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, ~~2022~~2023

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

For the transition period from ________ to ________

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,~~1221 Broadway, Suite ~~300~~1300 Nashville, Tennessee			~~37201~~37203
(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(s)

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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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 ~~November 3, 2022~~July 31, 2023 was ~~46,929,958.~~46,798,639.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION
	Glossary Of Abbreviations And Acronyms	3
Item 1.	Consolidated Financial Statements	4
	Consolidated Balance Sheets as of ~~September~~June 30 ~~30, 2022~~, 2023 (Unaudited) and December 31, ~~2021~~2022	4
	Consolidated Statements of Income (Unaudited) for the three and ~~nine~~six months ended ~~September~~June 30 ~~30,~~, 2023 and 2022 ~~and 2021~~	5
	Consolidated Statements of Comprehensive Income (Unaudited) for the three and ~~nine~~six months ended S ~~eptember~~June 30, 2023 ~~30,~~and 2022 ~~and 2021~~	6
	Consolidated Statements of Changes in Shareholders' Equity (Unaudited) for the three and ~~nine~~ six months ended ~~September~~ June 30 ~~30, 2022~~, 2023 and ~~2021~~2022	7
	Consolidated Statements of Cash Flows (Unaudited) for the ~~nine~~six months ended ~~September~~ June 30, ~~2022~~2023 and ~~2021~~2022	9
	Condensed Notes to Consolidated Financial Statements (Unaudited)	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operation	49
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	8891
Item 4.	Controls and Procedures	8993
~~Part~~PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	9094
Item 1A.	Risk Factors	9094
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	9094
Item 5.	Other Information	94
Item 6.	Exhibits	9195
SIGNATURES		9296

PART I

GLOSSARY OF ABBREVIATIONS AND ACRONYMS

As used in this Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2022 (this "Report"),~~2023, 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 the Consolidated Financial Statements ~~(Unaudited)~~(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~~GDP

