,580		3,615		1,408		18,919		1,519		52,003
Recoveries of loans previously charged-off	895		151		50		39		0		17		0		296		1,448
Loans charged off	(1,381)		(18)		(365)		(21)		0		(209)		(545)		(1,037)		(3,576)
Initial allowance on loans purchased with deteriorated credit quality	11		11		107		3		0		54		443		40		669

Ending balance - June 30, 2020	$	8,878	$	35,599	$	12,463	$	6,811	$	4,499	$	7,420	$	30,444	$	7,015	$	113,129

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

The following tables provide the amount of the allowance for credit losses by ~~$4,494~~class of financing receivable disaggregated by measurement methodology as of June 30, 2021 and December 31, 2020:


	June 30, 2021
	Commercial and industrial		Construction		1-to-4 family residential mortgage		Residential line of credit		Multi-family residential mortgage		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Consumer and other		Total
Amount of allowance allocated to:
Individually evaluated for credit loss	$	105	$	131	$	0	$	8	$	0	$	23	$	676	$	0	$	943
Collectively evaluated for credit loss	13,073		31,151		18,063		6,467		12,976		4,015		29,020		9,985		124,750
Purchased credit deteriorated	613		1,556		1,609		241		499		669		13,160		623		18,970
Ending balance - June 30, 2021	$	13,791	$	32,838	$	19,672	$	6,716	$	13,475	$	4,707	$	42,856	$	10,608	$	144,663


	December 31, 2020
	Commercial and industrial		Construction		1-to-4 family residential mortgage		Residential line of credit		Multi-family residential mortgage		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Consumer and other		Total
Amount of allowance allocated to:
Individually evaluated for credit loss	$	373	$	95	$	0	$	9	$	0	$	30	$	1,531	$	1	$	2,039
Collectively evaluated for credit loss	13,493		54,065		17,206		10,031		6,326		4,062		33,706		10,516		149,405
Purchased credit deteriorated	882		4,317		2,014		494		848		757		8,910		723		18,945
Ending balance - December 31, 2020	$	14,748	$	58,477	$	19,220	$	10,534	$	7,174	$	4,849	$	44,147	$	11,240	$	170,389

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

The following tables provide the ~~February 14, 2020 acquisition date. Outside~~amount of ~~the impact~~loans by class of ~~Franklin on the provision for credit losses, the remaining loan portfolio benefited from improved economic forecasts, seen for the first time in 2020, reflective~~financing receivable disaggregated by measurement methodology as of the resumption of more normalized commercial activity within our markets. As such, excluding the increase recorded upon the acquisition of Franklin, we reduced the allowance for credit losses by $7,336 during the three months ended SeptemberJune 30, ~~2020 based on these improved economic forecasts. See Note 2, "Mergers~~2021, and ~~acquisitions" for additional details related to PCD loans acquired on February 14, 2020.~~December 31, 2020:


	June 30, 2021
	Commercial and industrial		Construction		1-to-4 family residential mortgage		Residential line of credit		Multi-family residential mortgage		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Consumer and other		Total
Loans, net of unearned income
Individually evaluated for credit loss	$	15,159	$	5,993	$	894	$	412	$	0	$	9,135	$	7,207	$	26	$	38,826
Collectively evaluated for credit loss	1,176,960		1,097,065		1,038,746		384,698		354,021		822,532		1,368,161		311,481		6,553,664
Purchased credit deteriorated	46,821		42,107		86,983		16,233		9,579		91,938		299,846		12,957		606,464
Ending balance - June 30, 2021	$	1,238,940	$	1,145,165	$	1,126,623	$	401,343	$	363,600	$	923,605	$	1,675,214	$	324,464	$	7,198,954


	December 31, 2020
	Commercial and industrial		Construction		1-to-4 family residential mortgage		Residential line of credit		Multi-family residential mortgage		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Consumer and other		Total
Loans, net of unearned income
Individually evaluated for credit loss	$	15,578	$	4,851	$	848	$	412	$	0	$	7,846	$	8,631	$	39	$	38,205
Collectively evaluated for credit loss	1,270,058		1,140,634		987,142		387,250		156,447		813,151		1,272,203		302,983		6,329,868
Purchased credit deteriorated	60,486		76,735		101,280		20,549		19,229		103,844		318,145		14,618		714,886
Ending balance - December 31, 2020	$	1,346,122	$	1,222,220	$	1,089,270	$	408,211	$	175,676	$	924,841	$	1,598,979	$	317,640	$	7,082,959

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

~~The following provides the changes in the allowance for credit losses by class of financing receivable for the three and nine months ended September 30, 2020 and 2019:~~

Commercial
and industrial Construction 1-to-4
family
residential
mortgage Residential
line of credit Multi-family
residential
mortgage Commercial
real estate
owner
occupied Commercial
real estate
non-owner
occupied Consumer
and other Total
Three Months Ended September 30, 2020
Beginning balance -
June 30, 2020
$ 8,878 $ 35,599 $ 12,463 $ 6,811 $ 4,499 $ 7,420 $ 30,444 $ 7,015 $ 113,129
Provision for credit losses (1,520) 22,383 4,194 4,053 1,908 (1,276) 12,364 3,728 45,834
Recoveries of loans
previously charged-off
757 51 116 22 0 51 0 175 1,172
Loans charged off (249) 0 (8) 0 0 (95) (166) (475) (993)
Initial allowance on loans
purchased with
deteriorated credit quality 743 5,596 1,533 569 784 605 14,998 3 24,831
Ending balance -
September 30, 2020
$ 8,609 $ 63,629 $ 18,298 $ 11,455 $ 7,191 $ 6,705 $ 57,640 $ 10,446 $ 183,973
Nine Months Ended September 30, 2020
Beginning balance -
December 31, 2019
$ 4,805 $ 10,194 $ 3,112 $ 752 $ 544 $ 4,109 $ 4,621 $ 3,002 $ 31,139
Impact of adopting ASC
326 on non-purchased
credit deteriorated loans
5,300 1,533 7,920 3,461 340 1,879 6,822 3,633 30,888
Impact of adopting ASC
326 on purchased credit
deteriorated loans
82 150 421 (3) 0 162 184 (438) 558
Provision for credit losses (2,354) 45,962 5,412 6,633 5,523 132 31,282 5,247 97,837
Recoveries of loans
previously charged-off
1,652 202 166 61 0 68 0 471 2,620
Loans charged off (1,630) (18) (373) (21) 0 (304) (711) (1,512) (4,569)
Initial allowance on loans
purchased with
deteriorated credit quality
754 5,606 1,640 572 784 659 15,442 43 25,500
Ending balance -
September 30, 2020
$ 8,609 $ 63,629 $ 18,298 $ 11,455 $ 7,191 $ 6,705 $ 57,640 $ 10,446 $ 183,973

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

~~(Dollar amounts are in thousands, except share and per share amounts)~~

~~The following disclosures are presented in accordance with GAAP in effect prior to the adoption of CECL. The Company has included these disclosures to address the applicable prior periods presented.~~

The following table provides the amount of the allowance for credit losses by class of financing receivable for loans individually evaluated for impairment, loans collectively evaluated for impairment and loans acquired with deteriorated credit quality as of December 31, 2019:

December 31, 2019
Commercial
and industrial Construction 1-to-4
family
residential
mortgage Residential
line of credit Multi-family
residential
mortgage Commercial
real estate
owner
occupied Commercial
real estate
non-owner occupied Consumer
and other Total
Amount of allowance allocated to:
Individually evaluated for impairment $ 241 $ 0 $ 8 $ 9 $ 0 $ 238 $ 399 $ 0 $ 895
Collectively evaluated for
impairment
4,457 10,192 2,940 743 544 3,853 3,909 1,933 28,571
Acquired with deteriorated
credit quality
107 2 164 0 0 18 313 1,069 1,673
Ending balance -
December 31, 2019
$ 4,805 $ 10,194 $ 3,112 $ 752 $ 544 $ 4,109 $ 4,621 $ 3,002 $ 31,139

The following table provides the amount of loans by class of financing receivable for loans individually evaluated for impairment, loans collectively evaluated for impairment and loans acquired with deteriorated credit quality as of December 31, 2019:

December 31, 2019
Commercial
and industrial Construction 1-to-4
family
residential
mortgage Residential
line of credit Multi-family
residential
mortgage Commercial
real estate
owner
occupied Commercial
real estate
non-owner
occupied Consumer
and other Total
Loans, net of unearned
income

Individually evaluated
for impairment
$ 9,026 $ 2,061 $ 1,347 $ 579 $ 0 $ 2,993 $ 7,755 $ 49 $ 23,810
Collectively evaluated
for impairment
1,023,326 546,156 689,769 220,878 69,429 621,386 902,792 254,944 4,328,680
Acquired with deteriorated
credit quality
1,684 2,884 19,338 73 0 5,891 10,197 17,085 57,152
Ending balance -
December 31, 2019
$ 1,034,036 $ 551,101 $ 710,454 $ 221,530 $ 69,429 $ 630,270 $ 920,744 $ 272,078 $ 4,409,642

Credit Quality

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 that share similar risk characteristics collectively. Loans that do not share similar risk characteristics are evaluated individually.

The Company uses the following definitions for risk ratings:

~~Pass.~~


			Pass.			Loans rated Pass include those that are adequately collateralized performing loans which management believes do not have conditions that have occurred or may occur that would result in the loan being downgraded into an inferior category. The Pass category also includes loans rated as Watch, which include those that management believes have conditions that have occurred, or may occur, which could result in the loan being downgraded to an inferior category.




			Special Mention.			Loans rated Special Mention are those that have potential weakness that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the institution’s credit position at some future date. Management does not believe there will be a loss of principal or interest. These loans require intensive servicing and may possess more than normal credit risk.




			Classified.			Loans included in the Classified category include loans rated as Substandard and Doubtful. Loans rated as Substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard loans 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. Also included in this category are loans classified as Doubtful, which have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weakness or weaknesses make collection or liquidation in full, based on currently existing facts, conditions, and values, highly questionable and improbable. The total amortized cost of loans rated as Doubtful were insignificant for all periods presented.

Risk ratings are ~~adequately performing~~updated on an ongoing basis and ~~collateralized and which management believes do not have conditions that have occurred or may occur which would result in the~~are subject to change by continuous loan ~~being downgraded into an inferior category.~~

~~Watch.~~ Loans rated as Watch include those that management believes have conditions that have occurred, or may occur, which could result in the loan being downgraded to an inferior category. Also included in watch are loans rated as special mention, which 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 institution’s credit position at some future date.

~~Substandard.~~ Loans rated 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 rated have a well-defined weakness or weaknessesmonitoring processes.

2423

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

~~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.

~~Risk ratings are updated on an ongoing basis and are subject to change by continuous loan monitoring processes.~~

The following ~~table presents~~tables present the credit quality of our loan portfolio by year of origination as of ~~September~~June 30, 2021 and December 31, 2020. Revolving loans are presented separately. Management considers the guidance in ASC 310-20 when determining whether a modification, extension, or renewal constitutes a current period origination. Generally, current period renewals of credit are reunderwritten at the point of renewal and considered current period originations for the purposes of the ~~table~~tables below.


September 30, 2020
As of June 30, 2021																		As of June 30, 2021
		Term Loans																	Term Loans
		Amortized Cost Basis by Origination Year																	Amortized Cost Basis by Origination Year
		2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Total			2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Commercial and industrial	Commercial and industrial																	Commercial and industrial
Pass	Pass	$	399,906	$	186,100	$	69,916	$	53,213	$	33,976	$	45,860	$	511,111	$	1,300,082	Pass	$	93,229	$	160,243	$	162,002	$	63,799	$	48,206	$	66,856	$	584,470	$	1,178,805
Watch		3,236		3,034		6,283		3,652		11,293		6,245		36,083		69,826
Substandard		6		3,160		17,022		6,552		686		6,869		13,269		47,564
Doubtful		35		0		0		0		0		0		164		199
Special Mention																		Special Mention	27		278		423		20		468		3,118		15,920		20,254
Classified																		Classified	660		2,706		2,674		10,426		3,728		6,914		12,773		39,881

Total	Total	403,183		192,294		93,221		63,417		45,955		58,974		560,627		1,417,671		Total	93,916		163,227		165,099		74,245		52,402		76,888		613,163		1,238,940

Construction	Construction																	Construction
Pass	Pass	311,117		448,019		110,473		49,845		41,750		75,570		115,894		1,152,668		Pass	261,384		393,404		205,133		48,972		29,372		84,769		110,748		1,133,782
Watch		1,282		1,231		9,435		13,822		1,305		3,585		0		30,660
Substandard		0		972		642		132		880		4,919		0		7,545
Doubtful		0		0		0		0		0		5		0		5
Special Mention																		Special Mention	0		160		0		0		1,209		734		0		2,103
Classified																		Classified	0		32		2,199		3,967		124		2,757		201		9,280

Total	Total	312,399		450,222		120,550		63,799		43,935		84,079		115,894		1,190,878		Total	261,384		393,596		207,332		52,939		30,705		88,260		110,949		1,145,165

Residential real estate:	Residential real estate:																	Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage																	1-to-4 family mortgage
Pass	Pass	232,248		203,167		188,471		170,725		119,327		168,732		0		1,082,670		Pass	203,719		241,270		152,228		126,627		130,028		246,202		0		1,100,074
Watch		1,257		786		3,318		12,580		4,155		14,506		0		36,602
Substandard		532		1,452		3,274		4,128		2,039		9,120		0		20,545
Doubtful		0		34		0		0		270		490		0		794
Special Mention																		Special Mention	44		1,145		1,201		606		328		2,752		0		6,076
Classified																		Classified	0		339		1,807		3,374		5,237		9,716		0		20,473

Total	Total	234,037		205,439		195,063		187,433		125,791		192,848		0		1,140,611		Total	203,763		242,754		155,236		130,607		135,593		258,670		0		1,126,623

Residential line of credit	Residential line of credit																	Residential line of credit
Pass	Pass	254		0		87		0		208		3,577		405,767		409,893		Pass	0		0		0		0		0		0		396,297		396,297
Watch		0		0		0		0		0		0		5,205		5,205
Substandard		109		1		0		3		0		0		4,848		4,961
Doubtful		0		0		0		0		0		0		259		259
Special Mention																		Special Mention	0		0		0		0		0		0		344		344
Classified																		Classified	0		0		0		0		0		0		4,702		4,702

Total	Total	363		1		87		3		208		3,577		416,079		420,318		Total	0		0		0		0		0		0		401,343		401,343

Multi-family mortgage	Multi-family mortgage																	Multi-family mortgage
Pass	Pass	23,747		15,055		12,629		54,660		11,718		36,812		11,259		165,880		Pass	143,092		31,127		74,713		7,370		39,365		57,426		10,454		363,547
Watch		0		0		0		0		0		0		0		0
Substandard		0		0		0		0		0		57.00		0		57
Doubtful		0		0		0		0		0		0		0		0
Special Mention																		Special Mention	0		0		0		0		0		0		0		0
Classified																		Classified	0		0		0		0		0		53		0		53

Total	Total	23,747		15,055		12,629		54,660		11,718		36,869		11,259		165,937		Total	143,092		31,127		74,713		7,370		39,365		57,479		10,454		363,600

Commercial real estate:																		Commercial real estate:
Owner occupied																		Owner occupied
Pass																		Pass	64,153		138,004		187,870		89,391		90,172		256,949		58,761		885,300
Special Mention																		Special Mention	0		0		1,335		3,649		1,464		5,749		288		12,485
Classified																		Classified	0		0		3,123		2,634		4,157		14,146		1,760		25,820

Total																		Total	64,153		138,004		192,328		95,674		95,793		276,844		60,809		923,605

Non-owner occupied																		Non-owner occupied
Pass																		Pass	226,622		162,080		166,597		300,073		202,577		505,746		54,947		1,618,642
Special Mention																		Special Mention	0		0		0		3,500		0		8,278		0		11,778
Classified																		Classified	0		0		4,136		24,616		1,542		14,455		45		44,794

Total																		Total	226,622		162,080		170,733		328,189		204,119		528,479		54,992		1,675,214

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)


As of June 30, 2021
	Term Loans
	Amortized Cost Basis by Origination Year
	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Consumer and other loans
Pass	56,647		65,973		44,844		36,124		23,731		76,402		14,476		318,197
Special Mention	75		0		14		0		1		522		0		612
Classified	38		144		222		1,023		926		2,865		437		5,655

Total	56,760		66,117		45,080		37,147		24,658		79,789		14,913		324,464

Total Loans
Pass	1,048,846		1,192,101		993,387		672,356		563,451		1,294,350		1,230,153		6,994,644
Special Mention	146		1,583		2,973		7,775		3,470		21,153		16,552		53,652
Classified	698		3,221		14,161		46,040		15,714		50,906		19,918		150,658

Total	$	1,049,690	$	1,196,905	$	1,010,521	$	726,171	$	582,635	$	1,366,409	$	1,266,623	$	7,198,954

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

2020 2019 2018 2017 2016 Prior Revolving Loans Amortized Cost Basis Total
Commercial real estate:
Owner occupied
Pass 99,827 181,214 106,212 97,689 81,383 221,365 49,382 837,072
Watch 3,596 4,343 6,843 22,939 7,858 19,233 3,188 68,000
Substandard 428 1,302 3,815 1,457 2,931 8,440 1,542 19,915
Doubtful 0 0 0 0 0 0 0 0
Total 103,851 186,859 116,870 122,085 92,172 249,038 54,112 924,987
Non-owner occupied
Pass 108,229 248,852 360,309 218,431 291,626 250,806 43,005 1,521,258
Watch 0 6,181 5,897 26,361 21,775 43,984 45 104,243
Substandard 0 149 12,130 1,166 1,693 3,761 0 18,899
Doubtful 0 0 0 0 0 0 0 0
Total 108,229 255,182 378,336 245,958 315,094 298,551 43,050 1,644,400
Consumer and other loans
Pass 65,261 57,677 42,388 28,207 42,014 32,720 18,440 286,707
Watch 159 707 1,714 1,418 3,044 8,352 392 15,786
Substandard 121 68 264 618 463 2,653 407 4,594
Doubtful 0 260 295 544 196 354 0 1,649
Total 65,541 58,712 44,661 30,787 45,717 44,079 19,239 308,736
Total
Pass 1,240,589 1,340,084 890,485 672,770 622,002 835,442 1,154,858 6,756,230
Watch 9,530 16,282 33,490 80,772 49,430 95,905 44,913 330,322
Substandard 1,196 7,104 37,147 14,056 8,692 35,819 20,066 124,080
Doubtful 35 294 295 544 466 849 423 2,906
Total $ 1,251,350 $ 1,363,764 $ 961,417 $ 768,142 $ 680,590 $ 968,015 $ 1,220,260 $ 7,213,538


As of December 31, 2020
	Term Loans
	Amortized Cost Basis by Origination Year
	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Total
Commercial and industrial
Pass	$	339,074	$	185,636	$	70,549	$	59,917	$	37,573	$	42,685	$	540,960	$	1,276,394
Special Mention	231		824		561		445		915		2,580		24,826		30,382
Classified	2,501		2,688		11,227		4,425		6,582		1,277		10,646		39,346

Total	341,806		189,148		82,337		64,787		45,070		46,542		576,432		1,346,122

Construction
Pass	461,715		390,443		86,490		52,942		40,907		62,890		112,004		1,207,391
Special Mention	469		1,485		2,197		1,221		729		13		0		6,114
Classified	573		1,755		3,178		141		0		3,068		0		8,715

Total	462,757		393,683		91,865		54,304		41,636		65,971		112,004		1,222,220

Residential real estate:
1-to-4 family mortgage
Pass	283,107		176,711		164,499		157,731		111,194		162,051		0		1,055,293
Special Mention	1,423		1,829		1,209		753		721		3,865		0		9,800
Classified	448		1,428		3,806		5,473		3,622		9,400		0		24,177

Total	284,978		179,968		169,514		163,957		115,537		175,316		0		1,089,270

Residential line of credit
Pass	0		0		0		0		0		0		400,206		400,206
Special Mention	0		0		0		0		0		0		2,653		2,653
Classified	0		0		0		0		0		0		5,352		5,352

Total	0		0		0		0		0		0		408,211		408,211

Multi-family mortgage
Pass	29,006		13,446		11,843		46,561		28,330		35,339		11,094		175,619
Special Mention	0		0		0		0		0		0		0		0
Classified	0		0		0		0		0		57		0		57

Total	29,006		13,446		11,843		46,561		28,330		35,396		11,094		175,676


Commercial real estate:
Owner occupied
Pass	140,904		179,500		97,577		94,659		76,539		224,108		53,451		866,738
Special Mention	967		1,356		4,251		16,173		6,101		2,466		230		31,544
Classified	44		1,785		2,423		6,074		274		11,226		4,733		26,559

Total	141,915		182,641		104,251		116,906		82,914		237,800		58,414		924,841

Non-owner occupied
Pass	166,962		229,442		342,640		221,149		290,163		272,184		38,820		1,561,360
Special Mention	0		1,500		6,672		0		207		8,445		0		16,824
Classified	0		2,210		1,502		0		0		17,083		0		20,795

Total	166,962		233,152		350,814		221,149		290,370		297,712		38,820		1,598,979

Consumer and other loans
Pass	89,625		52,839		39,725		27,201		43,503		37,673		14,817		305,383
Special Mention	281		797		1,588		468		526		1,364		11		5,035
Classified	151		565		1,434		1,161		935		2,308		668		7,222

Total	90,057		54,201		42,747		28,830		44,964		41,345		15,496		317,640

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

~~The following table shows credit quality indicators by class of financing receivable at December 31, 2019.~~

December 31, 2019 Pass Watch Substandard Total
Loans, excluding purchased credit impaired loans
Commercial and industrial $ 946,247 $ 66,910 $ 19,195 $ 1,032,352
Construction 541,201 4,790 2,226 548,217
Residential real estate:
1-to-4 family mortgage 666,177 11,380 13,559 691,116
Residential line of credit 218,086 1,343 2,028 221,457
Multi-family mortgage 69,366 63 0 69,429
Commercial real estate:
Owner occupied 576,737 30,379 17,263 624,379
Non-owner occupied 876,670 24,342 9,535 910,547
Consumer and other 248,632 3,304 3,057 254,993
Total loans, excluding purchased credit impaired loans $ 4,143,116 $ 142,511 $ 66,863 $ 4,352,490
Purchased credit impaired loans
Commercial and industrial $ 0 $ 1,224 $ 460 $ 1,684
Construction 0 2,681 203 2,884
Residential real estate:
1-to-4 family mortgage 0 15,091 4,247 19,338
Residential line of credit 0 0 73 73
Multi-family mortgage 0 0 0 0
Commercial real estate:
Owner occupied 0 4,535 1,356 5,891
Non-owner occupied 0 6,617 3,580 10,197
Consumer and other 0 13,521 3,564 17,085
Total purchased credit impaired loans 0 43,669 13,483 57,152
Total loans $ 4,143,116 $ 186,180 $ 80,346 $ 4,409,642


As of December 31, 2020
	Term Loans
	Amortized Cost Basis by Origination Year
	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Total
Total Loans
Pass	1,510,393		1,228,017		813,323		660,160		628,209		836,930		1,171,352		6,848,384
Special Mention	3,371		7,791		16,478		19,060		9,199		18,733		27,720		102,352
Classified	3,717		10,431		23,570		17,274		11,413		44,419		21,399		132,223

Total	$	1,517,481	$	1,246,239	$	853,371	$	696,494	$	648,821	$	900,082	$	1,220,471	$	7,082,959

Nonaccrual and Past Due Loans

Nonperforming loans include loans that are no longer accruing interest (nonaccrual loans) and loans past due ninety or more days and still accruing interest.

The following tables ~~provide information on nonaccrual and past due loans~~represent an analysis of the aging by class of financing receivable as of ~~September~~June 30, ~~2020~~2021 and December 31, 2019. For December 31, 2019, purchased credit impaired ("PCI") loans are not included in the nonperforming disclosures as these loans are considered to be performing, even though they may be contractually past due. This is because any non-payment of contractual principal or interest was considered in the periodic re-estimation of expected cash flows and was included in the 2019 loan loss provision or future period yield adjustments. Under PCD accounting, management considers changes in the credit quality of the borrower as part of its regular estimation of expected credit losses and does not make the same future yield adjustments as under the PCI accounting. Consequently, PCD loans that are contractually past due or on nonaccrual status, including those formerly accounted for as PCI loans, are included in the September 30, 2020 nonperforming disclosures.2020:


June 30, 2021	30-89 days past due		90 days or more and accruing interest		Non-accrual loans		Loans current on payments and accruing interest		Total
Commercial and industrial	$	757	$	104	$	15,538	$	1,222,541	$	1,238,940
Construction	1,023		487		5,303		1,138,352		1,145,165
Residential real estate:
1-to-4 family mortgage	3,753		8,002		5,094		1,109,774		1,126,623
Residential line of credit	716		48		1,189		399,390		401,343
Multi-family mortgage	0		0		53		363,547		363,600
Commercial real estate:
Owner occupied	1,100		0		8,074		914,431		923,605
Non-owner occupied	737		0		12,016		1,662,461		1,675,214
Consumer and other	2,660		457		3,162		318,185		324,464
Total	$	10,746	$	9,098	$	50,429	$	7,128,681	$	7,198,954


December 31, 2020	30-89 days past due		90 days or more and accruing interest		Non-accrual loans		Loans current on payments and accruing interest		Total
Commercial and industrial	$	3,297	$	330	$	16,005	$	1,326,490	$	1,346,122
Construction	7,607		573		4,053		1,209,987		1,222,220
Residential real estate:
1-to-4 family mortgage	7,058		10,470		5,923		1,065,819		1,089,270
Residential line of credit	3,551		239		1,757		402,664		408,211
Multi-family mortgage	0		57		0		175,619		175,676
Commercial real estate:
Owner occupied	98		0		7,948		916,795		924,841
Non-owner occupied	915		0		12,471		1,585,593		1,598,979
Consumer and other	4,469		2,027		2,603		308,541		317,640
Total	$	26,995	$	13,696	$	50,760	$	6,991,508	$	7,082,959

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

The following ~~table represents an analysis of the aging by class of financing receivable as of September 30, 2020:~~

September 30, 2020 30-89 days
past due 90 days or
more and accruing
interest Non-accrual
loans Loans current
on payments
and accruing
interest Total
Commercial and industrial $ 1,581 $ 11 $ 6,579 $ 1,409,500 $ 1,417,671
Construction 4,346 196 2,018 1,184,318 1,190,878
Residential real estate:
1-to-4 family mortgage 4,143 7,452 6,752 1,122,264 1,140,611
Residential line of credit 287 216 1,925 417,890 420,318
Multi-family mortgage 0 57 0 165,880 165,937
Commercial real estate:
Owner occupied 1,096 0 2,194 921,697 924,987
Non-owner occupied 114 0 12,358 1,631,928 1,644,400
Consumer and other 3,584 1,132 2,759 301,261 308,736
Total $ 15,151 $ 9,064 $ 34,585 $ 7,154,738 $ 7,213,538

~~The following~~ tables provide the amortized cost basis of loans on non-accrual status, as well as any related allowance as of June 30, 2021 and ~~interest income,~~December 31, 2020 by class of financing receivable.



June 30, 2021	Non-accrual with no related allowance		Non-accrual with related allowance		Related allowance
Commercial and industrial	$	14,401	$	1,137	$	119
Construction	4,254		1,049		151
Residential real estate:
1-to-4 family mortgage	1,493		3,601		91
Residential line of credit	830		359		8
Multi-family mortgage	0		53		8
Commercial real estate:
Owner occupied	7,412		662		43
Non-owner occupied	6,418		5,598		736
Consumer and other	0		3,162		162
Total	$	34,808	$	15,621	$	1,318



December 31, 2020	Non-accrual with no related allowance		Non-accrual with related allowance		Related allowance

Commercial and industrial	$	13,960	$	2,045	$	383
Construction	3,061��		992		131
Residential real estate:
1-to-4 family mortgage	3,048		2,875		84
Residential line of credit	854		903		31
Multi-family mortgage	0		0		0
Commercial real estate:
Owner occupied	7,172		776		63
Non-owner occupied	4,566		7,905		1,711
Consumer and other	0		2,603		147
Total	$	32,661	$	18,099	$	2,550

The following presents interest income recognized on nonaccrual loans during the three and six months ended June 30, 2021 and 2020:


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Commercial and industrial	$	219	$	17	$	333	$	169
Construction	16		6		30		33
Residential real estate:
1-to-4 family mortgage	67		6		85		13
Residential line of credit	27		0		45		1
Multi-family mortgage	1		0		2		0
Commercial real estate:
Owner occupied	101		43		232		64
Non-owner occupied	141		109		230		128
Consumer and other	55		24		55		24
Total	$	627	$	205	$	1,012	$	432

Accrued interest receivable written off as ofan adjustment to interest income amounted to $132 and $162 for the three ~~and nine~~ months ended ~~September~~June 30, ~~2020:~~

September 30, 2020
u End of period amortized cost
Beginning of
period non-accrual
amortized cost Non-accrual
with no
related
allowance Non-accrual
with
related
allowance Related
allowance
Commercial and industrial $ 5,586 $ 913 $ 5,666 $ 936
Construction 1,254 980 1,038 145
Residential real estate:
1-to-4 family mortgage 4,585 4,247 2,505 62
Residential line of credit 489 0 1,925 74
Commercial real estate:
Owner occupied 2,285 1,469 725 66
Non-owner occupied 9,460 5,475 6,883 1,568
Consumer and other 1,623 88 2,671 165
Total $ 25,282 $ 13,172 $ 21,413 $ 3,016

Interest Income
September 30, 2020 Three Months Ended Nine Months Ended
Commercial and industrial $ 287 $ 304
Construction 42 48
Residential real estate:
1-to-4 family mortgage 15 21
Residential line of credit 72 72
Commercial real estate:
Owner occupied 32 75
Non-owner occupied 76 185
Consumer and other 0 24
Total $ 524 $ 729
2021 and 2020, respectively, and $597 and $282 for the six months ended June 30, 2021 and 2020, respectively.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

Troubled debt restructurings

As of June 30, 2021 and December 31, 2020, the Company had a recorded investment in TDRs of $42,678 and $15,988, respectively. The ~~following disclosures are presented in accordance with GAAP in effect prior~~modifications included extensions of the maturity date and/or a stated rate of interest to one lower than the ~~adoption~~current market rate to borrowers experiencing financial difficulty. Of these loans, $23,608 and $8,279 were classified as non-accrual loans as of ~~CECL.~~June 30, 2021 and December 31, 2020, respectively. The Company has ~~included~~calculated $1,285 and $310 in allowances for credit losses on TDRs as of June 30, 2021 and December 31, 2020, respectively. Unfunded loan commitments related to these ~~disclosures~~loans totaled $6,153 as of June 30, 2021. There were 0 commitments to ~~address the applicable prior periods presented.~~

extend any additional funds on troubled debt restructurings as of December 31, 2020.

The following ~~table provides~~tables present the ~~period-end amounts~~financial effect of TDRs recorded during the periods indicated.


Three Months Ended June 30, 2021	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Charge offs and specific reserves
Commercial and industrial	4	$	13,055	$	13,055	$	0

Commercial real estate:
Owner occupied	4	3,550		3,550		0

Residential real estate:
1-to-4 family mortgage	2	811		811		0
Residential line of credit	1	11		11		0

Total	11	$	17,427	$	17,427	$	0


Six Months Ended June 30, 2021	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Charge offs and specific reserves
Commercial and industrial	5	$	13,162	$	13,162	$	0

Commercial real estate:
Owner occupied	4	3,550		3,550		0
Non-owner occupied	1	11,997		11,997		0
Residential real estate:
1-to-4 family mortgage	2	811		811		0
Residential line of credit	1	11		11		0

Total	13	$	29,531	$	29,531	$	0


Three Months Ended June 30, 2020	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Charge offs and specific reserves
Commercial and industrial	1	$	1,153	$	1,153	$	0

Commercial real estate:
Owner occupied	1	788		788		0

Residential real estate:
1-to-4 family mortgage	1	13		13		0


Total	3	$	1,954	$	1,954	$	0


Six Months Ended June 30, 2020	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Charge offs and specific reserves
Commercial and industrial	1	$	1,153	$	1,153	$	0

Commercial real estate:
Owner occupied	1	788		788		0

Residential real estate:
1-4 family mortgage	2	77		77		0

Total	4	$	2,018	$	2,018	$	0

There were 0 loans ~~that are~~modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the three and six months ended June 30, 2021 and 2020. A loan is considered to be in payment default once it is 90 days contractually past due ~~loans not accruing interest and loans current on payments accruing interest by category at December 31, 2019:~~

December 31, 2019 30-89 days
past due 90 days or
more and accruing
interest Non-accrual
loans Purchased Credit
Impaired loans Loans current on payments and accruing interest Total
Commercial and industrial $ 1,918 $ 291 $ 5,587 $ 1,684 $ 1,024,556 $ 1,034,036
Construction 1,021 42 1,087 2,884 546,067 551,101
Residential real estate:
1-to-4 family mortgage 10,738 3,965 3,332 19,338 673,081 710,454
Residential line of credit 658 412 416 73 219,971 221,530
Multi-family mortgage 63 0 0 0 69,366 69,429
Commercial real estate:
Owner occupied 1,375 0 1,793 5,891 621,211 630,270
Non-owner occupied 327 0 7,880 10,197 902,340 920,744
Consumer and other 2,377 833 967 17,085 250,816 272,078
Total $ 18,477 $ 5,543 $ 21,062 $ 57,152 $ 4,307,408 $ 4,409,642

~~Impaired Loans~~

~~The following disclosures are presented in accordance with GAAP in effect prior to~~under the ~~adoption of CECL. The Company has included these disclosures to address the applicable prior periods presented.~~

~~Impaired loans recognized in conformity with ASC 310 at December 31, 2019 segregated by class, were as follows:~~

December 31, 2019 Recorded
investment Unpaid
principal Related
allowance
With a related allowance recorded:
Commercial and industrial $ 6,080 $ 8,350 $ 241
Residential real estate:
1-to-4 family mortgage 264 324 8
Residential line of credit 320 320 9
Commercial real estate:
Owner occupied 756 1,140 238
Non-owner occupied 6,706 6,747 399
Consumer and other 0 0 0
Total $ 14,126 $ 16,881 $ 895
With no related allowance recorded:
Commercial and industrial $ 2,946 $ 3,074 $ —
Construction 2,061 2,499 —
Residential real estate:
1-to-4 family mortgage 1,083 1,449 —
Residential line of credit 259 280 —
Commercial real estate:
Owner occupied 2,237 2,627 —
Non-owner occupied 1,049 1,781 —
Consumer and other 49 49 —
Total $ 9,684 $ 11,759 $ —
Total impaired loans $ 23,810 $ 28,640 $ 895

modified terms.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

~~Average recorded investment and interest income on a cash basis recognized during the three and nine months ended September 30, 2019 on impaired loans, segregated by class, were as follows:~~

Three Months Ended Nine Months Ended
September 30, 2019 Average recorded investment Interest income recognized (cash basis) Average recorded investment Interest income recognized (cash basis)
With a related allowance recorded:
Commercial and industrial $ 3,109 $ 51 $ 1,850 $ 156
Residential real estate:
1-to-4 family mortgage 265 2 205 13
Commercial real estate:
Owner occupied 184 4 371 10
Non-owner occupied 6,143 56 6,241 90
Consumer and other 447 0 198 19
Total $ 10,148 $ 113 $ 8,865 $ 288
With no related allowance recorded:
Commercial and industrial $ 766 $ 11 $ 991 $ 36
Construction 1,639 90 1,641 142
Residential real estate:
1-to-4 family mortgage 835 24 962 50
Residential line of credit 427 0 245 2
Commercial real estate:
Owner occupied 2,045 41 2,171 103
Non-owner occupied 1,050 0 1,050 0
Consumer and other 66 2 69 5
Total $ 6,828 $ 168 $ 7,129 $ 338
Total impaired loans $ 16,976 $ 281 $ 15,994 $ 626

~~Purchased Credit Impaired Loans~~

As of December 31, 2019, the carrying value of PCI loans accounted for under ASC 310-30 "Loans and Debt Securities Acquired with Deteriorated Credit Quality" was $57,152. The following table presents changes in the value of the accretable yield for PCI loans for the periods indicated.

Three Months Ended September 30, Nine Months Ended September 30,
2019 2019
Balance at the beginning of period $ (14,862) $ (16,587)
Additions through business combinations 0 (1,167)
Principal reductions and other reclassifications from nonaccretable difference (150) 100
Accretion 1,583 5,471
Changes in expected cash flows 110 (1,136)
Balance at end of period $ (13,319) $ (13,319)

Included in the ending balance of the accretable yield on PCI loans at December 31, 2019, was a purchase accounting liquidity discount of $292. There was also a purchase accounting nonaccretable credit discount of $3,537 related to the PCI loan portfolio at December 31, 2019, and an accretable credit and liquidity discount on non-PCI loans of $8,964 and $3,924, respectively, as of December 31, 2019.

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

~~(Dollar amounts are in thousands, except share and per share amounts)~~

Interest revenue, through accretion of the difference between the recorded investment of the loans and the expected cash flows, was recognized on all PCI loans. Accretion of interest income amounting to $1,583 and $5,471 was recognized on PCI loans during the three and nine months ended September 30, 2019, respectively. This included both the contractual interest income recognized and the purchase accounting contribution through accretion of the liquidity discount for changes in estimated cash flows. The total purchase accounting contribution through accretion excluding contractual interest collected for all purchased loans was $2,102~~and$6,030for the three and nine months ended September 30, 2019, respectively.~~

~~Restructured Loans~~

As of September 30, 2020 and December 31, 2019, the Company has a recorded investment in TDRs of $16,681 and $12,206, respectively. The modifications included extensions of the maturity date and/or a stated rate of interest to one lower than the current market rate to borrowers experiencing financial difficulty. The Company has calculated $854 and $360 of specific reserves for those loans at September 30, 2020 and December 31, 2019, respectively. There were no commitments to lend any additional amounts to these customers for either period end. Of these loans, $12,243 and $5,201 were classified as non-accrual loans as of September 30, 2020 and December 31, 2019, respectively.

~~The following tables present the financial effect of TDRs recorded during the periods indicated.~~

Three Months Ended September 30, 2020 Number of loans Pre-modification outstanding recorded investment Post-modification outstanding recorded investment Charge offs and specific reserves
Commercial and industrial 2 $ 420 $ 420 $ 0
Total 2 $ 420 $ 420 $ 0

Three Months Ended September 30, 2019 Number of loans Pre-modification outstanding recorded investment Post-modification outstanding recorded investment Charge offs and specific reserves
Commercial and industrial 1 $ 16 $ 16 $ 0
Construction 1 1,070 1,070
Commercial real estate:
Owner occupied 1 927 927 0
Non-owner occupied 1 1,366 1,366 106
Residential real estate:
1-to-4 family mortgage 1 128 128 0
Total 5 $ 3,507 $ 3,507 $ 106

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

~~(Dollar amounts are in thousands, except share and per share amounts)~~

Nine Months Ended September 30, 2020 Number of loans Pre-modification outstanding recorded investment Post-modification outstanding recorded investment Charge offs and specific reserves
Commercial and industrial 3 $ 1,573 $ 1,573 $ 0
Commercial real estate:
Owner occupied 1 788 788 0
Non-owner occupied 2 3,752 3,752 $ 0
Residential real estate:
1-to-4 family mortgage 2 77 77 0
Total 8 $ 6,190 $ 6,190 $ 0

Nine Months Ended September 30, 2019 Number of loans Pre-modification outstanding recorded investment Post-modification outstanding recorded investment Charge offs and specific reserves
Commercial and industrial 3 $ 3,204 $ 3,204 $ 0
Construction 1 1,070 1,070 0
Commercial real estate:
Owner occupied 1 927 927 0
Non-owner occupied 1 1,366 1,366 106
Residential real estate:
1-4 family mortgage 1 128 128 0
Total 7 $ 6,695 $ 6,695 $ 106

There were 0 loans modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the three or nine months ended September 30, 2020 and~~2019. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.~~

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy. The terms of certain other loans were modified during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 that did not meet the definition of a TDR. The modification of these loans usually involve either a modification of the terms of a loan to borrowers who are not experiencing financial difficulties or an insignificant delay in payments.

Collateral Dependent Loans

For loans for which the repayment (based on the Company's assessment) is expected to be provided substantially through the operation or sale of collateral and the borrower is experiencing financial difficulty, the following table presents the loans and the corresponding individually assessed allowance for credit losses by class of financing receivable. Significant changes in individually assessed reserves are due to changes in the valuation of the underlying collateral in addition to changes in accrual and past due status.


		September 30, 2020				June 30, 2021
		Type of Collateral							Type of Collateral
		Real Estate		Financial Assets and Equipment			Individually assessed allowance for credit loss				Real Estate		Financial Assets and Equipment		Individually assessed allowance for credit loss
Commercial and industrial	Commercial and industrial	$	0	$	4,697		$	668		Commercial and industrial	$	696	$	14,524	$	1
Construction	Construction	1,817		0			0			Construction	5,993		0		131
Residential real estate:	Residential real estate:									Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	190		0			0			1-to-4 family mortgage	1,615		0		0
Residential line of credit	Residential line of credit	1,195		0			9			Residential line of credit	1,241		0		8
Multi-family mortgage		0		0			0

Commercial real estate:	Commercial real estate:									Commercial real estate:
Owner occupied	Owner occupied	928		0			34			Owner occupied	10,045		0		23
Non-owner occupied	Non-owner occupied	8,181		0			1,544			Non-owner occupied	11,624		0		676
Consumer and other		333		0			36

Total	Total	$	12,644	$	4,697		$	2,291		Total	$	31,214	$	14,524	$	839


	December 31, 2020
	Type of Collateral
	Real Estate		Financial Assets and Equipment		Individually assessed allowance for credit loss
Commercial and industrial	$	0	$	1,728	$	117
Construction	3,877		0		0
Residential real estate:
1-to-4 family mortgage	226		0		0
Residential line of credit	1,174		0		9

Commercial real estate:
Owner occupied	3,391		0		30
Non-owner occupied	8,164		0		1,531

Total	$	16,832	$	1,728	$	1,687

Deferrals Program included in COVID-19 Relief

The following table outlines the Company's recorded investment and percentage of loans held for investment by class of financing receivable for executed deferrals remaining on deferral status as of June 30, 2021 or December 31, 2020, in connection with Company's COVID-19 relief programs. These deferrals typically ranged from sixty to ninety days per deferral and the majority were not considered TDRs under the interagency regulatory guidance or CARES Act, issued in March 2020. Section 541 of the Consolidated Appropriations Act (CAA) extended this relief to the earlier of January 1, 2022 or 60 days after the national emergency termination date. As of June 30, 2021 and December 31, 2020, the Company had a recorded investment in loans totaling $1,355,475 and $1,399,088 previously deferred that were no longer in deferral status.

3230

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

~~Deferrals Program as part of COVID-19 Relief~~

On March 22, 2020, an Interagency Statement was issued by banking regulators encouraging financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of COVID-19. Additionally, Section 4013 of the CARES Act further provides that a qualified loan modification is exempt by law from classification as a TDR as defined by GAAP, from the period beginning March 1, 2020 until the earlier of December 31, 2020 or the date that is 60 days after the date on which the national emergency concerning the COVID-19 outbreak terminates. The following table outlines the Company's recorded investment and percentage of loans held for investment by class of financing receivable for Company executed deferrals that remain on deferral at September 30, 2020, in connection with Company COVID-19 relief programs. These deferrals typically ranged from ~~sixty~~ to ninety days per deferral and were not considered TDRs under the interagency regulatory guidance or the CARES Act issued in March 2020. As of September 30, 2020, the Company had a total of $1,181,232 loans previously deferred that returned to normal payment status.


		September 30, 2020							June 30, 2021	December 31, 2020
					% of Loans					% of Loans				% of Loans
Commercial and industrial	Commercial and industrial		$	25,641		1.8	%	Commercial and industrial		$	13	0	%	$	7,118	0.5	%
Construction	Construction		35,920			3.0	%	Construction		0		0	%	1,918		0.2	%
Residential real estate:	Residential real estate:							Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage		43,281			3.8	%	1-to-4 family mortgage		3,194		0.3	%	19,201		1.8	%
Residential line of credit	Residential line of credit		9,226			2.2	%	Residential line of credit		0		0	%	204		0	%
Multi-family mortgage	Multi-family mortgage		19,005			11.5	%	Multi-family mortgage		0		0	%	3,305		1.9	%
Commercial real estate:	Commercial real estate:							Commercial real estate:
Owner occupied	Owner occupied		60,614			6.6	%	Owner occupied		871		0.1	%	19,815		2.1	%
Non-owner occupied	Non-owner occupied		270,552			16.5	%	Non-owner occupied		69,587		4.2	%	139,590		8.7	%
Consumer and other	Consumer and other		593			0.2	%	Consumer and other		217		0.1	%	11,366		3.6	%
Total	Total		$	464,832		6.4	%	Total		$	73,882	1.0	%	$	202,517	2.9	%

Note (5)~~—Loans held for sale:~~

Loans held for sale are recorded at fair value, and consist primarily of residential mortgage loans originated to be sold in the secondary market. During the three months ended September 30, 2020, the Company acquired a portfolio of commercial loans, including shared national credits and institutional healthcare loans, as part of the Franklin transaction that the Company has elected to account for as held for sale. As such, these loans are excluded from the allowance for credit losses. Instead, the loans are recorded at fair value with subsequent changes to fair value recognized in earnings. During the three months ended September 30, 2020, the Company recorded gains of $20,378 in 'other noninterest income' related to changes in fair value of this portfolio. The following table summarizes loans held for sale, at fair value, as of the periods presented:

September 30, December 31,
2020 2019
Commercial and industrial $ 241,256 $ 0
Residential real estate:
1-4 family mortgage 610,695 262,518
Total loans held for sale, at fair value $ 851,951 $ 262,518

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

~~(Dollar amounts are in thousands, except share and per share amounts)~~

~~Note (6)~~—Other real estate owned

The amount reported as other real estate owned includes property acquired through foreclosure in addition to excess facilities held for sale and is carried at fair value less estimated cost to sell the property. The following table summarizes the other real estate owned for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:


		Three Months Ended				Nine Months Ended					Three Months Ended					Six Months Ended
		September 30,				September 30,					June 30,					June 30,
		2020		2019		2020		2019				2021		2020			2021		2020
Balance at beginning of period	Balance at beginning of period	$	15,091	$	15,521	$	18,939	$	12,643	Balance at beginning of period		$	11,177	$	17,072		$	12,111	$	18,939
Transfers from loans	Transfers from loans	573		1,535		1,579		3,565		Transfers from loans		3,201		641			4,596		1,006
Transfers (to) from premises and equipment		0		0		(841)		2,640
Transfers to premises and equipment										Transfers to premises and equipment		0		0			0		(841)

Proceeds from sale of other real estate owned	Proceeds from sale of other real estate owned	(1,411)		(854)		(5,561)		(2,718)		Proceeds from sale of other real estate owned		(2,166)		(2,708)			(4,661)		(4,150)
Gain on sale of other real estate owned	Gain on sale of other real estate owned	119		260		464		582		Gain on sale of other real estate owned		272		170			1,100		345
Loans provided for sales of other real estate owned	Loans provided for sales of other real estate owned	0		0		0		(166)		Loans provided for sales of other real estate owned		(203)		0			(533)		0
Write-downs and partial liquidations	Write-downs and partial liquidations	(1,624)		(386)		(1,832)		(470)		Write-downs and partial liquidations		(295)		(84)			(627)		(208)
Balance at end of period	Balance at end of period	$	12,748	$	16,076	$	12,748	$	16,076	Balance at end of period		$	11,986	$	15,091		$	11,986	$	15,091

Foreclosed residential real estate properties totaled ~~$2,180~~$774 and ~~$4,295~~$1,890 as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The recorded investment in residential mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process totaled ~~$310~~$31 and ~~$82~~$167 at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

Excess land and facilities held for sale resulting from branch consolidations totaled ~~$6,178~~$5,498 and ~~$8,956~~$5,703 as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

~~Note (7)—Goodwill and intangible assets:~~

~~Goodwill~~

~~Balance at December 31, 2019~~

~~169,051~~

~~Addition from acquisition of Farmers National (see Note 2)~~

~~6,390~~

~~Addition from merger with Franklin (see Note 2)~~

~~60,645~~

~~Balance at September 30, 2020~~

~~236,086~~

~~Core deposit and other intangibles~~

~~Balance at December 31, 2019~~

~~17,589~~

~~Addition of core deposit intangible from acquisition of Farmers National (see Note 2)~~

~~2,490~~

~~Addition of core deposit intangible from merger with Franklin (see Note 2)~~

~~7,670~~

~~Less: amortization expense~~

~~(3,825)~~

~~Balance at September 30, 2020~~

~~23,924~~

Goodwill is tested annually, or more often if circumstances warrant, for impairment. Impairment exists when a reporting unit's carrying value exceeds its fair value. The Company performed a qualitative test of goodwill for impairment as of December 31, 2019 and determined there to be no impairment. Given the significant economic decline during the first nine months of 2020 due to COVID-19 and the resulting negative impact on most businesses, including banking, management determined it would be prudent to evaluate any adverse impact to the Company's recorded goodwill. As of September 30, 2020, the Company performed a qualitative assessment and determined it was more likely than not that the fair value of the reporting unit exceeded its carrying value, including goodwill. As such, no impairment was indicated. The Company recorded $100 in relief of goodwill during the nine months ended September 30, 2019, related to the sale of the TPO mortgage delivery channel.

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

~~(Dollar amounts are in thousands, except share and per share amounts)~~

Core deposit and other intangibles include core deposit intangibles, customer base trust intangible and manufactured housing servicing intangible. The composition of core deposit and other intangibles as of September 30, 2020 and December 31, 2019 is as follows:

Core deposit and other intangibles
Gross Carrying Amount Accumulated Amortization Net Carrying Amount
September 30, 2020
Core deposit intangible $ 59,835 $ (37,403) $ 22,432
Customer base trust intangible 1,600 (507) 1,093
Manufactured housing servicing intangible 1,088 (689) 399
Total core deposit and other intangibles $ 62,523 $ (38,599) $ 23,924
December 31, 2019
Core deposit intangible $ 49,675 $ (33,861) $ 15,814
Customer base trust intangible 1,600 (387) 1,213
Manufactured housing servicing intangible 1,088 (526) 562
Total core deposit and other intangibles $ 52,363 $ (34,774) $ 17,589

During the first quarter of 2020, the Company recorded $2,490 of core deposit intangibles resulting from the Farmers National acquisition, which is being amortized over a weighted average life of approximately 4 years. During the third quarter of 2020, the Company recorded $7,670 of core deposit intangibles resulting from the Franklin merger, which is being amortized over a weighted average life of approximately 4 years.

~~The estimated aggregate future amortization expense of core deposit and other intangibles is as follows:~~

Remainder of 2020 $ 1,494
2021 5,477
2022 4,586
2023 3,658
2024 2,946
Thereafter 5,763
$ 23,924

Note ~~(8)~~(6)—Leases:

As of ~~September~~June 30, ~~2020,~~2021, the Company was the lessee in 6058 operating leases and 1 finance lease of certain branch, mortgage and operations locations, of which 5444 operating leases and 1 finance lease currently have remaining terms varying from greater than one year to 3634 years. Leases with initial terms of less than one year are not recorded on the consolidated balance sheets. The Company also does not include equipment leases and leases in which the Company is the lessor on the consolidated balance sheets as these are insignificant.

Many leases include 1 or more options to renew, with renewal terms that can extend the lease up to an additional 20 years or more. Certain lease agreements contain provisions to periodically adjust rental payments for inflation. Renewal options that management is reasonably certain to renew and fixed rent escalations are included in the right-of-use ~~("ROU")~~ asset and lease liability.

~~As of August 15,~~During the year ended December 31, 2020, the Company recorded $24,330 in ROU assets and liabilities for operating leases assumed in the Franklin transaction. Additionally, the Company also assumed a finance lease in the Franklin transaction amounting to $1,630 included in other assets and borrowings on the consolidated balance sheets.

~~The~~ Company entered into a lease for a new corporate headquarters building located in downtown Nashville. The ~~lease agreement, comprising approximately 52,000 square feet of rentable space, includes signage rights,~~building is currently under construction and is anticipated to ~~commence~~be completed in ~~the fourth quarter of~~late 2022. Upon commencement, the Company estimates recording a ROU asset and operating lease liability of approximately $29,000 and $30,000, respectively, as well as associated deferred taxes, in connection with this lease.

3531

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

Upon commencement, the Company estimates recording a ROU asset and operating lease liability of approximately $29,000 and $30,000, respectively, in connection with this lease.

Information related to the Company's leases is presented ~~below:~~below as of June 30, 2021 and December 31, 2020:

September 30, December 31,
Classification 2020 2019
Right-of-use assets - operating Operating lease right-of-use assets $ 52,410 $ 32,539
Right-of-use assets - finance Other assets 1,616 0
Lease liabilities - operating Operating lease liabilities 56,705 $ 35,525
Lease liabilities - finance Borrowings 1,619 0
Weighted average remaining lease term (in years) - operating 12.4 14.1
Weighted average remaining lease term (in years) - finance 14.6 0.0
Weighted average discount rate - operating 2.66 % 3.44 %
Weighted average discount rate - finance 1.76 % — %


		June 30,			December 31,
	Classification	2021			2020
Right-of-use assets:
Operating leases	Operating lease right-of-use assets	$	45,423		$	49,537
Finance leases	Premises and equipment, net	1,533			1,588
Total right-of-use assets		$	46,956		$	51,125
Lease liabilities:
Operating leases	Operating lease liabilities	$	50,396		$	55,187
Finance leases	Borrowings	1,555			1,598
Total lease liabilities		$	51,951		$	56,785
Weighted average remaining lease term (in years) - operating		12.3			12.2
Weighted average remaining lease term (in years) - finance		13.9			14.4
Weighted average discount rate - operating		2.72		%	2.65		%
Weighted average discount rate - finance		1.76		%	1.76		%

~~As of September 30, 2020, the Company recorded impairment of ROU assets of $1,038, which is included in merger costs related to our branch consolidations from the Franklin transaction.~~

The components of total lease expense included in ~~'Occupancy and equipment expense'~~the consolidated statements of income were as follows:


		Three Months Ended				Nine Months Ended						Three Months Ended			Six Months Ended
		September 30,				September 30,						June 30,			June 30,
		2020		2019			2020		2019			Classification	2021			2020		2021		2020
Operating lease cost(1)		$	1,663	$	1,260		$	4,341	$	3,875
Operating lease costs:											Operating lease costs:
Amortization of right-of-use asset											Amortization of right-of-use asset	Occupancy and equipment	$	2,171		$	1,389	$	4,110	$	2,678
Short-term lease cost	Short-term lease cost	95		81			261		239		Short-term lease cost	Occupancy and equipment	102			30		189		166
Variable lease cost	Variable lease cost	78		146			376		580		Variable lease cost	Occupancy and equipment	241			160		476		298

Gain on lease modifications and terminations											Gain on lease modifications and terminations	Occupancy and equipment	(787)			0		(787)		0
Finance lease costs:											Finance lease costs:
Interest on lease liabilities											Interest on lease liabilities	Interest expense on borrowings	8			0		14		0
Amortization of right-of-use asset											Amortization of right-of-use asset	Occupancy and equipment	27			0		55		0
Total lease cost	Total lease cost	$	1,836	$	1,487		$	4,978	$	4,694	Total lease cost		$	1,762		$	1,579	$	4,057	$	3,142

~~(1) Includes amortization~~

During the three and six months ended June 30, 2021, the Company recorded a $787 gain on lease modifications and terminations on certain vacated locations that were consolidated as a result of ~~favorable lease intangible.~~acquisitions.

The Company does not separate lease and non-lease components and instead elects to account for them as a single lease component. Variable lease cost primarily represents variable payments such as common area maintenance, utilities, and property taxes.

~~A maturity analysis of operating lease liabilities and a reconciliation of undiscounted cash flows to the total operating lease liability is as follows:~~


	~~September 30,~~
	~~2020~~
~~Lease payments due:~~
~~September 30, 2021~~	$	~~7,928~~
~~September 30, 2022~~	~~7,196~~
~~September 30, 2023~~	~~6,572~~
~~September 30, 2024~~	~~6,046~~
~~September 30, 2025~~	~~5,298~~
~~Thereafter~~	~~35,242~~
~~Total undiscounted future minimum lease payments~~	~~68,282~~
~~Discount on cash flows~~	~~(11,577)~~
~~Total lease liability~~	$	~~56,705~~

3632

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

A maturity analysis of operating and finance lease liabilities and a reconciliation of undiscounted cash flows to the total lease liability as of June 30, 2021 is as follows:


	Operating		Finance
	Leases		Lease
Lease payments due:
June 30, 2022	$	7,734	$	115
June 30, 2023	6,759		117
June 30, 2024	5,696		119
June 30, 2025	5,002		121
June 30, 2026	4,675		122
Thereafter	30,976		1,164
Total undiscounted future minimum lease payments	60,842		1,758
Less: imputed interest	(10,446)		(203)
Lease liability	$	50,396	$	1,555

Note ~~(9)~~(7)—Mortgage servicing rights:

Changes in the Company’s mortgage servicing rights were as follows for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:


		Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019				2021		2020		2021		2020

Carrying value at beginning of period	Carrying value at beginning of period	$	60,508	$	66,380	$	75,521	$	88,829		Carrying value at beginning of period	$	104,192	$	62,581	$	79,997	$	75,521
Capitalization	Capitalization	18,202		10,387		33,415		30,319			Capitalization	10,573		12,267		22,167		20,063

Mortgage servicing rights acquired from Franklin, at fair value		4,850		0		4,850		0
Sales		0		0		0		(29,160)

Change in fair value:	Change in fair value:										Change in fair value:
Due to pay-offs/pay-downs	Due to pay-offs/pay-downs	(7,756)		(5,050)		(19,676)		(10,150)			Due to pay-offs/pay-downs	(7,865)		(7,277)		(17,186)		(11,920)
Due to change in valuation inputs or assumptions	Due to change in valuation inputs or assumptions	581		(5,561)		(22,575)		(13,682)			Due to change in valuation inputs or assumptions	(5,285)		(7,063)		16,637		(23,156)
Carrying value at end of period	Carrying value at end of period	$	71,535	$	66,156	$	71,535	$	66,156		Carrying value at end of period	$	101,615	$	60,508	$	101,615	$	60,508

The following table summarizes servicing income and expense, which are included in 'Mortgage banking income' and 'Other noninterest ~~expense,'~~expense', respectively, within the Mortgage segment operating results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:


		Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019				2021		2020		2021		2020
Servicing income:	Servicing income:										Servicing income:
Servicing income	Servicing income	$	5,536	$	3,960	$	15,667	$	12,763		Servicing income	$	6,788	$	5,113	$	13,719	$	10,131
Change in fair value of mortgage servicing rights	Change in fair value of mortgage servicing rights	(7,175)		(10,611)		(42,251)		(23,832)			Change in fair value of mortgage servicing rights	(13,150)		(14,340)		(549)		(35,076)
Change in fair value of derivative hedging instruments	Change in fair value of derivative hedging instruments	(265)		5,520		15,705		13,060			Change in fair value of derivative hedging instruments	10,005		1,102		(7,859)		15,970
Servicing income	Servicing income	(1,904)		(1,131)		(10,879)		1,991			Servicing income	3,643		(8,125)		5,311		(8,975)
Servicing expenses	Servicing expenses	1,999		1,732		5,392		4,961			Servicing expenses	2,693		1,992		5,225		3,393
Net servicing (loss) income (1)		$	(3,903)	$	(2,863)	$	(16,271)	$	(2,970)
Net servicing income (loss)(1)											Net servicing income (loss)(1)	$	950	$	(10,117)	$	86	$	(12,368)

(1) Excludes benefit of custodial service related noninterest-bearing deposits held by the Bank.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

Data and key economic assumptions related to the Company’s mortgage servicing rights as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 are as follows:


		September 30,			December 31,				June 30,			December 31,
		2020			2019				2021			2020
Unpaid principal balance	Unpaid principal balance	$	9,101,007		$	6,734,496		Unpaid principal balance	$	10,527,708		$	9,787,657
Weighted-average prepayment speed (CPR)	Weighted-average prepayment speed (CPR)	15.28		%	10.05		%	Weighted-average prepayment speed (CPR)	11.07		%	14.07		%
Estimated impact on fair value of a 10% increase	Estimated impact on fair value of a 10% increase	$	(4,214)		$	(2,839)		Estimated impact on fair value of a 10% increase	$	(4,840)		$	(4,493)
Estimated impact on fair value of a 20% increase	Estimated impact on fair value of a 20% increase	$	(8,053)		$	(5,474)		Estimated impact on fair value of a 20% increase	$	(9,311)		$	(8,599)
Discount rate	Discount rate	11.27		%	9.68		%	Discount rate	11.05		%	11.49		%
Estimated impact on fair value of a 100 bp increase	Estimated impact on fair value of a 100 bp increase	$	(2,570)		$	(3,086)		Estimated impact on fair value of a 100 bp increase	$	(3,981)		$	(2,942)
Estimated impact on fair value of a 200 bp increase	Estimated impact on fair value of a 200 bp increase	$	(4,960)		$	(5,932)		Estimated impact on fair value of a 200 bp increase	$	(7,700)		$	(5,674)
Weighted-average coupon interest rate	Weighted-average coupon interest rate	3.75		%	4.20		%	Weighted-average coupon interest rate	3.35		%	3.58		%
Weighted-average servicing fee (basis points)	Weighted-average servicing fee (basis points)	28			29			Weighted-average servicing fee (basis points)	28			28
Weighted-average remaining maturity (in months)	Weighted-average remaining maturity (in months)	328			335			Weighted-average remaining maturity (in months)	329			328

The Company hedges the mortgage servicing rights portfolio with various derivative instruments to offset changes in the fair value of the related mortgage servicing rights. See Note ~~13,~~10, "Derivatives" for additional information on these hedging instruments.

~~From time~~As of June 30, 2021 and December 31, 2020, mortgage escrow deposits totaled to time, the Company enters agreements to sell certain tranches of mortgage servicing rights. Upon consummation of the sale, the Company generally continues to subservice the underlying mortgage loans until they can be transferred to the purchaser. During the nine months ended September 30, 2019, the Company sold $29,160 of mortgage servicing rights on $2,034,374 of serviced mortgage loans. There was not a significant gain or loss recognized in connection with the sale. During the nine months ended September 30, 2020, there were no such transactions. As of$166,126 and $147,957, respectively.

3734

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

September 30, 2020 and 2019, there were no loans being serviced that related to the bulk sale of mortgage servicing rights. As of September 30, 2020 and December 31, 2019, mortgage escrow deposits totaled to $194,276 and $92,610, respectively.

Note ~~(10)—Borrowings:~~

~~Borrowings include securities sold under agreements to repurchase, lines of credit, Federal Home Loan Bank advances, and subordinated debt.~~

Outstanding Balance Weighted Average Interest Rate
September 30, December 31, September 30, December 31,
2020 2019 2020 2019
Securities sold under agreements to repurchase $ 32,469 $ 23,745 0.61 % 0.89 %
FHLB advances 200,000 250,000 0.77 % 1.60 %
Subordinated debt 189,750 30,930 5.10 % 5.13 %
Other borrowings 16,619 0 1.88 % 0 %
$ 438,838 $ 304,675

~~Federal Home Loan Bank Advances~~

As a member of the FHLB Cincinnati, the Bank receives advances from the FHLB pursuant to the terms of various agreements that assist in funding its mortgage and loan portfolio production. Under these agreements, the Company pledged qualifying loans of $2,079,975 as collateral securing a line of credit with a total borrowing capacity of $1,604,499 as of September 30, 2020. As of December 31, 2019, the Company pledged qualifying loans of $958,506 as collateral securing a line of credit with a total borrowing capacity of $760,607. Two letters of credit with the FHLB totaling $145,000 and one letter of credit with the FHLB of $75,000 was pledged to secure public funds that require collateralization at September 30, 2020 and December 31, 2019, respectively.

Borrowings against the Company's line totaled $200,000 and $250,000 as of September 30, 2020 and December 31, 2019, respectively. Total borrowings as of September 30, 2020 comprised $100,000 in long term advances, $0 in overnight cash management advances (CMAs) and $100,000 in 90 day fixed rate advances. The long-term advances as of September 30, 2020 contains putable features and is composed of $100.0 million carrying a maximum final term of 10 years. However, the FHLB owns the option to cancel the advances after one year and quarterly thereafter and carrying a fixed rate of 1.24%. During the third quarter of 2020, the Company repaid $50,000 in putable advances carrying a maximum final term of seven years. In addition to the repayment, the Company also incurred $2,593 in early termination costs associated with this advance. Subsequent to September 30, 2020, the Company elected to not renew the remaining $100,000 in outstanding FHLB 90 day fixed rate advances as discussed in Note 1, "Basis of presentation."

~~Maturities of FHLB advances as of September 30, 2020 are as follows:~~


	~~FHLB advances~~
~~Due on or before:~~
~~September 30, 2021~~	$	~~100,000~~
~~September 30, 2022~~	0
~~September 30, 2023~~	0
~~September 30, 2024~~	0
~~September 30, 2025~~	0
~~Due thereafter~~	~~100,000~~
~~Total~~	$	~~200,000~~

The Company maintained a line with the Federal Reserve Bank through the Borrower-in-Custody program in 2020 and 2019. As of September 30, 2020 and December 31, 2019, $1,378,968 and $1,407,662 of qualifying loans and $4,129 and $4,963 of investment securities were pledged to the Federal Reserve Bank through the Borrower-in-Custody program securing a line of credit of $1,001,764 and $1,013,239, respectively.

~~Subordinated Debt~~

In 2003, 2 separate trusts formed by the Company issued $9,000 of floating rate trust preferred securities (“Trust I”) and $21,000 of floating rate trust preferred securities (“Trust II”), respectively, as part of a pooled offering of such securities. The Company issued junior subordinated debentures of $9,280, which included proceeds of common securities purchased by the Company of $280, and junior subordinated debentures of $21,650, which included proceeds of common

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

~~(Dollar amounts are in thousands, except share and per share amounts)~~

securities of $650. Both issuances were to the trusts in exchange for the proceeds of the securities offerings, which represent the sole asset of the trusts. Trust I pays interest quarterly based upon the 3-month LIBOR plus 3.25%. Trust II pays interest quarterly based upon the 3-month LIBOR plus 3.15%. Rates for the two issues at September 30, 2020, were 3.56% and 3.43%, respectively. Rates for the two issues at December 31, 2019, were 5.19% and 5.10%, respectively. The Company may redeem the first junior subordinated debenture listed, in whole or in part, on any distribution payment date within 120 days of the occurrence of a special event, at the redemption price. The Company may redeem the second junior subordinated debentures listed, in whole or in part, any time after June 26, 2008, on any distribution payment date, at the redemption price. The junior subordinated debentures must be redeemed no later than 2033. The Company has classified $30,000 of subordinated debt as Tier 1 capital at both September 30, 2020 and December 31, 2019.

~~Additionally, in the third quarter of 2020, the Company placed $100,000 of~~ ~~ten~~ year fixed-to-floating rate subordinated notes, maturing September 1, 2030. This subordinated note instrument pays interest semi-annually in arrears based on a 4.5% fixed annual interest rate for the first five years of the notes. For years ~~six~~ ~~through~~ ~~ten~~, the interest rate resets on a quarterly basis, and will be based on the 3-month Secured Overnight Financing Rate plus a spread of 439 basis points. The Company is entitled to redeem the notes in whole or in part on any interest payment date on or after September 1, 2025. The Company classified the entire $100,000 placement of subordinated notes as Tier 2 capital at September 30, 2020. Under current regulatory guidelines, the instrument loses 20% of its Tier 2 capital treatment on a graded basis in the final five years prior to maturity.

The Company also assumed 2 issues of subordinated debt, totaling $60,000, as part of the Franklin merger. The notes, issued in 2016, feature $40,000 of 6.875% fixed-to-floating rate subordinated notes due March 30, 2026 ("March 2026 Subordinated Notes"), and $20,000 of 7% fixed-to-floating rate subordinated notes due July 1, 2026 ("July 2026 Subordinated Notes"). Both note issuances currently pay interest semi-annually, and will begin resetting interest rates on a quarterly basis after March 30, 2021 and July 1, 2021. For years ~~six~~ ~~through~~ ~~ten~~, interest for the March 2026 Subordinated Notes will based on the 3-month LIBOR plus 5.636%, and interest for the July 2026 Subordinated Notes will be based on the 3-month LIBOR plus 6.04%. The Company is entitled to redeem in whole or in part after the respective fifth anniversary of each note issuance. The Company classified the entire $60,000 in subordinated notes as Tier 2 capital at September 30, 2020.

~~Note (11)~~(8)—Income taxes:

An allocation of federal and state income taxes between current and deferred portions is presented below:

Three Months Ended September 30,
2020 2019
Current $ 13,123 $ 9,167
Deferred (15,163) (1,449)
Total $ (2,040) $ 7,718
Nine Months Ended September 30,
2020 2019
Current $ 37,038 $ 25,907
Deferred (31,543) (5,900)
Total $ 5,495 $ 20,007

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

~~(Dollar amounts are in thousands, except share and per share amounts)~~


	Three Months Ended June 30,
	2021		2020
Current	$	9,541	$	15,747
Deferred	3,899		(8,292)
Total	$	13,440	$	7,455

	Six Months Ended June 30,
	2021		2020
Current	$	15,490	$	23,915
Deferred	13,538		(16,380)
Total	$	29,028	$	7,535

The following table presents a reconciliation of federal income taxes at the statutory federal rate of 21% to the Company's effective tax rates for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:


		Three Months Ended September 30,											Three Months Ended June 30,
		2020				2019						2021					2020
Federal taxes calculated at statutory rate	Federal taxes calculated at statutory rate	$	(1,604)	21.0	%	$	6,653	21.0	%		Federal taxes calculated at statutory rate		$	11,916	21.0	%		$	6,369	21.0	%
Increase (decrease) resulting from:	Increase (decrease) resulting from:										Increase (decrease) resulting from:
State taxes, net of federal benefit	State taxes, net of federal benefit	100		(1.3)	%	1,512		4.7	%		State taxes, net of federal benefit		1,879		3.3	%		1,298		4.3	%

Benefit from equity based compensation		(7)		0.1	%	(275)		(0.9)	%
(Benefit) expense from equity based compensation											(Benefit) expense from equity based compensation		(124)		(0.2)	%		22		0.1	%
Municipal interest income, net of interest disallowance	Municipal interest income, net of interest disallowance	(422)		5.5	%	(211)		(0.7)	%		Municipal interest income, net of interest disallowance		(419)		(0.7)	%		(310)		(1.0)	%
Bank owned life insurance	Bank owned life insurance	(55)		0.7	%	(11)		0.1	%		Bank owned life insurance		(82)		(0.1)	%		(17)		(0.1)	%
Merger costs		126		(1.6)	%	0		0	%

Merger and offering costs											Merger and offering costs		127		0.2	%		32		0.1	%
Section 162(m) limitation											Section 162(m) limitation		21		0	%		0		0	%
Other	Other	(177)		2.3	%	50		0.2	%		Other		122		0.2	%		61		0.2	%
Income tax (benefit) expense, as reported		$	(2,040)	26.7	%	$	7,718	24.4	%
Income tax expense, as reported											Income tax expense, as reported		$	13,440	23.7	%		$	7,455	24.6	%

		Nine Months Ended September 30,								Six Months Ended June 30,
		2020				2019						2021					2020
Federal taxes calculated at statutory rate	Federal taxes calculated at statutory rate	$	4,938	21.0	%	$	17,272	21.0	%		Federal taxes calculated at statutory rate		$	26,293	21.0	%		$	6,542	21.0	%
Increase (decrease) resulting from:	Increase (decrease) resulting from:										Increase (decrease) resulting from:
State taxes, net of federal benefit	State taxes, net of federal benefit	1,266		5.4	%	3,855		4.7	%		State taxes, net of federal benefit		3,629		2.9	%		1,166		3.7	%
Expense (benefit) from equity based compensation		154		0.7	%	(668)		(0.8)	%
(Benefit) expense from equity based compensation											(Benefit) expense from equity based compensation		(345)		(0.3)	%		161		0.5	%
Municipal interest income, net of interest disallowance	Municipal interest income, net of interest disallowance	(996)		(4.2)	%	(650)		(0.8)	%		Municipal interest income, net of interest disallowance		(843)		(0.7)	%		(574)		(1.8)	%
Bank owned life insurance	Bank owned life insurance	(90)		(0.4)	%	(38)		0.1	%		Bank owned life insurance		(166)		(0.1)	%		(35)		(0.1)	%
Merger costs		289		1.2	%	0		0	%
Merger and offering costs											Merger and offering costs		127		0.1	%		163		0.5	%
Section 162(m) limitation											Section 162(m) limitation		248		0.2	%		0		0	%
Other	Other	(65)		(0.3)	%	236		0.3	%		Other		85		0.1	%		112		0.4	%
Income tax expense, as reported	Income tax expense, as reported	$	5,495	23.4	%	$	20,007	24.3	%		Income tax expense, as reported		$	29,028	23.2	%		$	7,535	24.2	%

As of ~~September 30,~~August 15, 2020, the Company acquired $8,346 of net operating losses from Franklin. The net operating loss carryforwards can be used to offset taxable income in future periods and reduce income tax liabilities in those future periods. ~~It is possible that~~While net operating losses ~~acquired will be~~are subject to ~~limitation~~certain annual utilization limits under IRC Section ~~382.~~382, the Company believes the net operating losses carryforward will be realized based on the projected annual limitation and the length of the net operating loss carryover period. The Company's determination of the realization of the net deferred tax asset is based on its assessment of all available positive and negative evidence. The net operating loss carryforward is set to expire as of December 31, ~~2030.~~2029.

The Company is subject to Internal Revenue Code Section 162(m), which limits the deductibility of compensation of certain individuals. The restricted stock unit plans that existed prior to the corporation being public will have payments in 2021 after the reliance period defined in the Section 162 regulations. Under the limitations of IRC Section 162(m), the Company will not be able to realize the deferred tax asset established on certain restricted stock units granted to these

4035

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

covered individuals. Therefore, a valuation allowance was established in the first quarter of 2021 for the Company's inability to take the benefit of the exercise of the restricted stock units. It is the Company’s policy to apply the IRC Section 162(m) limitations to stock based compensation first; therefore, the first quarter 2021 nondeductible IRC Section 162(m) expense was related to cash compensation and expense on the exercised restricted stock units that were above the limit as defined in IRC Section 162(m).

The components of the net deferred tax assets ~~(liabilities)~~ at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, are as follows:


		September 30,		December 31			June 30,		December 31
		2020		2019			2021		2020
Deferred tax assets:	Deferred tax assets:					Deferred tax assets:
Allowance for credit losses	Allowance for credit losses	$	51,869	$	8,113	Allowance for credit losses	$	40,878	$	48,409
Operating lease liabilities	Operating lease liabilities	14,892		9,373		Operating lease liabilities	13,067		14,496
Federal net operating loss	Federal net operating loss	1,753		0		Federal net operating loss	1,753		1,753
Amortization of core deposit intangibles		0		1,386

Deferred compensation	Deferred compensation	8,250		5,231		Deferred compensation	8,572		8,872
Unrealized loss on debt securities		0		54
Unrealized loss on equity securities		41		60

Unrealized loss on cash flow hedges	Unrealized loss on cash flow hedges	347		0		Unrealized loss on cash flow hedges	364		499
Other	Other	6,684		2,388		Other	19,817		19,101
Subtotal	Subtotal	83,836		26,605		Subtotal	84,451		93,130
Deferred tax liabilities:	Deferred tax liabilities:					Deferred tax liabilities:
FHLB stock dividends	FHLB stock dividends	$	(561)	$	(550)	FHLB stock dividends	$	(561)	$	(561)
Operating leases - right of use assets	Operating leases - right of use assets	(13,863)		(8,641)		Operating leases - right of use assets	(11,831)		(13,197)
Depreciation	Depreciation	(5,689)		(5,078)		Depreciation	(7,088)		(7,491)
Amortization of core deposit intangibles	Amortization of core deposit intangibles	(668)		0		Amortization of core deposit intangibles	(349)		(684)
Unrealized gain on equity securities						Unrealized gain on equity securities	(3,877)		(17)

Unrealized gain on cash flow hedges		0		(203)
Unrealized gain on debt securities	Unrealized gain on debt securities	(12,116)		(3,051)		Unrealized gain on debt securities	(5,987)		(13,027)
Mortgage servicing rights	Mortgage servicing rights	(18,557)		(19,678)		Mortgage servicing rights	(26,435)		(20,803)
Goodwill	Goodwill	(10,691)		(8,859)		Goodwill	(12,522)		(11,301)
Other	Other	200		(1,035)		Other	(9,828)		(9,653)
Subtotal	Subtotal	(61,945)		(47,095)		Subtotal	(78,478)		(76,734)
Net deferred tax assets (liabilities)		$	21,891	$	(20,490)
Net deferred tax assets						Net deferred tax assets	$	5,973	$	16,396

Note ~~(12)~~(9)—Commitments and contingencies:

Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates.

Commitments may expire without being used. Off-balance sheet risk of credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment.


		September 30,		December 31,			June 30,		December 31,
		2020		2019			2021		2020
Commitments to extend credit, excluding interest rate lock commitments	Commitments to extend credit, excluding interest rate lock commitments	$	1,819,070	$	1,086,173	Commitments to extend credit, excluding interest rate lock commitments	$	2,529,697	$	2,719,996
Letters of credit	Letters of credit	18,239		19,569		Letters of credit	68,792		67,598
Balance at end of period	Balance at end of period	$	1,837,309	$	1,105,742	Balance at end of period	$	2,598,489	$	2,787,594

~~In connection~~As of June 30, 2021 and December 31, 2020, loan commitments included above with ~~the adoption of CECL on January 1, 2020, the~~floating interest rates totaled $1.82 billion and $1.65 billion, respectively.

The Company estimates expected credit losses on off-balance sheet loan commitments that are not accounted for as derivatives. When applying the CECL methodology to estimate expected credit loss, the Company considers the likelihood that funding will occur, the contractual period of exposure to credit loss, the risk of loss, historical loss experience, and current conditions along with expectations of future economic conditions. As such, upon adoption the Company recorded an initial allowance for credit losses on unfunded commitments in other liabilities amounting to $2,947. The impact net of taxes was recorded as part of the cumulative adjustment to retained earnings of $25,018 on January 1, 2020.

4136

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

The table below presents activity within the allowance for credit losses on unfunded ~~commitments:~~commitments for the three and six months ended June 30, 2021 and 2020:


		For the Three Months Ended September 30,		For the Nine Months Ended September 30,			Three Months Ended June 30,				Six Months Ended June 30,
		2020		2020			2021		2020		2021		2020
Balance at beginning of period	Balance at beginning of period	$	6,500	$	0	Balance at beginning of period	$	14,156	$	4,618	$	16,378	$	0
Impact of CECL adoption on provision for credit losses on unfunded commitments	Impact of CECL adoption on provision for credit losses on unfunded commitments	0		2,947		Impact of CECL adoption on provision for credit losses on unfunded commitments	0		0		0		2,947
Increase in allowance for credit losses from unfunded commitments acquired in business combination		10,429		10,499
Increase in provision for credit losses from unfunded commitments acquired in business combination						Increase in provision for credit losses from unfunded commitments acquired in business combination	0		0		0		70
Provision for credit losses on unfunded commitments	Provision for credit losses on unfunded commitments	(862)		2,621		Provision for credit losses on unfunded commitments	(954)		1,882		(3,176)		3,483
Balance at end of period	Balance at end of period	$	16,067	$	16,067	Balance at end of period	$	13,202	$	6,500	$	13,202	$	6,500

In connection with the sale of mortgage loans to third party investors, the ~~Bank~~Company makes usual and customary representations and warranties as to the propriety of its origination activities. Occasionally, the investors require the ~~Bank~~Company to repurchase loans sold to them under the terms of the warranties. When this happens, the loans are recorded at fair value with a corresponding charge to a valuation reserve. The total principal amount of loans repurchased (or indemnified for) was ~~$1,329~~$761 and ~~$5,696~~$1,469 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, respectively and ~~$1,165~~$1,568 and ~~$4,675,~~$4,367 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, respectively. The Company has established a reserve associated with loan repurchases. This reserve is recorded in accrued expenses and other liabilities on the consolidated balance sheets.

The following table summarizes the activity in the repurchase reserve:


		Three Months Ended September 30,				For the Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019				2021		2020		2021		2020
Balance at beginning of period	Balance at beginning of period	$	4,601	$	3,407	$	3,529	$	3,273		Balance at beginning of period	$	6,284	$	3,829	$	5,928	$	3,529
Provision for loan repurchases or indemnifications	Provision for loan repurchases or indemnifications	901		107		2,128		255			Provision for loan repurchases or indemnifications	(706)		855		(266)		1,227
Recoveries on previous losses		(44)		(79)		(199)		(93)

Losses on loans repurchased or indemnified											Losses on loans repurchased or indemnified	(89)		(83)		(173)		(155)
Balance at end of period	Balance at end of period	$	5,458	$	3,435	$	5,458	$	3,435		Balance at end of period	$	5,489	$	4,601	$	5,489	$	4,601

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

Note ~~(13)~~(10)—Derivatives:

The Company utilizes derivative financial instruments as part of its ongoing efforts to manage its interest rate risk exposure as well as the exposure for its customers. Derivative financial instruments are included in the consolidated balance sheets line item “Other assets” or “Other liabilities” at fair value in accordance with ASC 815, “Derivatives and Hedging.”

The Company enters into commitments to originate loans whereby the interest rate on the loan is determined prior to funding (rate-lock commitments). Under such commitments, interest rates for mortgage loans are typically locked in for between 45 to 90 days with the customer. These interest rate lock commitments are recorded at fair value in the Company’s consolidated balance sheets. The Company also enters into best effort or mandatory delivery forward commitments to sell residential mortgage loans to secondary market investors. Gains and losses arising from changes in the valuation of the rate-lock commitments and forward commitments are recognized currently in earnings and are reflected under the line item “Mortgage banking income” on the consolidated statements of income.

The Company enters into forward commitments, futures and options contracts that are not designated as hedging instruments as economic hedges to offset the changes in fair value of ~~MSRs.~~Mortgage servicing rights. Gains and losses associated with these instruments are included in earnings and are reflected under the line item “Mortgage banking income” on the consolidated statements of income.

Additionally, the Company enters into derivative instruments that are not designated as hedging instruments to help its commercial customers manage their exposure to interest rate fluctuations. To mitigate the interest rate risk associated with customer contracts, the Company enters into an offsetting derivative contract. The Company manages its credit risk, or potential risk of default by its commercial customers through credit limit approval and monitoring procedures.

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

~~(Dollar amounts are in thousands, except share and per share amounts)~~

The Company also maintains 2 interest rate swap agreements with notional amounts totaling $30,000 used to hedge interest rate exposure on outstanding subordinated debentures included in long-term debt totaling $30,930. Under these agreements, the Company receives a variable rate of interest equal to 3-month LIBOR and pays a weighted average fixed rate of interest of 2.08%. The interest rate swap contracts, which mature in June of 2024, are designated as cash flow hedges with the objective of reducing the variability in cash flows resulting from changes in interest rates. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the fair value of these contracts resulted in a liability balances of ~~$2,063~~$1,391 and ~~$515,~~$1,909, respectively.

In July 2017, the Company entered into 3 interest rate swap contracts on floating rate liabilities at the Bank level with notional amounts of $30,000, $35,000 and $35,000 for a period of three, four and five years, respectively. These interest rate swaps were designated as cash flow hedges with the objective of reducing the variability of cash flows associated with $100,000 of FHLB borrowings. During ~~the first quarter of~~ 2018, these swaps were canceled, locking in a tax-adjusted gain of $1,564 in other comprehensive income to be accreted over the three, four and ~~five-year~~five-year terms of the underlying contracts. ~~As of September 30, 2020 and~~During the year ended December 31, ~~2019, there was $545 and $955, respectively, remaining in the other comprehensive income to be accreted. Subsequent to September 30,~~ 2020, the Company ~~elected to~~did not renew the ~~outstanding borrowing~~advances associated with the legacy cash flow hedge, and reclassified the remaining unamortized gain, ~~reflected above,~~ from accumulated other comprehensive income to ~~earnings,~~earnings.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

The following tables provide details on the Company’s derivative financial instruments as ~~discussed~~of the dates presented:


	June 30, 2021
	Notional Amount		Asset		Liability
Not designated as hedging:
Interest rate contracts	$	650,268	$	26,355	$	26,168
Forward commitments	1,172,717		0		1,401
Interest rate-lock commitments	787,258		13,120		0
Futures contracts	502,500		2,707		0

Total	$	3,112,743	$	42,182	$	27,569


	December 31, 2020
	Notional Amount		Asset		Liability
Not designated as hedging:
Interest rate contracts	$	606,878	$	34,547	$	34,317
Forward commitments	1,358,328		0		11,633
Interest rate-lock commitments	1,191,621		34,391		0
Futures contracts	375,400		0		383

Total	$	3,532,227	$	68,938	$	46,333


	June 30, 2021
	Notional Amount		Asset		Liability
Designated as hedging:
Interest rate swaps	$	30,000	$	0	$	1,391


	December 31, 2020
	Notional Amount		Asset		Liability
Designated as hedging:
Interest rate swaps	$	30,000	$	0	$	1,909

Gains (losses) included in ~~Note 1, "Basis~~the consolidated statements of ~~presentation."~~income related to the Company’s derivative financial instruments were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Not designated as hedging instruments (included in mortgage banking income):
Interest rate lock commitments	$	171	$	9,541	$	(21,271)	$	30,003
Forward commitments	(19,200)		(13,993)		24,058		(40,450)
Futures contracts	9,104		631		(7,228)		11,542

Total	$	(9,925)	$	(3,821)	$	(4,441)	$	1,095


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Designated as hedging:
Amount of gain reclassified from other comprehensive income and recognized in interest expense on borrowings, net of taxes of $0, $52, $0, and $104	$	0	$	148	$	0	$	295
Loss included in interest expense on borrowings	(143)		(62)		(280)		(74)
Total	$	(143)	$	86	$	(280)	$	221

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

The following discloses the amount included in other comprehensive income, net of tax, for derivative instruments designated as cash flow hedges for the periods presented:


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Designated as hedging:
Amount of gain (loss) recognized in other comprehensive income, net of tax $23, $(40), $135, and $(443)	$	67	$	(112)	$	383	$	(1,257)

Certain financial instruments, including derivatives, may be eligible for offset in the consolidated balance sheets when the “right of offset” exists or when the instruments are subject to an enforceable master netting agreement, which includes the right of the non-defaulting party or non-affected party to offset recognized amounts, including collateral posted with the counterparty, to determine a net receivable or net payable upon early termination of the agreement. Certain of the Company’s derivative instruments are subject to master netting agreements, however the Company has not elected to offset such financial instruments in the consolidated balance sheets. The following table presents the Company's gross derivative positions as recognized in the consolidated balance sheets as well as the net derivative positions, including collateral pledged to the extent the application of such collateral did not reduce the net derivative liability position below ~~zero,~~0, had the Company elected to offset those instruments subject to an enforceable master netting agreement:


		Offsetting Derivative Assets				Offsetting Derivative Liabilities					Offsetting Derivative Assets				Offsetting Derivative Liabilities
		September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020		June 30, 2021		December 31, 2020
Gross amounts recognized	Gross amounts recognized	$	4,328	$	331	$	39,298	$	14,682	Gross amounts recognized	$	4,466	$	3,863	$	23,536	$	34,051
Gross amounts offset in the consolidated balance sheets	Gross amounts offset in the consolidated balance sheets	0		0		0		0		Gross amounts offset in the consolidated balance sheets	0		0		0		0
Net amounts presented in the consolidated balance sheets	Net amounts presented in the consolidated balance sheets	4,328		331		39,298		14,682		Net amounts presented in the consolidated balance sheets	4,466		3,863		23,536		34,051

Gross amounts not offset in the consolidated balance sheets	Gross amounts not offset in the consolidated balance sheets									Gross amounts not offset in the consolidated balance sheets
Less: financial instruments	Less: financial instruments	974		139		974		139		Less: financial instruments	3,146		857		3,146		857
Less: financial collateral pledged	Less: financial collateral pledged	0		0		38,324		14,543		Less: financial collateral pledged	0		0		20,390		33,194
Net amounts	Net amounts	$	3,354	$	192	$	0	$	0	Net amounts	$	1,320	$	3,006	$	0	$	0

Most derivative contracts with clients are secured by collateral. Additionally, in accordance with the interest rate agreements with derivatives dealers, the Company may be required to post margin to these counterparties. At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had minimum collateral posting thresholds with certain derivative counterparties and had collateral posted of ~~$76,063~~$66,557 and ~~$33,616,~~$57,985, respectively, against its obligations under these agreements. Cash collateral related to derivative contracts is recorded in other assets in the consolidated balance sheets.

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

~~(Dollar amounts are in thousands, except share and per share amounts)~~

~~The following tables provide details on the Company’s derivative financial instruments as of the dates presented:~~

September 30, 2020
Notional Amount Asset Liability
Not designated as hedging:
Interest rate contracts $ 590,166 $ 39,538 $ 39,303
Forward commitments 1,510,902 0 4,523
Interest rate-lock commitments 1,364,222 43,049 0
Futures contracts 327,700 0 66
Total $ 3,792,990 $ 82,587 $ 43,892

December 31, 2019
Notional Amount Asset Liability
Not designated as hedging:
Interest rate contracts $ 440,556 $ 14,929 $ 14,929
Forward commitments 684,437 0 866
Interest rate-lock commitments 453,198 7,052 0
Futures contracts 389,000 0 1,623
Total $ 1,967,191 $ 21,981 $ 17,418

September 30, 2020
Notional Amount Asset Liability
Designated as hedging:
Interest rate swaps $ 30,000 $ 0 $ 2,063

December 31, 2019
Notional Amount Asset Liability
Designated as hedging:
Interest rate swaps $ 30,000 $ 0 $ 515

~~Gains (losses) included in the consolidated statements of income related to the Company’s derivative financial instruments were as follows:~~

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Not designated as hedging instruments (included in mortgage banking income):
Interest rate lock commitments $ 5,994 $ 447 $ 35,997 $ 4,202
Forward commitments (16,548) (3,227) (56,998) (12,895)
Futures contracts (587) 4,685 10,955 10,663
Option contracts 0 3 0 47
Total $ (11,141) $ 1,908 $ (10,046) $ 2,017

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Designated as hedging:
Amount of gain reclassified from other comprehensive income and recognized in interest expense on borrowings, net of taxes of $(41), $(46), $(145), and $(121) $ 115 $ 130 $ 410 $ 343
(Loss) gain included in interest expense on borrowings (137) 19 (211) 113
Total $ (22) $ 149 $ 199 $ 456

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

~~(Dollar amounts are in thousands, except share and per share amounts)~~

~~The following discloses the amount included in other comprehensive income, net of tax, for derivative instruments designated as cash flow hedges for the periods presented:~~

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Designated as hedging:
Amount of (loss) gain recognized in other comprehensive income, net of tax $40, $(90), $(403), $(407) $ 112 $ (256) $ (1,145) $ (1,151)

Note ~~(14)~~(11)—Fair value of financial instruments:

FASB ASC 820-10 defines fair value as 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 asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 also establishes a framework for measuring the fair value of assets and liabilities according to a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that are derived from assumptions based on management’s estimate of assumptions that market participants would use in pricing the asset or liability based on the best information available under the circumstances.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

The hierarchy is broken down into the following three levels, based on the reliability of inputs:

Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.

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

Level 3: Significant unobservable inputs for assets or liabilities that are derived from assumptions based on management’s estimate of assumptions that market participants would use in pricing the assets or liabilities.

The Company records the fair values of financial assets and liabilities on a recurring and non-recurring basis using the following methods and assumptions:

Investment ~~securities-Investment~~securities - Investment securities are recorded at fair value on a recurring basis. Fair values for securities are based on quoted market prices, where available. If quoted prices are not available, fair values are based on quoted market prices of similar instruments or are determined by matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the pricing relationship or correlation among other benchmark quoted securities. Investment securities valued using quoted market prices of similar instruments or that are valued using matrix pricing are classified as Level 2. When significant inputs to the valuation are unobservable, the available-for-sale securities are classified within Level 3 of the fair value hierarchy.

Where no active market exists for a security or other benchmark securities, fair value is estimated by the Company with reference to discount margins for other high-risk securities.

Loans held for ~~sale-Loans~~sale - Loans held for sale are carried at fair value. Fair value is determined using current secondary market prices for loans with similar characteristics for the mortgage portfolio, that is, using Level 2 inputs. Commercial loans held for sale at fair value is determined using an income approach with various assumptions including expected cash flows, market discount rates, credit metrics and collateral value when appropriate. As such, these are considered Level 3.

~~Derivatives-The~~Derivatives - The fair value of the Company's interest rate swaps are based upon fair values provided from entities that engage in interest rate swap activity and is based upon projected future cash flows and interest rates. Fair value of commitments is based on fees currently charged to enter into similar agreements, and for fixed-rate commitments, the difference between current levels of interest rates and the committed rates is also considered. These financial instruments are classified as Level 2.

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

~~(Dollar amounts are in thousands, except share and per share amounts)~~

~~Other real estate owned (“OREO”)-OREO~~OREO - OREO is comprised of commercial and residential real estate obtained in partial or total satisfaction of loan obligations and excess land and facilities held for sale. OREO acquired in settlement of indebtedness is recorded at the lower of the carrying amount of the loan or the fair value of the real estate less costs to sell. Fair value is determined on a nonrecurring basis based on appraisals by qualified licensed appraisers and is adjusted for management’s estimates of costs to sell and holding period discounts. The valuations are classified as Level 3.

Mortgage servicing rights ~~("MSRs")-MSRs~~- MSRs are carried at fair value. Fair value is determined using an income approach with various assumptions including expected cash flows, market discount rates, prepayment speeds, servicing costs, and other factors. As such, ~~mortgage servicing rights~~MSRs are considered Level 3.

Collateral dependent loans ~~(Impaired~~- Collateral dependent loans ~~prior to the adoption of ASC 326)-loans~~are loans for which, based on current information and events, the Company has determined foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan to be provided substantially through the operation or sale of the collateral and it is probable that the creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Collateral dependent loans are classified as Level 3.

~~The following table contains the estimated fair values and the related carrying values of the Company's financial instruments. Items which are not financial instruments are not included.~~

Fair Value
September 30, 2020 Carrying amount Level 1 Level 2 Level 3 Total
Financial assets:
Cash and cash equivalents $ 1,062,391 $ 1,062,391 $ 0 $ 0 $ 1,062,391
Investment securities 1,164,910 0 1,164,910 0 1,164,910
Loans, net 7,029,565 0 0 7,119,243 7,119,243
Loans held for sale 851,951 0 851,951 0 851,951
Interest receivable 47,120 39 5,284 41,797 47,120
Mortgage servicing rights 71,535 0 0 71,535 71,535
Derivatives 82,587 0 82,587 0 82,587
Financial liabilities:
Deposits:
Without stated maturities $ 7,530,117 $ 7,530,117 $ 0 $ 0 $ 7,530,117
With stated maturities 1,563,630 0 1,573,537 0 1,573,537
Securities sold under agreement to
repurchase and federal funds sold
32,469 32,469 0 0 32,469
Federal Home Loan Bank advances 200,000 0 206,232 0 206,232
Subordinated debt 189,750 0 0 189,711 189,711
Other borrowings 16,619 0 16,619 0 16,619
Interest payable 5,961 237 5,724 0 5,961
Derivatives 45,955 0 45,955 0 45,955

4641

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

Fair Value
December 31, 2019 Carrying amount Level 1 Level 2 Level 3 Total
Financial assets:
Cash and cash equivalents $ 232,681 $ 232,681 $ 0 $ 0 $ 232,681
Investment securities 691,676 0 691,676 0 691,676
Loans, net 4,378,503 0 0 4,363,903 4,363,903
Loans held for sale 262,518 0 262,518 0 262,518
Interest receivable 17,083 0 3,282 13,801 17,083
Mortgage servicing rights 75,521 0 0 75,521 75,521
Derivatives 21,981 0 21,981 0 21,981
Financial liabilities:
Deposits:
Without stated maturities $ 3,743,085 $ 3,743,085 $ 0 $ 0 $ 3,743,085
With stated maturities 1,191,853 0 1,200,145 0 1,200,145
Securities sold under agreement to
repurchase and federal funds sold
23,745 23,745 0 0 23,745
Federal Home Loan Bank advances 250,000 0 250,213 0 250,213
Subordinated debt 30,930 0 29,706 0 29,706
Interest payable 6,465 376 6,089 0 6,465
Derivatives 17,933 0 17,933 0 17,933
The following table contains the estimated fair values and the related carrying values of the Company's financial instruments. Items which are not financial instruments are not included.


	Fair Value
June 30, 2021	Carrying amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	1,717,097	$	1,717,097	$	0	$	0	$	1,717,097
Investment securities	1,409,175		0		1,409,175		0		1,409,175

Loans, net	7,054,291		0		0		7,199,111		7,199,111
Loans held for sale	821,529		0		697,407		124,122		821,529
Interest receivable	42,083		72		6,119		35,892		42,083
Mortgage servicing rights	101,615		0		0		101,615		101,615
Derivatives	42,182		0		42,182		0		42,182
Financial liabilities:
Deposits:
Without stated maturities	$	8,921,516	$	8,921,516	$	0	$	0	$	8,921,516
With stated maturities	1,282,440		0		1,292,720		0		1,292,720
Securities sold under agreement to repurchase and federal funds sold	33,056		33,056		0		0		33,056

Subordinated debt	149,351		0		0		153,631		153,631
Other borrowings	1,555		0		1,555		0		1,555
Interest payable	4,136		169		2,442		1,525		4,136
Derivatives	28,960		0		28,960		0		28,960


	Fair Value
December 31, 2020	Carrying amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	1,317,898	$	1,317,898	$	0	$	0	$	1,317,898
Investment securities	1,176,991		0		1,176,991		0		1,176,991

Loans, net	6,912,570		0		0		7,058,693		7,058,693
Loans held for sale	899,173		0		683,770		215,403		899,173
Interest receivable	43,603		33		5,254		38,316		43,603
Mortgage servicing rights	79,997		0		0		79,997		79,997
Derivatives	68,938		0		68,938		0		68,938
Financial liabilities:
Deposits:
Without stated maturities	$	8,020,783	$	8,020,783	$	0	$	0	$	8,020,783
With stated maturities	1,437,254		0		1,446,605		0		1,446,605
Securities sold under agreement to repurchase and federal funds sold	32,199		32,199		0		0		32,199

Subordinated debt	189,527		0		0		192,149		192,149
Other borrowings	16,598		0		16,598		0		16,598
Interest payable	6,772		327		4,210		2,235		6,772
Derivatives	48,242		0		48,242		0		48,242

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

The balances and levels of the assets measured at fair value on a recurring basis at ~~September~~June 30, ~~2020~~2021 are presented in the following table:


September 30, 2020		Quoted prices in active markets for identical assets (liabilities) (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)		Total
At June 30, 2021										At June 30, 2021	Quoted prices in active markets for identical assets (liabilities) (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)		Total
Recurring valuations:	Recurring valuations:									Recurring valuations:
Financial assets:	Financial assets:									Financial assets:
Available-for-sale securities:	Available-for-sale securities:									Available-for-sale securities:
U.S. government agency securities	U.S. government agency securities	$	0	$	1,994	$	0	$	1,994	U.S. government agency securities	$	0	$	8,255	$	0	$	8,255
Mortgage-backed securities		0		738,106		0		738,106
Municipals, tax-exempt		0		374,880		0		374,880
Mortgage-backed securities - residential										Mortgage-backed securities - residential	0		1,035,003		0		1,035,003
Mortgage-backed securities - commercial										Mortgage-backed securities - commercial	0		15,161		0		15,161
Municipal securities										Municipal securities	0		332,883		0		332,883
Treasury securities	Treasury securities	0		21,700		0		21,700		Treasury securities	0		10,534		0		10,534
Corporate securities	Corporate securities	0		1,987		0		1,987		Corporate securities	0		2,536		0		2,536
Equity securities	Equity securities	0		4,389		0		4,389		Equity securities	0		4,803		0		4,803
Total		$	0	$	1,143,056	$	0	$	1,143,056
Total securities										Total securities	$	0	$	1,409,175	$	0	$	1,409,175
Loans held for sale	Loans held for sale	$	0	$	851,951	$	0	$	851,951	Loans held for sale	0		697,407		124,122		821,529
Mortgage servicing rights	Mortgage servicing rights	0		0		71,535		71,535		Mortgage servicing rights	0		0		101,615		101,615
Derivatives	Derivatives	0		82,587		0		82,587		Derivatives	0		42,182		0		42,182
Financial Liabilities:	Financial Liabilities:									Financial Liabilities:
Derivatives	Derivatives	0		45,955		0		45,955		Derivatives	0		28,960		0		28,960

The balances and levels of the assets measured at fair value on a non-recurring basis at June 30, 2021 are presented in the following table:


At June 30, 2021	Quoted prices in active markets for identical assets (liabilities (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)		Total
Non-recurring valuations:
Financial assets:
Other real estate owned	$	0	$	0	$	6,927	$	6,927
Collateral dependent loans:
Commercial and industrial	$	0	$	0	$	15,220	$	15,220
Construction	0		0		5,993		5,993
Residential real estate:
1-4 family mortgage	0		0		1,615		1,615
Residential line of credit	0		0		1,241		1,241

Commercial real estate:
Owner occupied	0		0		10,045		10,045
Non-owner occupied	0		0		11,624		11,624

Total collateral dependent loans	$	0	$	0	$	45,738	$	45,738

4743

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

~~The balances and levels of the assets measured at fair value on a non-recurring basis at September 30, 2020 are presented in the following table:~~

At September 30, 2020 Quoted prices
in active
markets for
identical assets
(liabilities
(level 1) Significant
other
observable
inputs
(level 2) Significant unobservable
inputs
(level 3) Total
Non-recurring valuations:
Financial assets:
Other real estate owned $ 0 $ 0 $ 5,708 $ 5,708
Collateral dependent loans:
Commercial and industrial $ 0 $ 0 $ 4,697 $ 4,697
Construction 0 0 1,817 1,817
Residential real estate:
1-4 family mortgage 0 0 190 190
Residential line of credit 0 0 1,195 1,195
Commercial real estate:
Owner occupied 0 0 928 928
Non-owner occupied 0 0 8,181 8,181
Consumer and other 0 0 333 333
Total collateral dependent loans $ 0 $ 0 $ 17,341 $ 17,341

The balances and levels of the assets measured at fair value on a recurring basis at December 31, ~~2019~~2020 are presented in the following table:


At December 31, 2019		Quoted prices in active markets for identical assets (liabilities) (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)		Total
At December 31, 2020										At December 31, 2020	Quoted prices in active markets for identical assets (liabilities) (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)		Total
Recurring valuations:	Recurring valuations:									Recurring valuations:
Financial assets:	Financial assets:									Financial assets:
Available-for-sale securities:	Available-for-sale securities:									Available-for-sale securities:

Mortgage-backed securities		$	0	$	477,312	$	0	$	477,312
U.S. government agency securities										U.S. government agency securities	$	0	$	2,003	$	0	$	2,003
Mortgage-backed securities - residential										Mortgage-backed securities - residential	0		773,336		0		773,336
Mortgage-backed securities - commercial										Mortgage-backed securities - commercial	0		21,588		0		21,588
Municipals, tax-exempt	Municipals, tax-exempt	0		189,235		0		189,235		Municipals, tax-exempt	0		356,329		0		356,329
Treasury securities	Treasury securities	0		7,448		0		7,448		Treasury securities	0		16,628		0		16,628
Corporate securities	Corporate securities	0		1,022		0		1,022		Corporate securities	0		2,516		0		2,516
Equity securities	Equity securities	0		3,295		0		3,295		Equity securities	0		4,591		0		4,591
Total		$	0	$	678,312	$	0	$	678,312
Total securities										Total securities	$	0	$	1,176,991	$	0	$	1,176,991
Loans held for sale	Loans held for sale	$	0	$	262,518	$	0	$	262,518	Loans held for sale	$	0	$	683,770	$	215,403	$	899,173
Mortgage servicing rights	Mortgage servicing rights	0		0		75,521		75,521		Mortgage servicing rights	0		0		79,997		79,997
Derivatives	Derivatives	0		21,981		0		21,981		Derivatives	0		68,938		0		68,938
Financial Liabilities:	Financial Liabilities:									Financial Liabilities:
Derivatives	Derivatives	0		17,933		0		17,933		Derivatives	0		48,242		0		48,242

4844

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

The balances and levels of the assets measured at fair value on a non-recurring basis at December 31, ~~2019~~2020 are presented in the following table:


At December 31, 2019		Quoted prices in active markets for identical assets (liabilities) (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)		Total
At December 31, 2020										At December 31, 2020	Quoted prices in active markets for identical assets (liabilities) (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)		Total
Non-recurring valuations:	Non-recurring valuations:									Non-recurring valuations:
Financial assets:	Financial assets:									Financial assets:
Other real estate owned	Other real estate owned	$	0	$	0	$	9,774	$	9,774	Other real estate owned	$	0	$	0	$	6,662	$	6,662
Impaired Loans (1):
Collateral dependent loans:										Collateral dependent loans:
Commercial and industrial	Commercial and industrial	$	0	$	0	$	6,481	$	6,481	Commercial and industrial	$	0	$	0	$	1,728	$	1,728

Construction										Construction	0		0		3,877		3,877
Residential real estate:	Residential real estate:									Residential real estate:
1-4 family mortgage	1-4 family mortgage	0		0		378		378		1-4 family mortgage	0		0		226		226
Residential line of credit	Residential line of credit	0		0		321		321		Residential line of credit	0		0		1,174		1,174
Commercial real estate:	Commercial real estate:									Commercial real estate:
Owner occupied	Owner occupied	0		0		951		951		Owner occupied	0		0		3,391		3,391
Non-owner occupied	Non-owner occupied	0		0		2,560		2,560		Non-owner occupied	0		0		8,164		8,164

Total		$	0	$	0	$	10,691	$	10,691
Total collateral dependent loans										Total collateral dependent loans	$	0	$	0	$	18,560	$	18,560

~~(1) Includes both impaired non-purchased loans and collateral-dependent PCI loans.~~

~~There were no transfers between Level 1, 2 or 3 during the periods presented.~~

The following ~~table presents~~tables present information as of ~~September~~June 30, 2021 and December 31, 2020 about significant unobservable inputs (Level 3) used in the valuation of assets measured at fair value on a nonrecurring basis:

~~Financial instrument~~

~~Fair Value~~

~~Valuation technique~~

Significant
Unobservable inputs

Range of
inputs

~~Collateral dependent loans~~

~~17,341~~

~~Valuation~~As of ~~collateral~~June 30, 2021

~~Discount for comparable sales~~

~~0%-30%~~

~~Other real estate owned~~

~~5,708~~

~~Appraised value of property less costs to sell~~

~~Discount for costs to sell~~

~~0%-15%~~

~~The following table presents information as of December 31, 2019 about significant unobservable inputs (Level 3) used in the valuation of assets measured at fair value on a nonrecurring basis:~~

Financial instrument

Fair Value

Valuation technique

Significant
Unobservable inputs

Range of
inputs

~~Impaired~~Collateral dependent loans~~(1)~~

~~10,691~~45,738

Valuation of collateral

Discount for comparable sales

0%-30%

Other real estate owned

~~9,774~~6,927

Appraised value of property less costs to sell

Discount for costs to sell

0%-15%

~~(1) Includes both impaired non-purchased loans and collateral-dependent PCI loans.~~

As of December 31, 2020

Financial instrument

Fair Value

Valuation technique

Significant
Unobservable inputs

Range of
inputs

Collateral dependent loans

18,560

Valuation of collateral

Discount for comparable sales

0%-30%

Other real estate owned

6,662

Appraised value of property less costs to sell

Discount for costs to sell

0%-15%

For collateral dependent loans, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. Fair value of the loan's collateral is determined by third-party appraisals, which are then adjusted for the estimated selling and closing costs related to liquidation of of the collateral. Collateral dependent loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on changes in market conditions from the time of valuation and management's knowledge of the client and client's business. Other real estate owned acquired in settlement of indebtedness is recorded at fair value of the real estate less estimated costs to sell. Subsequently, it may be necessary to record nonrecurring fair value adjustments for declines in fair value. Any write-downs based on the asset's fair value at the date of foreclosure are charged to the allowance for credit losses. Appraisals for both collateral dependent loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the lending administrative department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry wide statistics. Collateral dependent loans that are dependent on recovery through sale of equipment, such as farm equipment, automobiles and aircrafts are generally valued based on public source pricing or subscription services while more complex assets are valued through leveraging brokers who have expertise in the collateral involved.

4945

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

Fair value option

The following table summarizes the Company's loans held for sale, at fair value, as of the dates presented:


	June 30,		December 31,
	2021		2020
Commercial and industrial	$	124,122	$	215,403
Residential real estate:
1-4 family mortgage	697,407		683,770
Total loans held for sale	$	821,529	$	899,173

Mortgage loans held for sale

The Company measures ~~all~~mortgage loans originated for sale at fair value under the fair value option as permitted under ASC ~~825.~~825, "Financial Instruments" ("ASC 825"). Electing to measure these assets at fair value reduces certain timing differences and more accurately matches the changes in fair value of the loans with changes in the fair value of derivative instruments used to economically hedge them.

Net gains (losses) of ~~$20,378~~$9,730 and ~~$6,512~~$(10,986) resulting from fair value changes of mortgage loans were recorded in income during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, respectively, compared to ~~$3,291~~net gains of $8,048 and ~~$2,329~~$13,866 during the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, respectively. The amount does not reflect changes in fair values of related derivative instruments used to hedge exposure to market-related risks associated with these mortgage loans. The change in fair value of both loans held for sale and the related derivative instruments are recorded in Mortgage Banking Income in the consolidated statements of income. Election of the fair value option allows the Company to reduce the accounting volatility that would otherwise result from the asymmetry created by accounting for the financial instruments at the lower of cost or fair value and the derivatives at fair value.

Government National Mortgage Association (GNMA) optional repurchase programs allow financial institutions to buy back

individual delinquent mortgage loans that meet certain criteria from the securitized loan pool for which the institution provides servicing and was the original transferor. At the servicer’s option and without GNMA’s prior authorization, the servicer may repurchase such a delinquent loan for an amount equal to 100 percent of the remaining principal balance of the loan. Under FASB ASC Topic 860, “Transfers and Servicing,” this buy-back option is considered a conditional option until the delinquency criteria are met, at which time the option becomes unconditional. When the Company is deemed to have regained effective control over these loans under the unconditional buy-back option, the loans can no longer be reported as sold and must be brought back onto the balance sheet, regardless of whether the Company intends to exercise the buy-back option if the buyback option provides the transferor a more-than-trivial benefit. As of ~~September~~June 30, ~~2020~~2021, and December 31, ~~2019,~~2020, there ~~was $129,644~~were $120,880 and ~~$51,705,~~$151,184, respectively, of delinquent GNMA loans previously sold that the Company did not record on its consolidated balance sheets as the Company determined there not to be a more-than-trivial benefit based on an analysis of interest rates and an assessment of potential reputational risk associated with these loans.

The Company’s valuation of mortgage loans held for sale incorporates an assumption for credit risk; however, given the short-term period that the Company holds these mortgage loans held for sale, valuation adjustments attributable to instrument-specific credit risk is nominal.

Commercial loans held for sale

The Company also has a portfolio of shared national credits and institutional healthcare loans that were acquired during 2020 in the acquisition of Franklin. These commercial loans are also being measured under the fair value option. As such, these loans are excluded from the allowance for credit losses. The following table sets forth the changes in fair value associated with this portfolio.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)


	Three Months Ended June 30, 2021
	Principal Balance		Fair Value Discount		Fair Value
Carrying value at beginning of period	$	197,490	$	(22,506)	$	174,984
Change in fair value:
Pay-downs and pay-offs	(52,226)		0		(52,226)
Write-offs to discount	(9,292)		9,292		0
Changes in valuation included in other noninterest income	0		1,364		1,364
Carrying value at end of period	$	135,972	$	(11,850)	$	124,122

	Six Months Ended June 30, 2021
	Principal Balance		Fair Value Discount		Fair Value
Carrying value at beginning of period	$	239,063	$	(23,660)	$	215,403
Change in fair value:
Pay-downs and pay-offs	(91,792)		0		(91,792)
Write-offs to discount	(11,299)		11,299		0
Changes in valuation included in other noninterest income	0		511		511
Carrying value at end of period	$	135,972	$	(11,850)	$	124,122

Interest income on loans held for sale measured at fair value is accrued as it is earned based on contractual rates and is reflected in loan interest income in the consolidated statements of income.

The following table summarizes the differences between the fair value and the principal balance for loans held for sale and nonaccrual loans measured at fair value as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:

September 30, 2020 Aggregate
fair value Aggregate
Unpaid
Principal
Balance Difference
Mortgage loans held for sale measured at fair value $ 610,695 $ 587,352 $ 23,343
Commercial loans held for sale measured at fair value 228,444 250,649 (22,205)
Past due loans of 90 days or more 0 0 0
Nonaccrual loans 12,812 12,812 0
December 31, 2019
Mortgage loans held for sale measured at fair value $ 262,518 $ 254,868 $ 7,650
Past due loans of 90 days or more 0 0 0
Nonaccrual loans 0 0 0

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

~~(Dollar amounts are in thousands, except share and per share amounts)~~


June 30, 2021	Aggregate fair value		Aggregate Unpaid Principal Balance		Difference
Mortgage loans held for sale measured at fair value	$	697,407	$	676,510	$	20,897
Commercial loans held for sale measured at fair value	118,278		124,846		(6,568)

Nonaccrual loans	5,844		11,126		(5,282)

December 31, 2020
Mortgage loans held for sale measured at fair value	$	683,770	$	651,887	$	31,883
Commercial loans held for sale measured at fair value	208,914		226,867		(17,953)
Past due loans of 90 days or more	83		163		(80)
Nonaccrual loans	6,406		12,033		(5,627)

Note ~~(15)~~(12)—Segment reporting:

The Company and the Bank are engaged in the business of banking and provide a full range of financial services. The Company determines reportable segments based on the significance of the segment’s operating results to the overall Company, the products and services offered, customer characteristics, processes and service delivery of the segments and the regular financial performance review and allocation of resources by the Chief Executive Officer, ~~(“CEO”),~~ the Company’s chief operating decision maker. The Company has identified 2 distinct reportable segments—Banking and Mortgage. The Company’s primary segment is Banking, which provides a full range of deposit and lending products and services to corporate, commercial and consumer customers. The Company offers full-service conforming residential mortgage products, including conforming residential loans and services through ~~the Mortgage segment utilizing mortgage offices outside of the geographic footprint of the Banking operations.~~2 distinct delivery channels: retail and ConsumerDirect. Additionally, the Mortgage segment includes the servicing of residential mortgage loans and the packaging and securitization of loans to governmental agencies. The ~~residential mortgage products and services originated in our Banking footprint and related revenues and expenses are included in our Banking segment. The~~ Company’s mortgage division represents a distinct reportable segment which differs from the Company’s primary business of commercial and retail banking.

As previously reported, on March 31, 2021, the Company re-evaluated its business segments and revised to align all mortgage activities with the Mortgage segment. Previously, the Company had attributed retail mortgage activities originating from geographical locations within the footprint of the Company's branches to the Banking segment. Results for the comparable prior period have been revised to reflect this realignment. The impact of this change on previously reported segment results was the reclassification of mortgage retail footprint total net contribution of $5,398 and $8,874 from the Banking segment to the Mortgage segment for the three and six months ended June 30, 2020, respectively.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

The financial performance of the Mortgage segment is assessed based on results of operations reflecting direct revenues and expenses and allocated expenses. This approach gives management a better indication of the operating performance of the segment. When assessing the Banking segment’s financial performance, the CEO utilizes reports with indirect revenues and expenses including but not limited to the investment portfolio, electronic delivery channels and areas that primarily support the banking segment operations. Therefore, these are included in the results of the Banking segment. Other indirect revenue and expenses related to general administrative areas are also included in the internal financial results reports of the Banking segment utilized by the CEO for analysis and are thus included for Banking segment reporting. The Mortgage segment utilizes funding sources from the Banking segment in order to fund mortgage loans that are ultimately sold on the secondary market. The Mortgage segment uses the proceeds from loan sales to repay obligations due to the Banking segment.

~~During the first quarter~~The following tables provide segment financial information for three and six months ended June 30, 2021 and 2020 as follows:


Three months ended June 30, 2021	Banking		Mortgage		Consolidated
Net interest income	$	86,553	$	10	$	86,563
Provisions for credit losses(1)	(13,839)		0		(13,839)
Mortgage banking income(2)	0		38,644		38,644
Change in fair value of mortgage servicing rights, net of hedging(2)	0		(3,145)		(3,145)
Other noninterest income	14,002		(201)		13,801
Depreciation and amortization	1,618		344		1,962
Amortization of intangibles	1,394		0		1,394

Other noninterest expense	55,182		34,422		89,604
Income before income taxes	$	56,200	$	542	$	56,742
Income tax expense					13,440
Net income applicable to FB Financial Corporation and noncontrolling interest					43,302
Net income applicable to noncontrolling interest(3)					8
Net income applicable to FB Financial Corporation					$	43,294
Total assets	$	10,908,107	$	1,010,260	$	11,918,367
Goodwill	242,561		0		242,561

(1)Included $(954) in provision for credit losses on unfunded commitments.

(2)Change in fair value of ~~2019,~~mortgage servicing rights, net of hedging is included in mortgage banking income in the Company's ~~Board~~consolidated statements of ~~Directors approved management's strategic plan to exit its wholesale~~income.

(3)Banking segment includes noncontrolling interest.


Three months ended June 30, 2020	Banking		Mortgage		Consolidated
Net interest income	$	55,350	$	(13)	$	55,337
Provisions for credit losses(1)	25,921		0		25,921
Mortgage banking income(2)	0		85,406		85,406
Change in fair value of mortgage servicing rights, net of hedging(2)	0		(13,238)		(13,238)
Other noninterest income	9,323		0		9,323
Depreciation and amortization	1,503		247		1,750
Amortization of intangibles	1,205		0		1,205

Other noninterest expense(3)	39,332		38,292		77,624
(Loss) income before income taxes	$	(3,288)	$	33,616	$	30,328
Income tax expense					7,455
Net income applicable to FB Financial Corporation and noncontrolling interest					22,873
Net income applicable to noncontrolling interest(4)					0
Net income applicable to FB Financial Corporation					$	22,873
Total assets	$	6,632,506	$	623,030	$	7,255,536
Goodwill	175,441		0		175,441

(1)Included $1,882 in provision for credit losses on unfunded commitments.

(2)Change in fair value of mortgage ~~delivery channels. On June 7, 2019,~~servicing rights, net of hedging is included in mortgage banking income in the ~~Company completed~~Company's consolidated statements of income.

(3)Included $1,586 of merger costs in the sale of its third party origination ("TPO") channel and on August 1, 2019, the Company completed the sale of its correspondent channel. The Mortgage segment incurred $112 and $1,995 in restructuring charges, during the three and nine months ended September 30, 2019, respectively,Banking Segment primarily related to ~~these sales. The restructuring charges include a one time charge~~the integration of ~~$100 in relief of goodwill associated with the TPO channel.~~Farmers National

(4)Banking segment includes noncontrolling interest.

5148

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

~~The following tables provide segment financial information for the three and nine months ended September 30, 2020 and 2019 as follows:~~


Three Months Ended September 30, 2020		Banking		Mortgage		Consolidated
Six Months Ended June 30, 2021								Six Months Ended June 30, 2021	Banking		Mortgage		Consolidated
Net interest income	Net interest income	$	68,791	$	37	$	68,828	Net interest income	$	169,150	$	(11)	$	169,139
Provisions for credit losses(1)	Provisions for credit losses(1)	55,401		0		55,401		Provisions for credit losses(1)	(27,693)		0		(27,693)
Mortgage banking income(2)	Mortgage banking income(2)	24,683		67,443		92,126		Mortgage banking income(2)	0		99,239		99,239
Change in fair value of mortgage servicing rights, net of hedging(2)	Change in fair value of mortgage servicing rights, net of hedging(2)	0		(7,440)		(7,440)		Change in fair value of mortgage servicing rights, net of hedging(2)	0		(8,408)		(8,408)
Other noninterest income	Other noninterest income	12,340		0		12,340		Other noninterest income	25,400		(201)		25,199
Depreciation and amortization	Depreciation and amortization	1,550		143		1,693		Depreciation and amortization	3,476		672		4,148
Amortization of intangibles	Amortization of intangibles	1,417		0		1,417		Amortization of intangibles	2,834		0		2,834
Other noninterest mortgage banking expense		15,175		29,909		45,084

Other noninterest expense~~(3)~~	Other noninterest expense~~(3)~~	69,568		330		69,898		Other noninterest expense~~(3)~~	107,619		73,057		180,676
(Loss) income before income taxes		$	(37,297)	$	29,658	$	(7,639)
Income tax benefit						(2,040)
Net loss						(5,599)
Income before income taxes								Income before income taxes	$	108,314	$	16,890	$	125,204
Income tax expense								Income tax expense					29,028
Net income applicable to FB Financial Corporation and noncontrolling interest								Net income applicable to FB Financial Corporation and noncontrolling interest					96,176
Net income applicable to noncontrolling interest(3)								Net income applicable to noncontrolling interest(3)					8
Net income applicable to FB Financial Corporation								Net income applicable to FB Financial Corporation					$	96,168
Total assets	Total assets	$	10,378,122	$	632,316	$	11,010,438	Total assets	$	10,908,107	$	1,010,260	$	11,918,367
Goodwill	Goodwill	236,086		0		236,086		Goodwill	242,561		0		242,561

(1)Included ~~$9,567~~$(3,176) in provision for credit losses on unfunded commitments.

(2)~~Included~~Change in fair value of mortgage servicing rights, net of hedging is included in mortgage banking income in the Company's consolidated statements of income.

(3)~~Included $20,400 of merger costs in the~~ Banking segment ~~related to the acquisition and integration of Franklin, and $330 of merger costs in the Mortgage segment related to the Franklin merger.~~includes noncontrolling interest.

Three Months Ended September 30, 2019
Banking Mortgage Consolidated
Net interest income $ 58,350 $ (45) $ 58,305
Provision for credit losses 1,831 0 1,831
Mortgage banking income 10,693 23,591 34,284
Change in fair value of mortgage servicing rights, net of hedging(1)
0 (5,091) (5,091)
Other noninterest income 8,952 0 8,952
Depreciation and amortization 1,255 125 1,380
Amortization of intangibles 1,197 0 1,197
Other noninterest mortgage banking expense 8,087 15,561 23,648
Other noninterest expense(2)
36,598 112 36,710
Income before income taxes 29,027 2,657 31,684
Income tax expense 7,718
Net income 23,966
Total assets $ 5,730,492 $ 358,403 $ 6,088,895
Goodwill 168,486 0 168,486


Six Months Ended June 30, 2020	Banking		Mortgage		Consolidated
Net interest income	$	111,583	$	3	$	111,586
Provisions for credit losses(1)	55,486		0		55,486
Mortgage banking income(2)	0		124,019		124,019
Change in fair value of mortgage servicing rights, net of hedging(2)	0		(19,106)		(19,106)
Other noninterest income	19,278		0		19,278
Depreciation and amortization	2,995		497		3,492
Amortization of intangibles	2,408		0		2,408

Other noninterest expense(3)	80,454		62,784		143,238
(Loss) income before income taxes	$	(10,482)	$	41,635	$	31,153
Income tax expense					7,535


Net income applicable to FB Financial Corporation and noncontrolling interest					23,618
Net income applicable to noncontrolling interest(4)					0
Net income applicable to FB Financial Corporation					$	23,618
Total assets	$	6,632,506	$	623,030	$	7,255,536
Goodwill	175,441		0		175,441

(1)~~Included in mortgage banking income in the Company's consolidated statements of income.~~

~~(2)Included $295 in merger costs in the Banking segment related to the Atlantic Capital branch acquisition and $112 in mortgage restructuring charges in the Mortgage segment.~~

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

~~(Dollar amounts are in thousands, except share and per share amounts)~~

Nine Months Ended September 30, 2020
Banking Mortgage Consolidated
Net interest income $ 180,374 $ 40 $ 180,414
Provision for credit losses(1)
110,887 0 110,887
Mortgage banking income 52,274 163,871 216,145
Change in fair value of mortgage servicing rights, net of hedging(2)
0 (26,546) (26,546)
Other noninterest income 31,618 0 31,618
Depreciation and amortization 4,545 379 4,924
Amortization of intangibles 3,825 0 3,825
Other noninterest mortgage banking expense 33,892 74,237 108,129
Other noninterest expense(3)
150,022 330 150,352
(Loss) income before income taxes $ (38,905) $ 62,419 $ 23,514
Income tax expense 5,495
Net income $ 18,019
Total assets $ 10,378,122 $ 632,316 $ 11,010,438
Goodwill 236,086 0 236,086

~~(1)Included $13,050~~Includes $3,483 in provision for credit losses on unfunded commitments.

(2)~~Included~~Change in fair value of mortgage servicing rights, net of hedging is included in mortgage banking income in the Company's consolidated statements of income.

(3)~~Included $25,036~~Includes $4,636 of merger costs in the Banking segment related to the ~~acquisition and integration of~~ Farmers National acquisition and ~~Franklin, and $330 of merger costs in the Mortgage segment related to~~ the Franklin merger.

(4)Banking segment includes noncontrolling interest.

Nine Months Ended September 30, 2019
Banking Mortgage Consolidated
Net interest income $ 168,322 $ 22 $ 168,344
Provision for credit losses 4,103 0 4,103
Mortgage banking income 20,530 64,982 85,512
Change in fair value of mortgage servicing rights, net of hedging(1)
0 (10,772) (10,772)
Other noninterest income 25,423 0 25,423
Depreciation and amortization 3,431 399 3,830
Amortization of intangibles 3,180 0 3,180
Other noninterest mortgage banking expense 15,090 50,608 65,698
Other noninterest expense(2)
107,452 1,995 109,447
Income before income taxes $ 81,019 $ 1,230 $ 82,249
Income tax expense 20,007
Net income $ 62,242
Total assets $ 5,730,492 $ 358,403 $ 6,088,895
Goodwill 168,486 0 168,486

~~(1)Included in mortgage banking income in the Company's consolidated statements of income.~~

~~(2)Includes $4,699 in merger costs in the Banking segment related to the Atlantic Capital branch acquisition and $1,995 in mortgage restructuring charges in the Mortgage segment.~~

Our Banking segment provides our Mortgage segment with a warehouse line of credit that is used to fund mortgage loans held for sale. The warehouse line of credit, which is eliminated in consolidation, had a prime interest rate of 3.25% ~~and5.00%~~ as of ~~September~~June 30, ~~2020~~2021 and ~~2019, respectively,~~2020, and is limited based on interest income earned by the Mortgage segment. The amount of interest paid by our Mortgage segment to our Banking segment under this warehouse line of credit is recorded as interest income to our Banking segment and as interest expense to our Mortgage segment, both of which are included in the calculation of net interest income for each segment. The amount of interest paid by our Mortgage segment to our Banking segment under this warehouse line of credit was ~~$3,940~~$6,110 and ~~$2,875~~$3,335 for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$9,650~~$11,510 and ~~$8,723~~$5,710 for the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~and 2019,~~ respectively.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

Note ~~(16)~~(13)—Minimum capital requirements:

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action.

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

~~(Dollar amounts are in thousands, except share and per share amounts)~~

Under regulatory guidance for non-advanced approaches institutions, the Bank and Company are required to maintain minimum ~~amounts and~~capital ratios ~~of common equity Tier I capital to risk-weighted assets.~~as outlined in the table below. Additionally, under U.S. Basel III Capital Rules, the decision was made to ~~opt-out~~opt out of including accumulated other comprehensive income in regulatory capital. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Bank and Company met all capital adequacy requirements to which they are subject.

In December 2018, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC approved a final rule to address changes to credit loss accounting under GAAP, including banking organizations’ implementation of CECL. The final rule provides banking organizations the option to phase in over a three-year period the day-one adverse effects on regulatory capital that may result from the adoption of the new accounting standard. In March 2020, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC announced a final rule to delay the estimated impact on regulatory capital stemming from the implementation of CECL. The final rule maintains the three-year transition option in the previous rule and provides banks the option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period (five-year transition option). The Company adopted the capital transition relief over the permissible five-year period.

Actual and required capital amounts and ratios are included below ~~for~~as of the ~~periods presented.~~dates indicated.


		Actual				For capital adequacy purposes				Minimum Capital adequacy with capital buffer				To be well capitalized under prompt corrective action provisions					Actual				Minimum Capital adequacy with capital buffer			To be well capitalized under prompt corrective action provisions
		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio			Amount		Ratio			Amount		Ratio		Amount		Ratio
September 30, 2020
June 30, 2021																		June 30, 2021
Total Capital (to risk-weighted assets)	Total Capital (to risk-weighted assets)																	Total Capital (to risk-weighted assets)
FB Financial Corporation	FB Financial Corporation	$	1,334,127	15.3	%	$	697,583	8.0	%	$	915,577	10.5	%	N/A		N/A		FB Financial Corporation	$	1,383,471	14.9	%		$	974,690	10.5	%	N/A		N/A
FirstBank	FirstBank	1,314,864		15.0	%	701,261		8.0	%	920,405		10.5	%	$	876,576	10.0	%	FirstBank	1,317,759		14.2	%		971,072		10.5	%	$	924,831	10.0	%
Tier 1 Capital (to risk-weighted assets)	Tier 1 Capital (to risk-weighted assets)																	Tier 1 Capital (to risk-weighted assets)
FB Financial Corporation	FB Financial Corporation	$	1,054,144	12.1	%	$	522,716	6.0	%	$	740,514	8.5	%	N/A		N/A		FB Financial Corporation	$	1,177,609	12.7	%		$	789,034	8.5	%	N/A		N/A
FirstBank	FirstBank	1,107,144		12.7	%	523,060		6.0	%	741,002		8.5	%	$	697,414	8.0	%	FirstBank	1,131,897		12.2	%		786,106		8.5	%	$	739,865	8.0	%
Tier 1 Capital (to average assets)	Tier 1 Capital (to average assets)																	Tier 1 Capital (to average assets)
FB Financial Corporation	FB Financial Corporation	$	1,054,144	11.8	%	$	357,564	4.0	%	N/A		N/A		N/A		N/A		FB Financial Corporation	$	1,177,609	10.1	%		$	466,866	4.0	%	N/A		N/A
FirstBank	FirstBank	1,107,144		12.4	%	357,143		4.0	%	N/A		N/A		$	446,429	5.0	%	FirstBank	1,131,897		9.7	%		465,961		4.0	%	$	582,451	5.0	%
Common Equity Tier 1 Capital (to risk-weighted assets)	Common Equity Tier 1 Capital (to risk-weighted assets)																	Common Equity Tier 1 Capital (to risk-weighted assets)
FB Financial Corporation	FB Financial Corporation	$	1,024,144	11.8	%	$	390,563	4.5	%	$	607,543	7.0	%	N/A		N/A		FB Financial Corporation	$	1,147,609	12.4	%		$	649,793	7.0	%	N/A		N/A
FirstBank	FirstBank	1,107,144		12.7	%	392,295		4.5	%	610,237		7.0	%	$	566,649	6.5	%	FirstBank	1,131,897		12.2	%		647,382		7.0	%	$	601,140	6.5	%

Actual For capital adequacy purposes Minimum Capital
adequacy with
capital buffer To be well capitalized
under prompt corrective
action provisions
Amount Ratio Amount Ratio Amount Ratio Amount Ratio
December 31, 2019
Total Capital (to risk-weighted assets)
FB Financial Corporation $ 633,549 12.2 % $ 415,442 8.0 % $ 545,268 10.5 % N/A N/A
FirstBank 623,432 12.1 % 412,186 8.0 % 540,995 10.5 % $ 515,233 10.0 %
Tier 1 Capital (to risk-weighted assets)
FB Financial Corporation $ 602,410 11.6 % $ 311,591 6.0 % $ 441,421 8.50 % N/A N/A
FirstBank 592,293 11.5 % 309,022 6.0 % 437,782 8.50 % $ 412,030 8.0 %
Tier 1 Capital (to average assets)
FB Financial Corporation $ 602,410 10.1 % $ 238,578 4.0 % N/A N/A N/A N/A
FirstBank 592,293 9.9 % 239,310 4.0 % N/A N/A $ 299,138 5.0 %
Common Equity Tier 1 Capital
(to risk-weighted assets)
FB Financial Corporation $ 572,410 11.1 % $ 232,058 4.5 % $ 360,979 7.0 % N/A N/A
FirstBank 592,293 11.5 % 231,767 4.5 % 360,526 7.0 % $ 334,774 6.5 %


	Actual				Minimum Capital adequacy with capital buffer			To be well capitalized under prompt corrective action provisions
	Amount		Ratio			Amount		Ratio		Amount		Ratio
December 31, 2020
Total Capital (to risk-weighted assets)
FB Financial Corporation	$	1,358,897	15.0	%		$	952,736	10.5	%	N/A		N/A
FirstBank	1,353,279		14.9	%		951,327		10.5	%	$	906,026	10.0	%
Tier 1 Capital (to risk-weighted assets)
FB Financial Corporation	$	1,090,364	12.0	%		$	771,262	8.5	%	N/A		N/A
FirstBank	1,142,548		12.6	%		770,122		8.5	%	$	724,820	8.0	%
Tier 1 Capital (to average assets)
FB Financial Corporation	$	1,090,364	10.0	%		$	435,064	4.0	%	N/A		N/A
FirstBank	1,142,548		10.5	%		435,279		4.0	%	$	544,098	5.0	%
Common Equity Tier 1 Capital (to risk-weighted assets)
FB Financial Corporation	$	1,060,364	11.7	%		$	635,157	7.0	%	N/A		N/A
FirstBank	1,142,548		12.6	%		634,218		7.0	%	$	588,917	6.5	%

5450

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

Note ~~(17)~~(14)—Stock-Based Compensation

Restricted Stock Units

The Company grants restricted stock units under compensation arrangements for the benefit of employees, executive officers, and directors. Restricted stock unit grants are subject to time-based vesting. The total number of restricted stock units granted represents the maximum number of restricted stock units eligible to vest based upon the service conditions set forth in the grant agreements.

The following table summarizes information about the changes in restricted stock units as of ~~and for~~ the ~~following periods presented:~~dates indicated:

Nine Months Ended September 30,
2020 2019
Restricted Stock
Units
Outstanding Weighted
Average Grant
Date
Fair Value Restricted Stock
Units
Outstanding Weighted
Average Grant
Date
Fair Value
Balance at beginning of period 826,263 $ 23.76 1,140,215 $ 21.96
Granted(1)
353,891 31.12 167,343 34.05
Vested (145,157) 31.67 (270,959) 24.00
Forfeited (19,269) 33.19 (11,727) 24.56
Balance at end of period 1,015,728 $ 25.83 1,024,872 $ 23.67

~~(1)~~ ~~Includes 118,776 restricted stock units issued in replacement of those initially granted by Franklin. See Note 2 for additional information.~~


	Six Months Ended June 30,
	2021			2020
	Restricted Stock Units Outstanding	Weighted Average Grant Date Fair Value		Restricted Stock Units Outstanding	Weighted Average Grant Date Fair Value
Balance at beginning of period	1,047,071	$	26.06	826,263	$	23.76
Granted	193,760	43.06		132,605	33.92
Vested	(159,114)	32.63		(132,203)	32.52
Forfeited	(29,639)	27.36		(14,826)	34.24
Balance at end of period	1,052,078	$	27.73	811,839	$	24.84

The total fair value of restricted stock units vested and released was ~~$3,549~~$828 and ~~$4,597 for the three and nine months ended September 30, 2020, respectively, and $1,488 and $6,503~~$5,192 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2021, respectively, and $1,048 and $4,299 for the three and six months ended June 30, 2020, respectively.

The compensation cost related to stock grants and vesting of restricted stock units was$~~4,651~~2,193 and ~~$6,666~~$4,659 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, respectively, and ~~$1,836~~$2,015 and ~~$5,621~~$3,817 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, respectively. This included ~~$237 and~~ $~~615~~142 and $299 paid to Company ~~independent~~ directors during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, respectively, and ~~$186~~$231 and ~~$537~~$378 during the three and ~~nine~~six months ended ~~September~~June 30, ~~2019, respectively,~~2020, related to ~~independent~~ director grants and compensation elected to be settled in stock.

As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, there ~~were $14,533~~was $16,091 and ~~$11,499, respectively,~~$13,436 of total unrecognized compensation cost related to unvested restricted stock units which is expected to be recognized over a weighted-average period of ~~2.26~~2.7 years and ~~2.00~~2.5 years, respectively. ~~At September~~As of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, there were ~~$533~~2,158,408 and ~~$375,~~2,240,434 shares available for issuance under the 2016-LTIP plan, respectively. At June 30, 2021 and December 31, 2020, there was $741 and $613, respectively, accrued in other liabilities related to dividends declared to be paid upon vesting and distribution of the underlying ~~RSUs.~~restricted stock units.

Performance Based Restricted Stock Units

~~During 2020,~~The following table summarizes information about the changes in performance stock units as of and for the six months ended June 30, 2021 and 2020.




	Six Months Ended June 30,
	2021			2020
	Performance Stock Units Outstanding	Weighted Average Grant Date Fair Value		Performance Stock Units Outstanding	Weighted Average Grant Date Fair Value
Balance at beginning of period (unvested)	53,147	$	36.21	0	$	0
Granted	65,304	43.20		53,147	36.21
Vested	0	0		0	0
Forfeited or expired	(2,319)	36.73		0	0
Balance at end of period (unvested)	116,132	$	40.13	53,147	$	36.21

The Company ~~began awarding~~awards performance-based restricted stock units ~~("PSUs")~~ to executives and other officers and employees. Under the terms of the award, the number of units that will vest and convert to shares of common stock will be based on the extent to which the Company achieves specified performance criteria during the fixed ~~three-year~~three-year performance period. The

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

number of shares issued upon vesting will range from 0% to 200% of the PSUs granted. The PSUs vest at the end of a ~~three-year~~three-year period based on average adjusted return on tangible equity as reported, adjusted for unusual gains/losses, merger expenses, and other items as approved by the compensation committee of the Company's board of directors. Compensation expense for the PSUs will be estimated each period based on the fair value of the stock at the grant date and the most probable outcome of the performance condition, adjusted for the passage of time within the vesting period of the awards.

The Company ~~granted 53,147 shares of performance based restricted stock units and~~ recorded compensation cost of ~~$171~~$322 and ~~$587~~$522 during the three and ~~nine~~six months ended ~~September~~June 30, 2021 respectively, and $335 and $416 for the three and six months ended June 30, 2020, respectively. As of ~~September~~June 30, ~~2020,~~2021, the Company determined the probability of meeting the performance criteria for each grant, and recorded compensation cost associated with a ~~181%~~140.0% (related to shares granted in 2020) and 102.5% (related to shares granted in 2021) vesting, when factoring in the conversion of PSUs to shares of common stock. As of ~~September~~June 30, ~~2020,~~2021, maximum unrecognized compensation cost at 200% payout related to the unvested PSUs was ~~$2,775,~~$7,829, and the remaining performance period over which the cost could be recognized was 2.4 years.

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

~~(Dollar amounts are in thousands, except share and per share amounts)~~

Employee Stock Purchase Plan:

The Company maintains an employee stock purchase plan ~~(“ESPP”)~~ under which employees, through payroll deductions, are able to purchase shares of Company common stock. The purchase price is 95% of the lower of the market price on the first or last day of the offering period. The maximum number of shares issuable during any offering period is 200,000 shares and a participant may not purchase more than 725 shares during any offering period (and, in any event, no more than $25 worth of common stock in any calendar year). ~~During~~There were 0 shares issued under ESPP during the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019, there were 18,034 and 12,558 shares of common stock issues under the ESPP,~~2020, respectively. During the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, there were ~~30,179~~21,566 and ~~23,171~~12,145 shares of common stock issued under the ESPP, respectively. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, there were ~~2,379,006~~2,357,440 and ~~2,409,185~~2,379,006 shares available for issuance under the ESPP, respectively.

Note ~~(18)~~(15)—Related party transactions:

(A) Loans:

The Bank has made and expects to continue to make loans to the directors, certain management and executive officers of the Company and their affiliates in the ordinary course of business, in compliance with regulatory requirements.

An analysis of loans to executive officers, certain management, and directors of the Bank and their affiliates is presented below:


Loans outstanding at January 1, ~~2020~~2021	$	~~30,880~~24,675
New loans and advances	~~5,870~~1,687
Change in related party status	~~4,167~~ (98)
Repayments	~~(8,200)~~(4,933)
Loans outstanding at ~~Loans outstanding at September~~June 30, ~~2020~~2021	$	~~32,717~~21,331

Unfunded commitments to certain executive officers, certain management and directors and their associates totaled ~~$25,934~~$20,465 and ~~$19,404~~$23,059 at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

(B) Deposits:

The Bank held deposits from related parties totaling ~~$268,179~~$303,900 and ~~$238,781~~$245,084 as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

The Bank leases various office spaces from entities owned by certain directors of the Company under varying terms. The Company had ~~$60~~$21 and ~~$86~~$53 in unamortized leasehold improvements related to these leases at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. These improvements are being amortized over a term not to exceed the length of the lease. Lease expense for these properties totaled ~~$125~~$132 and ~~$381~~$260 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021, respectively, and $128 and ~~$381~~$256 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019, respectively.~~2020.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Dollar amounts are in thousands, except share and per share amounts)

(D) Aviation time sharing agreement:

The Company is a participant to aviation time sharing agreements with entities owned by a certain director of the Company. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, the Company made payments of ~~$17~~$21 and~~$108,~~ $32, respectively, and ~~$46~~$58 and ~~$143~~$91 during the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, respectively, under these agreements.

(E) Registration rights agreement:

The Company is party to a registration rights agreement with its former majority shareholder entered into in connection with the 2016 IPO, under which the Company is responsible for payment of expenses (other than underwriting discounts and commissions) relating to sales to the public by the shareholder of shares of the Company’s common stock beneficially owned by him. Such expenses include registration fees, legal and accounting fees, and printing costs payable by the Company and expensed when incurred. During the three and six months ended June 30, 2021, the Company paid $605 under this agreement related to the secondary offering completed during the second quarter of 2021. NaN such expenses were incurred during the three and six months ended June 30, 2020.

5653

ITEM 2 – Management’s discussion and analysis of financial condition and results of operations

The following is a discussion of our financial condition at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, and our results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, and should be read in conjunction with our audited consolidated financial statements set forth in our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, that was filed with the Securities and Exchange Commission ~~(the "SEC")~~ on March ~~13, 2020~~12, 2021 (our "Annual Report"), and with the accompanying unaudited notes to the consolidated financial statements set forth in this Quarterly Report on Form 10-Q for the quarterly period ended ~~September~~June 30, ~~2020~~2021 (this "Report").

Forward-looking statements

~~Certain statements contained in this press release may constitute~~This quarterly report contains certain forward-looking statements within the meaning of ~~Section 27A of~~ the Private Securities Litigation Reform Act of ~~1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.~~1995. These forward-looking statements include, without limitation, statements regarding the projected impact of the COVID-19 global pandemic on our business operations, statements relating to the ~~timing,~~ benefits, costs, and synergies of the ~~mergers~~merger with Franklin Financial Network, Inc. (“Franklin”) (the ~~“Franklin merger”) and FNB Financial Corp. (“FNB”) (together with the Franklin merger, the “mergers”~~“merger”), and FB Financial’s future plans, results, strategies, and expectations.

These statements can generally be identified by the use of the words and phrases “may,” “will,” “should,” “could,” “would,” “goal,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target,” “aim,” “predict,” “continue,” “seek,” “projection,” and other variations of such words and phrases and similar expressions.

These forward-looking statements are not historical facts, and are based upon management's current expectations, estimates, and projections, many of which, by their nature, are inherently uncertain and beyond FB Financial’s control. The inclusion of these forward-looking statements should not be regarded as a representation by FB Financial or any other person that such expectations, estimates, and projections will be achieved. Accordingly, FB Financial cautions shareholders and investors that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, and uncertainties that are difficult to predict. Actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. A number of factors could cause actual results to differ materially from those contemplated by the forward-looking statements including, without limitation, (1) current and future economic conditions, including the effects of ~~declines~~inflation, interest rate fluctuations, changes in ~~housing and commercial~~the economy or supply-demand imbalances affecting local real estate prices, and high unemployment rates ~~and a continued slowdown in economic growth~~ in the local or regional economies in which we operate and/or the US economy generally, (2) the effects of the COVID-19 pandemic, including the magnitude and duration of the pandemic and its impact on ~~general economic and~~the economy, financial ~~market conditions~~markets, and on our business and our customers' business, results of operations, asset quality and financial condition, as well as the efficacy, distribution, and public adoption of vaccines and the impact of the Delta variant of the coronavirus or the emergence of other new variants of the coronavirus, (3) changes in government interest rate policies and its impact on our business, net interest margin, and mortgage operations, (4) our ability to effectively manage problem credits, (5) the risk that the cost savings and any revenue synergies from the ~~mergers~~merger or another acquisition may not be realized or may take longer than anticipated to be realized, (6) disruption from the mergers with customer, supplier, or employee relationships, (7) the risks related to the integrations of the combined businesses following the Franklin merger, (8) the diversion of management time on issues related to the mergers, (9) the ability of FB Financial to effectively integrate and manage the larger and more complex operations of the combined company following the ~~Franklin~~ merger, ~~(10) the risks associated with FB Financial’s pursuit of future acquisitions, (11) reputational risk and the reaction of the parties’ respective customers to the mergers, (12)~~(7) FB Financial’s ability to ~~successful~~successfully execute its various business strategies, ~~(13) uncertainty regarding changes to~~(8) the impact of the recent change in the U.S. presidential administration ~~and/or~~and Congress and any resulting impact on economic policy, capital markets, federal regulation, and the response to the COVD-19 pandemic; (8) the potential impact of the proposed phase-out of the LIBOR or other changes involving LIBOR (9) the effectiveness of our cyber security controls and ~~(14)~~procedures to prevent and mitigate attempted intrusions; (10) the Company's dependence on information technology systems of third party service providers and the risk of systems failures, interruptions, or breaches of security, (11) general competitive, economic, political, and market conditions. Further information regarding FB Financial and factors which could affect the forward-looking statements contained herein can be found in FB Financial's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019,~~2020, and ~~its other~~in any of FB Financial's subsequent filings with the Securities and Exchange Commission (the “SEC”). Many of these factors are beyond FB Financial’s ability to control or predict. If one or more events related to these or other risks or uncertainties materialize, or if the underlying assumptions prove to be incorrect, actual results may differ materially from the forward-looking statements. Accordingly, shareholders and investors should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date of this ~~release,~~filing, and FB Financial undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. New risks and uncertainties may emerge from time to time, and it is not possible for FB Financial to predict their occurrence or how they will affect the company.

FB Financial qualifies all forward-looking statements by these cautionary statements.

5754

Critical accounting policies

Our financial statements are prepared in accordance with U.S. generally accepted accounting principles ~~(“GAAP”)~~ and general practices within the banking industry. Within our financial statements, certain financial information contains approximate measurements of financial effects of transactions and impacts at the consolidated balance sheet dates and our results of operations for the reporting periods. We monitor the status of proposed and newly issued accounting standards to evaluate the impact on our financial condition and results of operations. Our accounting policies, including the impact of any newly issued accounting standards, are discussed in further detail in Note 1, "Basis of presentation," in the notes to our consolidated financial statements in our Annual Report. Subsequent adoptions and changes to critical accounting policies during the three and nine months ended September 30, 2020 are further described in Note 1, "Basis of presentation" in the notes to our consolidated financial statements contained in this Report.

Selected historical consolidated financial data

The following table presents certain selected historical consolidated financial data as of the dates or for the periods indicated:


		As of or for the three months ended				As of or for the nine months ended				As of or for the year ended			As of or for the three months ended				As of or for the six months ended				As of or for the year ended

		September 30,				September 30,				December 31,			June 30,				June 30,				December 31,
(dollars in thousands, except per share data and %)	(dollars in thousands, except per share data and %)	2020		2019		2020		2019		2019		(dollars in thousands, except per share data and %)	2021		2020		2021		2020		2020
Statement of Income Data	Statement of Income Data											Statement of Income Data
Total interest income	Total interest income	$	81,127	$	73,242	$	216,408	$	210,894	$	282,537	Total interest income	$	96,329	$	65,607	$	191,114	$	135,281	$	314,644
Total interest expense	Total interest expense	12,299		14,937		35,994		42,550		56,501		Total interest expense	9,766		10,270		21,975		23,695		48,986
Net interest income	Net interest income	68,828		58,305		180,414		168,344		226,036		Net interest income	86,563		55,337		169,139		111,586		265,658
Provisions for credit losses	Provisions for credit losses	55,401		1,831		110,887		4,103		7,053		Provisions for credit losses	(13,839)		25,921		(27,693)		55,486		107,967
Total noninterest income	Total noninterest income	97,026		38,145		221,217		100,163		135,397		Total noninterest income	49,300		81,491		116,030		124,191		301,855
Total noninterest expense	Total noninterest expense	118,092		62,935		267,230		182,155		244,841		Total noninterest expense	92,960		80,579		187,658		149,138		377,085
Net (loss) income before income taxes		(7,639)		31,684		23,514		82,249		109,539
Income tax (benefit) expense		(2,040)		7,718		5,495		20,007		25,725
Net (loss) income		$	(5,599)	$	23,966	$	18,019	$	62,242	$	83,814
Income before income taxes												Income before income taxes	56,742		30,328		125,204		31,153		82,461
Income tax expense												Income tax expense	13,440		7,455		29,028		7,535		18,832
Net income applicable to FB Financial Corporation and noncontrolling interest												Net income applicable to FB Financial Corporation and noncontrolling interest	43,302		22,873		96,176		23,618		63,629
Net income applicable to noncontrolling interest												Net income applicable to noncontrolling interest	8		—		8		—		8
Net income applicable to FB Financial Corporation												Net income applicable to FB Financial Corporation	$	43,294	$	22,873	$	96,168	$	23,618	$	63,621
Net interest income (tax—equivalent basis)	Net interest income (tax—equivalent basis)	$	69,625	$	58,769	$	182,386	$	169,718	$	227,930	Net interest income (tax—equivalent basis)	$	87,321	$	55,977	$	170,689	$	112,761	$	268,497
Per Common Share	Per Common Share											Per Common Share
Basic net (loss) income		$	(0.14)	$	0.77	$	0.52	$	2.01	$	2.70
Diluted net (loss) income		(0.14)		0.76		0.52		1.97		2.65
Basic net income												Basic net income	$	0.91	$	0.71	$	2.03	$	0.75	$	1.69
Diluted net income												Diluted net income	0.90		0.70		2.00		0.74		1.67
Book value (1)	Book value (1)	26.38		24.08		26.38		24.08		24.56		Book value (1)	28.96		25.08		28.96		25.08		27.35
Tangible book value (4)	Tangible book value (4)	20.87		18.03		20.87		18.03		18.55		Tangible book value (4)	23.43		19.07		23.43		19.07		21.73
Cash dividends declared	Cash dividends declared	0.09		0.08		0.27		0.24		0.32		Cash dividends declared	0.11		0.09		0.22		0.18		0.36

Selected Balance Sheet Data	Selected Balance Sheet Data											Selected Balance Sheet Data
Cash and cash equivalents	Cash and cash equivalents	$	1,062,391	$	242,997	$	1,062,391	$	242,997	$	232,681	Cash and cash equivalents	$	1,717,097	$	717,592	$	1,717,097	$	717,592	$	1,317,898
Loans held for investment	Loans held for investment	7,213,538		4,345,344		7,213,538		4,345,344		4,409,642		Loans held for investment	7,198,954		4,827,023		7,198,954		4,827,023		7,082,959
Allowance for credit losses		(183,973)		(31,464)		(183,973)		(31,464)		(31,139)
Loans held for sale		851,951		305,493		851,951		305,493		262,518
Allowance for credit losses (5)												Allowance for credit losses (5)	(144,663)		(113,129)		(144,663)		(113,129)		(170,389)
Loans held for sale, at fair value												Loans held for sale, at fair value	821,529		435,479		821,529		435,479		899,173
Investment securities, at fair value	Investment securities, at fair value	1,164,910		671,781		1,164,910		671,781		691,676		Investment securities, at fair value	1,409,175		751,767		1,409,175		751,767		1,176,991
Other real estate owned, net	Other real estate owned, net	12,748		16,076		12,748		16,076		18,939		Other real estate owned, net	11,986		15,091		11,986		15,091		12,111
Total assets	Total assets	11,010,438		6,088,895		11,010,438		6,088,895		6,124,921		Total assets	11,918,367		7,255,536		11,918,367		7,255,536		11,207,330
Customer deposits	Customer deposits	9,001,673		4,896,327		9,001,673		4,896,327		4,914,587		Customer deposits	10,163,056		5,937,373		10,163,056		5,937,373		9,396,478
Brokered and internet time deposits	Brokered and internet time deposits	92,074		25,436		92,074		25,436		20,351		Brokered and internet time deposits	40,900		15,428		40,900		15,428		61,559
Total deposits	Total deposits	9,093,747		4,921,763		9,093,747		4,921,763		4,934,938		Total deposits	10,203,956		5,952,801		10,203,956		5,952,801		9,458,037

Borrowings	Borrowings	438,838		307,129		438,838		307,129		304,675		Borrowings	183,962		328,662		183,962		328,662		238,324
Total common shareholders' equity	Total common shareholders' equity	1,244,998		744,835		1,244,998		744,835		762,329		Total common shareholders' equity	1,371,721		805,216		1,371,721		805,216		1,291,289

5855


		As of or for the three months ended				As of or for the nine months ended				As of or for the year ended			As of or for the three months ended				As of or for the six months ended				As of or for the year ended

		September 30,				September 30,				December 31,			June 30,				June 30,				December 31,
(dollars in thousands, except per share data and %)	(dollars in thousands, except per share data and %)	2020		2019		2020		2019		2019		(dollars in thousands, except per share data and %)	2021		2020		2021		2020		2020
Selected Ratios	Selected Ratios											Selected Ratios
Return on average:	Return on average:											Return on average:
Assets (2)	Assets (2)	(0.24)	%	1.59	%	0.32	%	1.47	%	1.45	%	Assets (2)	1.46	%	1.30	%	1.66	%	0.70	%	0.75	%
Shareholders' equity (2)	Shareholders' equity (2)	(2.13)	%	13.0	%	2.61	%	11.7	%	11.6	%	Shareholders' equity (2)	13.0	%	11.6	%	14.7	%	6.07	%	6.58	%
Tangible common equity (4)	Tangible common equity (4)	(2.72)	%	17.5	%	3.34	%	15.6	%	15.4	%	Tangible common equity (4)	16.1	%	15.3	%	18.3	%	8.04	%	8.54	%
Average shareholders' equity to average assets	Average shareholders' equity to average assets	11.4	%	12.2	%	12.1	%	12.5	%	12.5	%	Average shareholders' equity to average assets	11.3	%	11.2	%	11.3	%	11.6	%	11.5	%
Net interest margin (tax-equivalent basis)	Net interest margin (tax-equivalent basis)	3.28	%	4.28	%	3.53	%	4.42	%	4.34	%	Net interest margin (tax-equivalent basis)	3.18	%	3.50	%	3.18	%	3.70	%	3.46	%
Efficiency ratio	Efficiency ratio	71.2	%	65.3	%	66.5	%	67.8	%	67.7	%	Efficiency ratio	68.4	%	58.9	%	65.8	%	63.3	%	66.4	%
Adjusted efficiency ratio (tax-equivalent basis) (4)	Adjusted efficiency ratio (tax-equivalent basis) (4)	58.2	%	64.5	%	59.8	%	65.1	%	65.4	%	Adjusted efficiency ratio (tax-equivalent basis) (4)	68.9	%	57.5	%	65.8	%	60.9	%	59.2	%
Loans held for investment to deposit ratio	Loans held for investment to deposit ratio	79.3	%	88.3	%	79.3	%	88.3	%	89.4	%	Loans held for investment to deposit ratio	70.6	%	81.1	%	70.6	%	81.1	%	74.9	%
Yield on interest-earning assets	Yield on interest-earning assets	3.86	%	5.37	%	4.22	%	5.53	%	5.42	%	Yield on interest-earning assets	3.53	%	4.14	%	3.59	%	4.48	%	4.09	%
Cost of interest-bearing liabilities	Cost of interest-bearing liabilities	0.83	%	1.50	%	0.99	%	1.52	%	1.48	%	Cost of interest-bearing liabilities	0.49	%	0.94	%	0.57	%	1.11	%	0.94	%
Cost of total deposits	Cost of total deposits	0.56	%	1.11	%	0.69	%	1.13	%	1.10	%	Cost of total deposits	0.31	%	0.65	%	0.36	%	0.79	%	0.62	%

Credit Quality Ratios	Credit Quality Ratios											Credit Quality Ratios
Allowance for credit losses to loans, net of unearned income		2.55	%	0.72	%	2.55	%	0.72	%	0.71	%
Allowance for credit losses to nonperforming loans		421.5	%	154.5	%	421.5	%	154.5	%	117.0	%
Allowance for credit losses to loans, net of unearned income (5)												Allowance for credit losses to loans, net of unearned income (5)	2.01	%	2.34	%	2.01	%	2.34	%	2.41	%
Allowance for credit losses to nonperforming loans (5)												Allowance for credit losses to nonperforming loans (5)	243.0	%	324.8	%	243.0	%	324.8	%	264.3	%
Nonperforming loans to loans, net of unearned income	Nonperforming loans to loans, net of unearned income	0.61	%	0.47	%	0.61	%	0.47	%	0.60	%	Nonperforming loans to loans, net of unearned income	0.83	%	0.72	%	0.83	%	0.72	%	0.91	%
Capital Ratios (Company)	Capital Ratios (Company)											Capital Ratios (Company)
Total common Shareholders' equity to assets		11.3	%	12.2	%	11.3	%	12.2	%	12.4	%
Total common shareholders' equity to assets												Total common shareholders' equity to assets	11.5	%	11.1	%	11.5	%	11.1	%	11.5	%
Tier 1 capital (to average assets)	Tier 1 capital (to average assets)	11.8	%	10.1	%	11.8	%	10.1	%	10.1	%	Tier 1 capital (to average assets)	10.1	%	9.7	%	10.1	%	9.7	%	10.0	%
Tier 1 capital (to risk-weighted assets (3)	Tier 1 capital (to risk-weighted assets (3)	12.1	%	11.3	%	12.1	%	11.3	%	11.6	%	Tier 1 capital (to risk-weighted assets (3)	12.7	%	12.1	%	12.7	%	12.1	%	12.0	%
Total capital (to risk-weighted assets) (3)	Total capital (to risk-weighted assets) (3)	15.3	%	12.0	%	15.3	%	12.0	%	12.2	%	Total capital (to risk-weighted assets) (3)	14.9	%	13.4	%	14.9	%	13.4	%	15.0	%
Tangible common equity to tangible assets (4)	Tangible common equity to tangible assets (4)	9.2	%	9.5	%	9.2	%	9.4	%	9.7	%	Tangible common equity to tangible assets (4)	9.52	%	8.67	%	9.52	%	8.67	%	9.38	%
Common Equity Tier 1 (to risk-weighted assets) (CET1) (3)	Common Equity Tier 1 (to risk-weighted assets) (CET1) (3)	11.8	%	10.8	%	11.8	%	10.8	%	11.1	%	Common Equity Tier 1 (to risk-weighted assets) (CET1) (3)	12.4	%	11.6	%	12.4	%	11.6	%	11.7	%
Capital Ratios (Bank)	Capital Ratios (Bank)											Capital Ratios (Bank)
Total common Shareholders' equity to assets	Total common Shareholders' equity to assets	12.1	%	12.5	%	12.1	%	12.5	%	12.8	%	Total common Shareholders' equity to assets	11.4	%	11.6	%	11.4	%	11.6	%	12.3	%
Tier 1 capital (to average assets)	Tier 1 capital (to average assets)	12.4	%	9.8	%	12.4	%	9.8	%	9.9	%	Tier 1 capital (to average assets)	9.72	%	9.70	%	9.72	%	9.70	%	10.5	%
Tier 1 capital (to risk-weighted assets) (3)	Tier 1 capital (to risk-weighted assets) (3)	12.7	%	11.1	%	12.7	%	11.1	%	11.5	%	Tier 1 capital (to risk-weighted assets) (3)	12.2	%	12.3	%	12.2	%	12.3	%	12.6	%
Total capital to (risk-weighted assets) (3)	Total capital to (risk-weighted assets) (3)	15.0	%	11.7	%	15.0	%	11.7	%	12.1	%	Total capital to (risk-weighted assets) (3)	14.2	%	13.5	%	14.2	%	13.5	%	14.9	%
Common Equity Tier 1 (to risk-weighted assets) (CET1) (3)	Common Equity Tier 1 (to risk-weighted assets) (CET1) (3)	12.7	%	11.1	%	12.7	%	11.1	%	11.5	%	Common Equity Tier 1 (to risk-weighted assets) (CET1) (3)	12.2	%	12.3	%	12.2	%	12.3	%	12.6	%

(1)Book value per share equals our total shareholders’ equity as of the date presented divided by the number of shares of our common stock outstanding as of the date presented. The number of shares of our common stock outstanding was ~~47,191,677, 30,865,636,~~47,360,950, 32,101,108, and ~~31,034,315~~47,220,743 as of ~~September~~June 30, ~~2020, September~~2021, June 30, ~~2019~~2020 and December 31, ~~2019,~~2020, respectively.

(2)We have calculated our return on average assets and return on average equity for a period by dividing annualized net income for that period by our average assets and average equity, as the case may be, for that period. We have calculated our pro forma return on average assets and pro forma return on average equity for a period by calculating our pro forma net income for that period as described in footnote 4 below and dividing that by our average assets and average equity, as the case be, for that period. We calculate our average assets and average equity for a period by dividing the sum of our total asset balance or total stockholder’s equity balance, as the case may be, as of the close of business on each day in the relevant period and dividing by the number of days in the period.

(3)We calculate our risk-weighted assets using the standardized method of the Basel III Framework.

(4)These measures are not measures recognized under generally accepted accounting principles (United States) ~~(“GAAP”)~~, and are therefore considered to be non-GAAP financial measures. See “GAAP reconciliation and management explanation of non-GAAP financial measures” for a reconciliation of these measures to their most comparable GAAP measures.

(5)Excludes reserve for credit losses on unfunded commitments.

GAAP reconciliation and management explanation of non-GAAP financial measures

We identify certain financial measures discussed in this Report as being "non-GAAP financial measures." The non-GAAP financial measures presented in this Report are adjusted efficiency ratio (tax equivalent basis), tangible book value per common share, tangible common equity to tangible assets and return on average tangible equity.

In accordance with the SEC's rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and

presented in accordance with GAAP as in effect from time to time in the United States in our statements of income, balance sheets or statements of cash flows.

The non-GAAP financial measures that we discuss in this Report should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we discuss in our selected historical consolidated financial data may differ from that of other companies reporting measures with similar names. You should understand how such other banking organizations calculate their financial measures similar or with names similar to the non-GAAP financial measures we have discussed in our selected historical consolidated financial data when comparing such non-GAAP financial measures. The following reconciliation tables provide a more detailed analysis of, and reconciliations for, each of these non-GAAP financial measures.

Adjusted Efficiency ratio (tax equivalent basis)

The adjusted efficiency ratio (tax equivalent basis) is a non-GAAP measure that excludes certain gains (losses), merger and conversion, offering, and mortgage ~~restructuring-related~~restructuring expenses and other selected items. Our management uses this measure in its analysis of our performance. Our management believes this measure provides a greater understanding of ongoing operations and enhances comparability of results with prior periods, as well as demonstrates the effects of significant gains or losses and changes. The most directly comparable financial measure calculated in accordance with GAAP is the efficiency ratio.

The following table presents, as of the dates set forth below, a reconciliation of our adjusted efficiency ratio (tax-equivalent basis) to our efficiency ratio:


		Three Months Ended September 30,						Nine Months Ended September 30,						Year ended December 31,
(dollars in thousands, except per share data)		2020			2019			2020			2019			2019
(In Thousands, Except Share Data and %)																	(In Thousands, Except Share Data and %)	Three Months Ended June 30,						Six Months Ended June 30,						Year Ended December 31,
																		2021			2020			2021			2020			2020
Adjusted efficiency ratio (tax-equivalent basis)	Adjusted efficiency ratio (tax-equivalent basis)																Adjusted efficiency ratio (tax-equivalent basis)
Total noninterest expense	Total noninterest expense	$	118,092		$	62,935		$	267,230		$	182,155		$	244,841		Total noninterest expense	$	92,960		$	80,579		$	187,658		$	149,138		$	377,085

Less merger and conversion, and mortgage restructuring expenses		20,730			407			25,366			6,694			7,380
Less merger and conversion and offering expenses																	Less merger and conversion and offering expenses	605			1,586			605			4,636			34,879
Less gain on lease terminations																	Less gain on lease terminations	(787)			—			(787)			—			—
Less FHLB prepayment penalties																	Less FHLB prepayment penalties	—			—			—			—			6,838

Adjusted noninterest expense	Adjusted noninterest expense	$	97,362		$	62,528		$	241,864		$	175,461		$	237,461		Adjusted noninterest expense	$	93,142		$	78,993		$	187,840		$	144,502		$	335,368
Net interest income (tax-equivalent basis)	Net interest income (tax-equivalent basis)	$	69,625		$	58,769		$	182,386		$	169,718		$	227,930		Net interest income (tax-equivalent basis)	$	87,321		$	55,977		$	170,689		$	112,761		$	268,497
Total noninterest income	Total noninterest income	97,026			38,145			221,217			100,163			135,397			Total noninterest income	49,300			81,491			116,030			124,191			301,855
Less gain on change in fair value on commercial loans held for sale																	Less gain on change in fair value on commercial loans held for sale	1,364			—			511			—			3,228
Less cash life insurance benefit																	Less cash life insurance benefit	—			—			—			—			715

Less (loss) gain on sales of other real estate		(1,505)			(126)			(1,368)			112			545
Less gain (loss) on other assets		226			44			(156)			52			(104)
Less gain (loss) on securities		583			(20)			618			75			57
Less (loss) gain on sales or write-downs of other real estate owned and other assets																	Less (loss) gain on sales or write-downs of other real estate owned and other assets	(23)			86			473			137			(1,491)
Less loss on other assets																	Less loss on other assets	(4)			(54)			(15)			(382)			(90)
Less gain (loss) from securities, net																	Less gain (loss) from securities, net	144			(28)			227			35			1,631
Adjusted noninterest income	Adjusted noninterest income	$	97,722		$	38,247		$	222,123		$	99,924		$	134,899		Adjusted noninterest income	$	47,819		$	81,487		$	114,834		$	124,401		$	297,862
Adjusted operating revenue	Adjusted operating revenue	$	167,347		$	97,016		$	404,509		$	269,642		$	362,829		Adjusted operating revenue	$	135,140		$	137,464		$	285,523		$	237,162		$	566,359
Efficiency ratio (GAAP)	Efficiency ratio (GAAP)	71.2		%	65.3		%	66.5		%	67.8		%	67.7		%	Efficiency ratio (GAAP)	68.4		%	58.9		%	65.8		%	63.3		%	66.4		%
Adjusted efficiency ratio (tax-equivalent basis)	Adjusted efficiency ratio (tax-equivalent basis)	58.2		%	64.5		%	59.8		%	65.1		%	65.4		%	Adjusted efficiency ratio (tax-equivalent basis)	68.9		%	57.5		%	65.8		%	60.9		%	59.2		%

Tangible book value per common share and tangible common equity to tangible assets

Tangible book value per common share and tangible common equity to tangible assets are non-GAAP measures that exclude the impact of goodwill and other intangibles used by the Company's management to evaluate capital adequacy. Because intangible assets such as goodwill and other intangibles vary extensively from company to company, we believe that the presentation of this information allows investors to more easily compare the Company's capital position to other companies. The most directly comparable financial measure calculated in accordance with GAAP is book value per common share and our total shareholders' equity to total assets.

6058

The following table presents, as of the dates set forth below, tangible common equity compared with total shareholders' equity, tangible book value per common share compared with our book value per common share and common equity to tangible assets compared to total shareholders' equity to total assets:


		As of September 30,						As of December 31,				As of June 30,						As of December 31,
(dollars in thousands, except share and per share data)		2020			2019			2019
(In Thousands, Except Share Data and %)											(In Thousands, Except Share Data and %)	2021			2020			2020
Tangible Assets	Tangible Assets										Tangible Assets
Total assets	Total assets	$	11,010,438		$	6,088,895		$	6,124,921		Total assets	$	11,918,367		$	7,255,536		$	11,207,330
Adjustments:	Adjustments:										Adjustments:
Goodwill	Goodwill	(236,086)			(168,486)			(169,051)			Goodwill	(242,561)			(175,441)			(242,561)
Core deposit and other intangibles	Core deposit and other intangibles	(23,924)			(18,748)			(17,589)			Core deposit and other intangibles	(19,592)			(17,671)			(22,426)
Tangible assets	Tangible assets	$	10,750,428		$	5,901,661		$	5,938,281		Tangible assets	$	11,656,214		$	7,062,424		$	10,942,343
Tangible Common Equity	Tangible Common Equity										Tangible Common Equity
Total common shareholders' equity	Total common shareholders' equity	$	1,244,998		$	744,835		$	762,329		Total common shareholders' equity	$	1,371,721		$	805,216		$	1,291,289
Adjustments:	Adjustments:										Adjustments:
Goodwill	Goodwill	(236,086)			(168,486)			(169,051)			Goodwill	(242,561)			(175,441)			(242,561)
Core deposit and other intangibles	Core deposit and other intangibles	(23,924)			(18,748)			(17,589)			Core deposit and other intangibles	(19,592)			(17,671)			(22,426)
Tangible common equity	Tangible common equity	$	984,988		$	557,601		$	575,689		Tangible common equity	$	1,109,568		$	612,104		$	1,026,302
Common shares outstanding	Common shares outstanding	47,191,677			30,927,664			31,034,315			Common shares outstanding	47,360,950			32,101,108			47,220,743
Book value per common share	Book value per common share	$	26.38		$	24.08		$	24.56		Book value per common share	$	28.96		$	25.08		$	27.35
Tangible book value per common share	Tangible book value per common share	$	20.87		$	18.03		$	18.55		Tangible book value per common share	$	23.43		$	19.07		$	21.73
Total common shareholders' equity to total assets	Total common shareholders' equity to total assets	11.3		%	12.2		%	12.4		%	Total common shareholders' equity to total assets	11.5		%	11.1		%	11.5		%
Tangible common equity to tangible assets	Tangible common equity to tangible assets	9.2		%	9.4		%	9.7		%	Tangible common equity to tangible assets	9.52		%	8.67		%	9.38		%

Return on average tangible common equity

Return on average tangible common equity is a non-GAAP measure that uses average shareholders' equity and excludes the impact of goodwill and other intangibles. This measurement is also used by the Company's management to evaluate capital adequacy. The following table presents, as of the dates set forth below, reconciliations of total average tangible common equity to average shareholders' equity and return on average tangible common equity to return on average ~~shareholders~~shareholders' equity:


		Three Months Ended September 30,						Nine Months Ended September 30,						As of December 31,				Three Months Ended June 30,						Six Months Ended June 30,						Year Ended December 31,
(dollars in thousands)		2020			2019			2020			2019			2019
(In Thousands, Except %)																	(In Thousands, Except %)	2021			2020			2021			2020			2020
Return on average tangible common equity	Return on average tangible common equity																Return on average tangible common equity
Total average shareholders' equity		$	1,045,006		$	731,701		$	923,456		$	708,436		$	723,494
Total average common shareholders' equity																	Total average common shareholders' equity	$	1,339,938		$	795,705		$	1,321,947		$	782,475		$	966,336
Adjustments:	Adjustments:																Adjustments:
Average goodwill	Average goodwill	(205,473)			(168,486)			(184,548)			(157,924)			(160,587)			Average goodwill	(242,561)			(175,150)			(242,561)			(173,294)			(199,104)
Average intangibles, net	Average intangibles, net	(20,973)			(19,523)			(19,146)			(16,897)			(17,236)			Average intangibles, net	(20,253)			(18,209)			(20,970)			(18,223)			(22,659)
Average tangible common equity	Average tangible common equity	$	818,560		$	543,692		$	719,762		$	533,615		$	545,671		Average tangible common equity	$	1,077,124		$	602,346		$	1,058,416		$	590,958		$	744,573
Net (loss) income		$	(5,599)		$	23,966		$	18,019		$	62,242		$	83,814
Return on average shareholders' equity		(2.13)		%	13.0		%	2.61		%	11.7		%	11.6		%
Net income applicable to FB Financial Corporation																	Net income applicable to FB Financial Corporation	$	43,294		$	22,873		$	96,168		$	23,618		$	63,621
Return on average common shareholders' equity																	Return on average common shareholders' equity	13.0		%	11.6		%	14.7		%	6.07		%	6.58		%
Return on average tangible common equity	Return on average tangible common equity	(2.72)		%	17.5		%	3.34		%	15.6		%	15.4		%	Return on average tangible common equity	16.1		%	15.3		%	18.3		%	8.04		%	8.54		%

Overview

We are a ~~bank~~financial holding company headquartered in Nashville, Tennessee. We operate primarily through our wholly owned bank subsidiary, FirstBank, the third largest bank headquartered in Tennessee, based on total assets. FirstBank provides a comprehensive suite of commercial and consumer banking services to clients in select markets in Tennessee, ~~North~~Kentucky, Alabama ~~Kentucky~~ and North ~~Georgia.~~Georgia, and mortgage offices across the Southeast. As of ~~September~~June 30, ~~2020,~~2021, our footprint included 8781 full-service ~~bank~~ branches serving the following Tennessee Metropolitan Statistical ~~Areas (“MSAs”):~~Areas: Nashville, Chattanooga (including North Georgia), Knoxville, Memphis, and Jackson in addition to Bowling Green, Kentucky and Florence and Huntsville, ~~Alabama and~~Alabama. We also provide banking services to 16 community markets throughout Tennessee and North Georgia. FirstBank also provides mortgage banking services utilizing its bank branch network and mortgage banking offices strategically located throughout the southeastern United States ~~and~~in addition to a national internet delivery channel.

We operate through two segments, Banking and Mortgage. We generate most of our revenue in our Banking segment from interest on loans and investments, loan-related fees, ~~mortgage originations from mortgage offices within our banking footprint,~~ trust and investment services and deposit-related fees. Our primary source of funding for our loans is customer deposits, and, to a lesser extent, ~~Federal Home Loan Bank (“FHLB”)~~unsecured credit lines, FHLB advances, brokered and internet deposits, and other borrowings. We generate most of our revenue in our Mortgage segment from origination fees and gains on sales in the secondary market of mortgage loans that we originate ~~from our mortgage offices outside our Banking footprint and~~ through our retail and online ConsumerDirect ~~channel,~~channels, as well as from mortgage servicing revenues.

Pandemic Update

During 2020, the COVID-19 health pandemic created a crisis resulting in volatility in financial markets, sudden, unprecedented job losses, and disruption in consumer and commercial behavior, resulting in governments in the United States and globally to intervene with varying levels of direct monetary support and fiscal stimulus packages. All industries, municipalities and consumers have been impacted by the health crisis to some degree, including the markets that we serve. In attempts to “flatten the curve”, businesses not deemed essential were closed or constrained to capacity limitations, individuals were asked to restrict their movements, observe social distancing and shelter in place. These actions resulted in rapid decreases in commercial and consumer activity, temporary closures of many businesses, leading to a loss of revenues and a rapid increase in unemployment, widening of credit spreads, dislocation of bond markets, disruption of global supply chains and changes in consumer spending behavior. As certain restrictions began lifting and more businesses were allowed to open their doors in late 2020, we began to experience a slow improvement in commerce through much of our footprint, which continued into the first half of 2021 with further easing of restrictions and increasing availability of vaccinations. Despite the pickup in economic activity, commercial and consumer activity has not returned to pre-pandemic levels. Although most restrictions were lifted and vaccines became widely available during the first half of 2021, during the three months ended June 30, 2021, concern began building regarding the potential impact the new Delta variant of the virus may have on the global economy and the efficacy of available vaccines to protect against widespread infection. As such, there continues to be uncertainty regarding the long term effects on the global economy, which could have a material adverse impact on the Company's business operations, asset valuations, financial condition, and results of operations.

The Company has taken several actions to offer various forms of support to our customers and communities impacted by the virus. In addition, the Company continues to take deliberate actions to ensure the continued health and strength of its balance sheet, including increases in liquidity and managing assets and liabilities in order to maintain a strong capital position.

Mergers and acquisitions

Franklin Financial Network, Inc.

On August 15, 2020, the Company completed its previously announced merger with Franklin Financial Network, Inc, ~~("Franklin"),~~ and its wholly owned subsidiaries, with FB Financial Corporation continuing as the surviving entity. Under the terms of the agreement, the Company acquired total assets of ~~$3.62~~$3.63 billion, loans of $2.79 billion and assumed total deposits of ~~$3.11~~$3.12 billion. Total loans acquired ~~includes~~included a non-strategic institutional portfolio with a fair value of ~~$318.4~~$326.2 million the Company classified as held for sale. Franklin common shareholders received 15,058,181 shares of the Company's common stock, net of the equivalent value of 44,311 shares withheld on certain Franklin employee equity awards that vested upon change in control, as consideration in connection with the merger, in addition to $31.3 million in cash consideration. The Company also issued replacement restricted stock units to replace those initially granted by Franklin in 2020 that did not vest upon change in control, with a total fair value of $0.7 million attributed to pre-combination service. Based on the

closing price of the Company's common stock on the New York Stock Exchange of $29.52 on August 15, 2020, the merger consideration represented approximately $477.8 million in aggregate consideration.

The merger resulted in ~~additional~~ goodwill of ~~$60.6~~$67.2 million being recorded based on ~~preliminary~~the fair value ~~estimates~~ of total ~~net~~ assets acquired and liabilities assumed in the transaction.

The transaction added a new subsidiary to the Company, FirstBank Risk Management, which provides risk management services to the Company in the form of enhanced insurance coverages. It also added a new subsidiary to the Bank, FirstBank Investments of Tennessee, Inc., which provides investment services to the Bank. FBIT has a wholly owned subsidiary, FirstBank Investments of Nevada, Inc. to provide investment services to FBIT. FBIN has a controlling interest in a subsidiary, FirstBank Preferred Capital, Inc., which serves as a real estate investment trust, to allow the Bank to sell real estate loans to the REIT to obtain a tax benefit.

FNB Financial Corp. merger

On February 14, 2020, the Company completed its previously announced acquisition of FNB Financial Corp. and its wholly owned subsidiary, Farmers National Bank of Scottsville (collectively, "Farmers National"). Following the acquisition, Farmers National was merged into the Company with FB Financial Corporation continuing as the surviving entity. The Company acquired total assets of $258.2 million, loans of $182.2 million and deposits of $209.5 million. The consideration is valued at approximately $50.0 million based on 954,797 shares of the Company's common stock (utilizing the Company's market price of $36.70 on February 14, 2020) and $15.0 million in cash consideration. The acquisition resulted in ~~$6.4~~$6.3 million of ~~preliminary~~ goodwill.

~~Atlantic Capital Bank, N.A. Branches~~

On April 5, 2019, the Bank completed its branch acquisition to purchase 11 Tennessee and three Georgia branch locations (the "Branches") from Atlantic Capital Bank, N.A., a national banking association and a wholly owned subsidiary of Atlantic Capital Bancshares, Inc., a Georgia corporation (collectively, "Atlantic Capital"), further increasing market share in existing markets and expanding the Company's footprint into new locations. The branch acquisition added $588.9 million in customer deposits at a premium of 6.25% and $375.0 million in loans. All of the operations of the Branches are included in the Banking segment.

See Note 2, “Mergers and acquisitions” in the notes to the consolidated financial statements included in this Report for further details regarding the terms and conditions of these mergers and acquisitions.

~~Recent developments: COVID-19 and the CARES Act~~

In the first nine months of 2020, the COVID-19 health pandemic created a crisis resulting in volatility in financial markets, sudden, unprecedented job losses, and disruption in consumer and commercial behavior, resulting in governments in the United States and globally to intervene with varying levels of direct monetary support and fiscal stimulus packages. All industries, municipalities and consumers have been impacted by the health crisis to some degree, including the markets that we serve. In attempts to “flatten the curve”, businesses not deemed essential have been closed or constrained to capacity limitations, individuals have been asked to restrict their movements, observe social distancing and shelter in place. These actions resulted in rapid decreases in commercial and consumer activity, temporary closures of many businesses, leading to a loss of revenues and a rapid increase in unemployment, widening of credit spreads, dislocation of bond markets, disruption of global supply chains and changes in consumer spending behavior. During the end of second quarter of 2020, many municipalities within our footprint began loosening restrictions and many customers began returning to work, pointing to an improvement in economic conditions. Subsequent to these changes, the number of

COVID-19 cases began to rise in certain locations within our markets, or sustained at elevated levels for much of the third quarter, leading to an increase in restrictions, and slow down in commerce once again, which continues to persist. There is uncertainty regarding the long term effects on the global economy, but short term expectations include elevated unemployment and/or reduced labor participation, negative gross domestic product (GDP), alterations in business and consumer spending, depressed commercial real estate markets, and a continuation of current interest rate policies.

On March 3, 2020, the Federal Open Market Committee (‘‘FOMC’’) reduced the target federal funds rate by 50 basis points to a range of 1.00% to 1.25%. On March 15, 2020 the Federal Reserve announced it would revive its quantitative easing program to provide liquidity to the U.S. treasury and mortgage markets by committing to buy $500 billion of U.S. Treasuries and $200 billion of agency mortgage backed securities. On March 16, 2020, the FOMC further reduced the target federal funds rate by an additional 100 basis points to a range of 0.00% to 0.25%. On March 23, 2020 the Federal Reserve modified its quantitative easing program initiative to an unlimited purchase program that is expected to exceed the monetary policy support provided during the financial crisis over 10 years ago. These actions could have significant adverse effects on the earnings, financial condition and results of operations of the Company.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security ("CARES") Act was signed into law. The CARES Act includes the Paycheck Protection Program ("PPP"), a nearly $670 billion program, as amended, designed to aid small- and medium-sized businesses through federally guaranteed loans distributed through banks. These loans are intended to guarantee up to 24 weeks of payroll and other costs, including rent and other operating costs, to help those businesses remain viable and allow their workers to continue paying bills. As of September 30, 2020, we funded $310.7 million of PPP loans through the US Small Business Administration ("SBA"). The SBA has announced it will continue accepting PPP loan forgiveness applications in the fourth quarter of 2020, at which point we expect to begin to see a decline in these loans on our balance sheet, for which we anticipate being repaid in full.

On March 22, 2020, an Interagency Statement was issued by banking regulators encouraging financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of COVID-19. Additionally, Section 4013 of the CARES Act further provides that a qualified loan modification is exempt by law from classification as a troubled debt restructuring ("TDR") as defined by GAAP, from the period beginning March 1, 2020 until the earlier of December 31, 2020 or the date that is 60 days after the date on which the national emergency concerning the COVID-19 outbreak terminates. We have numerous customers that have experienced financial distress, as a direct result of COVID-19, and in response we introduced a payment deferral program to assist during these unprecedented times. As of September 30, 2020, we had a recorded investment in loans remaining on Company-sponsored deferred payments programs in connection with COVID-19 relief totaling $464.8 million, or approximately 6.4% of our loans held for investment. Of the loans granted deferrals, these modifications typically range between sixty to ninety days and were not considered TDRs under the interagency regulatory guidance or the CARES Act. Additionally, we service mortgages on behalf of Fannie Mae, Freddie Mac and Ginnie Mae, and as of September 30, 2020 approximately 6% of customers serviced on behalf of the aforementioned companies have received forbearance assistance. COVID-19 is expected to continue to influence commerce worldwide and the magnitude to which our financial results will be impacted is uncertain at this time.

Overview of recent financial performance

Results of operations

Three months ended ~~September~~June 30, ~~2020~~2021 compared to the three months ended ~~September~~June 30, ~~2019~~2020

~~We incurred a~~Our net ~~loss of $5.6~~income increased during the three months ended June 30, 2021 to $43.3 million, up from $22.9 million for the three months ended ~~September~~June 30, ~~2020 compared to a net income of $24.0 million~~2020. Diluted earnings per common share was $0.90 and $0.70 for the three months ended ~~September~~June 30, ~~2019. Diluted earnings per common share represented a loss of $0.14~~2021 and ~~earnings of $0.76 for the three months ended September 30,~~ 2020, ~~and 2019,~~ respectively. Our net ~~loss~~income represented a return on average assets, or ROAA, of ~~(0.24)%~~1.46% and 1.30% for the three months ended ~~September~~June 30, 2021 and 2020, ~~compared to~~respectively and a ~~return of 1.59% for the three months ended September 30, 2019, and our~~ return on average shareholders’ equity, or ROAE, ~~was (2.1)%~~of 13.0% and ~~13.0%~~11.6% for the same periods. Our ratio of return on average tangible common equity, or ~~ROATE~~ROATCE for the three months ended ~~September~~June 30, 2021 and 2020 was 16.1% and ~~2019 was (2.7)% and 17.5%~~15.3%, respectively.

~~These results continued to be impacted by the uncertainty in economic conditions during the quarter, however we benefited from an increase in noninterest income of $58.9 million to $97.0 million for~~During the three months ended ~~September~~June 30, 2020, compared with $38.1 million for prior year period. The increase in mortgage banking income was the primary driver for the uptick in noninterest income, as a result of the lower interest rate environment. These gains were offset by increases in our provision for credit losses on loans held for investment to $45.8 million for the three months ended September 30, 2020 compared to $1.8 million for the three months ended September 30, 2019, as well as an

increase in noninterest expenses of $55.2 million to $118.1 million for the three months ended September 30, 2020, up from $62.9 million for the same period in the prior year, primarily driven by increased merger costs and other costs associated with our overall growth.

~~During the three months ended September 30, 2020,~~2021, net interest income before the provision for credit losses increased to ~~$68.8~~$86.6 million compared with ~~$58.3~~$55.3 million for the three months ended ~~September~~June 30, ~~2019.~~

2020. Our net interest margin, on a tax-equivalent basis, decreased to ~~3.28%~~3.18% for the three months ended ~~September~~June 30, ~~2020,~~2021, compared with ~~4.28%~~3.50% for the three months ended ~~September~~June 30, ~~2019.~~2020. The ~~decline~~decrease was the combined result of sustained lower interest rates on newly issued loans for three months ended June 30, 2021 and a change in balance sheet ~~mix~~composition which was illustrated by an increase in excess liquidity, which negatively impacted our NIM by approximately 37 basis points for the three months ended June 30, 2021. Whereas, for the three months ended June 30, 2020, excess liquidity negatively impacted our NIM by approximately 7 basis points. We estimate our excess liquidity to be interest-bearing deposits with other financial institutions in excess of 5% of average tangible assets.

We incurred a decrease in noninterest income of $32.2 million to $49.3 million for the three months ended June 30, 2021, compared with $81.5 million for the same period in the prior year. The decrease in mortgage banking income was the primary driver for the downward movement in noninterest income, which was a result of lower interest rate lock volumes during the three months ended ~~September~~June 30, 2021 when compared with the three months ended June 30, 2020. ~~Average yield~~This decrease was partially offset by reversals in provisions for credit losses of $13.8 million (including a reversal of provision for credit losses on ~~interest-earning assets decreased 151 basis points year over year, from 5.37%~~unfunded commitments of $1.0 million) for the three months ended ~~September~~June 30, ~~2019,~~2021 compared to ~~3.86%~~recognition of provisions for credit losses of $25.9 million (including a recognition of provision for credit losses on unfunded commitments of $1.9 million) for the three months ended ~~September~~June 30, 2020.

~~Nine months ended September 30, 2020 compared to the nine months ended September 30, 2019~~

Our net income decreased during the nine months ended September 30, 2020 to $18.0 million from $62.2 million for the nine months ended September 30, 2019. Diluted earnings per common share was $0.52 and $1.97 for the nine months ended September 30, 2020 and 2019, respectively. Our net income represented a ROAA of 0.32% and 1.47% for the nine months ended September 30, 2020 and 2019, respectively, and a ROAE of 2.6% and 11.7% for the same periods. Our ratio of ROATE for the nine months ended September 30, 2020 and 2019 was 3.3% and 15.6%, respectively.

These results were significantly impacted by the decline in economic conditions, the result of the onset of the COVID-19 pandemic during the first half of 2020, combined with the impact of economic forecasts incorporated in our CECL loss rate model, leading to an increase in our provision for credit losses on loans held for investment of $97.8 million for the nine months ended September 30, 2020 compared with $4.1 million for the nine months ended September 30, 2019.

During the nine months ended September 30, 2020, net interest income before provision for credit losses increased slightly to $180.4 million compared with $168.3 million in the nine months ended September 30, 2019.

Our net interest margin, on a tax-equivalent basis, decreased to 3.53% for the nine months ended September 30, 2020 as compared to 4.42% for the nine months ended September 30, 2019, influenced by declining interest rates during the current period.

Noninterest income for the nine months ended September 30, 2020 increased by $121.1 million to $221.2 million, up from $100.2 million for prior year period. The increase in noninterest income was primarily driven by an increase in mortgage banking income of $114.9 million to $189.6 million.

Noninterest expense increased to ~~$267.2~~$93.0 million for the ~~nine~~three months ended ~~September~~June 30, ~~2020,~~2021, compared with ~~$182.2~~$80.6 million for the ~~nine~~three months ended ~~September~~June 30, ~~2019.~~2020. The increase in noninterest expense is reflective of the ~~increase in mortgage commissions stemming from elevated business activity, as well as the impact of our acquisitions and integration activities, including~~ increases in salaries, commissions and personnel-related costs from the incremental head ~~count.~~count associated with our growth, including the impact of our acquisition of Franklin.

Six months ended June 30, 2021 compared to the six months ended June 30, 2020

Our net income increased during the six months ended June 30, 2021 to $96.2 million from $23.6 million for the six months ended June 30, 2020. Diluted earnings per common share was $2.00 and $0.74 for the six months ended June 30, 2021 and 2020, respectively. Our net income represented a return on average assets of 1.66% and 0.70% for the six months ended June 30, 2021 and 2020, respectively, and a return on average equity of 14.7% and 6.07% for the same periods. Our ratio of return on average tangible common equity for the six months ended June 30, 2021 and 2020 was 18.3% and 8.04%, respectively.

These results were significantly impacted by the improvement in economic forecasts incorporated in our current expected credit losses loss rate model, leading to a reversal in our provisions for credit losses and unfunded commitments amounting to $27.7 million for the six months ended June 30, 2021 compared with provision expenses of $55.5 million for the six months ended June 30, 2020. Our results were also impacted by our acquisition of Farmers National during the six months ended June 30, 2020, resulting in merger expenses of $4.6 million during the first half of 2020. There were no business combinations during the six months ended June 30, 2021.

During the six months ended June 30, 2021, net interest income before provisions for credit losses increased to $169.1 million compared with $111.6 million in the six months ended June 30, 2020. Our net interest margin, on a tax-equivalent basis, decreased to 3.18% for the six months ended June 30, 2021 as compared to 3.70% for the six months ended June 30, 2020, influenced by a sustained low interest rate environment. Our NIM was also influenced by a change in balance sheet composition which was illustrated by an increase in excess liquidity, which negatively impacted our NIM by approximately 35 basis points for the six months ended June 30, 2021 compared to 4 basis points for the six months ended June 30, 2020.

Noninterest income for the six months ended June 30, 2021 decreased by $8.2 million to $116.0 million, down from $124.2 million for prior year period. The decrease in noninterest income was primarily driven by an decrease in mortgage banking income of $14.1 million to $90.8 million, which was partially offset by increases in both ATM and interchange fee income and investment services and trust income, reflecting the increase in commerce during the six months ended June 30, 2021 compared with the six months ended June 30, 2020.

Noninterest expense increased to $187.7 million for the six months ended June 30, 2021, compared with $149.1 million for the six months ended June 30, 2020. The increase in noninterest expense is reflective of the increases in salaries, commissions and personnel-related costs from the incremental head count increase associated with our growth, including the impact of our business combination with Franklin in the last half of 2020.

Financial condition

Our total assets ~~grew~~increased by ~~79.8%~~6.34% to ~~$11.01~~$11.92 billion ~~at September~~as of June 30, ~~2020,~~2021, as compared to ~~$6.12~~$11.21 billion atas of December 31, ~~2019. The~~2020. This increase reflects ~~additions through acquisitions amounting~~increased liquidity in the form of cash and cash equivalents of $399.2 million to ~~$3.62~~$1.72 billion ~~and $258.2 million~~as of June 30, 2021 from ~~Franklin and Farmers National, respectively, which closed on August 15, 2020 and February 14, 2020, respectively. Loans held for investment increased $2.80~~$1.32 billion ~~to $7.21 billion at September 30, 2020, compared to $4.41 billion at~~as of December 31, ~~2019. The~~2020, in addition to an increase ~~in loans held for investment in the nine months~~ of ~~2020 includes $2.44~~available-for-sale debt securities of $232.0 million to $1.40 billion ~~and $182.2 million~~as of ~~loans acquired~~June 30, 2021 from ~~Franklin and Farmers National, respectively,~~$1.17 billion as ~~well as $310.7 million~~ of ~~PPP loans originated as part of the CARES Act.~~

~~We grew total deposits by $4.16 billion to $9.09 billion at September 30, 2020, compared to $4.93 billion at~~ December 31, ~~2019. The increase includes $3.11 billion of customer deposits assumed in the Franklin acquisition and $209.5 million assumed in the Farmers National acquisition.~~

Excluding the impact of our merger and acquisition activities, as well as the PPP loans included in loans held for investment, total assets increased 11.3%, total loans decreased 2.8%, and total deposits increased 17.1%, in each case from December 31, 2019 to September 30, 2020.

Business segment highlights

We operate our business in two business segments: Banking and Mortgage. As previously reported, on March 31, 2021, the Company re-evaluated its business segments and revised to align all mortgage activities with the Mortgage segment. Previously, the Company had attributed retail mortgage activities originating from geographical locations within the footprint of the Company's branches to the Banking segment. Previously disclosed results for the three and six months ended June 30, 2020 have been revised to reflect this realignment. See Note ~~15,~~12, “Segment ~~reporting,”~~reporting” in the notes to our consolidated financial statements for a description of these business segments.

Banking

Income before taxes from the Banking segment ~~decreased~~increased for the three months ended ~~September~~June 30, ~~2020~~2021 to $56.2 million, compared to a loss of ~~$37.3 million compared to income of $29.0~~$3.3 million for the three months ended ~~September~~June 30, ~~2019. The~~2020. These results were primarily driven by ~~an increase~~reversals in ~~the~~provisions for credit losses of $13.8 million (including a reversal of provision for credit losses on ~~loans held~~unfunded commitments of $1.0 million) for ~~investment and unfunded loan commitments totaling $55.4 million during~~ the three months ended ~~September~~June 30, ~~2020. Net interest income increased $10.4~~2021 compared to provisions for credit losses expense of $25.9 million ~~to $68.8 million during~~(including a provision for credit losses on unfunded commitments of $1.9 million) for the three months ended ~~September~~June 30, ~~2020 from $58.4 million in the same period in the prior year.~~2020. Noninterest income increased to ~~$37.0~~$14.0 million in the three months ended ~~September~~June 30, ~~2020,~~2021 as compared to ~~$19.6~~$9.3 million in the three months ended ~~September~~June 30, ~~2019.~~2020. Noninterest expense increased ~~$40.6~~$16.2 million to $58.2 million for three months ended June 30, 2021, primarily due to ~~costs associated with~~ our overall growth, including ~~the impact of our acquisition of Franklin, Farmers National and the Branches and~~ increased salaries,

commissions and employee benefits ~~expenses. Results~~expenses associated with incremental headcount following our acquisition of our Banking Segment also include mortgage retail footprint pre-tax net contribution of $9.5 million in the three months ended September 30, 2020 compared to $2.6 million for the three months ended September 30, 2019.Franklin.

Income before taxes from the Banking segment ~~decreased in~~increased for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 to $108.3 million, compared to a loss of ~~$38.9 million, compared to income of $81.0~~$10.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019. The~~2020. These results were primarily driven by increases in net interest income of $57.6 million to $169.2 million during the six months ended June 30, 2021 compared to $111.6 million during the six months ended June 30, 2020. Our provisions for credit losses on loans held for investment and unfunded loan commitments ~~totaling $110.9~~resulted in a reversal of $27.7 million of provision during the ~~nine~~six months ended ~~September~~June 30, ~~2020. Net interest income increased $12.1 million~~2021 compared to ~~$180.4 million during the nine months ended September 30, 2020 from $168.3~~expense of $55.5 million in the same period in the ~~prior~~previous year. Noninterest income increased to ~~$83.9~~$25.4 million in the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 as compared to ~~$46.0~~$19.3 million in the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. Noninterest expense increased ~~$63.1~~$28.1 million ~~primarily~~to $113.9 million for six months ended June 30, 2021 due to ~~merger and other costs associated with our overall growth, including increased~~increases in salaries, commissions and employee benefits ~~expenses~~ associated with ~~incremental~~our growth, including the impact of additional headcount ~~following~~resulting from our ~~acquisitions. Results~~acquisition of Franklin and investment in additional revenue producers in our Banking Segment also include mortgage retail footprint pre-tax net contribution of $18.4 million in the nine months ended September 30, 2020 compared to pre-tax net contribution of $5.4 million for the nine months ended September 30, 2019.markets.

Mortgage

During 2019, we made a strategic decision to sell our wholesale mortgage operations, which comprise the third party origination ("TPO") and correspondent mortgage delivery channels (collectively referred to as "mortgage restructuring"). The exit of the two wholesale channels better aligns the Mortgage segment with our strategic plan and long-term vision for the Company. This has also allowed additional focus on our retail and Consumer Direct origination channels. In connection with the mortgage restructuring, the Company incurred related expenses, including $0.1 million attributed to the relief of goodwill, totaling $0.1 million and $2.0 million for the three and nine months ended September 30, 2019, respectively.

Income before taxes from the Mortgage segment ~~increased~~decreased to ~~$29.7~~$0.5 million for the three months ended ~~September~~June 30, ~~2020,~~2021, compared with ~~$2.7~~$33.6 million for the three months ended ~~September~~June 30, ~~2019;~~2020; the result of ~~higher~~lower volumes ~~encouraged~~impacted by the ~~lower~~rising interest rate environment and a ~~sustained elevation~~decrease in refinancing activity. Noninterest income ~~increased $41.5~~decreased $36.9 million to ~~$60.0~~$35.3 million ~~during~~for the three months ended ~~September~~June 30, ~~2020,~~2021, compared with $72.2 million the three months ended ~~September~~June 30, ~~2019. The components and activity of mortgage banking income are discussed further under the heading "Noninterest income" within the "Management's discussion and analysis" section of this Report.~~2020.

Noninterest expense for the three months ended ~~September~~June 30, 2021 and 2020 ~~and 2019~~ was ~~$30.4~~$34.8 million and ~~$15.8~~$38.5 million, respectively. ~~Elevated~~Lower noninterest expenses were mainly attributable to decreased mortgage commissions and other costs associated with ~~increased volumes~~the lower volume during the three months ended ~~September~~June 30, 2021 compared with the three months ended June 30, 2020.

Income before taxes from the Mortgage segment ~~increased~~decreased to ~~$62.4~~$16.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 as compared to ~~$1.2~~$41.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019 primarily due to increased volume driven by declining interest rates and an increase~~2020 There was a decrease in ~~refinancing activity. Noninterest~~mortgage banking income ~~increased $83.1~~of $14.1 million to ~~$137.3~~$90.8 million during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 compared to ~~$54.2~~$104.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. This was a result of a 15.4% decrease in interest rate lock volume during the six months ended June 30, 2021 compared with the same period in the prior year. Generally, mortgage volume increases in lower interest rate environments and robust housing markets and decreases in rising interest rate environments and slower housing markets. This slowdown in interest rate lock volume during the six months ended June 30, 2021 reflects the slow down experienced across the industry compared with the same period in the prior year, which benefited from historically low interest rates pre-empted by the COVID-19 Pandemic.

Noninterest expense for the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020 ~~and 2019~~ was ~~$74.9~~$73.7 million and ~~$53.0~~$63.3 million, respectively. This increase during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 is mainly attributable to ~~a continued~~additional hiring which was driven by the increased volume our business lines were experiencing. Headcount also increased following our 2020 acquisitions.

~~increase in business activity~~Further discussion on the components of mortgage banking income is included under the subheading 'Noninterest income' included within this management's discussion and ~~the result of a conducive interest rate environment for refinancing during the period, which led to an increase in related commissions and incentives expenses.~~analysis.

Results of operations

Throughout the following discussion of our operating results, we present our net interest income, net interest margin and efficiency ratio on a fully tax-equivalent basis. The fully tax-equivalent basis adjusts for the tax-favored status of net interest income from certain loans and investments. We believe this measure to be the preferred industry measurement of net interest income, which enhances comparability of net interest income arising from taxable and tax-exempt sources.

The adjustment to convert certain income to a tax-equivalent basis consists of dividing tax exempt income by one minus the combined federal and blended state statutory income tax rate of 26.06% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019.~~2020.

Net interest income

Net interest income is the most significant component of our earnings, generally comprising of over 50% of our total revenues in a given ~~quarter.~~period. Net interest income and margin are shaped by many factors, primarily the volume, term structure and mix of earning assets, funding mechanisms, and interest rate fluctuations. Other factors include accretion income on purchased loans, prepayment risk on mortgage and investment–related assets, and the composition and maturity of earning assets and interest-bearing liabilities. Loans typically generate more interest income than investment securities with similar maturities. Funding from client deposits generally costs less than wholesale funding sources.

Factors such as general economic activity, Federal Reserve monetary policy, and price volatility of competing alternative investments, can also exert significant influence on our ability to optimize the mix of assets and funding, net interest income, and margin.

In response to economic uncertainty related to the COVID-19 pandemic, short term interest rates have been at historic lows. The Federal Funds Target Rate range was 0% - 0.25% as of June 30, 2020 and maintained this rate as of June 30, 2021. According to the Chair of the Board of Governors of the Federal Reserve, ~~remains committed to using all available tools to support the economy and uphold their dual mandate of full employment and stable prices. The FOMC maintained~~ the Federal Funds Target Rate is not likely to drop below this range. However, the Federal Reserve does have other tools available that it can employ and has expressed an intention to do so in order to maintain a targeted level of liquidity. Furthermore, the Federal Reserve has indicated it expects only slight rate increases over the next 24 months and expects a Federal Funds Target range of 0.50% to ~~zero lower bound, and~~0.75% by 2023. Additionally, the Federal Reserve maintained their commitment to open-ended purchases of Treasury securities and agency mortgage-backed securities. During the ~~third quarter~~first half of ~~2020,~~2021, the US Treasury yield curve steepened as long-term rates rose and short-term rates ~~fell~~remained constant. During the first half of 2020, the US Treasury curve flatten as long-term and long-term rates rose. As a result of the spread of COVID-19, economic uncertainties have arisen that are likely to continue having a negative impact on net interest income. Other financial impacts could occur, though such potential impacts are unknown at this time.short-term decreased significantly.

Three months ended ~~September~~June 30, ~~2020~~2021 compared to three months ended ~~September~~June 30, ~~2019~~2020

Net interest income increased ~~18.0%~~56.4% to ~~$68.8~~$86.6 million for the three months ended June 30, 2021 compared to $55.3 million in the three months ended ~~September~~June 30, ~~2020 compared to $58.3 million in the three months ended September 30, 2019.~~2020. On a tax-equivalent basis, net interest income increased ~~$10.9~~$31.3 million to ~~$69.6~~$87.3 million infor the three months ended ~~September~~June 30, ~~2020~~2021 as compared to ~~$58.8~~$56.0 million infor the three months ended ~~September~~June 30, ~~2019.~~2020. The increase in tax-equivalent net interest income infor the three months ended ~~September~~June 30, ~~2020~~2021 was primarily driven by an increase in ~~loan~~the volume ~~influenced by the Franklin merger, and offset by~~in loans held for investment combined with a ~~larger~~ decrease in ~~overall~~our cost of ~~deposits.~~funding, specifically our borrowing rate on customer time deposits, which decreased to 0.63% for the three months ended June 30, 2021 compared to 1.78% for the three months ended June 30, 2020.

Interest income, on a tax-equivalent basis, was ~~$81.9~~$97.1 million for the three months ended ~~September~~June 30, ~~2020,~~2021, compared to ~~$73.7~~$66.2 million for the three months ended ~~September~~June 30, ~~2019,~~2020, an increase of ~~$8.2~~$30.8 million. Interest income on loans held for investment, on a tax-equivalent basis, increased ~~$6.4~~$25.2 million to ~~$71.7~~$83.4 million for the three months ended ~~September~~June 30, ~~2020~~2021 from ~~$65.2~~$58.2 million for the three months ended ~~September~~June 30, ~~2019~~2020 primarily due to ~~increased loan volume driven by growth~~an increase in average balances of loans held for investment of $2.31 billion. The increase in the average loan balances ~~of $1,756.1 million. The growth in average loan balance~~period over period reflects the ~~addition of $182.2 million in loans acquired from Farmers National and $2,436.7 million in loans~~$2.43 billion loan portfolio acquired in the Franklin ~~merger. In addition, the origination~~merger offset by a decrease of $116.9 million in average PPP loans during the ~~period contributed~~three months ended June 30, 2021 from an ~~additional $311.0~~average balance of $234.3 million ~~increase in average total loans held~~ for ~~investment.~~the three months ended June 30, 2020.

The tax-equivalent yield on loans held for investment was ~~4.70%,~~4.72% for the three months ended June 30, 2021, down ~~131~~18 basis points from the three months ended ~~September~~June 30, ~~2019.~~2020. The decrease in yield was primarily due to sustained low contractual interest rates during the ~~lower interest rate environment and was also impacted by lower-yielding PPP~~three months ended June 30, 2021 compared with the contractual rates of loans ~~originated~~paid off or refinanced during the period. Contractual loan interest rates yielded ~~4.36%~~4.31% in the three months ended ~~September~~June 30, ~~2020~~2021 compared with ~~5.50%~~4.57% in the three months ended ~~September~~June 30, ~~2019.~~2020. Excluding PPP loans, ~~contribute 18~~which have a 1% contractual loan yield, our contractual loan yield would have been 6 basis points higher for the three months ended June 30, 2021 compared to 18 points higher for the same period of ~~this decline in contractual loan yield.~~the prior year.

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Our NIM, on a tax-equivalent basis, decreased to 3.18% during the three months ended June 30, 2021 from 3.50% in the three months ended June 30, 2020, driven by loans issued in a declining interest rate environment and a change in balance sheet mix. The components of our loan yield, a key driver to our NIM for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, were as follows:


		Three Months Ended September 30,								Three Months Ended June 30,
		2020				2019					2021				2020
(dollars in thousands)	(dollars in thousands)	Interest income		Average yield		Interest income		Average yield				(dollars in thousands)	Interest income		Average yield		Interest income		Average yield
Loan yield components:	Loan yield components:											Loan yield components:
Contractual interest rate on loans held for investment (1)(2)	Contractual interest rate on loans held for investment (1)(2)	$	66,441	4.36	%	$	59,645	5.50	%			Contractual interest rate on loans held for investment(1)(2)	$	76,127	4.31	%	$	54,233	4.57	%
Origination and other loan fee income (2)	Origination and other loan fee income (2)	4,029		0.26	%	3,293		0.30	%			Origination and other loan fee income(2)	6,928		0.39	%	2,823		0.24	%
Accretion on purchased loans		526		0.04	%	2,102		0.19	%
(Amortization) accretion on purchased loans												(Amortization) accretion on purchased loans	(226)		(0.01)	%	976		0.08	%
Nonaccrual interest collections	Nonaccrual interest collections	664		0.04	%	201		0.02	%			Nonaccrual interest collections	535		0.03	%	169		0.01	%

Total loan yield	Total loan yield	$	71,660	4.70	%	$	65,241	6.01	%			Total loan yield	$	83,364	4.72	%	$	58,201	4.90	%

(1)Includes tax-equivalent adjustment.

(2)Includes ~~$797~~$0.3 million and $0.6 million of loan contractual interest and ~~$850~~$1.1 million and $0.6 million of loan fees related to PPP loans for ~~the~~ three months ended ~~September~~June 30, ~~2020.~~2021 and 2020, respectively.

Accretion on purchased loans lowered the NIM by 1 basis point for the three months ended June 30, 2021 and contributed ~~2 and 15~~6 basis points to the NIM for the three months ended ~~September~~June 30, ~~2020 and 2019, respectively.~~2020. The decrease in accretion is due in part to the ~~adoption~~continued impact of ~~CECL and~~ purchase accounting resulting from our merger with Franklin, ~~that~~which after grossing up the amortized cost of purchased credit deteriorated loans, contributed a net premium of $11.3 million recorded as of August 15, 2020, to be amortized as a reduction to loan interest income. ~~Contractual interest and origination fees on~~Excluding PPP loans, ~~attributed 8~~which have a contractual interest rate of 1%, our NIM would have been 5 and 11 basis points ~~to the NIM~~higher for the three months ended ~~September~~June 30, ~~2020. We~~2021 and 2020, respectively. As of June 30, 2021, we anticipate recognizing an estimated ~~$4.9~~$0.4 million in deferred origination fees, net of third party costs and deferred salaries, over the remaining life of the PPP loan portfolio.

Our NIM, on a tax-equivalent basis, decreased to 3.28% during the three months ended September 30, 2020 from 4.28% in the three months ended September 30, 2019, driven by a declining interest rate environment and change in balance sheet mix, partially attributable to our acquisition of Franklin during the period.

Interest expense was ~~$12.3~~$9.8 million for the three months ended ~~September~~June 30, ~~2020,~~2021, a decrease of ~~$2.6~~$0.5 million as compared to the three months ended ~~September~~June 30, ~~2019.~~2020. The primary driver was the decrease in interest ~~rates~~expense on time deposits of ~~$2.9~~$3.0 million to ~~$10.6~~$2.4 million for the three months ended ~~September~~June 30, ~~2020,~~2021, compared to ~~$13.5~~$5.4 million for the three months ended ~~September 30, 2019. The decrease was largely attributed to money market deposits which decreased to $3.6 million for the three months ended September~~June 30, 2020 ~~from $4.6 million for the three months ended September 30, 2019 and customer time deposits~~ which ~~decreased to $4.8 million for the three months ended September 30, 2020 from $6.4 million for the three months ended September 30, 2019. The average rate~~was partially offset by an increase in interest expense on money markets decreased to 0.66%, down 79 basis points from the three months ended September 30, 2019. Average money market balances increased $918.6 million to $2,179.1 million during the three months ended September 30, 2020 from $1,260.6 millionsubordinated debt of $1.4 for the same ~~period in the previous year.~~The decrease in deposit interest expense was also attributed to a $1.5 million decrease in customer time deposit interest expense during the three months ended September 30, 2020, driven by lower rates.period. The average rate on customer time deposits decreased 69115 basis points from ~~2.13%~~1.78% for the three months ended ~~September~~June 30, ~~2019~~2020 to ~~1.44%~~0.63% for the three months ended ~~September~~June 30, ~~2020.~~

Deposit balance growth was partially attributed to proceeds customers received from PPP loans in addition to an increase of $45.2 million in mortgage servicing related deposits. The deposit growth from PPP loans is difficult to quantify due to the fact that depositors' cash is fluid2021 as more costly deposits with higher interest rates matured or renewed and comes from many sources. Deposit balances of customers who received PPP funds from our originations have increased, however, it is difficult to distinguish how much of the growth was received from our PPP proceeds or other banking relationships.repriced at lower interest rates. Total cost of deposits was ~~0.56%~~0.31% for the three months ended ~~September~~June 30, ~~2020~~2021 compared to ~~1.11%~~0.65% for the three months ended ~~September~~June 30, ~~2019.~~2020. Average subordinated debt outstanding increased to $149.2 million for the three months ended June 30, 2021 from $30.9 million for the three months ended June 30, 2020 as a result of our $100.0 million issuance in the last half of 2020 and additional subordinated debt we assumed in the Franklin merger.

6765

Average balance sheet amounts, interest earned and yield analysis

The table below shows the average balances, income and expense and yield and rates of each of our interest-earning assets and interest-bearing liabilities on a tax equivalent basis, if applicable, for the periods indicated.


		Three Months Ended September 30,												Three Months Ended June 30,
		2020						2019							2021				2020
(dollars in thousands on tax-equivalent basis)	(dollars in thousands on tax-equivalent basis)	Average balances (1)		Interest income/ expense		Average yield/ rate		Average balances (1)		Interest income/ expense		Average yield/ rate				(dollars in thousands on tax-equivalent basis)	Average balances (1)		Interest income/ expense		Average yield/ rate		Average balances (1)		Interest income/ expense		Average yield/ rate
Interest-earning assets:	Interest-earning assets:															Interest-earning assets:
Loans (2)(4)	Loans (2)(4)	$	6,062,785	$	71,660	4.70	%	$	4,306,725	$	65,241	6.01	%			Loans(2)(4)	$	7,085,300	$	83,364	4.72	%	$	4,775,229	$	58,201	4.90	%
Loans held for sale- mortgage	Loans held for sale- mortgage	486,899		3,624		2.96	%	262,896		2,448		3.69	%			Loans held for sale- mortgage	726,782		4,948		2.73	%	358,108		2,947		3.31	%
Loans held for sale-commercial	Loans held for sale-commercial	99,745		1,336		5.33	%	—		—		—	%			Loans held for sale-commercial	152,699		1,626		4.27	%	—		—		—	%
Securities:	Securities:															Securities:
Taxable	Taxable	604,557		2,286		1.50	%	508,924		3,137		2.45	%			Taxable	976,170		3,844		1.58	%	494,987		2,619		2.13	%
Tax-exempt (4)	Tax-exempt (4)	309,352		2,614		3.36	%	153,633		1,588		4.10	%			Tax-exempt(4)	323,902		2,614		3.24	%	236,161		2,174		3.70	%
Total Securities(4)	Total Securities(4)	913,909		4,900		2.13	%	662,557		4,725		2.83	%			Total Securities(4)	1,300,072		6,458		1.99	%	731,148		4,793		2.64	%
Federal funds sold		88,626		19		0.09	%	24,388		166		2.70	%
Federal funds sold and reverse repurchase agreements’																Federal funds sold and reverse repurchase agreements’	106,257		41		0.15	%	50,402		10		0.08	%
Interest-bearing deposits with other financial institutions	Interest-bearing deposits with other financial institutions	763,251		309		0.16	%	176,708		950		2.13	%			Interest-bearing deposits with other financial institutions	1,614,106		494		0.12	%	509,283		194		0.15	%
FHLB stock	FHLB stock	22,517		76		1.34	%	15,976		176		4.37	%			FHLB stock	31,731		156		1.97	%	16,871		102		2.43	%
Total interest earning assets (4)	Total interest earning assets (4)	8,437,732		81,924		3.86	%	5,449,250		73,706		5.37	%			Total interest earning assets(4)	11,016,947		97,087		3.53	%	6,441,041		66,247		4.14	%
Noninterest Earning Assets:	Noninterest Earning Assets:															Noninterest Earning Assets:
Cash and due from banks	Cash and due from banks	69,788						51,433								Cash and due from banks	134,501						58,304
Allowance for credit losses	Allowance for credit losses	(144,991)						(30,484)								Allowance for credit losses	(157,990)						(91,196)
Other assets(3)	Other assets(3)	816,759						518,373								Other assets(3)	906,992						666,463
Total noninterest earning assets	Total noninterest earning assets	741,556						539,322								Total noninterest earning assets	883,503						633,571
Total assets	Total assets	$	9,179,288					$	5,988,572							Total assets	$	11,900,450					$	7,074,612
Interest-bearing liabilities:	Interest-bearing liabilities:															Interest-bearing liabilities:
Interest bearing deposits:	Interest bearing deposits:															Interest bearing deposits:
Interest-bearing checking	Interest-bearing checking	$	1,626,067	$	2,194	0.54	%	$	971,686	$	2,338	0.95	%			Interest-bearing checking	$	3,027,435	$	2,689	0.36	%	$	1,161,593	$	1,717	0.59	%
Money market(5)	Money market(5)	2,179,128		3,589		0.66	%	1,260,555		4,607		1.45	%			Money market(5)	2,960,264		2,816		0.38	%	1,422,344		2,179		0.62	%
Savings deposits	Savings deposits	309,689		58		0.07	%	207,221		78		0.15	%			Savings deposits	411,711		57		0.06	%	254,357		41		0.06	%
Customer time deposits(5)	Customer time deposits(5)	1,334,829		4,817		1.44	%	1,184,737		6,362		2.13	%			Customer time deposits(5)	1,291,125		2,016		0.63	%	1,197,960		5,292		1.78	%
Brokered and internet time deposits(5)	Brokered and internet time deposits(5)	60,327		(85)		(0.56)	%	28,273		137		1.92	%			Brokered and internet time deposits(5)	39,860		341		3.43	%	16,844		80		1.91	%
Time deposits	Time deposits	1,395,156		4,732		1.35	%	1,213,010		6,499		2.13	%			Time deposits	1,330,985		2,357		0.71	%	1,214,804		5,372		1.78	%
Total interest-bearing deposits	Total interest-bearing deposits	5,510,040		10,573		0.76	%	3,652,472		13,522		1.47	%			Total interest-bearing deposits	7,730,395		7,919		0.41	%	4,053,098		9,309		0.92	%
Other interest-bearing liabilities:	Other interest-bearing liabilities:															Other interest-bearing liabilities:
Securities sold under agreemnets to repurchase and federal funds purchased		37,309		51		0.54	%	30,585		80		1.04	%
Securities sold under agreements to repurchase and federal funds purchased																Securities sold under agreements to repurchase and federal funds purchased	32,543		21		0.26	%	32,451		50		0.62	%
Federal Home Loan Bank advances	Federal Home Loan Bank advances	249,457		406		0.65	%	248,315		918		1.47	%			Federal Home Loan Bank advances	—		—		—	%	250,000		405		0.65	%
Subordinated debt(6)	Subordinated debt(6)	95,048		1,222		5.11	%	30,930		417		5.35	%			Subordinated debt(6)	149,155		1,819		4.89	%	30,930		399		5.19	%
Other borrowings	Other borrowings	15,015		47		1.25	%	—		—		—	%			Other borrowings	1,569		7		1.79	%	15,000		107		2.87	%
Total other interest-bearing liabilities	Total other interest-bearing liabilities	396,829		1,726		1.73	%	309,830		1,415		1.81	%			Total other interest-bearing liabilities	183,267		1,847		4.04	%	328,381		961		1.18	%
Total Interest-bearing liabilities	Total Interest-bearing liabilities	5,906,869		12,299		0.83	%	3,962,302		14,937		1.50	%			Total Interest-bearing liabilities	7,913,662		9,766		0.49	%	4,381,479		10,270		0.94	%
Noninterest bearing liabilities:	Noninterest bearing liabilities:															Noninterest bearing liabilities:
Demand deposits	Demand deposits	2,050,084						1,180,685								Demand deposits	2,484,176						1,728,343
Other liabilities	Other liabilities	177,329						113,884								Other liabilities	162,581						169,085
Total noninterest-bearing liabilities	Total noninterest-bearing liabilities	2,227,413						1,294,569								Total noninterest-bearing liabilities	2,646,757						1,897,428
Total liabilities	Total liabilities	8,134,282						5,256,871								Total liabilities	10,560,419						6,278,907
FB Financial Corporation common shareholders' equity																FB Financial Corporation common shareholders' equity	1,339,938						795,705
Noncontrolling interest																Noncontrolling interest	93						—
Shareholders' equity	Shareholders' equity	1,045,006						731,701								Shareholders' equity	1,340,031						795,705
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	9,179,288					$	5,988,572							Total liabilities and shareholders' equity	$	11,900,450					$	7,074,612
Net interest income (tax-equivalent basis)	Net interest income (tax-equivalent basis)			$	69,625					$	58,769					Net interest income (tax-equivalent basis)			$	87,321					$	55,977
Interest rate spread (tax-equivalent basis)	Interest rate spread (tax-equivalent basis)					3.03	%					3.87	%			Interest rate spread (tax-equivalent basis)					3.04	%					3.20	%
Net interest margin (tax-equivalent basis) (5)						3.28	%					4.28	%
Net interest margin (tax-equivalent basis)(7)																Net interest margin (tax-equivalent basis)(7)					3.18	%					3.50	%
Cost of total deposits	Cost of total deposits					0.56	%					1.11	%			Cost of total deposits					0.31	%					0.65	%
Average interest-earning assets to average interesting-bearing liabilities	Average interest-earning assets to average interesting-bearing liabilities					142.8	%					137.5	%			Average interest-earning assets to average interesting-bearing liabilities					139.2	%					147.0	%

(1)Calculated using daily averages.

(2)Average balances of nonaccrual loans are included in average loan balances. Loan fees of ~~$4.0~~$6.9 million and ~~$3.3~~$2.8 million, net (amortization) accretion of ~~$0.5~~$(0.2) million and ~~$2.1~~$1.0 million, and nonaccrual interest collections of ~~$0.7~~$0.5 million and $0.2 million are included in interest income in the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

(3)Includes investments in premises and equipment, other real estate owned, interest receivable, MSRs, core deposit and other intangibles, goodwill and other miscellaneous assets.

(4)Interest income includes the effects of taxable-equivalent adjustments using a U.S. federal income tax rate and, where applicable, state income tax to increase tax-exempt interest income to a tax-equivalent basis. The net taxable-equivalent adjustment amounts included in the above table were $0.8 million and $0.6 million for the three months ended June 30, 2021 and 2020, respectively.

(5)Includes $0.9 million of interest rate premium accretion on money market deposits, $0.6 million of interest rate premium accretion on customer time deposits and $0.1 million of interest rate premium accretion on brokered and internet deposits for the three months ended June 30, 2021. Amounts in the prior year comparable period are not significant.

(6)Includes $0.1 million and $0 of interest rate premium accretion on subordinated debt for the three months ended June 30, 2021 and June 30, 2020, respectively.

(7)The NIM is calculated by dividing annualized net interest income, on a tax-equivalent basis, by average total earning assets.

Six months ended June 30, 2021 compared to six months ended June 30, 2020

On a tax-equivalent basis, net interest income increased $57.9 million to $170.7 million for the six months ended June 30, 2021 as compared to $112.8 million for the six months ended June 30, 2020. The increase in tax-equivalent net interest income in the six months ended June 30, 2021 was primarily driven by an increase in the volume of loans held for investment outstanding as a result of the Franklin merger, coupled with a decrease in overall cost of deposits, which declined to 0.36% for the six months ended June 30, 2021, a 43 basis point reduction from the same period in 2020.

Interest income, on a tax-equivalent basis, was $192.7 million for the six months ended June 30, 2021, compared to $136.5 million for the six months ended June 30, 2020, an increase of $56.2 million. Interest income on loans held for investment, on a tax-equivalent basis, increased $46.4 million to $166.4 million for the six months ended June 30, 2021 from $120.0 million for the six months ended June 30, 2020 primarily due to increased loan volume driven by growth in average loan held for investment balances of $2.41 billion.

The tax-equivalent yield on loans held for investment was 4.77%, down 44 basis points from the six months ended June 30, 2020. The decrease in yield was primarily due to the addition of new loans which were originated in a lower interest rate environment while higher yielding loans were paid off and refinanced at lower rates. Contractual loan interest rates yielded 4.35% in the six months ended June 30, 2021 compared with 4.85% in the six months ended June 30, 2020. Excluding PPP loans, which have a 1% contractual loan yield, our contractual loan yield would have been 7 basis points higher for the six months ended June 30, 2021 compared to 10 points higher for the same period in the prior year.

Overall, our NIM, on a tax-equivalent basis, decreased to 3.18% for the six months ended June 30, 2021 from 3.70% for the six months ended June 30, 2020, driven by the sustained low interest rate environment and change in balance sheet mix, partially attributable to our acquisition of Franklin and impact of excess liquidity carried on our balance sheet. The components of our loan yield, a key driver to our net interest margin for the six months ended June 30, 2021 and 2020 were as follows:


	Six Months Ended June 30,
	2021				2020
(dollars in thousands)	Interest income		Average yield		Interest income		Average yield
Loan yield components:
Contractual interest rate on loans held for investment (1)(2)	$	151,955	4.35	%	$	111,615	4.85	%
Origination and other loan fee income (2)	13,568		0.39	%	5,412		0.23	%
(Amortization) Accretion on purchased loans	(284)		(0.01)	%	2,554		0.11	%
Nonaccrual interest collections	1,192		0.04	%	437		0.02	%


Total loan yield	$	166,431	4.77	%	$	120,018	5.21	%

(1)Includes tax-equivalent adjustment.

(2)Includes $0.7 million and $0.6 million of loan contractual interest and $2.7 million and $0.6 million of loan fees related to PPP loans for the six months ended June 30, 2021 and 2020, respectively.

Accretion on purchased loans lowered the NIM 1 basis point and contributed 8 basis points to the NIM for the six months ended June 30, 2021 and 2020, respectively. The decrease in accretion is due to the continued impact of purchase accounting resulting from our mergers, which can fluctuate based on volume of early pay-offs. Excluding PPP loans, our NIM would have been 6 and 5 basis points higher for the six months ended June 30, 2021 and 2020, respectively.

Interest expense was $22.0 million for the six months ended June 30, 2021, a decrease of $1.7 million as compared to the six months ended June 30, 2020. The decrease was largely attributed to a reduction of interest rates on customer time deposits partially offset by an increase in volume on subordinated debt. Interest expense on customer time deposits decreased to $5.1 million for the six months ended June 30, 2021 from $11.1 million for the six months ended June 30, 2020. This primary driver of decrease was due to the average rate on customer time deposits, which decreased 111 basis points from 1.87% for the six months ended June 30, 2020 to 0.76% for the six months ended June 30, 2021.

The decrease in interest expense from customer deposits was partially offset by an increase in interest expense on subordinated debt of $3.4 million associated with the increase in volume from our $100.0 million subordinated note offering and additional subordinated notes acquired from Franklin.

Average balance sheet amounts, interest earned and yield analysis


	Six Months Ended June 30,
	2021						2020
(dollars in thousands on tax-equivalent basis)	Average balances(1)		Interest income/ expense		Average yield/ rate		Average balances(1)		Interest income/ expense		Average yield/ rate
Interest-earning assets:
Loans (2)(4)	$	7,043,092	$	166,431	4.77	%	$	4,631,577	$	120,018	5.21	%
Loans held for sale-mortgage	687,635		9,238		2.71	%	286,129		4,937		3.47	%
Loans held for sale-commercial	175,135		3,783		4.36	%	—		—		—	%
Securities:
Taxable	903,830		6,663		1.49	%	503,493		5,675		2.27	%
Tax-exempt (4)	329,074		5,260		3.22	%	216,496		4,089		3.80	%
Total Securities (4)	1,232,904		11,923		1.95	%	719,989		9,764		2.73	%
Federal funds sold and reverse repurchase agreements	119,959		61		0.10	%	78,785		255		0.65	%
Interest-bearing deposits with other financial institutions	1,521,162		915		0.12	%	398,330		1,276		0.64	%
FHLB stock	31,597		313		2.00	%	16,539		206		2.50	%
Total interest earning assets (4)	10,811,484		192,664		3.59	%	6,131,349		136,456		4.48	%
Noninterest Earning Assets:
Cash and due from banks	153,523						61,303
Allowance for credit losses	(164,648)						(77,128)
Other assets (3)	900,592						622,499
Total noninterest earning assets	889,467						606,674
Total assets	$	11,700,951					$	6,738,023
Interest-bearing liabilities:
Interest bearing deposits:
Interest bearing checking	$	2,887,671	$	5,707	0.40	%	$	1,116,633	$	3,896	0.70	%
Money market deposits(7)	2,939,177		6,431		0.44	%	1,400,394		6,150		0.88	%
Savings deposits	390,772		110		0.06	%	236,475		120		0.10	%
Customer time deposits(7)	1,332,868		5,052		0.76	%	1,200,080		11,135		1.87	%
Brokered and internet time deposits(7)	40,060		445		2.24	%	18,600		176		1.90	%
Time deposits	1,372,928		5,497		0.81	%	1,218,680		11,311		1.87	%
Total interest bearing deposits	7,590,548		17,745		0.47	%	3,972,182		21,477		1.09	%
Other interest-bearing liabilities:
Securities sold under agreements to repurchase and federal funds purchased	31,946		57		0.36	%	29,641		107		0.73	%
Federal Home Loan Bank advances	—		—		—	%	250,000		1,119		0.90	%
Subordinated debt(6)	168,965		4,160		4.96	%	30,930		820		5.33	%
Other borrowings	3,734		13		0.70	%	11,374		172		3.04	%
Total other interest-bearing liabilities	204,645		4,230		4.17	%	321,945		2,218		1.39	%
Total interest-bearing liabilities	7,795,193		21,975		0.57	%	4,294,127		23,695		1.11	%
Noninterest bearing liabilities:
Demand deposits	2,416,869						1,520,954
Other liabilities	166,849						140,467
Total noninterest-bearing liabilities	2,583,718						1,661,421
Total liabilities	10,378,911						5,955,548
FB Financial Corporation common shareholders' equity	1,321,947						782,475
Noncontrolling interest	93						—
Shareholders' equity	1,322,040						782,475
Total liabilities and shareholders' equity	$	11,700,951					$	6,738,023
Net interest income (tax-equivalent basis)			$	170,689					$	112,761
Interest rate spread (tax-equivalent basis)					3.02	%					3.37	%
Net interest margin (tax-equivalent basis) (5)					3.18	%					3.70	%
Cost of total deposits					0.36	%					0.79	%
Average interest-earning assets to average interest-bearing liabilities					138.7	%					142.8	%

(1)Calculated using daily averages.

(2)Average balances of nonaccrual loans are included in average loan balances. Loan fees of $13.6 million and $5.4 million, net (amortization) accretion of $(0.3) million and $2.6 million, and nonaccrual interest collections of $1.2 million and $0.4 million are included in interest income for the six months ended June 30, 2021 and 2020, respectively.

(3)Includes investments in premises and equipment, other real estate owned, interest receivable, mortgage servicing rights, core deposit and other intangibles, goodwill and other miscellaneous assets.

(4)Interest income includes the effects of taxable-equivalent adjustments using a U.S. federal income tax rate and, where applicable, state income tax to increase tax-exempt interest income to a tax-equivalent basis. The net taxable-equivalent adjustment amounts included in the above table were ~~$0.8~~$1.6 million and ~~$0.5~~$1.2 million for the ~~three~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

(5)The NIM is calculated by dividing annualized net interest income, on a tax-equivalent basis, by average total earning assets.

(6)

~~Nine~~Includes $0.4 million and $0 of accretion on subordinated debt fair value mark for the six months ended ~~September~~June 30, 2021 and 2020, ~~compared to nine months ended September 30, 2019~~respectively.

~~Net interest income increased 7.17% to $180.4~~(7)Includes $1.9 million in the nine months ended September 30, 2020 compared to $168.3 million in the nine months ended September 30, 2019. On a tax-equivalent basis, net interest income increased $12.7 million to $182.4 million in the nine months ended September 30, 2020 as compared to $169.7 million in the nine months ended September 30, 2019. The increase in tax-equivalent net interest income in the nine months ended September 30, 2020 was primarily driven by increased total volume in loans held for investment, reflecting the impact of ~~our acquisitons from Franklin and Farmers National during the period, which were offset by a larger decrease in rates on deposits, particularly money market accounts.~~

Interest income, on a tax-equivalent basis, was $218.4 million for the nine months ended September 30, 2020, compared to $212.3 million for the nine months ended September 30, 2019, an increase of $6.1 million.

Average loan balances increased $1,041.6 million during the nine months ended September 30, 2020, reflecting the addition of loans held for investment from Franklin and Farmers National. Additionally, average loans held for investment includes $182.2 million in average PPP loan balances. Partially offsetting the increase in average volume of loans held for investment was a decrease in yield due in part to lower accretion on acquired loans. The tax-equivalent yield on loans held for investment was 5.01%, down 112 basis points from the nine months ended September 30, 2019. Contractual loan interest rates yielded 4.65% during the nine months ended September 30, 2020 compared with 5.58% in the nine months ended September 30, 2019 driven by the declining interest rate ~~environment influenced by COVID-19.~~

~~The components of our loan yield, a key driver to our NIM for the nine months ended September 30, 2020 and 2019, were as follows:~~

Nine Months Ended September 30,
2020 2019
(dollars in thousands) Interest
income Average
yield Interest
income Average
yield
Loan yield components:
Contractual interest rate on loans held for
investment (1)(2)
$ 178,056 4.65 % $ 169,850 5.58 %
Origination and other loan fee income (2)
9,441 0.25 % 10,114 0.33 %
Accretion on purchased loans 3,080 0.08 % 6,030 0.20 %
Nonaccrual interest collections 1,101 0.03 % 446 0.01 %
Syndicated loan fee income — — % 200 0.01 %
Total loan yield $ 191,678 5.01 % $ 186,640 6.13 %

~~(1)Includes tax equivalent adjustment.~~

~~(2)Includes $1.4 million of loan contractual interest and $1.5 million of loan fees related to PPP loans for the nine months ended September 30, 2020.~~

Accretion on purchased loans contributed 6 basis points to the NIM for the nine months ended September 30, 2020 compared to 16 basis points for the same period in 2019. Contractual interest and origination fees on PPP loans attributed 8 basis point to the NIM for the nine months ended September 30, 2020.

Our NIM, on a tax-equivalent basis, decreased to 3.53% during the nine months ended September 30, 2020 from 4.42% in the nine months ended September 30, 2019, driven by the highly competitive markets we serve, a declining interest rate environment and increased volume and change in balance sheet mix influenced by our acquisitions.

Interest expense was $36.0 million for the nine months ended September 30, 2020, a decrease of $6.6 million as compared to the nine months ended September 30, 2019. The primary driver for the decrease was interest expense on deposits, which decreased by $6.8 million to $32.1 million for the nine months ended September 30, 2020, compared to $38.9 million for the nine months ended September 30, 2019. The decrease was primarily attributed to the decrease in ratespremium accretion on money market accounts with a secondary driver of lower rates on customer time deposits. The average rate on money markets decreased to 0.78%, down 69 basis points from the nine months ended September 30, 2019. Average money market balances increased $476.1deposits, $1.4 million ~~to $1,661.9 million during the nine months ended September 30, 2020 from $1,185.7 million for the same period in the previous year. Additionally, the average rate~~ on customer time deposits ~~decreased to 1.71%~~and $0.3 million on brokered and internet time deposits for the ~~nine~~six months ended ~~September~~June 30, ~~2020 from 2.09% during the nine months ended September 30, 2019, which was again influenced by the overall interest rate environment and funding strategy.~~

Deposit balance growth was impacted by the $209.5 million and $3,107.0 million in deposits assumed in our mergers with Farmers National and Franklin, respectively. Total cost of deposits was 0.69% for the nine months ended September 30, 2020 compared to 1.13% for the nine months ended September 30, 2019.

~~Average balance sheet amounts, interest earned and yield analysis~~

Nine Months Ended September 30,
2020 2019
(dollars in thousands on tax-equivalent basis)
Average
balances(1)
Interest
income/
expense Average
yield/
rate
Average
balances(1)
Interest
income/
expense Average
yield/
rate
Interest-earning assets:
Loans (2)(4)
$ 5,112,130 $ 191,678 5.01 % $ 4,070,535 $ 186,640 6.13 %
Loans held for sale-mortgage 353,540 8,561 3.23 % 253,629 7,871 4.15 %
Loans held for sale-commercial 33,491 1,336 5.33 % — — — %
Securities:
Taxable 537,427 7,961 1.98 % 519,941 10,254 2.64 %
Tax-exempt (4)
247,674 6,703 3.62 % 146,336 4,704 4.30 %
Total Securities (4)
785,101 14,664 2.49 % 666,277 14,958 3.00 %
Federal funds sold 82,089 274 0.45 % 18,355 377 2.75 %
Interest-bearing deposits with other financial institutions 520,858 1,585 0.41 % 111,551 1,861 2.23 %
FHLB stock 18,547 282 2.03 % 14,867 561 5.05 %
Total interest earning assets (4)
6,905,756 218,380 4.22 % 5,135,214 212,268 5.53 %
Noninterest Earning Assets:
Cash and due from banks 64,150 52,108
Allowance for credit losses (101,005) (30,041)
Other assets (3)
738,866 490,424
Total noninterest earning assets 702,011 512,491
Total assets $ 7,607,767 $ 5,647,705
Interest-bearing liabilities:
Interest bearing deposits:
Interest bearing checking $ 1,287,684 $ 6,090 0.63 % $ 939,654 $ 6,687 0.95 %
Money market 1,661,867 9,739 0.78 % 1,185,745 13,071 1.47 %
Savings deposits 261,058 178 0.09 % 195,822 222 0.15 %
Customer time deposits 1,245,324 15,952 1.71 % 1,148,180 17,970 2.09 %
Brokered and internet time deposits 32,610 91 0.37 % 52,759 915 2.32 %
Time deposits 1,277,934 16,043 1.68 % 1,200,939 18,885 2.10 %
Total interest bearing deposits 4,488,543 32,050 0.95 % 3,522,160 38,865 1.48 %
Other interest-bearing liabilities:
Securities sold under agreements to repurchase and federal funds purchased 32,215 158 0.66 % 25,992 232 1.19 %
Federal Home Loan Bank advances 249,818 1,525 0.82 % 166,450 2,216 1.78 %
Subordinated debt 52,459 2,042 5.20 % 30,930 1,237 5.35 %
Other borrowings 12,671 219 2.31 % — — — %
Total other interest-bearing liabilities 347,163 3,944 1.52 % 223,372 3,685 2.21 %
Total interest-bearing liabilities 4,835,706 35,994 0.99 % 3,745,532 42,550 1.52 %
Noninterest bearing liabilities:
Demand deposits 1,698,618 1,088,876
Other liabilities 149,987 104,861
Total noninterest-bearing liabilities 1,848,605 1,193,737
Total liabilities 6,684,311 4,939,269
Shareholders' equity 923,456 708,436
Total liabilities and shareholders' equity $ 7,607,767 $ 5,647,705
Net interest income (tax-equivalent basis) $ 182,386 $ 169,718
Interest rate spread (tax-equivalent basis) 3.23 % 4.01 %
Net interest margin (tax-equivalent basis) (5)
3.53 % 4.42 %
Cost of total deposits 0.69 % 1.13 %
Average interest-earning assets to average interest-bearing liabilities 142.8 % 137.1 %

~~(1)Calculated using daily averages.~~

~~(2)~~Average balances of nonaccrual loans are included in average loan balances. Loan fees of $9.4 million and $10.1 million, accretion of $3.1 million and $6.0 million, nonaccrual interest collections of $1.1 million and $0.4 million, and syndicated loan fees of $0 and $0.2 million are included in interest income2021. Amounts in the ~~nine months ended September 30, 2020 and 2019, respectively.~~

~~(3)Includes investments in premises and equipment, other real estate owned, interest receivable, MSRs, core deposit and other intangibles, goodwill and other miscellaneous assets.~~

~~(4)~~Interest income includes the effects of taxable-equivalent adjustments using a U.S. federal income tax rate and, where applicable, state income tax to increase tax-exempt interest income to a tax-equivalent basis. The net taxable-equivalent adjustment amounts included in the above table were $2.0 million and $1.4 million for the nine months ended September 30, 2020 and 2019, respectively.

~~(5)The NIM is calculated by dividing annualized net interest income, on a tax-equivalent basis, by average total earning assets.~~prior year comparable period are not significant.

Rate/volume analysis

The tables below present the components of the changes in net interest income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019.~~2020. For each major category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes due to average volumes and changes due to rates, with the changes in both volumes and rates allocated to these two categories based on the proportionate absolute changes in each category.

Three months ended ~~September~~June 30, ~~2020~~2021 compared to three months ended ~~September~~June 30, ~~2019~~2020


		Three months ended September 30, 2020 compared to three months ended September 30, 2019 due to changes in							Three months ended June 30, 2021 compared to three months ended June 30, 2020 due to changes in
(in thousands on a tax-equivalent basis)	(in thousands on a tax-equivalent basis)	Volume		Rate		Net increase (decrease)		(in thousands on a tax-equivalent basis)	Volume		Rate		Net increase (decrease)
Interest-earning assets:	Interest-earning assets:							Interest-earning assets:
Loans (1)(2)	Loans (1)(2)	$	20,756	$	(14,337)	$	6,419	Loans(1)(2)	$	27,180	$	(2,017)	$	25,163
Loans held for sale - residential	Loans held for sale - residential	1,667		(491)		1,176		Loans held for sale - residential	2,510		(509)		2,001
Loans held for sale - commercial	Loans held for sale - commercial	1,336		—		1,336		Loans held for sale - commercial	1,626		—		1,626
Securities available for sale and other securities:
Securities available-for-sale and other securities:								Securities available-for-sale and other securities:
Taxable	Taxable	362		(1,213)		(851)		Taxable	1,895		(670)		1,225
Tax Exempt (2)	Tax Exempt (2)	1,316		(290)		1,026		Tax Exempt(2)	708		(268)		440
Federal funds sold and balances at Federal Reserve Bank		14		(161)		(147)
Federal funds sold and reverse repurchase agreements								Federal funds sold and reverse repurchase agreements	22		9		31
Time deposits in other financial institutions	Time deposits in other financial institutions	237		(878)		(641)		Time deposits in other financial institutions	338		(38)		300
FHLB stock	FHLB stock	22		(122)		(100)		FHLB stock	73		(19)		54
Total interest income (2)	Total interest income (2)	25,710		(17,492)		8,218		Total interest income(2)	34,352		(3,512)		30,840
Interest-bearing liabilities:	Interest-bearing liabilities:							Interest-bearing liabilities:
Interest-bearing checking	Interest-bearing checking	883		(1,027)		(144)		Interest-bearing checking	1,657		(685)		972
Money market(3)	Money market(3)	1,513		(2,531)		(1,018)		Money market(3)	1,463		(826)		637
Savings deposits	Savings deposits	19		(39)		(20)		Savings deposits	22		(6)		16
Customer time deposits(3)	Customer time deposits(3)	542		(2,087)		(1,545)		Customer time deposits(3)	145		(3,421)		(3,276)
Brokered and internet time deposits(3)	Brokered and internet time deposits(3)	(45)		(177)		(222)		Brokered and internet time deposits(3)	197		64		261
Securities sold under agreements to repurchase and federal funds purchased	Securities sold under agreements to repurchase and federal funds purchased	9		(38)		(29)		Securities sold under agreements to repurchase and federal funds purchased	—		(29)		(29)
Federal Home Loan Bank advances	Federal Home Loan Bank advances	2		(514)		(512)		Federal Home Loan Bank advances	(405)		—		(405)
Subordinated debt(4)	Subordinated debt(4)	824		(19)		805		Subordinated debt(4)	1,442		(22)		1,420
Other borrowings	Other borrowings	47		—		47		Other borrowings	(60)		(40)		(100)
Total interest expense	Total interest expense	3,794		(6,432)		(2,638)		Total interest expense	4,461		(4,965)		(504)
Change in net interest income (2)	Change in net interest income (2)	$	21,916	$	(11,060)	$	10,856	Change in net interest income(2)	$	29,891	$	1,453	$	31,344

(1)Average loans are gross, including nonaccrual loans and overdrafts (before deduction of allowance for credit losses). Loan fees of ~~$4.0~~$6.9 million and ~~$3.3~~$2.8 million, (amortization) accretion of ~~$0.5~~$(0.2) million and ~~$2.1~~$1.0 million and nonaccrual interest collections of ~~$0.7~~$0.5 million and $0.2 million are included in interest income for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

(2)Interest income includes the effects of the tax-equivalent adjustments to increase tax-exempt interest income to a tax-equivalent basis.

(3)Includes $0.9 million and $0 of interest rate premium accretion on money market deposits, $0.6 million and $0.2 million of interest rate premium accretion on customer time deposits and $0.1 million and $0 of interest rate premium accretion (amortization) on brokered and internet deposits for the three months ended June 30, 2021 and 2020, respectively.

(4)Includes $0.1 million and $0 of interest rate premium accretion on subordinated debt for the three months ended June 30, 2021 and 2020, respectively.

~~Nine months ended September~~Six Months Ended June 30, ~~2020~~2021 compared to ~~nine months ended September~~Six Months Ended June 30, ~~2019~~2020


		Nine months ended September 30, 2020 compared to nine months ended September 30, 2019 due to changes in							Six months ended June 30, 2021 compared to six months ended June 30, 2020 due to changes in
(dollars in thousands on a tax-equivalent basis)	(dollars in thousands on a tax-equivalent basis)	Volume		Rate		Total		(dollars in thousands on a tax-equivalent basis)	Volume		Rate		Net increase (decrease)
Interest-earning assets:	Interest-earning assets:							Interest-earning assets:
Loans ~~(2)~~(1)	Loans ~~(2)~~(1)	$	39,054	$	(34,016)	$	5,038	Loans ~~(2)~~(1)	$	56,985	$	(10,572)	$	46,413
Loans held for sale - residential	Loans held for sale - residential	2,419		(1,729)		690		Loans held for sale - residential	5,394		(1,093)		4,301
Loans held for sale - commercial	Loans held for sale - commercial	1,336		—		1,336		Loans held for sale - commercial	3,783		—		3,783
Securities available for sale and other securities:
Securities available-for-sale and other securities:								Securities available-for-sale and other securities:
Taxable	Taxable	259		(2,552)		(2,293)		Taxable	2,951		(1,963)		988
Tax Exempt (2)	Tax Exempt (2)	2,743		(744)		1,999		Tax Exempt(2)	1,799		(628)		1,171
Federal funds sold and balances at Federal Reserve Bank		213		(316)		(103)
Federal funds sold and reverse repurchase agreements								Federal funds sold and reverse repurchase agreements	21		(215)		(194)
Time deposits in other financial institutions	Time deposits in other financial institutions	1,246		(1,522)		(276)		Time deposits in other financial institutions	675		(1,036)		(361)
FHLB stock	FHLB stock	56		(335)		(279)		FHLB stock	149		(42)		107
Total interest income (2)	Total interest income (2)	47,326		(41,214)		6,112		Total interest income(2)	71,757		(15,549)		56,208
Interest-bearing liabilities:	Interest-bearing liabilities:							Interest-bearing liabilities:
Interest-bearing checking		1,646		(2,243)		(597)
Money market		2,790		(6,122)		(3,332)
Interest bearing checking								Interest bearing checking	3,500		(1,689)		1,811
Money market deposits(4)								Money market deposits(4)	3,367		(3,086)		281
Savings deposits	Savings deposits	44		(88)		(44)		Savings deposits	43		(53)		(10)
Customer time deposits(4)	Customer time deposits(4)	1,244		(3,262)		(2,018)		Customer time deposits(4)	503		(6,586)		(6,083)
Brokered and internet time deposits(4)	Brokered and internet time deposits(4)	(56)		(768)		(824)		Brokered and internet time deposits(4)	238		31		269
Securities sold under agreements to repurchase and federal funds purchased	Securities sold under agreements to repurchase and federal funds purchased	31		(105)		(74)		Securities sold under agreements to repurchase and federal funds purchased	4		(54)		(50)
Federal Home Loan Bank advances	Federal Home Loan Bank advances	509		(1,200)		(691)		Federal Home Loan Bank advances	(1,119)		—		(1,119)
Subordinated debt(3)	Subordinated debt(3)	838		(33)		805		Subordinated debt(3)	3,398		(58)		3,340
Other borrowings	Other borrowings	219		—		219		Other borrowings	(27)		(132)		(159)
Total interest expense	Total interest expense	7,265		(13,821)		(6,556)		Total interest expense	9,907		(11,627)		(1,720)
Change in net interest income (2)	Change in net interest income (2)	$	40,061	$	(27,393)	$	12,668	Change in net interest income(2)	$	61,850	$	(3,922)	$	57,928

(1)Average loans are gross, including nonaccrual loans and overdrafts (before deduction of allowance for ~~credit~~loan losses). Loan fees of ~~$9.4~~$13.6 million and ~~$10.1~~$5.4 million, (amortization) accretion of ~~$3.1~~$(0.3) million and ~~$6.0~~$2.6 million, and nonaccrual interest collections of ~~$1.1~~$1.2 million and $0.4 ~~million, and syndicated loan fee income of $0 and $0.2~~ million, are included in interest income for the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~and 2019,~~ respectively.

(2)Interest income includes the effects of the tax-equivalent adjustments to increase tax-exempt interest income to a tax-equivalent basis.

(3) Includes $0.4 million of accretion on subordinated debt fair value mark for the six months ended June 30, 2021.

(4) Includes $1.9 million of interest rate premium accretion on money market deposits, $1.4 million on customer time deposits and $0.3 million on brokered and internet time deposits for the six months ended June 30, 2021. Amounts in the prior year comparable period were not significant.

Provision for credit losses

The provision for credit losses charged to operating expense is an amount which, in the judgment of management, is necessary to maintain the allowance for credit losses ~~("ACL")~~ at an appropriate level under the current expected credit loss model. The ~~determination of~~provision for credit losses recorded represents the amount needed to maintain the appropriate level of the allowance ~~is complex and involves a high degree of judgment and subjectivity. Refer to Note 1, "Basis of presentation" in the notes to our consolidated financial statements~~ for ~~a detailed discussion regarding ACL methodology.~~credit losses based on management’s quarterly estimates.

Three months ended ~~September~~June 30, ~~2020~~2021 compared to three months ended ~~September~~June 30, ~~2019~~2020

~~Our~~We recognized a reversal of provision for credit losses on loans held for investment for the three months ended ~~September~~June 30, ~~2020 was $45.8~~2021 of $12.9 million as compared to ~~$1.8~~an expense of $24.0 million for the three months ended ~~September~~June 30, ~~2019. The steep year-over-year increase~~2020. This reversal resulted from management’s best estimate of losses over the life of loans in our portfolio in accordance with the ~~provision for credit losses was primarily~~CECL approach, given an improvement in economic outlook and forecasts. Although the ~~result of conforming the acquired Franklin loan~~ portfolio to comply with CECL under our established framework and governance model, as CECL requires the establishment of an allowance for credit losses for non-purchased credit deteriorated loans be recognized through the provision for credit losses on the acquisition date. On a standalone basis, the acquired Franklin loan portfolio increased the provision for credit losses by $53.2 million forbenefited from improving economic forecasts during the three months ended ~~September~~June 30, ~~2020. Outside of~~2021, there is much uncertainty surrounding the impact of ~~Franklin on~~ the ~~provision~~COVID-19 pandemic and the Delta variant, which may continue to lead to increased volatility in forecasted macroeconomic variables, a key input to our calculated level of allowance for credit losses, the remaining loan portfolio benefited from improved economic forecasts, seen for the first time in 2020, reflective of the resumption of more normalized commercial activity within our markets. As such, we reduced the provision by $7.3 million based on these improved economic forecasts. Additionally, given the pervasive impact of COVID-19, we also performed additional qualitative evaluations on certain classes of financing receivables, in line with our established qualitative framework.losses. These evaluations weighed the impact of the current economic outlook, status of federal

government stimulus programs, and geographical and demographic considerations, among other factors. See further discussion under the subheading "Allowance for credit ~~losses".~~losses."

~~Nine~~The Company estimates expected credit losses on off-balance sheet loan commitments that are not accounted for as derivatives. When applying the CECL methodology to estimate expected credit loss, the Company considers the likelihood that funding will occur, the contractual period of exposure to credit loss, the risk of loss, historical loss experience, and current conditions along with expectations of future economic conditions. As such, the Company recorded a release in the provision for credit losses on unfunded commitments of $1.0 million for the three months ended ~~September~~June 30, ~~2020~~2021 compared to ~~nine~~a provision expense of $1.9 million for the three months ended ~~September~~June 30, ~~2019~~2020.

~~Our~~Six months ended June 30, 2021 compared to six months ended June 30, 2020

We recognized a reversal of provision for credit losses on loans held for investment for the ~~nine~~six months ended ~~September~~June 30, ~~2020 was $97.8~~2021 of $24.5 million as compared to ~~$4.1~~a expense of $52.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. The ~~increase~~reversal in total provision for credit losses was primarily the result of ~~merger and acquisition activity, namely Farmers National and Franklin, and~~improving economic forecasts allowing for a reduction of our reserves, as discussed above. Additionally, the impact of applying CECL on the acquired loan portfolios. As discussed above, CECL requires the establishment of an allowance for credit losses for non-purchased credit deteriorated loans be recognized throughCompany recorded a release to the provision for credit losses on unfunded commitments of $3.2 million for the acquisition date. The provision for credit losses on loans held for investment recognized in expense in conjunction with the Farmers National acquisition on February 14, 2020 amounted to $2.9 million. The provision for credit losses on loans held for investment recognized in expense in conjunction with the Franklin acquisition on August 15, 2020 amounted to $52.8 million. For the ninesix months ended ~~September~~June 30, ~~2020, we have projected sustained deterioration in~~2021 compared to a provision of $3.5 million for the ~~loss drivers~~six months ended June 30, 2020.

As of June 30, 2021 and ~~economic outlook, compared with the prior year period, over the reasonable and supportable forecast period resulting from COVID-19, as discussed above.~~

Upon and subsequent to adoption of CECL, for available-for-sale debt securities in an unrealized loss position, we evaluate the securities at each measurement date to determine whether the decline in the fair value below the amortized cost basis is due to credit-related factors or noncredit-related factors. Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized through ACL on the balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings via the provision for credit losses. At January 1, 2020 and September 30, 2020, we determined that all available-for-sale debt securities that experienced a decline in fair value below ~~the~~ amortized cost basis were due to noncredit-related factors. Therefore, there was no provision for credit losses recognized on available-for-sale debt securities during the ~~nine~~three and six months ended ~~September~~June 30, 2021 and 2020.

Noninterest income

Our noninterest income includes gains on sales of mortgage loans, unrealized change in fair value of loans held for sale and derivatives, fees on mortgage loan originations, loan servicing fees, hedging results, fees generated from deposit services, investment services and trust income, gains and losses on securities, other real estate owned and other assets and other miscellaneous noninterest income.

The following table sets forth the components of noninterest income for the periods indicated:

Three Months Ended September 30, Nine Months Ended September 30,
(dollars in thousands) 2020 2019 2020 2019
Mortgage banking income $ 84,686 $ 29,193 $ 189,599 $ 74,740
Service charges on deposit accounts 2,162 2,416 6,583 6,822
ATM and interchange fees 3,913 3,188 10,653 8,846
Investment services and trust income 1,828 1,336 4,893 3,918
Gain (loss) from securities, net 583 (20) 618 75
(Loss) gain on sales or write-downs of other real estate owned (1,505) (126) (1,368) 112
Gain (loss) from other assets 226 44 (156) 52
Other 5,133 2,114 10,395 5,598
Total noninterest income $ 97,026 $ 38,145 $ 221,217 $ 100,163


	Three Months Ended June 30,				Six Months Ended June 30,
(dollars in thousands)	2021		2020		2021		2020
Mortgage banking income	$	35,499	$	72,168	$	90,831	$	104,913
Service charges on deposit accounts	2,266		1,858		4,605		4,421
ATM and interchange fees	5,381		3,606		9,722		6,740
Investment services and trust income	2,999		1,368		5,007		3,065
Gain (loss) from securities, net	144		(28)		227		35
(Loss) gain on sales or write-downs of other real estate owned	(23)		86		473		137
Loss from other assets	(4)		(54)		(15)		(382)
Other	3,038		2,487		5,180		5,262
Total noninterest income	$	49,300	$	81,491	$	116,030	$	124,191

Three months ended ~~September~~June 30, ~~2020~~2021 compared to three months ended ~~September~~June 30, ~~2019~~2020

Noninterest income amounted to ~~$97.0~~$49.3 million for the three months ended ~~September~~June 30, ~~2020, an increase~~2021, a decrease of ~~$58.9~~$32.2 million, or ~~154.4%~~39.5%, as compared to ~~$38.1~~$81.5 million for the three months ended ~~September~~June 30, ~~2019.~~2020. Changes in selected components of noninterest income in the above table are discussed below.

Mortgage banking income primarily includes origination fees and realized gains and losses on the sale of mortgage loans, unrealized change in fair value of mortgage loans and derivatives, and mortgage servicing fees, which includes net change in fair value of MSRs and related derivatives. Mortgage banking income is initially driven by the recognition of interest rate lock commitments (IRLCs) at fair value at inception of the IRLCs. This is subsequently adjusted for changes in the overall interest rate environment offset by derivative contracts entered into to mitigate the interest rate exposure.

Upon sale of the loan, the net fair value gain is reclassified as a realized gain on sale. Mortgage banking income was ~~$84.7~~$35.5 million and ~~$29.2~~$72.2 million for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

During the three months ended ~~September~~June 30, ~~2020,~~2021, the Bank’s mortgage operations had sales of ~~$1.77 billion~~$1,681.5 million which generated a sales margin of ~~4.32%~~2.94%. This compares to ~~$1.22 billion~~$1,595.4 million and ~~2.29%~~2.85% for the three months ended ~~September~~June 30, ~~2019. The increase in sales margin is a result of the mortgage restructuring in 2019 and productive market conditions in~~ 2020. The industry ~~began to see~~benefited greatly from declining interest rates ~~decline~~ during the ~~first quarter of 2019 after rising through much of 2018. As~~three months ended June 30, 2020, causing an increase in interest ~~rates continued to drift lower throughout 2019,~~rate lock commitment volume, which has slowed in the ~~industry began to experience heightened refinancing activity that has carried over and accelerated into 2020.~~three months ended June 30, 2021 across the industry. Mortgage banking income from gains on sale and related fair value changes ~~increased~~decreased to ~~$86.6~~$31.9 million during the three months ended ~~September~~June 30, ~~2020~~2021 compared to ~~$30.3~~$80.3 million for the three months ended ~~September~~June 30, ~~2019.~~2020. Total interest rate lock volume ~~increased $782.4~~decreased $464.6 million, or ~~47.8%~~20.7%, during the three months ended ~~September~~June 30, ~~2020 compared to the same period in the previous year. Our interest rate lock volume during three months ended September 30, 2020 was composed of 76.1% refinancing activity compared with 68.7% during~~2021 over the same period in the previous year.

Our mortgage banking business is directly impacted by the interest rate environment, increased regulations, consumer demand, economic conditions, and investor demand for mortgage securities. Mortgage production, especially refinance activity, declines in rising interest rate environments. ~~While we have not yet experienced~~Our interest rate lock volume during three months ended June 30, 2021 was composed of 58.2% refinancing activity compared with 79.8% during the same period in the previous year. We continue to see margin compression and reduced volumes due to excess capacity in the industry, refinance fatigue and a ~~slowdown~~shortage of housing in our ~~mortgage production volume, our~~markets. Our interest rate lock volume is expected to be materially and adversely impacted by rising interest rates and housing shortage, and we expect to see ~~declining~~further declines in refinance activity within the mortgage industry when rates rise.

Income from mortgage servicing of ~~$5.5~~$6.8 million and ~~$4.0~~$5.1 million for three months ended ~~September~~June 30, 2021 and 2020, respectively, was partially offset by losses on changes in fair value of MSRs and ~~2019,~~related hedging activity of $3.1 million and $13.2 million in the three months ended June 30, 2021 and 2020, respectively.

The components of mortgage banking income for three months ended June 30, 2021 and 2020 were as follows:


	Three Months Ended June 30,
(in thousands)	2021			2020
Mortgage banking income:
Origination and sales of mortgage loans	$	49,435		$	45,515
Net change in fair value of loans held for sale and derivatives	(17,579)			34,778
Change in fair value on MSRs	(3,145)			(13,238)
Mortgage servicing income	6,788			5,113
Total mortgage banking income	$	35,499		$	72,168
Interest rate lock commitment volume by line of business:
Consumer direct	$	914,163		$	1,480,878

Retail	860,370			758,228

Total	$	1,774,533		$	2,239,106
Interest rate lock commitment volume by purpose (%):
Purchase	41.9		%	20.2		%
Refinance	58.2		%	79.8		%
Mortgage sales	$	1,681,509		$	1,595,413
Mortgage sale margin	2.94		%	2.85		%
Closing volume	$	1,550,950		$	1,709,375
Outstanding principal balance of mortgage loans serviced	$	10,527,708		$	7,700,862

Income from ATM and interchange fees includes debit card interchange, ATM and other consumer fees. During the three months ended June 30, 2021, these fees increased $1.8 million to $5.4 million compared to $3.6 million during the three months ended June 30, 2020. This increase is attributable to our growth in deposits and increased volume of transactions, which is partially attributed to our acquisition of Franklin completed in 2020.

Investment services and trust income increased $1.6 million to $3.0 million during the three months ended June 30, 2021 compared to $1.4 million during the three months ended June 30, 2020. This increase is primarily due to our growth and increase in wealth management commissions.

Six months ended June 30, 2021 compared to six months ended June 30, 2020

Noninterest income amounted to $116.0 million for the six months ended June 30, 2021, a decrease of $8.2 million, or 6.6%, as compared to $124.2 million for the six months ended June 30, 2020. Changes in selected components of noninterest income in the above table are discussed below.

Mortgage banking income was $90.8 million and $104.9 million for the six months ended June 30, 2021 and 2020, respectively, representing a 13.4% decrease year-over-year.

During the six months ended June 30, 2021, our mortgage operations had sales of $3,253.6 million which generated a gain on sales margin of 3.30%. This compares to $2,636.9 million and 2.88% for the six months ended June 30, 2020. The increase in gain on sales margin is a result of productive market conditions. The industry benefited greatly from declining interest rates in 2020, causing a sharp increase in interest rate lock commitment volume. It is anticipated that sales will slow in the second half of 2021 as interest rates rise and housing inventory remains low in some of our markets. Mortgage banking income from gains on sale and related fair value changes increased to $85.5 million during the six months ended June 30, 2021 compared to $113.9 million for the six months ended June 30, 2020. Total interest rate lock volume decreased $669.3 million, or 15.4%, during the six months ended June 30, 2021 compared to the previous year. The volume mix of refinances and purchases also shifted during six months ended June 30, 2021 to 62.4% refinance volume compared with 79.2% during the same period in the previous year.

Our mortgage banking business is directly impacted by the interest rate environment, regulatory environment, consumer demand, economic conditions, and investor demand for mortgage securities. Mortgage production, especially refinance activity, declines in rising interest rate environments. Mortgage production volume is expected to decline in the second half of 2021 as interest rates rise, which could materially and adversely impact the profitability of our mortgage business.

Income from mortgage servicing of $13.7 million and $10.1 million for six months ended June 30, 2021 and 2020, respectively, was offset by declines in fair value of MSRs and related hedging activity of ~~$7.4~~$8.4 million and ~~$5.1~~$19.1 million in the ~~three~~six months ended ~~September~~June 30, 2021 and 2020, ~~and 2019,~~ respectively.

~~The components of mortgage banking income for three months ended September 30, 2020 and 2019 were as follows:~~

Three Months Ended September 30,
(dollars in thousands) 2020 2019
Mortgage banking income:
Origination and sales of mortgage loans $ 76,506 $ 28,020
Net change in fair value of loans held for sale and derivatives 10,084 2,304
Change in fair value on MSRs (7,440) (5,091)
Mortgage servicing income 5,536 3,960
Total mortgage banking income $ 84,686 $ 29,193
Interest rate lock commitment volume by line of business:
Consumer direct $ 1,453,238 $ 973,142
Retail 965,434 503,861
Correspondent — 159,263
Total $ 2,418,672 $ 1,636,266
Interest rate lock commitment volume by purpose (%):
Purchase 23.9 % 31.3 %
Refinance 76.1 % 68.7 %
Mortgage sales $ 1,770,043 $ 1,223,985
Mortgage sale margin 4.32 % 2.29 %
Closing volume $ 1,932,450 $ 1,237,599
Outstanding principal balance of mortgage loans serviced $ 9,101,007 $ 6,297,723

Mortgage banking income attributable to our Banking segment from retail operations within the Bank footprint was $24.7 million and $10.7 million for the three months ended September 30, 2020 and 2019, respectively, and mortgage banking income attributable to our Mortgage segment was $60.0 million and $18.5 million for the three months ended September 30, 2020 and 2019, respectively.

Other noninterest income for the three months ended September 30, 2020 increased $3.0 million to $5.1 million as compared to other noninterest income of $2.1 million for three months ended September 30, 2019. This increase reflects increases associated with growth and volume of business, which is partially attributable our mergers.

7473

~~Nine months ended September 30, 2020 compared to nine months ended September 30, 2019~~

Noninterest income amounted to $221.2 million for the nine months ended September 30, 2020, an increase of $121.1 million, or 120.9%, as compared to $100.2 million for the nine months ended September 30, 2019. Changes in selected components of noninterest income in the above table are discussed below. Except as discussed below, the description of noninterest income as well as the underlying reasons for variances to prior year are substantially the same as the comparative quarterly discussion.

~~Mortgage banking income was $189.6 million and $74.7 million for the nine months ended September 30, 2020 and 2019, respectively.~~

During the nine months ended September 30, 2020, the Bank’s mortgage operations had sales of $4.41 billion which generated a sales margin of 3.46%. This compares to $3.45 billion and 1.88% for the nine months ended September 30, 2019. Mortgage banking income from gains on sale and related fair value changes increased to $200.5 million during the nine months ended September 30, 2020 compared to $72.7 million for the nine months ended September 30, 2019. Total interest rate lock volume increased $1.93 billion, or 40.0%, during the nine months ended September 30, 2020 over the same period in the previous year.

Income from mortgage servicing of $15.7 million and $12.8 million for nine months ended September 30, 2020 and 2019, respectively, was offset by declines in fair value of MSRs and related hedging activity of $26.5 million and $10.8 million in the nine months ended September 30, 2020 and 2019, respectively.

The components of mortgage banking income for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 were as follows:


		Nine Months Ended September 30,						Six Months Ended June 30,
(dollars in thousands)	(dollars in thousands)	2020			2019				(dollars in thousands)	2021			2020
Mortgage banking income:
Mortgage banking income									Mortgage banking income
Origination and sales of mortgage loans	Origination and sales of mortgage loans	$	152,411		$	64,903			Origination and sales of mortgage loans	$	107,328		$	75,905
Net change in fair value of loans held for sale and derivatives	Net change in fair value of loans held for sale and derivatives	48,067			7,846				Net change in fair value of loans held for sale and derivatives	(21,808)			37,983
Change in fair value on MSRs	Change in fair value on MSRs	(26,546)			(10,772)				Change in fair value on MSRs	(8,408)			(19,106)
Mortgage servicing income	Mortgage servicing income	15,667			12,763				Mortgage servicing income	13,719			10,131
Total mortgage banking income	Total mortgage banking income	$	189,599		$	74,740			Total mortgage banking income	$	90,831		$	104,913
Interest rate lock commitment volume by line of business:	Interest rate lock commitment volume by line of business:								Interest rate lock commitment volume by line of business:
Consumer direct	Consumer direct	$	4,248,741		$	2,300,715			Consumer direct	$	1,863,350		$	2,795,503
Third party origination (TPO)		—			327,373

Retail	Retail	2,502,817			1,202,668				Retail	1,800,233			1,537,383
Correspondent		—			990,646

Total	Total	$	6,751,558		$	4,821,402			Total	$	3,663,583		$	4,332,886
Interest rate lock commitment volume by purpose (%):	Interest rate lock commitment volume by purpose (%):								Interest rate lock commitment volume by purpose (%):
Purchase	Purchase	21.9		%	46.2		%		Purchase	37.6		%	20.8		%
Refinance	Refinance	78.1		%	53.8		%		Refinance	62.4		%	79.2		%
Mortgage sales	Mortgage sales	$	4,406,932		$	3,448,871			Mortgage sales	$	3,253,579		$	2,636,889
Mortgage sale margin	Mortgage sale margin	3.46		%	1.88		%		Mortgage sale margin	3.30		%	2.88		%
Closing volume	Closing volume	$	4,739,497		$	3,477,658			Closing volume	$	3,308,882		$	2,807,047
Outstanding principal balance of mortgage loans serviced	Outstanding principal balance of mortgage loans serviced	$	9,101,007		$	6,297,723			Outstanding principal balance of mortgage loans serviced	$	10,527,708		$	7,700,862

Mortgage banking income attributable to our Banking segment from retail operations within the Bank footprint was $52.3 million and $20.5 million for the nine months ended September 30, 2020 and 2019, respectively, and mortgage banking income attributable to our Mortgage segment was $137.3 million and $54.2 million for the nine months ended September 30, 2020 and 2019, respectively.

ATM and interchange fees ~~include debit card interchange, ATM and other consumer fees. These fees~~ increased ~~$1.8~~$3.0 million to ~~$10.7~~$9.7 million during ~~nine~~the six months ended ~~September~~June 30, ~~2020~~2021 as compared to ~~$8.8~~$6.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. This increase is attributable to our growth in deposits and increased volume of transactions, which is partially ~~attributable~~attributed to our acquisitions ~~during the period.~~completed in 2020. Though we have not yet experienced a decline, ~~yet, if~~ our ~~asset size remains over $10 billion as of December 31, 2020, our ATM and~~ interchange fee income is expected to decline in 2022 as a result of the Durbin amendment, which limits interchange fees banking institutions with asset sizes greater than $10 billion are permitted to charge.

Other noninterest income for the nine months ended September 30, 2020 increased $4.8 million to $10.4 million as compared to other noninterest income of $5.6 million for nine months ended September 30, 2019. This increase reflects increased interest rate swap fee income and increases associated with growth and volume of business, which is partially attributable to growth from our mergers.

Noninterest expense

Our noninterest expense includes primarily salaries and employee benefits expense, occupancy expense, legal and professional fees, data processing expense, regulatory fees and deposit insurance assessments, advertising and promotion and other real estate owned expense, among others. We monitor the ratio of noninterest expense to the sum of net interest income plus noninterest income, which is commonly known as the efficiency ratio.

The following table sets forth the components of noninterest expense for the periods indicated:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,					Six Months Ended June 30,
(dollars in thousands)	(dollars in thousands)	2020		2019		2020		2019		(dollars in thousands)		2021		2020			2021		2020
Salaries, commissions and employee benefits	Salaries, commissions and employee benefits	$	67,676	$	40,880	$	166,556	$	112,495	Salaries, commissions and employee benefits		$	62,367	$	55,258		$	126,938	$	98,880
Occupancy and equipment expense	Occupancy and equipment expense	4,892		4,058		13,166		12,107		Occupancy and equipment expense		5,356		4,096			11,205		8,274
Legal and professional fees	Legal and professional fees	1,917		1,993		5,427		5,412		Legal and professional fees		2,090		1,952			4,524		3,510
Data processing	Data processing	2,994		2,816		8,229		7,843		Data processing		2,542		2,782			4,861		5,235
Merger costs	Merger costs	20,730		295		25,366		4,699		Merger costs		—		1,586			—		4,636
Amortization of core deposit and other intangibles	Amortization of core deposit and other intangibles	1,417		1,197		3,825		3,180		Amortization of core deposit and other intangibles		1,394		1,205			2,834		2,408

Advertising	Advertising	2,256		1,895		7,236		7,066		Advertising		3,559		2,591			5,812		4,980
Other expense	Other expense	16,210		9,801		37,425		29,353		Other expense		15,652		11,109			31,484		21,215
Total noninterest expense	Total noninterest expense	$	118,092	$	62,935	$	267,230	$	182,155	Total noninterest expense		$	92,960	$	80,579		$	187,658	$	149,138

Three months ended ~~September~~June 30, ~~2020~~2021 compared to three months ended ~~September~~June 30, ~~2019~~2020

Noninterest expense increased by ~~$55.2~~$12.4 million during the three months ended ~~September~~June 30, ~~2020~~2021 to ~~$118.1~~$93.0 million as compared to ~~$62.9~~$80.6 million in the three months ended ~~September~~June 30, ~~2019.~~2020. Changes in selected components of noninterest expense in the above table are discussed below.

Salaries, commissions and employee benefits expense was the largest component of noninterest expenses representing ~~57.3%~~67.1% and ~~65.0%~~68.6% of total noninterest expense in the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. During the three months ended ~~September~~June 30, ~~2020,~~2021, salaries and employee benefits expense increased ~~$26.8~~$7.1 million, or ~~65.5%~~12.9%, to ~~$67.7~~$62.4 million as compared to ~~$40.9~~$55.3 million for the three months ended ~~September~~June 30, ~~2019.~~2020. This increase was mainly driven by an increase of ~~$12.5~~$8.4 million in ~~commissions and incentives expenses resulting from increased mortgage production. The increase also reflects~~salaries due to the impact of our headcount increase resulting from our ~~recent merger~~acquisition of Franklin and ~~acquisitions.~~investment in additional revenue producers in our markets, which included a $4.0 million decrease in salaries in the Mortgage segment, reflective of the slowdown in production during the period.

Costs resulting from our equity compensation grants during the three months ended ~~September~~June 30, 2021 and 2020 ~~and 2019~~ amounted ~~to $3.0~~$2.5 million and ~~$1.8~~$2.3 million, respectively. These grants comprise restricted stock units that were granted in conjunction with our 2016 IPO to all full-time associates and ~~are~~ extended to new associates each year, in addition to annual performance grants. Additionally, this expense includes costs related to performance-based restricted stock units granted during 2021 and 2020 which resulted in ~~$0.2~~$0.3 million inof expense during both the three months ended ~~September~~June 30, 2021 and 2020. We also issued replacement restricted stock units for those initially granted during 2020 by Franklin, which did not vest upon change in control. During the three months ended September 30, 2020, we recognized $0.2 million of expense related to these awards. We expect to see elevated levels of expense from equity compensation grants as a result of this grant, which retains its original vesting schedule as granted by Franklin, with graded vesting through the requisite service period ending in the first quarter of 2023.

~~Merger~~There were no merger costs ~~amounted to $20.7 million~~ for the three months ended ~~September~~June 30, ~~2020~~2021 compared to ~~$0.3~~$1.6 million in merger cost for the three months ended ~~September~~June 30, ~~2019.~~2020. Merger costs during the three months ended ~~September~~June 30, 2020 include costs associated with the ~~integration and~~ conversion related to our ~~merger with Franklin~~acquisition of Farmers National that was completed during the third quarter. For the three months ended September 30, 2020, merger costs consisted of $6.5 million of contract termination costs, $4.4 million of branch closing and consolidation costs, $3.8 million of professional fees, $3.2 million of severance and separation benefits, $2.5 million of conversion-related costs, and $0.3 million of other acquisition-related costs. Costs during the previous year were related to our acquisition of the Branches, which closed during the secondfirst quarter ~~of the~~

previous year. We anticipate incurring additional conversion-related merger costs through the end of 2020, as well as severance and separation benefits through the first half of 2021 for certain merger-related employment agreements.2020.

Other noninterest expense primarily includes mortgage servicing expenses, regulatory fees and deposit insurance assessments, software license and maintenance fees and various other miscellaneous expenses. Other noninterest expense increased ~~$6.4~~$4.5 million during the three months ended ~~September~~June 30, ~~2020~~2021 to ~~$16.2~~$15.7 million compared to ~~$9.8~~$11.1 million during the three months ended ~~September~~June 30, ~~2019. The~~2020. This increase ~~reflects~~includes $2.1 million increase in software license and maintenance fees, $0.7 million increase in mortgage servicing expenses, $0.6 million in offering costs under our registration rights agreement from the secondary offering completed during the period, and additional overall increase in miscellaneous and other costs associated with our growth, including the impact of our merger with Franklin and acquisitions of Farmers National and the Branches, as well as a one-time prepayment penalty of $2.6 million, incurred in connection with our repayment of $50.0 million in 90 day fixed rate advances. During the threeacquisitions.

Six months ended ~~September~~June 30, ~~2019, other noninterest expense also included mortgage restructuring charges of $0.8 million.~~

~~Nine~~2021 compared to six months ended ~~September~~June 30, 2020 ~~compared to nine months ended September 30, 2019~~

Noninterest expense increased by ~~$85.1~~$38.5 million during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 to ~~$267.2~~$187.7 million as compared to ~~$182.2~~$149.1 million in the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. Changes in selected components of noninterest expense in the above table are discussed below. ~~Except as discussed below, the description of noninterest expense as well as the underlying reasons for variances to prior year are substantially the same as the comparative quarterly discussion.~~

Salaries, commissions and employee benefits expense was the largest component of noninterest expenses representing ~~62.3%~~67.6% and ~~61.8%~~66.3% of total noninterest expense in the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. During the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, salaries and employee benefits expense increased ~~$54.1~~$28.1 million, or ~~48.1%~~28.4%, to ~~$166.6~~$126.9 million as compared to ~~$112.5~~$98.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019. This~~2020. The largest components of the $28.1 million increase ~~included~~was an increase of $5.5 million in ~~mortgage-related~~ commissions and ~~incentives~~$16.8 million employee salaries. These increases were mainly driven by our increase in headcount as a result of ~~$29.3 million resulting~~ our mergers. Our full-time equivalent employees increased to 1,945 as of June 30, 2021from ~~increased mortgage production during the nine months ended September~~1,506 as of June 30, ~~2020 compared with the same period in the prior year.~~2020.

Costs resulting from our equity compensation grants during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 amounted to ~~$7.3~~$5.2 million and ~~$5.6~~$4.2 million, respectively. Additionally, during 2020 ~~the Company~~we began ~~awarding~~granting performance-based ~~restricted~~ stock units, which resulted in ~~$0.6~~$0.5 million and $0.4 million in expense during the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, respectively.

Occupancy and equipment expense increased $2.9 million to $11.2 million during the six months ended June 30, 2021 as compared to $8.3 million in the six months ended June 30, 2020. This increase is related to increased leased property and maintenance costs which increased as a result of our merger activity and additional locations.

Merger costs amounted to ~~$25.4~~$4.6 million for the ~~nine~~six months ended ~~September~~June 30, 2020 ~~compared to $4.7 million for the nine months ended September 30, 2019. Merger costs during the nine months ended September 30, 2020 include costs associated with the integration and conversion~~ related to our acquisition and conversion of Farmers National, ~~and~~which closed February 14, 2020. There was no such merger ~~with Franklin, completed in the first and third quarters of 2020, respectively.~~activity during six months ended June 30, 2021.

Other noninterest expense primarily includes mortgage servicing expenses, regulatory fees and deposit insurance assessments, software license and maintenance fees and various other miscellaneous expenses. Other noninterest expense increased ~~$8.1~~$10.3 million during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 to ~~$37.4~~$31.5 million compared to ~~$29.4~~$21.2 million during the ~~nine~~six months ended ~~September~~June 30, ~~2019. During~~2020. The increase reflects a $4.1 million increase in software licenses and maintenance fees, a $1.2 million increase in regulatory fees and increased other costs associated with our growth, including the ~~nine months ended September 30, 2019, other noninterest expense also included mortgage restructuring charges~~impact of ~~$2.0 million.~~our 2020 acquisitions.

Efficiency ratio

The efficiency ratio is one measure of productivity in the banking industry. This ratio is calculated to measure the cost of generating one dollar of revenue. That is, the ratio is designed to reflect the percentage of one dollar which must be expended to generate that dollar of revenue. We calculate this ratio by dividing noninterest expense by the sum of net interest income and noninterest income. For an adjusted efficiency ratio, we exclude certain gains, losses and expenses we do not consider core to our business.

Our efficiency ratio was ~~71.2%~~68.4% and ~~66.5%~~65.8% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, respectively, and ~~65.3%~~58.9% and~~67.8%~~ 63.3% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, respectively. Our adjusted efficiency ratio, on a tax-equivalent basis, was ~~58.2%~~68.9% and ~~59.8%~~65.8% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, respectively, and~~64.5%~~ 57.5% and ~~65.1%~~60.9% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, respectively. See “GAAP reconciliation and management explanation of non-GAAP financial measures” in this Report for a discussion of the adjusted efficiency ratio.

Return on equity and assets

The following table sets forth our ROAA, ROAE, dividend payout ratio and average shareholders’ equity to average assets ratio for the periods indicated:


		Three Months Ended September 30,				Nine Months Ended September 30,				Year Ended December 31,			Three Months Ended June 30,				Six Months Ended June 30,				Year ended December 31,
		2020		2019		2020		2019		2019			2021		2020		2021		2020		2020
Return on average total assets	Return on average total assets	(0.24)	%	1.59	%	0.32	%	1.47	%	1.45	%	Return on average total assets	1.46	%	1.30	%	1.66	%	0.70	%	0.75	%
Return on average shareholders' equity	Return on average shareholders' equity	(2.13)	%	13.0	%	2.61	%	11.7	%	11.6	%	Return on average shareholders' equity	13.0	%	11.6	%	14.7	%	6.07	%	6.58	%
Dividend payout ratio	Dividend payout ratio	(77.4)	%	10.7	%	56.4	%	12.3	%	12.2	%	Dividend payout ratio	12.3	%	12.9	%	11.0	%	24.7	%	22.8	%
Average shareholders’ equity to average assets	Average shareholders’ equity to average assets	11.4	%	12.2	%	12.1	%	12.5	%	12.5	%	Average shareholders’ equity to average assets	11.3	%	11.2	%	11.3	%	11.6	%	11.5	%

~~Due to~~As previously discussed, during the ~~impact of the COVID-19 pandemic, the Company~~three and six months ended June 30, 2021, we recognized ~~significant increases~~a reversal in ~~provision~~our provisions for credit losses of $13.8 million and $27.7 million, respectively, which ~~resulted~~contributed to an improvement in return on average total assets of ~~(0.24)%~~1.46% and ~~0.32%~~1.66% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020, respectively, as compared~~2021, respectively. This compares to ~~1.59%~~provisions for credit losses of $25.9 million and ~~1.47%~~$55.5 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020 as a result of the onset of COVID-19 and impact on the macroeconomic forecasts included in our CECL model, which resulted in a return on average assets of 1.30% and 0.70%, respectively. ~~Return~~Our return on average shareholders’ equity was ~~(2.13)%~~13.0% and ~~2.61%~~14.7% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, respectively, as compared to ~~13.0%~~11.6% and ~~11.7%~~6.07% for the three and ~~nine~~six months ended September 30, 2019, respectively. The onset of the COVID-19 pandemic, our acquisition of Franklin, and the resulting increases in the provision for credit losses resulted in a net loss during the three months ended SeptemberJune 30, 2020, ~~which drove an unusual dividend payout ratio for the quarter that is not reflective of historical payout ratios or longer-term intent.~~respectively.

Income taxes

~~We recorded an income tax benefit of $2.0 million compared with income~~Income tax expense ~~of $7.7~~was $13.4 million and $7.5 million for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~income tax expense of $5.5~~$29.0 million and ~~$20.0~~$7.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. This represents effective tax rates of ~~26.7%~~23.7% and ~~23.4%~~24.6% for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~24.4%~~23.2% and ~~24.3%~~24.2% for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The primary differences from the enacted rates are applicable state income taxes reduced for non-taxable income and tax credits, and additional deductions for equity-based compensation upon the distribution of RSUs.

We are subject to Internal Revenue Code Section 162(m), which limits the deductibility of compensation of certain individuals. The restricted stock unit plans that existed prior to coming a public company will have payments in 2021 after the reliance period defined in the Section 162 regulations. Under the limitations of IRC Section 162(m), we will not be able to realize the deferred tax asset established on certain restricted stock units granted to these covered individuals. Therefore, a valuation allowance was established in the first quarter of 2021 related to our inability to take the benefit of the exercise of the restricted stock units. It is our policy to apply the IRC Section 162(m) limitations to stock based compensation first; therefore, the 2021 nondeductible IRC Section 162(m) expense was related to cash compensation and expense on the exercised restricted stock units that were above the limit as defined in IRC Section 162(m).

Financial condition

The following discussion of our financial condition compares balances as of ~~September~~June 30, ~~2020~~2021 with December 31, ~~2019.~~2020.

Total assets

Our total assets were ~~$11.01~~$11.92 billion at ~~September~~June 30, ~~2020,~~2021, compared to total assets of ~~$6.12~~$11.21 billion as of December 31, ~~2019. The~~2020. This increase ~~was attributable to our acquisition~~included increased levels of Farmers National, completed on February 14, 2020 and merger with Franklin on August 15, 2020, which added assets of $258.2 million and $3.62 billion, respectively, combined with our participation in the PPP. As of September 30, 2020, we have originated over 2,993 PPP loans, increasing loans held for investment by $310.7 million. The SBA will continue accepting PPP forgiveness applications in the fourth quarter of 2020, at which point we expect to begin to see a decline in these loans, for which we anticipate being repaid in full. Additionally,liquidity as we held cash and cash equivalents of ~~$1.06~~$1.72 billion at ~~September~~June 30, ~~2020,~~2021, an increase of ~~$829.7 million during the first nine months~~$0.40 billion from $1.32 billion as of ~~2020, up from $232.7 million at~~ December 31, ~~2019. As a result~~2020. Also included in the increase in total assets from December 31, 2020 was an increase of ~~the COVID-19 pandemic and the upcoming Franklin merger, we have taken appropriate measures to ensure adequate liquidity.~~$232.0 million in available-for-sale debt securities.

Loan portfolio

Our loan portfolio is our most significant earning asset, comprising ~~65.5%~~60.4% and ~~72.0%~~63.2% of our total assets as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Our strategy is to grow our loan portfolio by originating quality commercial and consumer loans that comply with our credit policies and that produce revenues consistent with our financial objectives. Our overall lending approach is primarily focused on providing credit to our customers directly rather than purchasing loan syndications and loan participations from other banks (collectively, “participated loans”). At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, loans held for investment included approximately ~~$229.0~~$194.6 million and ~~$103.4~~$206.8 million, respectively, related to ~~participated~~purchased participation loans. We believe our loan portfolio is well-balanced, which provides us with the opportunity to grow while monitoring our loan concentrations.

Loans by type

The following table sets forth the balance and associated percentage of each class of financing receivable in our loan portfolio as of the dates indicated:


													As of June 30,				As of December 31,
		September 30, 2020				December 31, 2019				2021	2020
(dollars in thousands)	(dollars in thousands)	Amount		% of total		Amount		% of total				(dollars in thousands)	Amount		% of total		Amount		% of total
Loan Type:	Loan Type:											Loan Type:
Commercial and industrial (1)	Commercial and industrial (1)	$	1,417,671	20	%	$	1,034,036	23	%			Commercial and industrial (1)	$	1,238,940	17	%	$	1,346,122	19	%
Construction	Construction	1,190,878		16	%	551,101		13	%			Construction	1,145,165		16	%	1,222,220		17	%
Residential real estate:	Residential real estate:											Residential real estate:
1-to-4 family	1-to-4 family	1,140,611		16	%	710,454		16	%			1-to-4 family	1,126,623		16	%	1,089,270		15	%
Line of credit	Line of credit	420,318		6	%	221,530		5	%			Line of credit	401,343		6	%	408,211		6	%
Multi-family	Multi-family	165,937		2	%	69,429		2	%			Multi-family	363,600		5	%	175,676		2	%
Commercial real estate:	Commercial real estate:											Commercial real estate:
Owner-Occupied	Owner-Occupied	924,987		13	%	630,270		14	%			Owner-Occupied	923,605		13	%	924,841		13	%
Non-Owner Occupied	Non-Owner Occupied	1,644,400		23	%	920,744		21	%			Non-Owner Occupied	1,675,214		23	%	1,598,979		23	%
Consumer and other	Consumer and other	308,736		4	%	272,078		6	%			Consumer and other	324,464		4	%	317,640		5	%
Total loans	Total loans	$	7,213,538	100	%	$	4,409,642	100	%			Total loans	$	7,198,954	100	%	$	7,082,959	100	%

(1)Includes ~~$310,719~~$57.4 million and $212.6 million of loans originated as part of the PPP ~~at September~~as of June 30, 2021 and December 31, 2020, ~~established by the CARES Act, in response to the COVID-19 pandemic. The PPP is administered by the SBA; loans originated as part of the PPP may be forgiven by the SBA under a set of defined rules.~~respectively.

Loan concentrations are considered to exist when there are amounts loaned to a number of borrowers engaged in similar activities ~~which~~that would cause them to be similarly impacted by economic or other conditions. At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, there were no concentrations of loans exceeding 10% of total loans other than the categories of loans disclosed in the table above. We believe our loan portfolio is diversified relative to industry concentrations across the various loan portfolio categories. While most industries have ~~and are expected to continue to experience adverse impacts~~been adversely impacted as a result of COVID–19, certain industries are more sensitive and for that reason present ~~more~~greater risk than others. As of September 30, 2020, outstanding loan principal balances of loans in deferral status amounted to $309.0 million in industries that we consider areas of concern that we continue to monitor.other industries. The following presents industry loan categories considered to be “of concern” in relation to our total portfolio as of ~~September~~June 30, 2021 and December 31, 2020.


~~Industry~~	Approximate % of total loans		~~Description of components~~
~~Retail lending~~	~~8.7~~	%	~~Includes non-owner occupied CRE, automobile, recreational vehicle and boat dealers, gas stations and convenience stores, pharmacies and drug stores, and sporting goods.~~
~~Healthcare~~	~~4.7~~	%	~~Includes assisted living, nursing and continuing care, medical practices, social assistance, mental health and substance abuse centers.~~
~~Hotel~~	~~4.7~~	%	~~Vast majority of hotel exposure is built around long-term successful hotel operators and strong flags located within our banking footprint.~~
~~Other leisure~~	~~1.8~~	%	~~Includes marinas, recreational vehicle parks and campgrounds, fitness and recreational sports centers, sports teams and clubs, historical sites, and theaters.~~
~~Transportation~~	~~1.8~~	%	Includes trucking exposure made up of truckload operators, equipment lessors to owner/operators, and local franchisees of major national trucking companies. Also includes air travel (no commercial airlines) and support and to a lesser extent, consumer charter and transportation and warehousing.
~~Restaurants~~	~~1.9~~	%	~~Majority made up of full service restaurants with no major concentration by operator or brand. Also includes limited service restaurants and bars.~~


		Approximate % of total loans
Industry	Description of components	June 30, 2021		December 31, 2020
Retail lending	Includes non-owner occupied CRE, automobile, recreational vehicle and boat dealers, gas stations and convenience stores, pharmacies and drug stores, and sporting goods.	8.0	%	8.7	%
Healthcare	Includes assisted living, nursing and continuing care, medical practices, social assistance, mental health and substance abuse centers.	4.3	%	4.9	%
Hotel	Vast majority of hotel exposure is built around long-term successful hotel operators and strong flags located within our banking footprint.	4.6	%	4.9	%
Other leisure	Includes marinas, recreational vehicle parks and campgrounds, fitness and recreational sports centers, sports teams and clubs, historical sites, and theaters.	1.7	%	1.7	%
Transportation	Includes trucking exposure made up of truckload operators, equipment lessors to owner/operators, and local franchisees of major national trucking companies. Also includes air travel (no commercial airlines) and support and to a lesser extent, consumer charter and transportation and warehousing.	1.7	%	1.6	%
Restaurants	Majority made up of full service restaurants with no major concentration by operator or brand. Also includes limited service restaurants and bars.	2.2	%	2.0	%

Banking regulators have established thresholds of less than 100% of ~~risk based~~tier 1 capital ~~concentrations~~plus allowance for credit losses in construction lending and less than 300% of ~~risk based~~tier 1 capital ~~concentrations~~plus allowance for credit losses in commercial real estate lending that management monitors as part of the risk management process. The construction concentration ratio is a percentage of the outstanding construction and land development loans to total ~~risk-based capital.~~tier 1 capital plus allowance for credit losses. The commercial real estate concentration ratio is a percentage of the outstanding balance of non-owner occupied commercial real estate, multifamily, and construction and land development loans to ~~total risk-based capital.~~tier 1 capital plus allowance for credit losses. Management strives to operate within the thresholds set forth above.

When a company's ratios are in excess of one or both of these guidelines, banking regulators generally require an increased level of monitoring in these lending areas by management.

The table below shows concentration ratios for the Bank and Company as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, which both were within the stated thresholds.


		As a percentage (%) of risk based capital					As a percentage (%) of tier 1 capital plus allowance for credit losses
		FirstBank		FB Financial Corporation			FirstBank		FB Financial Corporation
September 30, 2020
June 30, 2021						June 30, 2021
Construction	Construction	90.6	%	89.3	%	Construction	89.7	%	86.6	%
Commercial real estate	Commercial real estate	228.3	%	225.0	%	Commercial real estate	250.8	%	242.1	%
December 31, 2019
December 31, 2020						December 31, 2020
Construction	Construction	88.4	%	87.0	%	Construction	93.1	%	96.9	%
Commercial real estate	Commercial real estate	247.4	%	243.4	%	Commercial real estate	228.3	%	237.7	%

Loan categories

The principal categories of our loans held for investment portfolio are discussed below:

Commercial and industrial loans. We provide a mix of variable and fixed rate commercial and industrial loans. Our commercial and industrial loans are typically made to small and medium-sized manufacturing, wholesale, retail and service businesses for working capital and operating needs and business expansions, including the purchase of capital equipment and loans made to farmers relating to their operations. This category also includes loans secured by manufactured housing receivables. Commercial and industrial loans generally include lines of credit and loans with maturities of five years or less. This category also includes the loans we originated as part of the PPP, established by the ~~CARES~~Coronavirus Aid, Relief and Economic Security Act. The PPP is administered by the SBA, and loans we originated as part of the PPP may be forgiven by the SBA under a set of defined rules. These federally guaranteed loans were intended to provide up to 24 weeks of payroll and other operating costs as a source of aid to small- and medium-sized businesses. Commercial and industrial loans are generally made with operating cash flows as the primary source of repayment, but may also include collateralization by inventory, accounts receivable, equipment and personal guarantees. We plan to continue to make commercial and industrial loans an area of emphasis in our lending operations in the future. AsExcluding PPP loans totaling $57.4 million and $212.6 million as of ~~September~~June 30, 2021 and December 31, 2020, respectively, our commercial and industrial loans comprised ~~$1,417.7 million,~~$1.18 billion, or ~~20%~~17%, and $1.13 billion, or 16%, respectively, of our loans compared to $1,034.0 million, or 23% of loans, as of December 31, 2019. Excluding PPP loans totaling $310.7 million as of September 30, 2020, our commercial and industrial loans comprised $1,107.0 million.held for investment.

Commercial real estate owner-occupied loans. Our commercial real estate owner-occupied loans include loans to finance commercial real estate owner occupied properties for various purposes including use as offices, warehouses, production facilities, health care facilities, retail centers, restaurants, churches and agricultural based facilities. Commercial real estate owner-occupied loans are typically repaid through the ongoing business operations of the borrower, and hence are dependent on the success of the underlying business for repayment and are more exposed to general economic conditions. ~~As of September 30, 2020, our owner occupied commercial real estate loans comprised $925.0 million, or 13% of loans, compared to $630.3 million, or 14%, of loans, as of December 31, 2019.~~

Commercial real estate non-owner occupied loans. Our commercial real estate non-owner occupied loans include loans to finance commercial real estate non-owner occupied investment properties for various purposes including use as offices, warehouses, health care facilities, hotels, mixed-use residential/commercial, manufactured housing communities, retail centers, multifamily properties, assisted living facilities and agricultural based facilities. Commercial real estate non-owner occupied loans are typically repaid with the funds received from the sale of the completed property or rental proceeds from such property, and are therefore more sensitive to adverse conditions in the real estate market, which can also be affected by general economic conditions. ~~As of September 30, 2020, our non-owner occupied commercial real estate loans comprised $1,644.4 million, or 23%, of loans, compared to $920.7 million, or 21% of loans, as of December 31, 2019.~~

Residential real estate 1-4 family mortgage loans. Our residential real estate 1-4 family mortgage loans are primarily made with respect to and secured by single family homes, including manufactured homes with real estate, which are both owner-occupied and investor owned. We intend to continue to make residential 1-4 family housing loans at a similar pace, so long as housing values in our markets do not deteriorate from current prevailing levels and we are able to make such loans consistent with our current credit and underwriting standards. First lien residential 1-4 family mortgages may be

affected by unemployment or underemployment and deteriorating market values of real estate. ~~As of September 30, 2020, our residential real estate mortgage loans comprised $1,140.6 million, or 16% of loans, compared to $710.5 million, or 16%, of loans as of December 31, 2019.~~

Residential line of credit loans. Our residential line of credit loans are primarily revolving, open-end lines of credit secured by 1-4 family residential properties. We intend to continue to make residential line of credit loans if housing values in our markets do not deteriorate from current prevailing levels and we are able to make such loans consistent with our current credit and underwriting standards. Residential line of credit loans may be affected by unemployment or underemployment and deteriorating market values of real estate. ~~Our home equity loans as of September 30, 2020 comprised $420.3 million or 6% of loans compared to $221.5 million, or 5%, of loans as of December 31, 2019.~~

Multi-family residential loans. Our multi-family residential loans are primarily secured by multi-family properties, such as apartments and condominium buildings. These loans may be affected by unemployment or underemployment and deteriorating market values of real estate. ~~Our multifamily loans as of September 30, 2020 comprised $165.9 million, or 2% of loans, compared to $69.4 million, or 2%, of loans as of December 31, 2019.~~

Construction loans. Our construction loans include commercial construction, land acquisition and land development loans and single-family interim construction loans to small- and medium-sized businesses and individuals. These loans are generally secured by the land or the real property being built and are made based on our assessment of the value of the property on an as-completed basis. We expect to continue to make construction loans at a similar pace so long as demand continues and the market for and values of such properties remain stable or continue to improve in our markets. These loans can carry risk of repayment when projects incur cost overruns, have an increase in the price of building materials, encounter zoning and environmental issues, or encounter other factors that may affect the completion of a

project on time and on budget. Additionally, repayment risk may be negatively impacted when the market experiences a deterioration in the value of real estate. ~~As of September 30, 2020, our construction loans comprised $1,190.9 million, or 16% of loans compared to $551.1 million, or 13%of loans as of December 31, 2019.~~

Consumer and other loans. Consumer and other loans include consumer loans made to individuals for personal, family and household purposes, including car, boat and other recreational vehicle loans and personal lines of credit. Consumer loans are generally secured by vehicles and other household goods. The collateral securing consumer loans may depreciate over time. The company seeks to minimize these risks through its underwriting standards. Other loans also include loans to states and political subdivisions in the U.S. These loans are generally subject to the risk that the borrowing municipality or political subdivision may lose a significant portion of its tax base or that the project for which the loan was made may produce inadequate revenue. None of these categories of loans represents a significant portion of our loan portfolio. ~~As of September 30, 2020, our consumer and other loans comprised $308.7 million, or 4% of loans, compared to $272.1 million, or 6% of loans as of December 31, 2019.~~

Loan maturity and sensitivities

The following tables present the contractual maturities of our loan portfolio as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020. Loans with scheduled maturities are reported in the maturity category in which the payment is due. Demand loans with no stated maturity and overdrafts are reported in the “due in 1 year or less” category. Loans that have adjustable rates are shown as amortizing to final maturity rather than when the interest rates are next subject to change. The tables do not include prepayment assumptions or scheduled repayments. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had ~~$22.6~~$22.0 million and ~~$23.1~~$22.4 million, respectively, in fixed-rate loans in which the Company has entered into variable rate swap contracts.


Loan type (dollars in thousands)	Loan type (dollars in thousands)	Maturing in one year or less			Maturing in one to five years			Maturing after five years			Total			Loan type (dollars in thousands)	Maturing in one year or less			Maturing in one to five years			Maturing after five years			Total
As of September 30, 2020
As of June 30, 2021														As of June 30, 2021
Commercial and industrial	Commercial and industrial	$	199,847		$	1,057,734		$	160,090		$	1,417,671		Commercial and industrial	$	507,749		$	567,998		$	163,193		$	1,238,940
Commercial real estate:	Commercial real estate:													Commercial real estate:
Owner occupied	Owner occupied	113,426			465,293			346,268			924,987			Owner occupied	100,825			482,077			340,703			923,605
Non-owner occupied	Non-owner occupied	172,814			764,362			707,224			1,644,400			Non-owner occupied	95,109			804,332			775,773			1,675,214
Residential real estate:	Residential real estate:													Residential real estate:
1-to-4 family	1-to-4 family	81,969			364,612			694,030			1,140,611			1-to-4 family	76,140			365,486			684,997			1,126,623
Line of credit	Line of credit	23,587			84,612			312,119			420,318			Line of credit	33,996			77,182			290,165			401,343
Multi-family	Multi-family	4,668			61,947			99,322			165,937			Multi-family	4,879			234,280			124,441			363,600
Construction	Construction	593,499			393,251			204,128			1,190,878			Construction	579,896			416,833			148,436			1,145,165
Consumer and other	Consumer and other	29,789			81,585			197,362			308,736			Consumer and other	39,883			79,647			204,934			324,464
Total ($)	Total ($)	$	1,219,599		$	3,273,396		$	2,720,543		$	7,213,538		Total ($)	$	1,438,477		$	3,027,835		$	2,732,642		$	7,198,954
Total (%)	Total (%)	16.9		%	45.4		%	37.7		%	100.0		%	Total (%)	20.0		%	42.0		%	38.0		%	100.0		%


Loan type (dollars in thousands)	Loan type (dollars in thousands)	Maturing in one year or less			Maturing in one to five years			Maturing after five years			Total			Loan type (dollars in thousands)	Maturing in one year or less			Maturing in one to five years			Maturing after five years			Total
As of December 31, 2019
As of December 31, 2020														As of December 31, 2020
Commercial and industrial	Commercial and industrial	$	396,045		$	501,693		$	136,298		$	1,034,036		Commercial and industrial	$	225,384		$	955,847		$	164,891		$	1,346,122
Commercial real estate:	Commercial real estate:													Commercial real estate:
Owner occupied	Owner occupied	97,724			367,072			165,474			630,270			Owner occupied	114,993			453,426			356,422			924,841
Non-owner occupied	Non-owner occupied	109,172			552,333			259,239			920,744			Non-owner occupied	134,846			770,849			693,284			1,598,979
Residential real estate:	Residential real estate:													Residential real estate:
1-to-4 family	1-to-4 family	63,297			258,570			388,587			710,454			1-to-4 family	78,600			361,804			648,866			1,089,270
Line of credit	Line of credit	7,179			47,629			166,722			221,530			Line of credit	27,970			82,084			298,157			408,211
Multi-family	Multi-family	1,793			57,602			10,034			69,429			Multi-family	6,291			74,139			95,246			175,676
Construction	Construction	241,872			259,942			49,287			551,101			Construction	613,153			384,124			224,943			1,222,220
Consumer and other	Consumer and other	38,830			66,016			167,232			272,078			Consumer and other	29,051			77,398			211,191			317,640
Total ($)	Total ($)	$	955,912		$	2,110,857		$	1,342,873		$	4,409,642		Total ($)	$	1,230,288		$	3,159,671		$	2,693,000		$	7,082,959
Total (%)	Total (%)	21.7		%	47.9		%	30.4		%	100.0		%	Total (%)	17.4		%	44.6		%	38.0		%	100.0		%

8280

For loans due after one year or more, the following tables present the sensitivities to changes in interest rates as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.


Loan type (dollars in thousands)	Loan type (dollars in thousands)	Fixed interest rate			Floating interest rate			Total			Loan type (dollars in thousands)	Fixed interest rate			Floating interest rate			Total
As of September 30, 2020
As of June 30, 2021											As of June 30, 2021
Commercial and industrial	Commercial and industrial	$	646,719		$	571,105		$	1,217,824		Commercial and industrial	$	356,868		$	374,323		$	731,191
Commercial real estate:	Commercial real estate:										Commercial real estate:
Owner occupied	Owner occupied	506,886			304,675			811,561			Owner occupied	548,249			274,531			822,780
Non-owner occupied	Non-owner occupied	533,666			937,920			1,471,586			Non-owner occupied	664,951			915,154			1,580,105
Residential real estate:	Residential real estate:										Residential real estate:
1-to-4 family	1-to-4 family	827,473			231,169			1,058,642			1-to-4 family	843,282			207,201			1,050,483
Line of credit	Line of credit	2,399			394,332			396,731			Line of credit	2,004			365,343			367,347
Multi-family	Multi-family	79,696			81,573			161,269			Multi-family	115,881			242,840			358,721
Construction	Construction	143,652			453,727			597,379			Construction	165,149			400,120			565,269
Consumer and other	Consumer and other	257,802			21,145			278,947			Consumer and other	266,727			17,854			284,581
Total ($)	Total ($)	$	2,998,293		$	2,995,646		$	5,993,939		Total ($)	$	2,963,111		$	2,797,366		$	5,760,477
Total (%)	Total (%)	50.0		%	50.0		%	100.0		%	Total (%)	51.4		%	48.6		%	100.0		%


Loan type (dollars in thousands)	Loan type (dollars in thousands)	Fixed interest rate			Floating interest rate			Total			Loan type (dollars in thousands)	Fixed interest rate			Floating interest rate			Total
As of December 31, 2019
As of December 31, 2020											As of December 31, 2020
Commercial and industrial	Commercial and industrial	$	288,666		$	349,325		$	637,991		Commercial and industrial	$	577,567		$	543,171		$	1,120,738
Commercial real estate:	Commercial real estate:										Commercial real estate:
Owner occupied	Owner occupied	422,684			109,862			532,546			Owner occupied	534,035			275,813			809,848
Non-owner occupied	Non-owner occupied	324,951			486,621			811,572			Non-owner occupied	609,100			855,033			1,464,133
Residential real estate:	Residential real estate:										Residential real estate:
1-to-4 family	1-to-4 family	532,409			114,748			647,157			1-to-4 family	809,012			201,658			1,010,670
Line of credit	Line of credit	892			213,459			214,351			Line of credit	4,647			375,594			380,241
Multi-family	Multi-family	49,091			18,545			67,636			Multi-family	86,232			83,153			169,385
Construction	Construction	93,342			215,887			309,229			Construction	182,761			426,306			609,067
Consumer and other	Consumer and other	215,822			17,426			233,248			Consumer and other	267,263			21,326			288,589
Total ($)	Total ($)	$	1,927,857		$	1,525,873		$	3,453,730		Total ($)	$	3,070,617		$	2,782,054		$	5,852,671
Total (%)	Total (%)	55.8		%	44.2		%	100.0		%	Total (%)	52.5		%	47.5		%	100.0		%

8381

The following table presents the contractual maturities of our loan portfolio segregated into fixed and floating interest rate loans as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.


(dollars in thousands)	(dollars in thousands)	Fixed interest rate			Floating interest rate			Total			(dollars in thousands)	Fixed interest rate			Floating interest rate			Total
As of September 30, 2020
As of June 30, 2021											As of June 30, 2021
One year or less	One year or less	$	249,701		$	969,898		$	1,219,599		One year or less	$	590,905		$	847,572		$	1,438,477
One to five years	One to five years	1,999,391			1,274,005			3,273,396			One to five years	1,713,193			1,314,642			3,027,835
More than five years	More than five years	998,902			1,721,641			2,720,543			More than five years	1,249,918			1,482,724			2,732,642
Total ($)	Total ($)	$	3,247,994		$	3,965,544		$	7,213,538		Total ($)	$	3,554,016		$	3,644,938		$	7,198,954
Total (%)	Total (%)	45.0		%	55.0		%	100.0		%	Total (%)	49.4		%	50.6		%	100.0		%


(dollars in thousands)	(dollars in thousands)	Fixed interest rate			Floating interest rate			Total			(dollars in thousands)	Fixed interest rate			Floating interest rate			Total
As of December 31, 2019
As of December 31, 2020											As of December 31, 2020
One year or less	One year or less	$	381,148		$	574,764		$	955,912		One year or less	$	321,315		$	908,973		$	1,230,288
One to five years	One to five years	1,224,977			885,880			2,110,857			One to five years	1,906,319			1,253,352			3,159,671
More than five years	More than five years	702,880			639,993			1,342,873			More than five years	1,164,298			1,528,702			2,693,000
Total ($)	Total ($)	$	2,309,005		$	2,100,637		$	4,409,642		Total ($)	$	3,391,932		$	3,691,027		$	7,082,959
Total (%)	Total (%)	52.4		%	47.6		%	100.0		%	Total (%)	47.9		%	52.1		%	100.0		%

Of the loans shown above with floating interest rates, ~~totaling $3.97 billion as of September 30, 2020,~~ many ~~of such~~ have interest rate floors as follows:


Loans with interest rate floors (dollars in thousands)	Loans with interest rate floors (dollars in thousands)	Maturing in one year or less		Weighted average level of support (bps)	Maturing in one to five years		Weighted average level of support (bps)	Maturing after five years		Weighted average level of support (bps)	Total		Weighted average level of support (bps)	Loans with interest rate floors (dollars in thousands)	Maturing in one year or less		Weighted average level of support (bps)	Maturing in one to five years		Weighted average level of support (bps)	Maturing after five years		Weighted average level of support (bps)	Total		Weighted average level of support (bps)
As of September 30, 2020
As of June 30, 2021														As of June 30, 2021
Loans with current rates above floors:	Loans with current rates above floors:													Loans with current rates above floors:

1-25 bps	1-25 bps	$	106,069	10.69	$	55,689	4.98	$	89,310	12.03	$	251,068	9.90	1-25 bps	$	57,399	22.48	$	232,419	13.94	$	191,048	14.30	$	480,866	15.10
26-50 bps	26-50 bps	5,019		49.97	1,992		50.00	16,586		44.18	23,597		45.91	26-50 bps	10,965		50.00	3,096		49.26	16,897		47.95	30,958		48.81
51-75 bps	51-75 bps	474		75.00	4,258		75.00	12,983		74.99	17,715		74.99	51-75 bps	805		47.99	4,299		74.41	14,161		73.08	19,265		73.46
76-100 bps	76-100 bps	273		98.28	553		100.00	2,900		99.32	3,726		99.34	76-100 bps	1,202		100.00	819		95.14	4,760		95.43	6,781		96.21
101-125 bps	101-125 bps	6,296		124.79	—		—	1,541		125.00	7,837		124.83	101-125 bps	431		120.82	142		125.00	1,867		122.01	2,440		121.98
126-150 bps	126-150 bps	35		150.00	591		150.00	2,627		149.55	3,253		149.63	126-150 bps	48		150.00	11,174		135.73	3,187		147.35	14,409		138.35
151-200 bps	151-200 bps	8		175.00	1,729		178.45	5,803		176.89	7,540		177.24	151-200 bps	223		177.24	1,653		178.53	5,515		177.56	7,391		177.77
200-250 bps		—		—	407		250.00	1,009		239.76	1,416		242.70
201-250 bps														201-250 bps	—		—	268		247.40	924		239.72	1,192		241.45
251 bps and above	251 bps and above	987		275.00	627		275.00	2,604		287.13	4,218		282.49	251 bps and above	813		321.36	696		282.23	2,753		300.93	4,262		301.77
Total loans with current rates above floors	Total loans with current rates above floors	$	119,161	21.07	$	65,846	21.61	$	135,363	41.89	$	320,370	29.98	Total loans with current rates above floors	$	71,886	33.09	$	254,566	23.11	$	241,112	32.18	$	567,564	28.22
Loans with current rates below floors:	Loans with current rates below floors:													Loans with current rates below floors:
1-25 bps	1-25 bps	$	71,138	21.14	$	92,874	5.71	$	20,922	20.10	$	184,934	13.27	1-25 bps	$	78,804	22.30	$	121,389	19.65	$	75,951	16.45	$	276,144	19.53
26-50 bps	26-50 bps	57,124		48.26	48,742		45.50	70,082		48.40	175,948		47.55	26-50 bps	61,034		48.37	86,743		44.16	107,435		47.62	255,212		46.63
51-75 bps	51-75 bps	104,043		74.85	56,518		71.84	75,365		67.46	235,926		71.77	51-75 bps	99,323		73.82	88,026		69.38	128,092		68.15	315,441		70.28
76-100 bps	76-100 bps	59,636		96.83	87,510		92.96	114,115		93.05	261,261		93.88	76-100 bps	65,676		96.03	121,595		88.87	96,707		93.00	283,978		91.93
101-125 bps	101-125 bps	60,024		124.21	29,508		122.02	116,510		120.40	206,042		121.74	101-125 bps	32,334		124.03	50,163		120.59	74,484		118.01	156,981		120.07
126-150 bps	126-150 bps	42,650		147.05	40,480		143.71	189,962		140.22	273,092		141.80	126-150 bps	22,963		142.85	43,805		139.30	83,427		139.85	150,195		140.15
151-200 bps	151-200 bps	81,097		177.80	76,207		179.22	167,046		174.14	324,350		176.25	151-200 bps	38,580		182.10	64,207		179.83	92,951		178.50	195,738		179.65
200-250 bps		15,547		225.09	35,029		227.58	118,111		224.28	168,687		225.04
201-250 bps														201-250 bps	23,197		233.12	20,097		223.34	48,562		223.75	91,856		226.03
251 bps and above	251 bps and above	14,675		527.45	29,054		295.17	100,336		285.34	144,065		311.99	251 bps and above	18,709		362.36	35,703		287.92	47,842		308.50	102,254		311.16
Total loans with current rates below floors	Total loans with current rates below floors	$	505,934	91.52	$	495,922	97.13	$	972,449	130.34	$	1,974,305	111.63	Total loans with current rates below floors	$	440,620	101.79	$	631,728	97.50	$	755,451	114.85	$	1,827,799	105.71

8482

Asset quality

In order to operate with a sound risk profile, we focus on originating loans that we believe to be of high quality. We have established loan approval policies and procedures to assist us in maintaining the overall quality of our loan portfolio. When delinquencies in our loans exist, we rigorously monitor the levels of such delinquencies for any negative or adverse trends. From time to time, we may modify loans to extend the term or make other concessions, including extensions or interest rate modifications, to help a borrower with a deteriorating financial condition stay current on their loan and to avoid foreclosure. Furthermore, we are committed to collecting on all of our loans, which can result in us carrying higher nonperforming assets. We believe this practice leads to higher recoveries in the long-term.

Nonperforming assets

Our nonperforming assets consist of nonperforming loans, other real estate owned and other miscellaneous non-earning assets. Nonperforming loans are those on which the accrual of interest has stopped, as well as loans that are contractually 90 days past due on which interest continues to accrue. Generally, the accrual of interest is discontinued when the full collection of principal or interest is in doubt or when the payment of principal or interest has been contractually 90 days past due, unless the obligation is both well secured and in the process of collection. In our loan review process, we seek to identify and proactively address nonperforming loans. Accrued interest receivable written off as an adjustment to interest income amounted to $0.1 million and $0.2 million for the three months ended June 30, 2021 and 2020, respectively, and $0.6 million and $0.3 million for the six months ended June 30, 2021 and 2020, respectively. Additionally, we had net interest recoveries on nonperforming assets previously charged off of $0.5 million and $0.2 million for the three months ended June 30, 2021 and 2020, respectively, and $1.2 million and $0.4 million for the six months ended June 30, 2021 and 2020, respectively.

As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we had ~~$70.4~~$78.2 million and ~~$47.1~~$84.2 million, respectively, in nonperforming assets. AsIn addition to loans held for investment, nonperforming assets included commercial loans held for sale that were past due 90 days or more or not accruing interest. These nonperforming commercial loans held for sale represent a pool of ~~September~~shared national credits and institutional healthcare loans that were acquired during 2020 in our acquisition of Franklin and amounted to $5.8 million and $6.5 million as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. As of June 30, 2021 and December 31, 2020, other real estate owned included ~~$6.2~~$5.5 million and ~~$9.0~~$5.7 million, respectively, of excess land and facilities held for sale resulting from our acquisitions. Other nonperforming assets ~~including~~included other repossessed non-real estate amounting to $0.8 million and $1.2 million as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019 amounted to $1.2 million and $1.6 million,~~2020, respectively.

~~We had net interest recoveries on nonperforming assets previously charged off~~Government National Mortgage Association optional repurchase programs allow financial institutions to buy back individual delinquent mortgage loans that meet certain criteria from the securitized loan pool for which the institution provides servicing and was the original transferor. At the servicer’s option and without GNMA’s prior authorization, the servicer may repurchase such a delinquent loan for an amount equal to 100 percent of ~~$0.7 million~~the remaining principal balance of the loan. Under FASB ASC Topic 860, “Transfers and ~~$0.2 million for~~Servicing,” this buy-back option is considered a conditional option until the ~~three months ended September~~delinquency criteria are met, at which time the option becomes unconditional. When the Company is deemed to have regained effective control over these loans under the unconditional buy-back option, the loans can no longer be reported as sold and must be brought back onto the balance sheet, regardless of whether the Company intends to exercise the buy-back option if the buyback option provides the transferor a more-than-trivial benefit. At June 30, ~~2020 and 2019, respectively, and net interest recoveries of $1.1 million and $0.4 million for the nine months ended September 30, 2020 and 2019, respectively.~~

~~At September 30, 2020~~2021 and December 31, ~~2019,~~2020, there were ~~$129.6~~$120.9 million and ~~$51.7~~$151.2 million of delinquent GNMA loans that had previously been sold; however, we determined there not to be a more-than-trivial benefit of rebooking based on an analysis of interest rates and an assessment of potential reputational risk associated with these loans. As such, these were not recorded on our balance ~~sheet~~sheets as of ~~September~~June 30, ~~2020~~2021 or December 31, ~~2019. We continue to assess this on a quarterly basis.~~2020.

8583

The following table provides details of our nonperforming assets, the ratio of such loans and other nonperforming assets to total assets, and certain other related information as of the dates presented:


		As of September 30,						As of December 31,				As of June 30,						As of December 31,
(dollars in thousands)	(dollars in thousands)	2020			2019			2019			(dollars in thousands)	2021			2020			2020
Loan Type	Loan Type										Loan Type
Commercial and industrial	Commercial and industrial	$	6,590		$	387		$	5,878		Commercial and industrial	$	15,642		$	2,419		$	16,335
Construction	Construction	2,214			1,107			1,129			Construction	5,790			1,947			4,626
Residential real estate:	Residential real estate:										Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	14,204			8,576			7,297			1-to-4 family mortgage	13,096			10,104			16,393
Residential line of credit	Residential line of credit	2,141			719			828			Residential line of credit	1,237			981			1,996
Multi-family mortgage	Multi-family mortgage	57			—			—			Multi-family mortgage	53			—			57
Commercial real estate:	Commercial real estate:										Commercial real estate:
Owner occupied	Owner occupied	2,194			1,274			1,793			Owner occupied	8,074			2,644			7,948
Non-owner occupied	Non-owner occupied	12,358			6,601			7,880			Non-owner occupied	12,016			13,339			12,471
Consumer and other	Consumer and other	3,891			1,699			1,800			Consumer and other	3,619			3,391			4,630
Total nonperforming loans held for investment	Total nonperforming loans held for investment	43,649			20,363			26,605			Total nonperforming loans held for investment	59,527			34,825			64,456
Loans held for sale	Loans held for sale	12,812			—			—			Loans held for sale	5,844			—			6,489
Other real estate owned	Other real estate owned	12,748			16,076			18,939			Other real estate owned	11,986			15,091			12,111
Other	Other	1,184			1,519			1,580			Other	816			1,306			1,170
Total nonperforming assets	Total nonperforming assets	$	70,393		$	37,958		$	47,124		Total nonperforming assets	$	78,173		$	51,222		$	84,226
Total nonperforming loans held for investment as a percentage of total loans held for investment	Total nonperforming loans held for investment as a percentage of total loans held for investment	0.61		%	0.47		%	0.60		%	Total nonperforming loans held for investment as a percentage of total loans held for investment	0.83		%	0.72		%	0.91		%
Total nonperforming assets as a percentage of total assets	Total nonperforming assets as a percentage of total assets	0.64		%	0.62		%	0.77		%	Total nonperforming assets as a percentage of total assets	0.66		%	0.71		%	0.75		%
Total accruing loans over 90 days delinquent as a percentage of total assets	Total accruing loans over 90 days delinquent as a percentage of total assets	0.08		%	0.04		%	0.09		%	Total accruing loans over 90 days delinquent as a percentage of total assets	0.08		%	0.09		%	0.12		%
Loans restructured as troubled debt restructurings	Loans restructured as troubled debt restructurings	$	16,681		$	11,460		$	12,206		Loans restructured as troubled debt restructurings	$	42,678		$	13,277		$	15,988
Troubled debt restructurings as a percentage of total loans held for investment	Troubled debt restructurings as a percentage of total loans held for investment	0.23		%	0.26		%	0.28		%	Troubled debt restructurings as a percentage of total loans held for investment	0.59		%	0.28		%	0.23		%

We have evaluated our nonperforming loans held for investment and believe all nonperforming loans have been adequately reserved for in the allowance for credit losses ~~at September~~as of June 30, ~~2020.~~2021. Management also continually monitors past due loans for potential credit quality deterioration. Loans not considered nonperforming include loans 30-89 days past due amounting to ~~$15.2~~$10.7 million at ~~September~~June 30, ~~2020~~2021 as compared to ~~$18.5~~$27.0 million at December 31, 2019. Periods prior to our adoption of CECL on January 1, 2020 exclude purchased credit impaired ("PCI") loans from nonperforming totals while the current period includes PCD loans at their contractual number of days past due. Loans in deferral status are considered current.2020.

Other real estate owned consists of properties acquired through foreclosure or acceptance of a deed in lieu of foreclosure in addition to excess facilities held for ~~sale.~~sale resulting from the consolidation of our facilities resulting from our mergers. These properties are carried at the lower of cost or fair value based on appraised value less estimated selling costs. Losses arising at the time of foreclosure of properties are charged against the allowance for credit losses. Reductions in the carrying value subsequent to foreclosure are charged to earnings and are included in ~~“Gain~~“(Loss) gain on sales or write-downs of other real estate owned” in the accompanying consolidated statements of income. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, other real estate owned included write-downs and partial liquidations of ~~$1.6~~$0.3 million and ~~$1.8~~$0.6 million, respectively, which combined with gains on sales of other real estate, resulted in a net ~~losses~~loss of ~~$1.5 million~~$23 thousand and ~~$1.4~~net gain of $0.5 million, respectively. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, other real estate owned included write-downs and partial liquidations of ~~$0.4~~$0.1 million and ~~$0.5~~$0.2 million, respectively, which combined with net gains on sales of other real estate owned, resulted in a net ~~loss of~~gains $0.1 million and ~~a net gain~~ $0.1 million, respectively.

8684

~~Non-TDR~~ Loan Modifications due to COVID-19

~~During~~On March 22, 2020, a statement was issued by our banking regulators and titled the ~~third quarter~~“Interagency Statement on Loan

Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus” (the “Interagency Statement”) that encourages financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of COVID-19. Additionally, Section 4013 of the CARES Act further stipulated that a qualified loan modification was exempt by law from classification as a troubled debt restructuring, from the period beginning March 1, 2020 until the earlier of December 31, 2020, or the date that is 60 days after the date on which the national emergency concerning the COVID-19 pandemic is terminated. Section 541 of the CAA extended this relief to the earlier of January 1, 2022 or 60 days after the national emergency termination date. The Interagency Statement was subsequently revised in April 2020 to clarify the interaction of the original guidance with Section 4013 of the CARES Act, as well as setting forth the banking regulators’ views on consumer protection considerations.

We have numerous customers that have experienced financial distress as a direct result of COVID-19, and in response we ~~continued offering~~offered financial relief in the form of a payment deferral program to ~~those experiencing financial hardships related to~~assist our customers through these unprecedented times. The majority of these modifications were consistent with the ~~COVID-19 pandemic.~~"Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus" and the CARES Act and did not qualify as TDRs. As of ~~September~~June 30, 2021 and December 31, 2020, the total amortized cost of loans deferred as part of this program that were no longer in deferral status amounted to $1.36 billion and $1.40 billion, respectively. As of June 30, 2021 and December 31, 2020, recorded balances in total loans remaining in deferral status under this program amounted to $73.9 million and $202.5 million, respectively. Additionally, we ~~had deferred principal and/or interest payments~~service mortgages on ~~loans with recorded investments totaling $464.8 million~~behalf of Fannie Mae, Freddie Mac and Ginnie Mae, and as ~~a result~~of June 30, 2021 and December 31, 2020, approximately 2% and 6%, respectively, of customers serviced on behalf of the ~~effects of COVID-19.~~aforementioned companies were receiving forbearance assistance. The payment deferrals program differs from forbearance, in that all deferred payments are not normally due at the end of the deferral period. Instead, the payment due date is advanced to a future time period. Generally, interest continues to accrue on loans during the deferral period, unless the loan is on nonaccrual. The ~~vast~~ majority of our loans in deferral status are considered performing loans, and we anticipate collecting on these balances. We remain proactive in monitoring our loans in deferral status by reaching out to our borrowers with payment deferrals to determine their financial capacity and whether additional payment deferrals or other loan modifications are necessary. These modifications described above via payment deferrals program were promulgated by the effects of COVID-19 and do not qualify as TDRs, consistent with the "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus" and the CARES Act.

Classified loans

We categorize 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. We analyze loans that share similar risk characteristics collectively and loans that do not share similar risk characteristics are evaluated individually. Loans rated Pass include those that are adequately collateralized performing loans which management believes do not have conditions that have occurred or may occur that would result in the loan being downgraded into an inferior category. The Pass category also includes loans rated as Watch, which include those that management believes have conditions that have occurred, or may occur, which could result in the loan being downgraded to an inferior category. A Special Mention loan has potential or exhibited weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the institution’s credit position at some future date.Classified loans include those considered substandard and doubtful. See Note 4, “Loans and allowance for credit ~~losses,”~~losses” in the notes to our consolidated financial statements for a further description of these risk categories.

The following tables set forth information related to the credit quality of our loan portfolio as of the dates presented.


Loan type (dollars in thousands)	Loan type (dollars in thousands)	Pass		Watch		Substandard		Doubtful(1)		Total		Loan type (dollars in thousands)	Pass		Special Mention		Classified		Total
As of September 30, 2020
As of June 30, 2021												As of June 30, 2021
Commercial and industrial	Commercial and industrial	$	1,300,082	$	69,826	$	47,564	$	199	$	1,417,671	Commercial and industrial	$	1,178,805	$	20,254	$	39,881	$	1,238,940
Construction	Construction	1,152,668		30,660		7,545		5		1,190,878		Construction	1,133,782		2,103		9,280		1,145,165
Residential real estate:	Residential real estate:											Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	1,082,670		36,602		20,545		794		1,140,611		1-to-4 family mortgage	1,100,074		6,076		20,473		1,126,623
Residential line of credit	Residential line of credit	409,893		5,205		4,961		259		420,318		Residential line of credit	396,297		344		4,702		401,343
Multi-family mortgage	Multi-family mortgage	165,880		—		57		—		165,937		Multi-family mortgage	363,547		—		53		363,600
Commercial real estate:	Commercial real estate:											Commercial real estate:
Owner occupied	Owner occupied	837,072		68,000		19,915		—		924,987		Owner occupied	885,300		12,485		25,820		923,605
Non-owner occupied	Non-owner occupied	1,521,258		104,243		18,899		—		1,644,400		Non-owner occupied	1,618,642		11,778		44,794		1,675,214
Consumer and other	Consumer and other	286,707		15,786		4,594		1,649		308,736		Consumer and other	318,197		612		5,655		324,464
Total loans	Total loans	$	6,756,230	$	330,322	$	124,080	$	2,906	$	7,213,538	Total loans	$	6,994,644	$	53,652	$	150,658	$	7,198,954

~~(1)~~ ~~This category was added in 2020. Loans considered "Doubtful" were included as part of the "Substandard" risk category prior to January 1, 2020.~~


Loan type (dollars in thousands)	Loan type (dollars in thousands)	Pass		Watch		Substandard		Total		Loan type (dollars in thousands)	Pass		Special Mention		Classified		Total
As of December 31, 2019
Loans, excluding purchased credit impaired loans
As of December 31, 2020										As of December 31, 2020
Commercial and industrial	Commercial and industrial	$	946,247	$	66,910	$	19,195	$	1,032,352	Commercial and industrial	$	1,276,394	$	30,382	$	39,346	$	1,346,122
Construction	Construction	541,201		4,790		2,226		548,217		Construction	1,207,391		6,114		8,715		1,222,220
Residential real estate:	Residential real estate:									Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	666,177		11,380		13,559		691,116		1-to-4 family mortgage	1,055,293		9,800		24,177		1,089,270
Residential line of credit	Residential line of credit	218,086		1,343		2,028		221,457		Residential line of credit	400,206		2,653		5,352		408,211
Multi-family mortgage	Multi-family mortgage	69,366		63		—		69,429		Multi-family mortgage	175,619		—		57		175,676
Commercial real estate:	Commercial real estate:									Commercial real estate:
Owner occupied	Owner occupied	576,737		30,379		17,263		624,379		Owner occupied	866,738		31,544		26,559		924,841
Non-owner occupied	Non-owner occupied	876,670		24,342		9,535		910,547		Non-owner occupied	1,561,360		16,824		20,795		1,598,979
Consumer and other	Consumer and other	248,632		3,304		3,057		254,993		Consumer and other	305,383		5,035		7,222		317,640
Total loans, excluding purchased credit impaired loans		$	4,143,116	$	142,511	$	66,863	$	4,352,490

Purchased credit impaired loans
Commercial and industrial		$	—	$	1,224	$	460	$	1,684
Construction		—		2,681		203		2,884
Residential real estate:
1-to-4 family mortgage		—		15,091		4,247		19,338
Residential line of credit		—		—		73		73
Multi-family mortgage		—		—		—		—
Commercial real estate:
Owner occupied		—		4,535		1,356		5,891
Non-owner occupied		—		6,617		3,580		10,197
Consumer and other		—		13,521		3,564		17,085
Total purchased credit impaired loans		$	—	$	43,669	$	13,483	$	57,152
Total loans	Total loans	$	4,143,116	$	186,180	$	80,346	$	4,409,642	Total loans	$	6,848,384	$	102,352	$	132,223	$	7,082,959

Allowance for credit losses

As of January 1, 2020, our policy for the allowance changed with the adoption of CECL to a lifetime expected credit loss approach. As permitted, the new guidance was implemented using a modified retrospective approach with the impact of the initial adoption being recorded through retained earnings at January 1, 2020, with no restatement of prior periods. Prior to adoption, we calculated the allowance using an incurred loss approach.

The allowance for credit losses represents the portion of the loan's amortized cost basis that we do not expect to collect due to credit losses over the loan's life, considering past events, current conditions, and reasonable and supportable forecasts of future economic conditions considering macroeconomic forecasts. Loan losses are charged against the allowance when we believe the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance for credit losses is based on the loan's amortized cost basis, excluding accrued interest receivable, as we promptly charge off ~~uncollectible~~ accrued interest ~~receivable.~~receivable determined to be uncollectible. We determine the appropriateness of the allowance through periodic evaluation of the loan portfolio, lending-related commitments and other relevant factors, including macroeconomic forecasts and historical loss rates. In future quarters, we may update information and forecasts that may cause significant changes in the estimate in those future quarters.

Our methodology to determine the overall appropriateness of the allowance for credit losses includes the use of lifetime loss rate models. The quantitative models require tailored loan data and macroeconomic variables based on the inherent credit risks in each portfolio to more accurately measure the credit risks associated with each. Each of the quantitative models pools loans with similar risk characteristics and collectively assesses the lifetime loss rate for each pool to estimate its expected credit loss. When a loan no longer shares similar risk characteristics with other loans in any given pool, the loan is individually assessed.

We utilize probability-weighted forecasts, which consider multiple macroeconomic variables from a third-party vendor that are applicable to the type of loan. The weighting of the economic forecast scenarios, macroeconomic variables, and the reasonable and supportable period at the macroeconomic variable-level are reviewed and approved by the forecast governance committee based on expectations of future economic conditions.

We consider the need to qualitatively adjust our modeled quantitative expected credit loss estimate for information not already captured in the model loss estimation process. These qualitative factor adjustments may increase or decrease our estimate of expected credit losses. We review the qualitative adjustments so as to validate that information that has already been considered and included in the modeled quantitative loss estimation process is not also included in the qualitative adjustment. We consider the qualitative factors that are relevant to the institution as of the reporting date, which may include, but are not limited to: levels of and trends in delinquencies and performance of loans; levels of and trends in write-offs and recoveries collected; trends in volume and terms of loans; effects of any changes in reasonable and supportable economic forecasts; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; available relevant information sources that contradict our own forecast; effects of changes in prepayment expectations or other factors affecting assessments of loan contractual term; industry conditions; and effects of changes in credit concentrations.

The change in accounting estimate as a result of our adoption of CECL increased the ACL as of January 1, 2020 to $62.6 million from the allowance for loan losses as of December 31, 2019 of $31.1 million. Upon adoption, we recorded a cumulative effective adjustment to decrease retained earnings by $25.0 million, with corresponding adjustments to the allowance for credit losses on loans and unfunded commitments in addition to recording a deferred tax asset on our consolidated balance sheet. Included in our transition adjustment as of January 1, 2020 was the cumulative effective adjustment to gross-up the amortized cost amount of purchased credit deteriorated ("PCD") loans by $0.6 million.

The allowance for credit losses was ~~$184.0~~$144.7 million and ~~$31.1~~$170.4 million and represented ~~2.55%~~2.01% and ~~0.71%~~2.41% of loans held for investment ~~at September~~as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Excluding PPP loans with a recorded investment totaling ~~$310.7~~$57.4 million and ~~ACL of $49,~~$212.6 million, our ACL as a percentage of total loans held for investment would have been 112 and 7 basis points higher as of ~~September~~June 30, ~~2020.~~2021 and December 31, 2020, respectively. PPP loans are federally guaranteed as part of the CARES Act, provided PPP loan recipients receive loan forgiveness under the SBA regulations. As such, there is minimal credit risk associated with these loans.

In addition, we evaluated ~~for~~ changes in reasonable and supportable forecasts of macroeconomic variables during the ~~nine~~three and six months ended ~~September~~June 30, ~~2020,~~2021, primarily due to the impact of the COVID-19 pandemic, which resulted in projected ~~credit deterioration requiring us to recognize significant increases~~decrease in lifetime losses and overall decrease in the ACL. Specifically, we performed additional qualitative evaluations for certain categories within our loan portfolio, in line with our established qualitative framework, weighting the impact of the current economic outlook, status of federal government stimulus programs, and other considerations, in order to identify specific industries or borrowers seeing credit improvement or deterioration specific to the COVID-19 pandemic.

We also increased the ACL by $82.1 million of which $77.7 million related to loans acquired on August 15, 2020, as part of the Franklin acquisition and $4.5 million related to loans acquired on February 14, 2020, as part of the Farmers National acquisition. See Note 2, "Mergers and acquisitions" in the notes to our consolidated financial statements for additional details related to PCD loans.

~~The~~maintain an allowance for credit losses on unfunded commitments, ~~increased~~which decreased to ~~$16.1~~$13.2 million ~~at September~~as of June 30, ~~2020, and the deferred tax asset related to the ACL increased to $51.9~~2021 from $16.4 million ~~at September 30, 2020, compared to $8.1 million at~~as of December 31, ~~2019.~~

~~The OCC, the Board of Governors~~2020, also as a result of the Federal Reserve System, and the FDIC (collectively, "the Agencies") initially provided an option within the regulatory capital framework to limit the initial regulatory "day one" adverse impact by allowing a three-year phase in period for said impact. In March 2020, the Agencies subsequently announced an interim final rule to delay the estimated impact on regulatory capital stemming from the implementation of CECL. The interim final rule maintains the three-year transition option in the previous rule and provides banks the option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurredimproving macroeconomic forecasts incorporated into our CECL loss ~~methodology’s effect on regulatory capital, followed by a three-year transition period (five-year transition option). We elected the five-year capital transition relief option.~~

rate model.

The following table presents the allocation of the allowance for credit losses by loan category as well as the ratio of loans by loan category compared to the total loan portfolio as of the dates indicated:


											As of June 30,				As of December 31,
		As of September 30, 2020				As of December 31, 2019					2021				2020
(dollars in thousands)	(dollars in thousands)	Amount		% of Loans		Amount		% of Loans		(dollars in thousands)	Amount		% of Loans		Amount		% of Loans

Loan Type:	Loan Type:									Loan Type:
Commercial and industrial	Commercial and industrial	$	8,609	20	%	$	4,805	23	%	Commercial and industrial	$	13,791	17	%	$	14,748	19	%
Construction	Construction	63,629		16	%	10,194		13	%	Construction	32,838		16	%	58,477		17	%
Residential real estate:	Residential real estate:									Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	18,298		16	%	3,112		16	%	1-to-4 family mortgage	19,672		16	%	19,220		15	%
Residential line of credit	Residential line of credit	11,455		6	%	752		5	%	Residential line of credit	6,716		6	%	10,534		6	%
Multi-family mortgage	Multi-family mortgage	7,191		2	%	544		2	%	Multi-family mortgage	13,475		5	%	7,174		2	%
Commercial real estate:	Commercial real estate:									Commercial real estate:
Owner occupied	Owner occupied	6,705		13	%	4,109		14	%	Owner occupied	4,707		13	%	4,849		13	%
Non-owner occupied	Non-owner occupied	57,640		23	%	4,621		21	%	Non-owner occupied	42,856		23	%	44,147		23	%
Consumer and other	Consumer and other	10,446		4	%	3,002		6	%	Consumer and other	10,608		4	%	11,240		5	%
Total allowance	Total allowance	$	183,973	100	%	$	31,139	100	%	Total allowance	$	144,663	100	%	$	170,389	100	%

9087

The following table summarizes activity in our allowance for credit losses during the periods indicated:


		Three Months Ended September 30,						Nine Months Ended September 30,						Year Ended December 31,											Three Months Ended June 30,								Six Months Ended June 30,						Year Ended December 31,
(dollars in thousands)	(dollars in thousands)	2020			2019			2020			2019			2019								(dollars in thousands)			2021				2020				2021			2020			2020
Allowance for credit losses at beginning of period	Allowance for credit losses at beginning of period	$	113,129		$	30,138		$	31,139		$	28,932		$	28,932							Allowance for credit losses at beginning of period			$	157,954			$	89,141			$	170,389		$	31,139		$	31,139
Impact of adopting ASC 326 on non-purchased credit deteriorated loans	Impact of adopting ASC 326 on non-purchased credit deteriorated loans	—			—			30,888			—			—								Impact of adopting ASC 326 on non-purchased credit deteriorated loans			—				—				—			30,888			30,888
Impact of adopting ASC 326 on purchased credit deteriorated loans	Impact of adopting ASC 326 on purchased credit deteriorated loans	—			—			558			—			—								Impact of adopting ASC 326 on purchased credit deteriorated loans			—				—				—			558			558
Charge-offs:	Charge-offs:																					Charge-offs:
Commercial and industrial	Commercial and industrial	(249)			(3)			(1,630)			(261)			(2,930)								Commercial and industrial			(360)				(147)				(637)			(1,381)			(11,735)
Construction	Construction	—			—			(18)			—			—								Construction			—				(18)				(29)			(18)			(18)
Residential real estate:	Residential real estate:																					Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	(8)			—			(373)			(82)			(220)								1-to-4 family mortgage			(16)				(123)				(149)			(365)			(403)
Residential line of credit	Residential line of credit	—			(170)			(21)			(305)			(309)								Residential line of credit			(3)				(21)				(18)			(21)			(22)
Multi-family mortgage	Multi-family mortgage	—			—			—			—			—								Multi-family mortgage			—				—				—			—			—
Commercial real estate:	Commercial real estate:																					Commercial real estate:
Owner occupied	Owner occupied	(95)			—			(304)			—			—								Owner occupied			—				—				—			(209)			(304)
Non-owner occupied	Non-owner occupied	(166)			(12)			(711)			(12)			(12)								Non-owner occupied			—				(545)				—			(545)			(711)
Consumer and other	Consumer and other	(475)			(532)			(1,512)			(1,698)			(2,481)								Consumer and other			(480)				(311)				(1,196)			(1,037)			(2,112)
Total charge-offs	Total charge-offs	$	(993)		$	(717)		$	(4,569)		$	(2,358)		$	(5,952)							Total charge-offs			$	(859)			$	(1,165)			$	(2,029)		$	(3,576)		$	(15,305)
Recoveries:	Recoveries:																					Recoveries:
Commercial and industrial	Commercial and industrial	$	757		$	16		$	1,652		$	66		$	136							Commercial and industrial			$	87			$	807			$	216		$	895		$	1,712
Construction	Construction	51			1			202			8			11								Construction			—				151				—			151			205
Residential real estate:	Residential real estate:																					Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	116			25			166			62			79								1-to-4 family mortgage			41				26				65			50			122
Residential line of credit	Residential line of credit	22			75			61			121			138								Residential line of credit			9				24				15			39			125
Multi-family mortgage	Multi-family mortgage	—			—			—			—			—								Multi-family mortgage			—				—				—			—			—
Commercial real estate:	Commercial real estate:																					Commercial real estate:
Owner occupied	Owner occupied	51			3			68			95			108								Owner occupied			126				3				139			17			83
Non-owner occupied	Non-owner occupied	—			—			—			—			—								Non-owner occupied			—				—				—			—			—
Consumer and other	Consumer and other	175			92			471			435			634								Consumer and other			190				103				385			296			756
Total recoveries	Total recoveries	$	1,172		$	212		$	2,620		$	787		$	1,106							Total recoveries			$	453			$	1,114			$	820		$	1,448		$	3,003
Net recoveries (charge-offs)		179			(505)			(1,949)			(1,571)			(4,846)
Net charge-offs																	Net charge-offs	(406)		(51)			(1,209)				(2,128)				(12,302)
Provision for credit losses	Provision for credit losses	45,834			1,831			97,837			4,103			7,053								Provision for credit losses			(12,885)				24,039				(24,517)			52,003			94,606
Initial allowance on loans purchased with credit deterioration		24,831			—			25,500			—			—
Initial allowance for credit losses on loans purchased with credit deterioration																	Initial allowance for credit losses on loans purchased with credit deterioration	—		—			—				669				25,500

Allowance for credit losses at the end of period	Allowance for credit losses at the end of period	$	183,973		$	31,464		$	183,973		$	31,464		$	31,139							Allowance for credit losses at the end of period			$	144,663			$	113,129			$	144,663		$	113,129		$	170,389
Ratio of net charge-offs during the period to average loans outstanding during the period	Ratio of net charge-offs during the period to average loans outstanding during the period	0.01		%	(0.05)		%	(0.05)		%	(0.05)		%	(0.12)		%						Ratio of net charge-offs during the period to average loans outstanding during the period			(0.02)		%		—		%		(0.03)		%	(0.09)		%	(0.22)		%
Allowance for credit losses as a percentage of loans at end of period		2.55		%	0.72		%	2.55		%	0.72		%	0.71		%
Allowance for credit losses as a percentage of nonperforming loans at end of period		421.5		%	154.5		%	421.5		%	154.5		%	117.0		%
Allowance for credit losses as a percentage of loans at end of period(a)																	Allowance for credit losses as a percentage of loans at end of period(a)	2.01	%	2.34	%		2.01	%			2.34	%			2.41	%
Allowance for credit losses as a percentage of nonperforming loans at end of period(a)																	Allowance for credit losses as a percentage of nonperforming loans at end of period(a)	243.0	%	324.8	%		243.0	%			324.8	%			264.3	%

(a) Excludes reserve for credit losses on unfunded commitments of $13.2 million, $6.5 million, and $16.4 million recorded in accrued expenses and other liabilities at June 30, 2021, June 30, 2020, and December 31, 2020, respectively.

Loans held for sale

Commercial loans held for sale

~~During the three months ended September 30,~~On August 15, 2020, the Company acquired a portfolio of commercial loans, including shared national credits and institutional healthcare loans, as part of the Franklin transaction that the Company has elected to account for as held for sale. The loans had ~~an acquisition date~~a fair value of ~~$318.4~~$124.1 million ~~which declined~~as of June 30, 2021 compared to ~~$241.3~~$215.4 million ~~at September 30,~~as of December 31, 2020. The decrease is ~~primairly~~primarily attributable to loans within the portfolio being paid off through external ~~refinancing.~~refinancing and pay-downs. This decrease is also ~~partially offset by a change~~includes gains on changes in fair ~~vaue during the last half the third quarter~~value amounting to ~~$1.9~~$1.4 and $0.5 million for the three and six months ended June 30, 2021, respectively, which is included in 'other noninterest income' on the consolidated statement of income.

Mortgage loans held for sale

Mortgage loans held for sale were ~~$610.7~~$697.4 million at ~~September~~June 30, ~~2020~~2021 compared to ~~$262.5~~$683.8 million at December 31, ~~2019.~~2020. Interest rate lock volume for the three months ended ~~September~~June 30, 2021 and 2020, ~~and 2019,~~ totaled ~~$2.42~~$1.77 billion and ~~$1.64~~$2.24 billion, respectively, and ~~were $6.75~~$3.66 billion and ~~$4.82~~$4.33 billion for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Generally, mortgage volume increases in lower interest rate environments and robust housing markets and decreases in rising interest rate environments and slower housing markets. The ~~increase~~decrease in interest rate lock volume ~~for~~during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021 reflects the ~~increased volume in our retail and ConsumerDirect channels, which benefited from~~slow down experienced across the ~~lower interest rate environment when~~industry compared towith the same periods in the ~~previous year.~~prior year, which benefited from historically low interest rates pre-empted by the COVID-19 Pandemic. Interest rate lock commitments in the pipeline were ~~$1.36~~$0.79 billion ~~at September~~as of June 30, ~~2020~~2021 compared with ~~$453.2 million at~~$1.19 billion as of December 31, ~~2019.~~2020.

Mortgage loans to be sold are sold either on a “best efforts” basis or under a mandatory delivery sales agreement. Under a “best efforts” sales agreement, residential real estate originations are locked in at a contractual rate with third party private investors or directly with government sponsored agencies, and we are obligated to sell the mortgages to such investors only if the mortgages are closed and funded. The risk we assume is conditioned upon loan underwriting and market conditions in the national mortgage market. Under a mandatory delivery sales agreement, we commit to deliver a certain principal amount of mortgage loans to an investor at a specified price and delivery date. Penalties are paid to the investor if we fail to satisfy the contract. Gains and losses are realized at the time consideration is received and all other criteria for sales treatment have been met. These loans are typically sold within fifteen to twenty-five days after the loan is ~~funded.~~funded, depending on the economic environment and competition in the market. Although loan fees and some interest income are derived from mortgage loans held for sale, the main source of income is gains from the sale of these loans in the secondary market.

Deposits

Deposits represent the Bank’s primary source of funds. We continue to focus on growing core customer deposits through our relationship driven banking philosophy, community-focused marketing programs, and initiatives such as the development of our treasury management services.

Total deposits were ~~$9.09~~$10.20 billion and ~~$4.93~~$9.46 billion as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Noninterest-bearing deposits at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 were ~~$2.29~~$2.48 billion and ~~$1.21~~$2.27 billion, respectively, while interest-bearing deposits were ~~$6.81~~$7.72 billion and ~~$3.73~~$7.18 billion at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. ~~The 84.3% increase~~This deposit growth includes increases of $523.5 million and $70.1 million in ~~total~~interest-bearing demand and savings deposits, ~~from~~respectively, in each case compared to December 31, ~~2019 is partially attributed to merger~~2020. This was offset by declines in customer time and acquisition activity, including growth of $209.5 million in deposits assumed from Farmers National in the first quarter of 2020, and $3.11 billion in deposits assumed from the Franklin merger in the third quarter of 2020. We've also continued focus on core customer deposit growth, and increased escrow deposits that our third party servicing provider, Cenlar, transferred to the Bank. Our deposits balances also benefited from broader market conditions during the first nine months of 2020, as some of our customers received proceeds from PPP loans or other relief sources. Although we recognize many of our customer deposit balances remain at elevated levels, it is difficult to determine the amount of the increase attributable to PPP proceeds as depositors' cash positions are fluid and many customers have received additional relief from other sources.

Brokered and internet time deposits at September 30, 2020 increased significantly by $71.7 million to $92.1 million compared with $20.4 million at December 31, 2019. This steep increase was the result of assuming Franklin's brokered and internet time deposits ~~totaling $107.5~~of $134.2 million ~~at August 15, 2020; this balance has declined since acquisition through continued overall~~and $20.7 million, respectively, in each case as of June 30, 2021 compared to balances as of December 31, 2020. This change in deposit composition is a result of our balance sheet management ~~as we continue to replace brokered~~ and ~~internet~~focus on replacing time deposits with less costly funding sources.

Included in noninterest-bearing deposits are certain mortgage escrow and related customer deposits that our third-party servicing provider, Cenlar, transfers to the Bank which totaled ~~$194.3~~$166.1 million and ~~$92.6~~$148.0 million at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Additionally, our deposits from municipal and governmental entities (i.e. "public deposits") totaled ~~$726.0 million~~$1.93 billion at ~~September~~June 30, ~~2020,~~2021, compared to ~~$463.1 million~~$1.68 billion at December 31, 2019. Franklin contributed approximately $164.6 million to the increase in public deposits, while the remaining increase in public deposits was mainly attributed to seasonal fluctuations, as well as the addition of new customers.2020.

Our deposit base also includes certain commercial and high net worth individuals that periodically place deposits with the Bank for short periods of time and can cause fluctuations from period to period in the overall level of customer deposits outstanding. These fluctuations may include certain deposits from related parties as disclosed within Note ~~18,~~15, "Related

party transactions" in the notes to our consolidated financial statements included in this Report. Management continues to

focus on growing noninterest-bearing deposits while allowing more costly funding sources to ~~mature, repricing downward in our current lower interest rate conditions.~~mature.

Average deposit balances by type, together with the average rates per period are reflected in the average balance sheet amounts, interest paid and rate analysis tables included in this management's discussion and analysis under the subheading "Results of operations" discussion.

The following table sets forth the distribution by type of our deposit accounts ~~for~~as of the dates indicated:


															As of June 30,						As of December 31,
		September 30, 2020						December 31, 2019							2021						2020
(dollars in thousands)	(dollars in thousands)	Amount		% of total deposits		Average rate		Amount		% of total deposits		Average rate		(dollars in thousands)	Amount		% of total deposits		Average rate		Amount		% of total deposits		Average rate

Deposit Type	Deposit Type													Deposit Type
Noninterest-bearing demand	Noninterest-bearing demand	$	2,287,911	25	%	—	%	$	1,208,175	25	%	—	%	Noninterest-bearing demand	$	2,484,982	25	%	—	%	$	2,274,103	24	%	—	%
Interest-bearing demand	Interest-bearing demand	2,005,536		22	%	0.63	%	1,014,875		21	%	0.92	%	Interest-bearing demand	3,015,253		30	%	0.40	%	2,491,765		26	%	0.61	%
Money market	Money market	2,899,795		32	%	0.78	%	1,306,913		26	%	1.42	%	Money market	2,998,527		29	%	0.44	%	2,902,230		30	%	0.76	%
Savings deposits	Savings deposits	336,875		4	%	0.09	%	213,122		4	%	0.15	%	Savings deposits	422,754		4	%	0.06	%	352,685		4	%	0.08	%
Customer time deposits	Customer time deposits	1,471,556		16	%	1.71	%	1,171,502		24	%	2.09	%	Customer time deposits	1,241,540		12	%	0.76	%	1,375,695		15	%	1.52	%
Brokered and internet time deposits	Brokered and internet time deposits	92,074		1	%	0.37	%	20,351		—	%	2.27	%	Brokered and internet time deposits	40,900		—	%	2.24	%	61,559		1	%	0.90	%
Total deposits	Total deposits	$	9,093,747	100	%	0.69	%	$	4,934,938	100	%	1.10	%	Total deposits	$	10,203,956	100	%	0.36	%	$	9,458,037	100	%	0.62	%
Customer Time Deposits	Customer Time Deposits													Customer Time Deposits
0.00-0.50%	0.00-0.50%	$	319,594	22	%			$	18,919	1	%			0.00-0.50%	$	718,719	58	%			$	454,429	34	%
0.51-1.00%	0.51-1.00%	266,225		18	%			140,682		12	%			0.51-1.00%	189,411		15	%			253,883		18	%
1.01-1.50%	1.01-1.50%	172,532		12	%			55,557		5	%			1.01-1.50%	102,929		8	%			155,755		11	%
1.51-2.00%	1.51-2.00%	239,821		16	%			338,997		29	%			1.51-2.00%	62,326		5	%			169,414		12	%
2.01-2.50%	2.01-2.50%	189,078		13	%			312,528		27	%			2.01-2.50%	91,622		8	%			159,699		12	%
Above 2.50%	Above 2.50%	284,306		19	%			304,819		26	%			Above 2.50%	76,533		6	%			182,515		13	%
Total customer time deposits	Total customer time deposits	$	1,471,556	100	%			$	1,171,502	100	%			Total customer time deposits	$	1,241,540	100	%			$	1,375,695	100	%
Brokered and Internet Time Deposits	Brokered and Internet Time Deposits													Brokered and Internet Time Deposits
0.00-0.50%	0.00-0.50%	$	—	—	%			$	—	—	%			0.00-0.50%	$	98	—	%			$	—	—	%
0.51-1.00%	0.51-1.00%	—		—	%			—		—	%			0.51-1.00%	—		—	%			—		—	%
1.01-1.50%	1.01-1.50%	6,184		7	%			8,453		42	%			1.01-1.50%	595		1	%			5,660		9	%
1.51-2.00%	1.51-2.00%	71,304		77	%			9,368		46	%			1.51-2.00%	24,952		61	%			42,311		69	%
2.01-2.50%	2.01-2.50%	6,059		7	%			2,182		11	%			2.01-2.50%	8,786		22	%			5,312		9	%
Above 2.50%	Above 2.50%	8,527		9	%			348		1	%			Above 2.50%	6,469		16	%			8,276		13	%
Total brokered and internet time deposits	Total brokered and internet time deposits	92,074		100	%			20,351		100	%			Total brokered and internet time deposits	40,900		100	%			61,559		100	%
Total time deposits	Total time deposits	$	1,563,630					$	1,191,853					Total time deposits	$	1,282,440					$	1,437,254

9390

The following table sets forth our time deposits segmented by months to maturity and deposit amount as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


		As of September 30, 2020							As of June 30, 2021
(dollars in thousands)	(dollars in thousands)	Time deposits of $100 and greater		Time deposits of less than $100		Total		(dollars in thousands)	Time deposits of $100 and greater		Time deposits of less than $100		Total
Months to maturity:	Months to maturity:							Months to maturity:
Three or less	Three or less	$	275,971	$	109,142	$	385,113	Three or less	$	226,948	$	102,992	$	329,940
Over Three to Six	Over Three to Six	209,002		97,578		306,580		Over Three to Six	146,782		76,149		222,931
Over Six to Twelve	Over Six to Twelve	352,935		157,831		510,766		Over Six to Twelve	199,084		128,936		328,020
Over Twelve	Over Twelve	251,110		110,061		361,171		Over Twelve	267,959		133,590		401,549
Total	Total	$	1,089,018	$	474,612	$	1,563,630	Total	$	840,773	$	441,667	$	1,282,440


		As of December 31, 2019							As of December 31, 2020
(dollars in thousands)	(dollars in thousands)	Time deposits of $100 and greater		Time deposits of less than $100		Total		(dollars in thousands)	Time deposits of $100 and greater		Time deposits of less than $100		Total
Months to maturity:	Months to maturity:							Months to maturity:
Three or less	Three or less	$	126,604	$	66,520	$	193,124	Three or less	$	203,202	$	123,080	$	326,282
Over Three to Six	Over Three to Six	110,617		68,031		178,648		Over Three to Six	228,585		106,223		334,808
Over Six to Twelve	Over Six to Twelve	295,412		147,724		443,136		Over Six to Twelve	255,486		132,240		387,726
Over Twelve	Over Twelve	239,828		137,117		376,945		Over Twelve	254,672		133,766		388,438
Total	Total	$	772,461	$	419,392	$	1,191,853	Total	$	941,945	$	495,309	$	1,437,254

Investment portfolio

Our investment portfolio objectives include maximizing total return after other primary objectives are achieved such as, but not limited to, providing liquidity, capital preservation, and pledging collateral for various types of borrowings. The investment objectives guide the portfolio allocation among securities types, maturities, and other attributes.

The following table shows the carrying value of our total securities ~~available for sale~~available-for-sale by investment type and the relative percentage of each investment type for the dates indicated:


											As of June 30,				As of December 31,
		September 30, 2020				December 31, 2019					2021				2020
(dollars in thousands)	(dollars in thousands)	Carrying value		% of total		Carrying value		% of total		(dollars in thousands)	Carrying value		% of total		Carrying value		% of total
U.S. Government agency securities		$	1,994	—	%	$	—	—	%
U.S. government agency securities										U.S. government agency securities	$	8,255	—	%	$	2,003	—	%
Mortgage-backed securities - residential	Mortgage-backed securities - residential	738,106		64	%	477,312		69	%	Mortgage-backed securities - residential	1,035,003		74	%	773,336		67	%
Mortgage-backed securities - commercial	Mortgage-backed securities - commercial	21,854		2	%	13,364		2	%	Mortgage-backed securities - commercial	15,161		1	%	21,588		2	%
Municipals, tax exempt		374,880		32	%	189,235		28	%
Treasury securities		21,700		2	%	7,448		1	%
Municipal securities										Municipal securities	332,883		24	%	356,329		30	%
U.S. Treasury securities										U.S. Treasury securities	10,534		1	%	16,628		1	%
Corporate securities	Corporate securities	1,987		—	%	1,022		—	%	Corporate securities	2,536		—	%	2,516		—	%
Total securities available for sale		$	1,160,521	100	%	$	688,381	100	%
Total securities available-for-sale										Total securities available-for-sale	$	1,404,372	100	%	$	1,172,400	100	%

The fair value of our available-for-sale debt securities portfolio at ~~September~~June 30, ~~2020~~2021 was ~~$1,160.5 million~~$1.40 billion compared to ~~$688.4 million~~$1.17 billion at December 31, ~~2019.~~2020. During the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, we purchased ~~$154.3~~$223.5 million and ~~$37.9~~$30.4 million, respectively in investment securities and during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, we purchased ~~$214.3~~$354.8 million and $60.0 million in investment securities, respectively (excluding those acquired from Farmers National ~~and merged from Franklin) and $92.1 million in investment securities, respectively. The trade value of securities sold was $28.3 million~~ during the ~~three and nine~~six months ended ~~September~~June 30, ~~2020. The trade value~~2020). There were no sales of securities sold during the three and ~~nine~~six months ended ~~September~~June 30, ~~2019 totaled $22.7 million~~2021 and ~~$24.5 million, respectively. Maturities and calls of securities during~~2020. During the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019 totaled $67.8 million and $28.7 million, respectively, and during the nine months ended September 30,~~ 2020, ~~and 2019,~~ maturities and calls of securities totaled ~~$140.2~~$86.9 million and ~~$78.9~~$44.7 million, respectively, and during the six months ended June 30, 2021 and 2020, maturities and calls of securities totaled $147.9 million and $72.4 million, respectively. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, net unrealized gains of ~~$31.5~~$22.3 million and ~~$11.7~~$34.6 million, respectively, were ~~recorded on~~in included in the fair value of available-for-sale debt securities.

As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had ~~$4.4~~$4.8 million and ~~$3.3~~$4.6 million, respectively, in equity securities recorded at fair value that primarily ~~consisting~~consisted of mutual funds. The change in the fair value of equity securities

resulted in a net gain of $136 thousand and a net loss of $28 thousand during the three months ended June 30, 2021 and 2020, respectively. During the six months ended June 30, 2021 and 2020, the change in the fair value of equity securities resulted in a net gain of ~~$59~~$212 thousand and ~~$55~~$35 thousand, ~~during the three months ended September 30, 2020 and 2019,~~respectively.

~~respectively, compared to net gains of $94 thousand and $151 thousand during the nine months ended September 30, 2020 and 2019, respectively.~~

The following table sets forth the fair value, scheduled maturities and weighted average yields for our investment portfolio as of the dates indicated below:


		As of September 30, 2020					As of December 31, 2019						As of June 30,						As of December 31,
						2021					2020
(dollars in thousands)	(dollars in thousands)	Fair value	% of total investment securities		Weighted average yield (1)		Fair value	% of total investment securities		Weighted average yield (1)		(dollars in thousands)	Fair value		% of total investment securities		Weighted average yield (1)		Fair value		% of total investment securities		Weighted average yield (1)

Treasury securities
Treasury securities:												Treasury securities:
Maturing within one year	Maturing within one year	15,628	1.3	%	1.54	%	—	—	%	—	%	Maturing within one year	$	10,534	0.8	%	1.66	%	$	16,628	1.4	%	1.57	%
Maturing in one to five years	Maturing in one to five years	6,072	0.5	%	1.63	%	7,448	1.1	%	1.76	%	Maturing in one to five years	—		—	%	—	%	—		—	%	—	%
Maturing in five to ten years	Maturing in five to ten years	—	—	%	—	%	—	—	%	—	%	Maturing in five to ten years	—		—	%	—	%	—		—	%	—	%
Maturing after ten years	Maturing after ten years	—	—	%	—	%	—	—	%	—	%	Maturing after ten years	—		—	%	—	%	—		—	%	—	%
Total Treasury securities	Total Treasury securities	21,700	1.8	%	1.56	%	7,448	1.1	%	1.76	%	Total Treasury securities	10,534		0.8	%	1.66	%	16,628		1.4	%	1.57	%
Government agency securities:	Government agency securities:											Government agency securities:
Maturing within one year	Maturing within one year	—	—	%	—	%	—	—	%	—	%	Maturing within one year	—		—	%	—	%	—		—	%	—	%
Maturing in one to five years	Maturing in one to five years	—	—	%	—	%	—	—	%	—	%	Maturing in one to five years	1,250		0.1	%	1.00	%	—		—	%	—	%
Maturing in five to ten years	Maturing in five to ten years	1,994	0.2	%	2.64	%	—	—	%	—	%	Maturing in five to ten years	7,005		0.5	%	1.23	%	2,003		0.2	%	2.64	%
Maturing after ten years	Maturing after ten years	—	—	%	—	%	—	—	%	—	%	Maturing after ten years	—		—	%	—	%	—		—	%	—	%
Total government agency securities	Total government agency securities	1,994	0.2	%	2.64	%	—	—	%	—	%	Total government agency securities	8,255		0.6	%	1.19	%	2,003		0.2	%	2.64	%
Obligations of state and municipal subdivisions:
Municipal securities												Municipal securities
Maturing within one year	Maturing within one year	3,381	0.3	%	2.84	%	1,152	0.2	%	5.11	%	Maturing within one year	8,437		0.6	%	3.07	%	19,034		1.6	%	1.07	%
Maturing in one to five years	Maturing in one to five years	23,739	2.0	%	2.53	%	4,228	0.6	%	4.60	%	Maturing in one to five years	20,637		1.5	%	1.91	%	24,184		2.1	%	2.06	%
Maturing in five to ten years	Maturing in five to ten years	27,695	2.4	%	3.58	%	17,865	2.6	%	3.96	%	Maturing in five to ten years	36,705		2.7	%	2.94	%	37,313		3.2	%	2.76	%
Maturing after ten years	Maturing after ten years	320,065	27.6	%	3.28	%	165,990	24.1	%	3.84	%	Maturing after ten years	267,104		19.0	%	3.20	%	275,798		23.5	%	3.12	%
Total obligations of state and municipal subdivisions	Total obligations of state and municipal subdivisions	374,880	32.3	%	3.25	%	189,235	27.5	%	3.88	%	Total obligations of state and municipal subdivisions	332,883		23.8	%	3.08	%	356,329		30.4	%	3.07	%
Residential and commercial mortgage backed securities guaranteed by FNMA, GNMA and FHLMC:	Residential and commercial mortgage backed securities guaranteed by FNMA, GNMA and FHLMC:											Residential and commercial mortgage backed securities guaranteed by FNMA, GNMA and FHLMC:
Maturing within one year	Maturing within one year	—	—	%	—	%	—	—	%	—	%	Maturing within one year	—		—	%	—	%	—		—	%	—	%
Maturing in one to five years	Maturing in one to five years	2,986	0.3	%	3.12	%	496	0.1	%	1.83	%	Maturing in one to five years	4,339		0.3	%	2.56	%	2,975		0.3	%	3.12	%
Maturing in five to ten years	Maturing in five to ten years	31,370	2.7	%	2.48	%	24,316	3.5	%	3.16	%	Maturing in five to ten years	21,426		1.5	%	2.49	%	30,596		2.6	%	2.47	%
Maturing after ten years	Maturing after ten years	725,604	62.5	%	1.48	%	465,864	67.7	%	2.36	%	Maturing after ten years	1,024,399		72.9	%	1.51	%	761,353		64.9	%	1.45	%
Total residential and commercial mortgage backed securities guaranteed by FNMA, GNMA and FHLMC	Total residential and commercial mortgage backed securities guaranteed by FNMA, GNMA and FHLMC	759,960	65.5	%	1.53	%	490,676	71.3	%	2.40	%	Total residential and commercial mortgage backed securities guaranteed by FNMA, GNMA and FHLMC	1,050,164		74.7	%	1.52	%	794,924		67.8	%	1.50	%

Corporate securities:	Corporate securities:											Corporate securities:
Maturing within one year	Maturing within one year	—	—	%	—	%	—	—	%	—	%	Maturing within one year	—		—	%	—	%	—		—	%	—	%
Maturing in one to five years	Maturing in one to five years	—	—	%	—	%	—	—	%	—	%	Maturing in one to five years	500		—	%	5.00	%	500		—	%	5.00	%
Maturing in five to ten years	Maturing in five to ten years	1,987	0.2	%	4.19	%	1,022	0.1	%	4.13	%	Maturing in five to ten years	2,036		0.1	%	4.19	%	2,016		0.2	%	4.19	%
Maturing after ten years	Maturing after ten years	—	—	%	—	%	—	—	%	—	%	Maturing after ten years	—		—	%	—	%	—		—	%	—	%
Total Corporate securities	Total Corporate securities	1,987	0.2	%	4.19	%	1,022	0.1	%	4.13	%	Total Corporate securities	2,536		0.1	%	4.35	%	2,516		0.2	%	4.35	%
Total investment securities	Total investment securities	1,160,521	100.0	%	2.49	%	688,381	100.0	%	2.94	%	Total investment securities	$	1,404,372	100.0	%	1.90	%	$	1,172,400	100.0	%	2.29	%

(1)Yields on a tax-equivalent basis.

9592

The following table summarizes the amortized cost of debt securities classified as available-for-sale and their approximate fair values as of the dates shown:


(dollars in thousands)	(dollars in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value		(dollars in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Securities available for sale
As of September 30, 2020
Securities available-for-sale										Securities available-for-sale
As of June 30, 2021										As of June 30, 2021
U.S. government agency securities										U.S. government agency securities	$	8,255	$	1	$	(1)	$	8,255
Mortgage-backed securities - residential										Mortgage-backed securities - residential	1,031,233		9,507		(5,737)		1,035,003
Mortgage-backed securities - commercial										Mortgage-backed securities - commercial	14,715		446		—		15,161
Municipal securities										Municipal securities	314,862		18,088		(67)		332,883
U.S. Treasury securities										U.S. Treasury securities	10,486		48		—		10,534
Corporate securities										Corporate securities	2,500		42		(6)		2,536
											$	1,382,051	$	28,132	$	(5,811)	$	1,404,372
As of December 31, 2020										As of December 31, 2020
US Government agency securities	US Government agency securities	$	2,000	$	—	$	(6)	$	1,994	US Government agency securities	$	2,000	$	3	$	—	$	2,003
Mortgage-backed securities - residential	Mortgage-backed securities - residential	723,333		15,093		(320)		738,106		Mortgage-backed securities - residential	760,099		14,040		(803)		773,336
Mortgage-backed securities - commercial	Mortgage-backed securities - commercial	20,478		1,376		—		21,854		Mortgage-backed securities - commercial	20,226		1,362		—		21,588
Municipals, tax exempt		359,761		15,813		(694)		374,880
Treasury securities		21,482		218		—		21,700
Municipal securities										Municipal securities	336,543		19,806		(20)		356,329
U.S. Treasury securities										U.S. Treasury securities	16,480		148		—		16,628
Corporate securities	Corporate securities	1,999		3		(15)		1,987		Corporate securities	2,500		17		(1)		2,516
		$	1,129,053	$	32,503	$	(1,035)	$	1,160,521		$	1,137,848	$	35,376	$	(824)	$	1,172,400
As of December 31, 2019
US Government agency securities		$	—	$	—	$	—	$	—
Mortgage-backed securities - residential		474,144		4,829		(1,661)		477,312
Mortgage-backed securities - commercial		12,957		407		—		13,364
Municipals, tax exempt		181,178		8,287		(230)		189,235
Treasury securities		7,426		22		—		7,448
Corporate securities		1,000		22		—		1,022
		$	676,705	$	13,567	$	(1,891)	$	688,381

Securities purchased under agreements to resell ("reverse repurchase agreements")

We enter into agreements with certain customers to purchase investment securities under agreements to resell the following day. This investment deploys some of our liquidity position into an instrument that improves the return on those funds in the current low rate environment. Additionally, we believe it positions us more favorably for a potential rising interest rate environment in the future. Securities purchased under agreements to resell totaled $30.0 million and $0 at June 30, 2021 and December 31, 2020, respectively.

Borrowed funds

Deposits and investment securities ~~available for sale~~available-for-sale are the primary source of funds for our lending activities and general business purposes. However, we may also obtain advances from the FHLB, purchase federal funds and engage in overnight borrowing from the Federal Reserve, correspondent banks, or enter into client ~~purchase~~repurchase agreements. We also use these sources of funds as part of our asset liability management process to control our long-term interest rate risk exposure, even if it may increase our short-term cost of funds.

Our level of short-term borrowing can fluctuate on a daily basis depending on funding needs and the source of funds to satisfy those needs, in addition to the overall interest rate environment and cost of public funds. Borrowings can include securities sold under agreements to repurchase, lines of credit, advances from the FHLB, federal funds, and subordinated debt.

The following table sets forth our total borrowings segmented by years to maturity as of ~~September~~June 30, ~~2020:~~2021:

September 30, 2020
(dollars in thousands) Amount % of total Weighted average interest rate (%)
Maturing Within:
September 30, 2021 $ 147,469 34 % 0.53 %
September 30, 2022 — — % — %
September 30, 2023 — — % — %
September 30, 2024 — — % — %
September 30, 2025 — — % — %
Thereafter 291,369 66 % 3.76 %
Total $ 438,838 100 % 3.08 %


	June 30, 2021
(dollars in thousands)	Amount		% of total		Weighted average interest rate (%)
Maturing Within:
June 30, 2022	$	33,056	18	%	0.24	%
June 30, 2023	—		—	%	—	%
June 30, 2024	—		—	%	—	%
June 30, 2025	—		—	%	—	%
June 30, 2026	—		—	%	—	%
Thereafter	149,351		82	%	4.77	%
Total	$	182,407	100	%	2.98	%

Securities sold under agreements to repurchase

We enter into agreements with certain customers to sell certain securities under agreements to repurchase the security the following day. These agreements are made to provide customers with comprehensive treasury management programs a short-term return for their excess funds. Securities sold under agreements to repurchase totaled ~~$32.5~~$33.1 million and ~~$23.7~~$32.2 million at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019, respectively.~~

The Bank maintains lines with certain correspondent banks that provide borrowing capacity in the form of federal funds purchased in the aggregate amount of $335.0 million and $305.0 million as of September 30, 2020, ~~and December 31, 2019. There were no borrowings against the line at September 30, 2020 or December 31, 2019.~~

~~Federal Home Loan Bank advances~~

As a member of the FHLB Cincinnati, the Bank receives advances from the FHLB pursuant to the terms of various agreements that assist in funding its mortgage and loan portfolio balance sheet. Under the agreements, we pledge qualifying residential mortgages of $1,083.4 million and qualifying commercial mortgages of $996.6 million as collateral securing a line of credit with a total borrowing capacity of $1,604.5 million as of September 30, 2020. As of December 31, 2019, we pledged qualifying residential mortgages of $413.0 million and qualifying commercial mortgages of $545.5 million as collateral securing a line of credit with a total borrowing capacity of $760.6 million.

Borrowings against our line totaled $200.0 million and $250.0 million as of September 30, 2020 and December 31, 2019, respectively. FHLB advances as of September 30, 2020 includes one long-term advance with putable features totaling $100.0 million, while FHLB advances as of December 31, 2019 includes two long-term advances with putable features totaling $150.0 million. These two long-term advances of $100.0 million and $50.0 million carry maximum final terms of 10 years and 7 years, respectively. However, the FHLB owns the option to cancel the advances after one year and quarterly thereafter at predetermined fixed rates of 1.24% and 1.37%, respectively. There were no overnight cash management advances (CMAs) outstanding as of September 30, 2020 or December 31, 2019. Letters of credit with FHLB of $145.0 million and $75.0 million were pledged to secure public funds that required collateral as of September 30, 2020 and December 31, 2019, respectively. As of September 30, 2020 and December 31, 2019, $100.0 million of 90-day fixed-rate advances were also included in total FHLB advances. The maximum amount of FHLB borrowing outstanding at any month end was $250.0 million for the nine months ended September 30, 2020 and 2019. The weighted average interest rate on FHLB borrowings was 0.77% and 1.51% at September 30, 2020 and December 31, 2019, respectively.

Additionally, the Bank maintains a line with the Federal Reserve Bank through the Borrower-in-Custody program. As of September 30, 2020 and December 31, 2019, $1.38 billion and $1.41 billion of qualifying loans and $4.1 million and $5.0 million of investment securities were pledged to the Federal Reserve Bank, securing a line of credit of $1,001.8 million and $1,013.2 million, respectively.

Subordinated debt

We have two wholly-owned subsidiaries that are statutory business trusts (“Trusts”). The Trusts were created for the sole purpose of issuing 30-year capital trust preferred securities to fund the purchase of junior subordinated debentures issued by the Company. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, our $0.9 million investment in the Trusts was included in other assets in the accompanying consolidated balance sheets, and our $30.0 million obligation is reflected as junior subordinated debt, respectively. The junior subordinated debt bears interest at floating interest rates based on a spread over 3-month LIBOR plus 315 basis points ~~(3.38%~~(3.30% and ~~5.10%~~3.40% at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively) for the $21.7 million debenture and 3-month LIBOR plus 325 basis points ~~(3.47%~~(3.40% and ~~5.19%~~3.50% at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively) for the remaining $9.3 million. The $9.3 million debenture may be redeemed prior to the 2033 maturity date upon the occurrence of a special event, and the $21.7 million debenture may be redeemed prior to 2033 at our option.

Additionally, ~~in the third quarter of~~during 2020, we placed $100.0 million of ten year fixed-to-floating rate subordinated notes, maturing September 1, 2030. This subordinated note instrument pays interest semi-annually in arrears based on a 4.5% fixed annual interest rate for the first five years of the notes. For years six through ten, the interest rate resets on a quarterly basis, and will be based on the 3-month Secured Overnight Financing Rate plus a spread of 439 basis points. We are entitled to redeem the notes in whole or in part on any interest payment date on or after September 1, 2025. WeThe Company has classified the ~~entire $100.0~~issuance, net of unamortized issuance costs of $1.6 million ~~placement of subordinated notes~~and $1.8 million, as Tier 2 capital at ~~September~~June 30, ~~2020.~~2021 and December 31, 2020, respectively.

We also assumed two issues of subordinated debt, totaling $60,000, as part of the Franklin merger. The notes, issued by Franklin in 2016, feature $40,000 of 6.875% fixed-to-floating rate subordinated notes due March 30, 2026 ("March 2026 Subordinated Notes"), and $20,000 of 7% fixed-to-floating rate subordinated notes due July 1, 2026 ("July 2026 Subordinated Notes"). ~~Both note issuances currently pay interest on semi-annually, and will begin resetting interest rates on a quarterly basis after March~~During the six months ended June 30, 2021, ~~and July 1, 2021. For years six through ten, interest for~~we redeemed the $40.0 million March 2026 Subordinated Notes ~~will based~~in full. Additionally, during the three and six months ended June 30, 2021, we recorded accretion of a purchase accounting premium of $0.1 million and $0.4 million as a reduction to interest expense on ~~the 3-month LIBOR plus 5.636% and, and interest for the~~borrowings. The remaining July 2026 Subordinated ~~Notes will be based~~Note was paid off on ~~the 3-month LIBOR plus 6.04%. We are entitled~~July 1, 2021. There was $20 million and $60.0 million related to ~~redeem in whole or in part after the respective fifth anniversary of each note issuance. We classified the entire $60,000 in subordinated notes~~these issuances included as Tier 2 capital at

~~September~~as of June 30, ~~2020. Upon acquisition, we recorded a $0.8 million fair value premium adjustment~~2021 and ~~during the three months ended September 30,~~December 31, 2020, ~~we recognized $0.2 million of amortization expense.~~respectively.

Other borrowings

During the ~~nine months ended September 30,~~first quarter of 2020, we ~~initiated~~entered into total borrowings against a credit line in the amount ~~of $20.0 million (1.75% + 1 month LIBOR in effect 2 business days prior to reprice date) and borrowed~~ $15.0 million against the line to fund the cash consideration paid in connection with the Farmers National transaction. ~~An additional $5.0 million remains available for the Company to draw. This~~The line of credit ~~has a term of one year, maturing~~matured on February 21, ~~2021.~~2021 and was repaid in full. Other borrowings on our consolidated balance sheets also includes our finance lease liability totaling $1.6 million as of both June 30, 2021 and December 31, 2020. See Note 6, "Leases" within the Notes to our consolidated financial statements for additional information regarding our finance lease.

Liquidity and capital resources

Bank liquidity management

We are expected to maintain adequate liquidity at the Bank to meet the cash flow requirements of clients who may be either depositors wishing to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs. Our Liquidity and Interest Rate Risk Policy is intended to cause the Bank to maintain adequate liquidity and, therefore, enhance our ability to raise funds to support asset growth, meet deposit withdrawals and lending needs, maintain reserve requirements and otherwise sustain our operations. We accomplish this through management of the maturities of our interest-earning assets and interest-bearing liabilities. We believe that our present position is adequate to meet our current and future liquidity needs.

We continuously monitor our liquidity position to ensure that assets and liabilities are managed in a manner that will meet all of our short-term and long-term cash requirements. We manage our liquidity position to meet the daily cash flow needs of clients, while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of our shareholders. We also monitor our liquidity requirements in light of interest rate trends, changes in the economy and the scheduled maturity and interest rate sensitivity of the investment and loan portfolios and deposits.

~~As a result of~~Considering uncertainty surrounding the COVID-19 pandemic, we have taken steps to ensure adequate liquidity and access to funding sources. To date, we have not seen significant pressure on liquidity or sources of funding as a result of COVID-19 and have maintained higher than typical levels of liquidity in cash and cash equivalents to allow for flexibility.

As part of our liquidity management strategy, we also focus on minimizing our costs of liquidity and attempt to decrease these costs by growing our noninterest-bearing and other low-cost deposits, while replacing higher cost funding sources including time deposits and borrowed funds. While we do not control the types of deposit instruments our clients choose, we do influence those choices with the rates and the deposit specials we offer.

Our investment portfolio is another alternative for meeting liquidity needs. These assets generally have readily available markets that offer conversions to cash as needed. Securities within our investment portfolio are also used to secure certain deposit types and short-term borrowings. ~~At September~~As of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, securities with a carrying value of ~~$607.3~~$998.0 million and ~~$373.7~~$804.8 million, respectively, were pledged to secure government, public, trust and other deposits and as collateral for short-term borrowings, letters of credit and derivative instruments. ~~Additionally, we have a FHLB letter of credit to secure public funds totaling $145.0 million and $75.0 million at September 30, 2020 and December 31, 2019, respectively.~~

Additional sources of liquidity include federal funds purchased, reverse repurchase agreements, FHLB borrowings, and lines of credit. Interest is charged at the prevailing market rate on federal funds purchased, reverse repurchase agreements and FHLB advances. Funds and advances obtained from the FHLB are used primarily to meet day to day liquidity needs, particularly when the cost of such borrowing compares favorably to the rates that we would be required to pay to attract deposits. There were no outstanding overnight cash management advances ~~("CMAs") at September 30, 2020 and December 31, 2019. At September 30, 2020 and December 31, 2019, the balance of our outstanding additional long-term~~or other advances with the FHLB ~~were $100.0 million~~as of June 30, 2021 or December 31, 2020. There was $1.28 billion and ~~$150.0 million, respectively. The remaining balance available with the FHLB was $1,259.5 million and $435.6 million at September~~$1.18 billion as of June 30, ~~2020~~2021 and December 31, ~~2019, respectively.~~ 2020, respectively available to borrow against.

We also maintain lines of credit with other commercial banks totaling $345.0 million and $335.0 million ~~and $305.0 million at~~as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. These are unsecured, uncommitted lines of credit typically maturing at various times within the next twelve months. There were no borrowings against the lines ~~at September~~as of June 30, ~~2020 and at~~2021 or December 31, ~~2019.~~

2020.

Holding company liquidity management

The Company is a corporation separate and apart from the Bank and, therefore, it must provide for its own liquidity. The Company’s main source of funding is dividends declared and paid to it by the Bank. Statutory and regulatory limitations exist that affect the ability of the Bank to pay dividends to the Company. Management believes that these limitations will not impact the Company’s ability to meet its ongoing short-term cash obligations. For additional information regarding dividend restrictions, see the “Item 1. Business - Supervision and regulation,” "Item 1A. Risk Factors - Risks related to our business" and " Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Dividend Policy," each of which is set forth in our Annual Report.

Due to state banking laws, the Bank may not declare dividends in any calendar year in an amount exceeding the total of its net income for that year combined with its retained net income of the preceding two years, without the prior approval of the Tennessee Department of Financial ~~Institutions ("TDFI").~~Institutions. Based upon this regulation, as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019, $145.4~~2020, $90.0 million and ~~$223.7~~$185.7 million of the Bank’s retained earnings were available for the payment of dividends without such prior approval. In addition, dividends paid by the Bank to the Company would be prohibited if the effect thereof would

cause the Bank’s capital to be reduced below applicable minimum capital requirements. During the ~~nine~~three and six months ended ~~September~~June 30, 2021, there were $35.0 million and $110.0 million, respectively, in cash dividends approved by the board for payment from the Bank to the holding company. During the three and six months ended June 30, 2020, the board approved a quarterly ~~dividends~~dividend from the Bank to the holding company ~~totaling~~amounting to approximately ~~$43.7 million that did not require~~$5.3 million. None of these required approval from the TDFI. Subsequent to ~~September~~June 30, ~~2020,~~2021, the board approved a dividend from the Bank to the holding company ~~amounting to approximately $6.0~~for $6.3 million that also did not require approval from the TDFI. ~~No dividends from the Bank to the Company were paid during the three and nine months ended September 30, 2019.~~

During the three and ~~nine~~six months ended ~~September~~June 30, 2021, the Company declared and paid shareholder dividends of $0.11 per share, or $5.3 million and $0.22 per share, or $10.6 million, respectively. During the three and six months ended June 30, 2020, the Company declared and paid dividends of $0.09 per share, or ~~$4.3~~$3.0 million and ~~$0.27~~$0.18 per share, or ~~$10.2 million, respectively. During the three and nine months ended September 30, 2019, the Company declared and paid dividends of $0.08 per share, or $2.6 million, and $0.24 per share, or $7.7~~$5.8 million, respectively. Subsequent to ~~September~~June 30, ~~2020,~~2021, the Company declared a quarterly dividend in the amount of ~~$0.09~~$0.11 per share, payable on ~~November~~August 23, ~~2020,~~2021, to stockholders of record as of ~~November~~August 9, ~~2020.~~2021.

The Company is party to a registration rights agreement with its former majority shareholder entered into in connection with the 2016 ~~IPO,~~initial public offering, under which the Company is responsible for payment of expenses (other than underwriting discounts and commissions) relating to sales to the public by the shareholder of shares of the Company's common stock beneficially owned by him. Such expenses include registration fees, legal and accounting fees, and printing costs payable by the Company and expensed when incurred. During the three and six months ended June 30, 2021, the Company paid $0.6 million under this agreement related to the secondary offering completed during the second quarter of 2021. No such expenses were incurred during the ~~nine~~three and six months ended ~~September~~June 30, ~~2020 and 2019.~~

During the nine months ended September 30, 2020, the Company obtained a line of credit for $20.0 million, of which $15.0 million was borrowed to fund the cash consideration paid in connection with the Farmers National acquisition.2020.

Capital management and regulatory capital requirements

Our capital management consists of providing adequate equity to support our current and future operations. We are subject to various regulatory capital requirements administered by state and federal banking agencies, including the TDFI, Federal Reserve and the FDIC. Failure to meet minimum capital requirements may prompt certain actions by regulators that, if undertaken, could have a direct material adverse effect on our financial condition and results of operations. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Our capital amounts and classification are also subject to qualitative judgments by the regulators about components of capital, risk weightings and other factors.

9996

The Federal Reserve and the FDIC have issued guidelines governing the levels of capital that banks must maintain. Those guidelines specify capital tiers, which include the classifications set forth in the following table. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we exceeded all capital ratio requirements under prompt corrective action and other regulatory requirements, as detailed in the table below:


		Actual				Required for capital adequacy purposes (1)				To be well capitalized under prompt corrective action provision					Actual				Required for capital adequacy purposes (1)				To be well capitalized under prompt corrective action provision
(dollars in thousands)	(dollars in thousands)	Amount		Ratio (%)		Amount		Ratio (%)		Amount		Ratio (%)		(dollars in thousands)	Amount		Ratio (%)		Amount		Ratio (%)		Amount		Ratio (%)
September 30, 2020
June 30, 2021														June 30, 2021
Total capital (to risk weighted assets)	Total capital (to risk weighted assets)													Total capital (to risk weighted assets)
FB Financial Corporation	FB Financial Corporation	$	1,334,127	15.3	%	$	697,583	8.0	%	N/A		N/A		FB Financial Corporation	$	1,383,471	14.9	%	$	974,690	10.5	%	N/A		N/A
FirstBank	FirstBank	$	1,314,864	15.0	%	$	701,261	8.0	%	$	876,576	10.0	%	FirstBank	$	1,317,759	14.2	%	$	971,072	10.5	%	$	924,831	10.0	%
Tier 1 capital (to risk weighted assets)	Tier 1 capital (to risk weighted assets)													Tier 1 capital (to risk weighted assets)
FB Financial Corporation	FB Financial Corporation	$	1,054,144	12.1	%	$	522,716	6.0	%	N/A		N/A		FB Financial Corporation	$	1,177,609	12.7	%	$	789,034	8.5	%	N/A		N/A
FirstBank	FirstBank	$	1,107,144	12.7	%	$	523,060	6.0	%	$	697,414	8.0	%	FirstBank	$	1,131,897	12.2	%	$	786,106	8.5	%	$	739,865	8.0	%
Tier 1 Capital (to average assets)	Tier 1 Capital (to average assets)													Tier 1 Capital (to average assets)
FB Financial Corporation	FB Financial Corporation	$	1,054,144	11.8	%	$	357,564	4.0	%	N/A		N/A		FB Financial Corporation	$	1,177,609	10.1	%	$	466,866	4.0	%	N/A		N/A
FirstBank	FirstBank	$	1,107,144	12.4	%	$	357,143	4.0	%	$	446,429	5.0	%	FirstBank	$	1,131,897	9.7	%	$	465,961	4.0	%	$	582,451	5.0	%
Common Equity Tier 1 (CET1)	Common Equity Tier 1 (CET1)													Common Equity Tier 1 (CET1)
FB Financial Corporation	FB Financial Corporation	$	1,024,144	11.8	%	$	390,563	4.5	%	N/A		N/A		FB Financial Corporation	$	1,147,609	12.4	%	$	649,793	7.0	%	N/A		N/A
FirstBank	FirstBank	$	1,107,144	12.7	%	$	392,295	4.5	%	$	566,649	6.5	%	FirstBank	$	1,131,897	12.2	%	$	647,382	7.0	%	$	601,140	6.5	%
December 31, 2019
December 31, 2020														December 31, 2020
Total capital (to risk weighted assets)	Total capital (to risk weighted assets)													Total capital (to risk weighted assets)
FB Financial Corporation	FB Financial Corporation	$	633,549	12.2	%	$	415,442	8.0	%	N/A		N/A		FB Financial Corporation	$	1,358,897	15.0	%	$	952,736	10.5	%	N/A		N/A
FirstBank	FirstBank	$	623,432	12.1	%	$	412,186	8.0	%	$	515,233	10.0	%	FirstBank	$	1,353,279	14.9	%	$	951,327	10.5	%	$	906,026	10.0	%
Tier 1 capital (to risk weighted assets)	Tier 1 capital (to risk weighted assets)													Tier 1 capital (to risk weighted assets)
FB Financial Corporation	FB Financial Corporation	$	602,410	11.6	%	$	311,591	6.0	%	N/A		N/A		FB Financial Corporation	$	1,090,364	12.0	%	$	771,262	8.5	%	N/A		N/A
FirstBank	FirstBank	$	592,293	11.5	%	$	309,022	6.0	%	$	412,030	8.0	%	FirstBank	$	1,142,548	12.6	%	$	770,122	8.5	%	$	724,820	8.0	%
Tier 1 Capital (to average assets)	Tier 1 Capital (to average assets)													Tier 1 Capital (to average assets)
FB Financial Corporation	FB Financial Corporation	$	602,410	10.1	%	$	238,578	4.0	%	N/A		N/A		FB Financial Corporation	$	1,090,364	10.0	%	$	435,064	4.0	%	N/A		N/A
FirstBank	FirstBank	$	592,293	9.9	%	$	239,310	4.0	%	$	299,138	5.0	%	FirstBank	$	1,142,548	10.5	%	$	435,279	4.0	%	$	544,098	5.0	%
Common Equity Tier 1 (CET1)	Common Equity Tier 1 (CET1)													Common Equity Tier 1 (CET1)
FB Financial Corporation	FB Financial Corporation	$	572,410	11.1	%	$	232,058	4.5	%	N/A		N/A		FB Financial Corporation	$	1,060,364	11.7	%	$	635,157	7.0	%	N/A		N/A
FirstBank	FirstBank	$	592,293	11.5	%	$	231,767	4.5	%	$	334,774	6.5	%	FirstBank	$	1,142,548	12.6	%	$	634,218	7.0	%	$	588,917	6.5	%

(1) Minimum ratios presented exclude the capital conservation buffer.

~~We also have outstanding~~U.S. Basel III measures capital strength in three tiers and incorporates risk-adjusted assets to determine the risk-based capital ratios. Our common equity tier 1 capital primarily includes shareholders' equity less certain deductions for goodwill and other intangibles, net of taxes, net unrealized gains (losses) on AFS securities and derivative instruments, net of tax. Tier 1 capital is primarily comprised of common equity Tier 1 capital and included junior subordinated debentures with a carrying value of $30.0 million ~~at September~~as of June 30, ~~2020~~2021 and December 31, ~~2019, which are included~~2020. Tier 2 capital components include a portion of the allowance for credit losses in ~~our~~excess of Tier 1 ~~capital.~~

~~The Federal Reserve Board issued rules in March 2005 providing stricter quantitative~~statutory limits ~~on the amount of securities that, similar to~~and our junior subordinated debentures, are includable in Tier 1 capital. This guidance, which became fully effective in March 2009, did not impact the amount of debentures we include in Tier 1 capital. While our existing junior subordinated debentures are unaffected and are included in our Tier 1 capital, the Dodd-Frank Act specifies that any such securities issued after May 19, 2010, may not be included in Tier 1 capital.remaining combined trust preferred security debt issuances.

In December 2018, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC approved a final rule to address changes to credit loss accounting under GAAP, including banking organizations’ implementation of CECL. The final rule provides banking organizations the option to phase in over a three-year period the day-one adverse effects on regulatory capital that may result from the adoption of the new accounting standard. In March 2020, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC announced an interim final rule, which became final on September 30, 2020, to delay the estimated impact on regulatory capital stemming from the implementation of CECL. The ~~interim~~ final rule maintains the three-year transition option in the previous rule and provides banks the option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period (five-year transition option). The Company adopted the capital transition relief over the permissible five-year period.

~~As of September 30, 2020 and December 31, 2019, the Bank and Company met all capital adequacy requirements to which they are subject. Also, as ofSeptember 30, 2019,the date of the most recent FDIC examination, the Bank was well capitalized under the regulatory framework for prompt corrective action.~~

~~100~~97

Capital Expenditures

As of ~~September~~June 30, ~~2020,~~2021, we ~~had~~have $0.7 million in committed capital ~~commitments of approximately $1.3 million to be paid~~expenditures over the next twelve ~~months.~~months related to expansion of our locations.

Shareholders’ equity

Our total shareholders’ equity was ~~$1,245.1 million~~$1.37 billion at ~~September~~June 30, ~~2020~~2021 and ~~$762.3 million,~~$1.29 billion at December 31, ~~2019.~~2020. Book value per share was ~~$26.38~~$28.96 at ~~September~~June 30, ~~2020~~2021 and ~~$24.56~~$27.35 at December 31, ~~2019.~~2020, respectively. The growth in shareholders’ equity ~~over the first nine months of 2020~~during 2021 was primarily attributable to increases in additional paid-in capital and common stock; a result of our acquisitive growth strategy through the merger with Franklin and the acquisition of Farmers National. Other changes in shareholders' equity were driven by earnings retention and changes in accumulated other comprehensive income, partially offset by ~~a cumulative effective adjustment of $25.0 million on January 1, 2020 for the adoption of ASU 2016-13 and to a lesser extent,~~ declared dividends and activity related to equity-based compensation.

Off-balance sheet arrangements

In the normal course of business, we enter into various transactions, which in accordance with GAAP, are not included as part of our consolidated balance sheets. We enter into these transactions to meet the financing needs of our customers. These transactions include commitments to extend credit, standby and commercial letters of credit, and commitments to purchase loans, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in the consolidated balance sheets. For further information, see Note ~~12,~~9, "Commitments and contingencies" in the notes to the consolidated financial statements included elsewhere in this Report.

ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate sensitivity

Our market risk arises primarily from interest rate risk inherent in the normal course of lending and deposit-taking activities. Management believes that our ability to successfully respond to changes in interest rates will have a significant impact on our financial results. To that end, management actively monitors and manages our interest rate risk exposure.

The Asset Liability Management Committee, ~~(“ALCO”),~~ which is authorized by our board of directors, monitors our interest rate sensitivity and makes decisions relating to that process. The ALCO’s goal is to structure our asset/liability composition to maximize net interest income while managing interest rate risk so as to minimize the adverse impact of changes in interest rates on net interest income and capital in either a rising or declining interest rate environment. Profitability is affected by fluctuations in interest rates. A sudden and substantial change in interest rates may adversely impact our earnings because the interest rates borne by assets and liabilities do not change at the same speed, to the same extent or on the same basis.

We monitor the impact of changes in interest rates on our net interest income and economic value of equity ~~(“EVE”)~~ using rate shock analysis. Net interest income simulations measure the short-term earnings exposure from changes in market rates of interest in a rigorous and explicit fashion. Our current financial position is combined with assumptions regarding future business to calculate net interest income under varying hypothetical rate scenarios. EVE measures our long-term earnings exposure from changes in market rates of interest. EVE is defined as the present value of assets minus the present value of liabilities at a point in time. A decrease in EVE due to a specified rate change indicates a decline in the long-term earnings capacity of the balance sheet assuming that the rate change remains in affect over the life of the current balance sheet. For purposes of calculating EVE, a zero percent floor is assumed on discount factors.

~~101~~

The following analysis depicts the estimated impact on net interest income and EVE of immediate changes in interest rates at the specified levels for the periods presented:


						Percentage change in:									Percentage change in:
Change in interest rates	Change in interest rates	Net interest income (1)								Change in interest rates	Net interest income (1)
		Year 1				Year 2					Year 1				Year 2
		September 30,		December 31,		September 30,		December 31,			June 30,		December 31,		June 30,		December 31,
(in basis points)	(in basis points)	2020		2019		2020		2019		(in basis points)	2021		2020		2021		2020
+400	+400	26.1	%	8.4	%	35.3	%	9.7	%	+400	41.4	%	46.8	%	37.3	%	52.3	%
+300	+300	19.4	%	6.4	%	26.4	%	7.6	%	+300	30.6	%	34.8	%	27.7	%	39.1	%
+200	+200	13.0	%	4.4	%	18.0	%	5.4	%	+200	19.8	%	22.8	%	18.2	%	26.1	%
+100	+100	6.7	%	2.2	%	9.6	%	2.9	%	+100	9.40	%	10.7	%	8.86	%	12.9	%
-100	-100	(1.3)	%	(4.9)	%	(2.1)	%	(6.6)	%	-100	(5.62)	%	(3.80)	%	(8.31)	%	(6.80)	%
-200	-200	(1.4)	%	(8.5)	%	(2.1)	%	(11.6)	%	-200	(7.08)	%	(3.80)	%	(10.2)	%	(6.80)	%


		Percentage change in:					Percentage change in:
Change in interest rates	Change in interest rates	Economic value of equity (2)				Change in interest rates	Economic value of equity (2)
		September 30,		December 31,			June 30,		December 31,
(in basis points)	(in basis points)	2020		2019		(in basis points)	2021		2020
+400	+400	17.5	%	(3.8)	%	+400	13.8	%	40.0	%
+300	+300	14.0	%	(2.4)	%	+300	11.7	%	32.8	%
+200	+200	10.2	%	(1.0)	%	+200	8.86	%	24.2	%
+100	+100	5.5	%	(0.1)	%	+100	4.86	%	13.2	%
-100	-100	(6.7)	%	(4.7)	%	-100	(6.98)	%	(6.40)	%
-200	-200	(7.4)	%	(14.5)	%	-200	(10.6)	%	(6.29)	%

(1)The percentage change represents the projected net interest income for 12 months and 24 months on a flat balance sheet in a stable interest rate environment versus the projected net income in the various rate scenarios.

(2)The percentage change in this column represents our EVE in a stable interest rate environment versus EVE in the various rate scenarios.

The results for the net interest income simulations as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 resulted in an asset sensitive position. The primary influence of our asset sensitivity is the floating rate structure in many of our loans held for investment as well as the composition of our liabilities which is primarily core deposits. Non-interest bearing deposits continue be a strong source of funding which also increases asset sensitivity. ~~Beta assumptions on loans were constant during both periods while deposits were modified to better reflect historical deposit change behavior.~~ The COVID-19 pandemic resulted in unprecedented monetary stimulus from the Federal Reserve, which included, but was not limited to, a 150 basis point decrease in the federal funds target rate. While our variable rate loan portfolio is indexed to market rates, deposits

typically adjust at a percentage of the overall movement in market rates, resulting in margin compression. Index floors in our variable rate loans and aggressive deposit pricing should continue to mitigate some of this pressure in the near term.

The preceding measures assume no change in the size or asset/liability compositions of the balance sheet. Thus, the measures do not reflect the actions the ALCO may undertake in response to such changes in interest rates. The scenarios assume instantaneous movements in interest rates in increments of 100, 200, 300 and 400 basis points. As interest rates are adjusted over a period of time, it is our strategy to proactively change the volume and mix of our balance sheet in order to mitigate our interest rate risk. The computation of the prospective effects of hypothetical interest rate changes requires numerous assumptions regarding characteristics of new business and the behavior of existing positions. These business assumptions are based upon our experience, business plans and published industry experience. Key assumptions employed in the model include asset prepayment speeds, competitive factors, the relative price sensitivity of certain assets and liabilities and the expected life of non-maturity deposits. Because these assumptions are inherently uncertain, actual results may differ from simulated results.

We may utilize derivative financial instruments as part of an ongoing effort to mitigate interest rate risk exposure to interest rate fluctuations and facilitate the needs of our customers.

The Company enters into derivative instruments that are not designated as hedging instruments to help its commercial customers manage their exposure to interest rate fluctuations. To mitigate the interest rate risk associated with customer contracts, the Company enters into an offsetting derivative contract. The Company manages its credit risk, or potential risk of default by its commercial customers through credit limit approval and monitoring procedures.

~~102~~

The Company has entered into interest rate swap contracts to hedge interest rate exposure on short term liabilities, as well as interest rate swap contracts to hedge interest rate exposure on subordinated debentures. These interest rate swaps are all accounted for as cash flow hedges, with the Company receiving a variable rate of interest and paying a fixed rate of interest.

The Company enters into rate lock commitments and forward loan sales contracts as part of our ongoing efforts to mitigate our interest rate risk exposure inherent in our mortgage pipeline and held for sale portfolio. Under the interest rate lock commitments, interest rates for a mortgage loan are locked in with the client for a period of time, typically 30-90 days. Once an interest rate lock commitment is entered into with a client, we also enter into a forward commitment to sell the residential mortgage loan to secondary market investors. Forward loan sale contracts are contracts for delayed sale and delivery of mortgage loans to a counter party. We agree to deliver on a specified future date, a specified instrument, at a specified price or yield. The credit risk inherent to us arises from the potential inability of counterparties to meet the terms of their contracts. In the event of non-acceptance by the counterparty, we would be subject to the credit and inherent (or market) risk of the loans retained.

Additionally, the Company enters into forward commitments, options and futures contracts that are not designated as hedging instruments, which serve as economic hedges of the change in fair value of its MSRs.

For more information about our derivative financial instruments, see Note ~~13, “Derivative Instruments,”~~10, “Derivatives” in the notes to our consolidated financial statements.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

An evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) as of the end of the period covered by this Report was carried out under the supervision and with the participation of the Company’s Chief Executive Officer, ~~Interim~~ Chief Financial Officer and other members of the Company’s senior management. The Company’s Chief Executive Officer and ~~Interim~~ Chief Financial Officer concluded that, as of the end of the period covered by this Report, the Company’s disclosure controls and procedures were effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is: (i) accumulated and communicated to the Company’s management (including the Chief Executive Officer and ~~Interim~~ Chief Financial Officer) to allow timely decisions regarding required disclosure; and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended ~~September~~June 30, ~~2020,~~2021, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

100

The Company does not expect that its disclosure controls and procedures and internal control over financial reporting will prevent all errors and fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

~~103~~

PART ~~II—Other Information~~II

ITEM 1—LEGAL PROCEEDINGS

Various legal proceedings to which we or our subsidiaries are party arise from time to time in the normal course of business. As of the date of this Report, there are no material pending legal proceedings to which we or any of our subsidiaries is a party or of which any of our or our subsidiaries’ properties are subject.

ITEM 1A—RISK FACTORS

There have been no material changes to the risk factors set forth in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, ~~2019, with the exception of:~~

~~The COVID-19 pandemic (“COVID-19”) had and is likely to continue to have an adverse affect, possibly materially, on our business, results of operations, and financial condition.~~

COVID-19 presents a unique and exceptional risk to FirstBank and the banking industry overall. The pandemic has created economic and financial disruptions that have adversely affected, and are likely to continue to adversely affect, our business, results of operation, and financial condition. Due to the unpredictability of COVID-19, it is impossible to determine the extent to which the Company's business, results of operations, and financial condition will continue to be impacted. The extent to which the COVID-19 pandemic will continue to negatively affect our business, results of operation, and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic, the direct and indirect impact of the pandemic on our associates, customers, communities, vendors, and other financial institutions, and actions taken by governmental authorities and other third parties in response to the pandemic.

Federal, state, and local governments have implemented a variety of measures to manage the public health effects of COVID-19, such as ordering the closure of non-essential businesses and implementing required social distancing measures. Collectively, these measures, together with voluntary changes in behavior, have led to a substantial decrease in economic activity and an increase in unemployment, particularly in sectors such as retail, hospitality, travel, and healthcare, among others. While monthly unemployment claims have declined as compared to the beginning of the pandemic, the number of unemployed and under-employed US workers remain elevated. Governmental bodies enacted and implemented laws designed to stabilize the economy and provide relief to businesses and individuals to mitigate the consequences of COVID-19 and the policies restricting the operation of businesses and the movement of individuals. In response to the pandemic, the Federal Reserve has reduced the benchmark federal funds rate to a target range of 0% to 0.25%, and the yields on 10 and 30-year treasury notes have declined to historic lows. The effectiveness of these efforts is uncertain, and we cannot predict future developments, including how long the outbreak and related restrictions will last, which geographical regions may be particularly affected, or what other government responses may occur.

Given the ongoing and dynamic nature of the pandemic and its impact on the US and local economies, it is difficult to predict the full impact of the outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including the extent to which the coronavirus can be controlled and abated and when and if the economy will return to pre-pandemic levels. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we may be subject to the following risks, among others, any of which could have a material, adverse effect on our business, results of operation, and financial condition:

•2020~~the likelihood that our customers will become delinquent on their loans or other obligations to us, which, in turn, would result in a higher level of non-performing loans and net charge-offs.~~

•~~there may continue to be a decrease in the demand for some of our products and services, which will make it difficult to grow assets and income;~~

•if the economy is unable to substantially rebound and high levels of unemployment continue for an extended period, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;

•Additional COVID-19 outbreaks, spikes and "second waves” may lead to efforts by federal, state and local governments and health authorities to engage in efforts to contain or mitigate the pandemic's impact;

•the federal government has not yet extended certain unemployment relief or provided for additional COVID-19 related stimulus relief, which may adversely impact our business and financial performance by prolonging the US economic recovery and possibly adversely impacting our business and our customers’ businesses; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;

•~~if borrowers experience financial difficulties beyond forbearance periods, we must increase our allowance for loan losses, which will adversely affect net income;~~

•~~the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments;~~

~~104~~

•as the result of the decline in the Federal Reserve’s target federal funds rate to near 0%, the yield on our assets may decline more than the cost of our interest-bearing liabilities, which would reduce our net interest margin and net income;

•~~a material decrease in net income could result in a decrease in the amount or a cancellation of our quarterly cash dividend;~~

•~~we rely on third party vendors for critical services and the unavailability one or more of these services due to the pandemic could have an adverse effect on our operations;~~

•~~federal, state, or local governments create inconsistent, conflicting, contradictory, or moot, policies that disrupt financial markets or our business strategies;~~

•~~as a result of the government’s response to the COVID-19 pandemic, the national, regional and/or local economies may experience a recession, unusual inflation, or other atypical economical event;~~

•~~our employees, officers, or directors may become infected with or otherwise incapacitated because of COVID-19;~~

•many of our nonessential employees are working remotely from home, and this increase in our remote workforce poses an enhanced risk to operations, including potential impacts on financial controls and/or a loss of employee engagement and productivity, which could impact financial results and the operations of the Bank;

•the increase in the number of employees working remotely throughout the economy also subjects us, our customers, and our vendors to additional cybersecurity risk as cybercriminals attempt to exploit vulnerabilities, compromise business emails, and generate phishing attacks during this time; and

•our participation in the Paycheck Protection Program and/or other government stimulus lending programs may create a risk to the bank if we implement these stimulus programs incorrectly or untimely, which could harm our customers or our reputation..

You should also review our Risk Factors discussion in Item 1A of our 2019 Form 10-K for information regarding other factors that have and are likely to continue to affect our business and financial performance as a result of the pandemic.

ITEM 2—UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information about repurchases of common stock by the Company during the quarter ended ~~September~~June 30, ~~2020:~~2021:

Period

(a)
Total number of shares purchased

(b)
Average price paid per share

(d)
Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs

~~July~~April 1 - ~~July 31, 2020~~April 30, 2021

—

~~25,000,000~~100,000,000

~~August~~May 1 - ~~August~~May 31, ~~2020~~2021

—

~~25,000,000~~100,000,000

~~September~~June 1 - ~~September~~June 30, ~~2020~~2021

—

~~25,000,000~~100,000,000

Total

—

~~25,000,000~~100,000,000

~~The Company's stock repurchase plan, which was first approved by its~~On February 18, 2021 the board of directors ~~and announced on October 22, 2018, was amended on March 22, 2019 to provide that the Company may purchase~~approved a repurchase plan for up to ~~$25~~$100 million ~~in shares~~ of ~~its~~Company common ~~stock during~~stock. This repurchase plan expires March 31, 2022, and purchases will be conducted pursuant to a written plan intended to comply with Rule 10b-18 promulgated under the ~~year ending December 31, 2019, and up to another $25 million in shares during the year ending December 31, 2020.~~Exchange Act. To date, the Company has not repurchased any shares of common stock under the plan.

~~105~~

101

ITEM 6—EXHIBITS

The exhibits listed on the accompanying Exhibit Index are filed, furnished or incorporated by reference (as stated therein) as part of this Report.

EXHIBIT INDEX

~~Exhibit~~

~~NumberDescription~~


~~2.1~~Exhibit Number			Agreement and Plan of Merger, dated as of January 21, 2020, by and among FB Financial Corporation, Franklin Financial Network, Inc. and Paisley Acquisition Corporation (incorporated by reference to Exhibit 2.1 the Company's Form 8-K filed on January 24, 2020)Description

3.1			Amended and Restated Charter of FB Financial Corporation (incorporated by reference as Exhibit 3.1 to the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)
3.2			Amended and Restated Bylaws of FB Financial Corporation (incorporated by reference asto Exhibit 3.2 to the ~~Company’s~~Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 (File No. 001-37875) file on November 14, 2016)
4.1			Registration Rights Agreement by and between FB Financial Corporation and James W. Ayers, dated September 15, 2016 (incorporated by reference as Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 (File No. 001-37875) filed on November 14, 2016)
~~4.2~~			Indenture, dated March 31, 2016, by and between Franklin Financial Network, Inc. and the U.S. Bank National Association, as Trustee (incorporated herein by reference to Exhibit 4.1 to the current report on Form 8-K (File No. 001-36895) filed by Franklin Financial Network, Inc. with the Securities and Exchange Commission on March 31, 2016).
~~4.3~~			First Supplemental Indenture, dated March 31, 2016, by and between Franklin Financial Network, Inc. and U.S. Bank National Association, as Trustee (incorporated herein by reference to Exhibit 4.2 to the current report on Form 8-K (File No. 001-36895) filed by Franklin Financial Network, Inc. with the Securities and Exchange Commission on March 31, 2016).
~~4.4~~			Second Supplemental Indenture, by and among Franklin Financial Network, Inc., FB Financial Corporation and U.S. Bank, National Association (incorporated herein by reference to Exhibit 4.3 to the Company's Form 8-K filed with the Securities and Exchange Commission on August 18, 2020).
~~4.5~~			In accordance with Item 601(b)(4)(iii)(A) of Regulation S-K, certain instruments with respect to long-term debt of FirstBank have been omitted but will be furnished to the Securities and Exchange Commission upon request.


















10.1			~~Franklin~~Employment Agreement, dated July 31, 2021, among FB Financial ~~Network, Inc. Amended~~Corporation, FirstBank, and Restated 2017 Omnibus Equity Incentive (incorporated by reference to Exhibit 10.1 of the current report on Form 8-K (File No. 001-36895) filed by Franklin Financial Network, Inc. with the Securities and Exchange Commission on April 13, 2018).Christopher T. Holmes
31.1			Rule 13a-14(a) Certification of Chief Executive Officer*
31.2			Rules 13a-14(a) Certification of Chief Financial Officer*
32.1			Section 1350 Certification of Chief Executive Officer and Chief Financial Officer**
101.INS			Inline XBRL Instance Document*
101.SCH			Inline XBRL Taxonomy Extension Schema Document*
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document*
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document*
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


*			Filed herewith.
**			Furnished herewith.
†			~~Represents a management contract or a compensatory plan or arrangement.~~

~~106~~102

Signatures

Pursuant to the requirements of the section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.


						FB Financial Corporation

						/s/ Michael M. Mettee
~~November~~August 6, ~~2020~~2021						Michael M. Mettee ~~Interim~~ Chief Financial Officer (Principal Financial Officer)

						/s/ ~~Lisa M. Smiley~~Keith Rainwater
~~November~~August 6, ~~2020~~2021						~~Lisa M. Smiley~~Keith Rainwater Chief Accounting Officer (Principal Accounting ~~Officer~~Officer)

~~107~~103


	Balance before adoption of ASC 326		Cumulative effective adjustment to adopt ASC 326		Impact of the adjustment to adopt ASC 326	Balance at January 1, 2020 (post ASC 326 adoption)
ASSETS:
Loans	$	4,409,642	$	558	Increase	$	4,410,200
Allowance for credit losses	(31,139)		(31,446)		Increase	(62,585)
Total impact to assets			$	(30,888)	Net decrease
LIABILITIES AND EQUITY:
Allowance for credit losses on unfunded commitments	$	0	$	2,947	Increase	$	2,947
Net deferred tax liability	20,490		(8,817)		Decrease	11,673
Retained earnings	293,524		(25,018)		Decrease	268,506
Total impact to liabilities and equity			$	(30,888)	Net decrease


				September 30, 2020
	u				End of period amortized cost
		Beginning of period non-accrual amortized cost			Non-accrual with no related allowance		Non-accrual with related allowance		Related allowance

Commercial and industrial		$	5,586		$	913	$	5,666	$	936
Construction		1,254			980		1,038		145
Residential real estate:
1-to-4 family mortgage		4,585			4,247		2,505		62
Residential line of credit		489			0		1,925		74

Commercial real estate:
Owner occupied		2,285			1,469		725		66
Non-owner occupied		9,460			5,475		6,883		1,568
Consumer and other		1,623			88		2,671		165
Total		$	25,282		$	13,172	$	21,413	$	3,016


			Interest Income
September 30, 2020	Three Months Ended		Nine Months Ended

Commercial and industrial	$	287	$	304
Construction	42		48
Residential real estate:
1-to-4 family mortgage	15		21
Residential line of credit	72		72

Commercial real estate:
Owner occupied	32		75
Non-owner occupied	76		185
Consumer and other	0		24
Total	$	524	$	729


December 31, 2019	Recorded investment		Unpaid principal		Related allowance
With a related allowance recorded:
Commercial and industrial	$	6,080	$	8,350	$	241

Residential real estate:
1-to-4 family mortgage	264		324		8
Residential line of credit	320		320		9

Commercial real estate:
Owner occupied	756		1,140		238
Non-owner occupied	6,706		6,747		399
Consumer and other	0		0		0
Total	$	14,126	$	16,881	$	895
With no related allowance recorded:
Commercial and industrial	$	2,946	$	3,074	$	—
Construction	2,061		2,499		—
Residential real estate:
1-to-4 family mortgage	1,083		1,449		—
Residential line of credit	259		280		—

Commercial real estate:
Owner occupied	2,237		2,627		—
Non-owner occupied	1,049		1,781		—
Consumer and other	49		49		—
Total	$	9,684	$	11,759	$	—
Total impaired loans	$	23,810	$	28,640	$	895


Three Months Ended					Nine Months Ended
September 30, 2019	Average recorded investment		Interest income recognized (cash basis)		Average recorded investment		Interest income recognized (cash basis)
With a related allowance recorded:
Commercial and industrial	$	3,109	$	51	$	1,850	$	156

Residential real estate:
1-to-4 family mortgage	265		2		205		13


Commercial real estate:
Owner occupied	184		4		371		10
Non-owner occupied	6,143		56		6,241		90
Consumer and other	447		0		198		19
Total	$	10,148	$	113	$	8,865	$	288
With no related allowance recorded:
Commercial and industrial	$	766	$	11	$	991	$	36
Construction	1,639		90		1,641		142
Residential real estate:
1-to-4 family mortgage	835		24		962		50
Residential line of credit	427		0		245		2

Commercial real estate:
Owner occupied	2,045		41		2,171		103
Non-owner occupied	1,050		0		1,050		0
Consumer and other	66		2		69		5
Total	$	6,828	$	168	$	7,129	$	338
Total impaired loans	$	16,976	$	281	$	15,994	$	626


Three Months Ended September 30, 2019	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Charge offs and specific reserves
Commercial and industrial	1	$	16	$	16	$	0
Construction	1	1,070		1,070
Commercial real estate:
Owner occupied	1	927		927		0
Non-owner occupied	1	1,366		1,366		106
Residential real estate:
1-to-4 family mortgage	1	128		128		0
Total	5	$	3,507	$	3,507	$	106


Nine Months Ended September 30, 2020	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Charge offs and specific reserves
Commercial and industrial	3	$	1,573	$	1,573	$	0

Commercial real estate:
Owner occupied	1	788		788		0
Non-owner occupied	2	3,752		3,752		$	0
Residential real estate:
1-to-4 family mortgage	2	77		77		0


Total	8	$	6,190	$	6,190	$	0


Nine Months Ended September 30, 2019	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Charge offs and specific reserves
Commercial and industrial	3	$	3,204	$	3,204	$	0
Construction	1	1,070		1,070		0
Commercial real estate:
Owner occupied	1	927		927		0
Non-owner occupied	1	1,366		1,366		106
Residential real estate:
1-4 family mortgage	1	128		128		0

Total	7	$	6,695	$	6,695	$	106


	Core deposit and other intangibles
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
September 30, 2020
Core deposit intangible	$	59,835	$	(37,403)	$	22,432
Customer base trust intangible	1,600		(507)		1,093
Manufactured housing servicing intangible	1,088		(689)		399
Total core deposit and other intangibles	$	62,523	$	(38,599)	$	23,924

December 31, 2019
Core deposit intangible	$	49,675	$	(33,861)	$	15,814
Customer base trust intangible	1,600		(387)		1,213
Manufactured housing servicing intangible	1,088		(526)		562
Total core deposit and other intangibles	$	52,363	$	(34,774)	$	17,589


Remainder of 2020	$	1,494
2021	5,477
2022	4,586
2023	3,658
2024	2,946
Thereafter	5,763
	$	23,924


	Outstanding Balance				Weighted Average Interest Rate
	September 30,		December 31,		September 30,		December 31,
	2020		2019		2020		2019
Securities sold under agreements to repurchase	$	32,469	$	23,745	0.61	%	0.89	%
FHLB advances	200,000		250,000		0.77	%	1.60	%
Subordinated debt	189,750		30,930		5.10	%	5.13	%
Other borrowings	16,619		0		1.88	%	0	%
	$	438,838	$	304,675


At September 30, 2020	Quoted prices in active markets for identical assets (liabilities (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)		Total
Non-recurring valuations:
Financial assets:
Other real estate owned	$	0	$	0	$	5,708	$	5,708
Collateral dependent loans:
Commercial and industrial	$	0	$	0	$	4,697	$	4,697
Construction	0		0		1,817		1,817
Residential real estate:
1-4 family mortgage	0		0		190		190
Residential line of credit	0		0		1,195		1,195
Commercial real estate:
Owner occupied	0		0		928		928
Non-owner occupied	0		0		8,181		8,181
Consumer and other	0		0		333		333
Total collateral dependent loans	$	0	$	0	$	17,341	$	17,341


September 30, 2020	Aggregate fair value		Aggregate Unpaid Principal Balance		Difference
Mortgage loans held for sale measured at fair value	$	610,695	$	587,352	$	23,343
Commercial loans held for sale measured at fair value	228,444		250,649		(22,205)
Past due loans of 90 days or more	0		0		0
Nonaccrual loans	12,812		12,812		0

December 31, 2019
Mortgage loans held for sale measured at fair value	$	262,518	$	254,868	$	7,650
Past due loans of 90 days or more	0		0		0
Nonaccrual loans	0		0		0