~~Government National Mortgage Association~~Gross domestic product

ALCO

Asset Liability Management Committee

~~IRLC~~GNMA

~~Interest rate lock commitment~~Government National Mortgage Association

ASC

Accounting Standard Codification

HELOC

Home equity line of credit

ASU

Accounting Standard Update

HFI

Held for investment

Certificate of Deposit

HFS

Held for sale

CECL

Current expected credit losses

IRLC

Interest rate lock commitment

CEO

Chief Executive Officer

ISDA

International Swaps and Derivatives Association

CET1

Common Equity Tier 1

LIBOR

London Interbank Offered Rate

~~ASU~~C&I

~~Accounting Standard Update~~Commercial and Industrial

MSR

Mortgage servicing rights

~~CARES~~COVID-19

Coronavirus ~~Aid, Relief, and Economic Security Act~~pandemic

NIM

Net interest margin

~~CECL~~CPR

~~Current expected credit losses~~Conditional prepayment rate

OREO

Other real estate owned

~~CEO~~CRE

~~Chief Executive Officer~~

~~PPP~~

~~Paycheck Protection Program~~

~~CET1~~

~~Common Equity Tier 1~~Commercial real estate

PSU

Performance-based restricted stock units

~~COVID-19~~EPS

~~Coronavirus pandemic~~Earnings per share

Report

Form 10-Q for the quarterly period ended June 30, 2023

ESPP

Employee Stock Purchase Plan

ROAA

Return on average ~~total~~ assets

~~CPR~~EVE

~~Conditional prepayment rate~~Economic value of equity

ROAE

Return on average ~~shareholders'~~common equity

~~EPS~~FASB

~~Earnings per share~~Financial Accounting Standards Board

ROATCE

Return on average tangible common equity

~~ESPP~~

~~Employee Stock Purchase Plan~~

~~ROU~~

~~Right-of-use~~

~~EVE~~

~~Economic value of equity~~

~~RSU~~

~~Restricted stock units~~

~~FASB~~

~~Financial Accounting Standards Board~~

~~SBA~~

~~Small Business Administration~~

FDIC

Federal Deposit Insurance Corporation

~~SEC~~RSU

~~U.S. Securities and Exchange Commission~~Restricted stock units

Federal Reserve

Board of Governors of the Federal Reserve
System

~~SOFR~~SEC

~~Secured overnight financing rate~~U.S. Securities and Exchange Commission

FHLB

Federal Home Loan Bank

SOFR

Secured overnight financing rate

FHLMC

Federal Home Loan Mortgage Corporation

TDFI

Tennessee Department of Financial Institutions

~~FHLMC~~FNMA

Federal ~~Home Loan~~National Mortgage ~~Corporation~~Association

TDR

Troubled debt restructuring

~~FNMA~~

~~Federal National Mortgage Association~~

~~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,
		2022 (Unaudited)		2021			2023 (Unaudited)		2022
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	193,301	$	91,333	Cash and due from banks	$	147,646	$	259,872
Federal funds sold and reverse repurchase agreements	Federal funds sold and reverse repurchase agreements	115,140		128,087		Federal funds sold and reverse repurchase agreements	48,346		210,536
Interest-bearing deposits in financial institutions	Interest-bearing deposits in financial institutions	309,849		1,578,320		Interest-bearing deposits in financial institutions	964,362		556,644
Cash and cash equivalents	Cash and cash equivalents	618,290		1,797,740		Cash and cash equivalents	1,160,354		1,027,052
Investments:	Investments:					Investments:
Available-for-sale debt securities, at fair value	Available-for-sale debt securities, at fair value	1,482,171		1,678,525		Available-for-sale debt securities, at fair value	1,419,360		1,471,186
Equity securities, at fair value	Equity securities, at fair value	2,962		3,367		Equity securities, at fair value	3,031		2,990
Federal Home Loan Bank stock, at cost	Federal Home Loan Bank stock, at cost	58,587		32,217		Federal Home Loan Bank stock, at cost	40,266		58,641
Loans held for sale, at fair value		130,733		752,223
Loans		9,105,016		7,604,662
Less: allowance for credit losses		134,476		125,559
Net loans		8,970,540		7,479,103
Loans held for sale (includes $78,906 and $113,240 at fair value, respectively)						Loans held for sale (includes $78,906 and $113,240 at fair value, respectively)	99,131		139,451
Loans held for investment						Loans held for investment	9,326,024		9,298,212
Less: allowance for credit losses on loans HFI						Less: allowance for credit losses on loans HFI	140,664		134,192
Net loans held for investment						Net loans held for investment	9,185,360		9,164,020
Premises and equipment, net	Premises and equipment, net	143,277		143,739		Premises and equipment, net	154,526		146,316
Other real estate owned, net	Other real estate owned, net	5,919		9,777		Other real estate owned, net	1,974		5,794
Operating lease right-of-use assets	Operating lease right-of-use assets	61,444		41,686		Operating lease right-of-use assets	56,560		60,043
Interest receivable	Interest receivable	39,034		38,528		Interest receivable	44,973		45,684
Mortgage servicing rights, at fair value	Mortgage servicing rights, at fair value	171,427		115,512		Mortgage servicing rights, at fair value	166,433		168,365
Goodwill	Goodwill	242,561		242,561		Goodwill	242,561		242,561
Core deposit and other intangibles, net	Core deposit and other intangibles, net	13,407		16,953		Core deposit and other intangibles, net	10,438		12,368
Bank-owned life insurance	Bank-owned life insurance	74,976		73,519		Bank-owned life insurance	75,341		75,329
Other assets	Other assets	242,754		172,236		Other assets	227,087		227,956
Total assets	Total assets	$	12,258,082	$	12,597,686	Total assets	$	12,887,395	$	12,847,756
LIABILITIES	LIABILITIES					LIABILITIES
Deposits	Deposits					Deposits
Noninterest-bearing	Noninterest-bearing	$	2,966,514	$	2,740,214	Noninterest-bearing	$	2,400,288	$	2,676,631
Interest-bearing checking	Interest-bearing checking	2,648,161		3,418,666		Interest-bearing checking	2,879,336		3,059,984
Money market and savings	Money market and savings	3,228,337		3,546,936		Money market and savings	3,971,975		3,697,245
Customer time deposits	Customer time deposits	1,160,726		1,103,594		Customer time deposits	1,381,176		1,420,131
Brokered and internet time deposits	Brokered and internet time deposits	2,344		27,487		Brokered and internet time deposits	239,480		1,843
Total deposits	Total deposits	10,006,082		10,836,897		Total deposits	10,872,255		10,855,834
Borrowings	Borrowings	722,940		171,778		Borrowings	390,354		415,677
Operating lease liabilities	Operating lease liabilities	70,610		46,367		Operating lease liabilities	67,304		69,754
Accrued expenses and other liabilities	Accrued expenses and other liabilities	177,196		109,949		Accrued expenses and other liabilities	170,438		180,973
Total liabilities	Total liabilities	10,976,828		11,164,991		Total liabilities	11,500,351		11,522,238

SHAREHOLDERS' EQUITY	SHAREHOLDERS' EQUITY					SHAREHOLDERS' EQUITY
Common stock, $1 par value per share; 75,000,000 shares authorized; 46,926,377 and 47,549,241 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		46,926		47,549
Common stock, $1 par value per share; 75,000,000 shares authorized; 46,798,751 and 46,737,912 shares issued and outstanding, respectively						Common stock, $1 par value per share; 75,000,000 shares authorized; 46,798,751 and 46,737,912 shares issued and outstanding, respectively	46,799		46,738
Additional paid-in capital	Additional paid-in capital	867,139		892,529		Additional paid-in capital	859,516		861,588
Retained earnings	Retained earnings	554,536		486,666		Retained earnings	644,043		586,532
Accumulated other comprehensive (loss) income, net		(187,440)		5,858
Accumulated other comprehensive loss, net						Accumulated other comprehensive loss, net	(163,407)		(169,433)
Total FB Financial Corporation common shareholders' equity	Total FB Financial Corporation common shareholders' equity	1,281,161		1,432,602		Total FB Financial Corporation common shareholders' equity	1,386,951		1,325,425
Noncontrolling interest	Noncontrolling interest	93		93		Noncontrolling interest	93		93
Total equity	Total equity	1,281,254		1,432,695		Total equity	1,387,044		1,325,518
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	12,258,082	$	12,597,686	Total liabilities and shareholders' equity	$	12,887,395	$	12,847,756

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,
		2022		2021		2022		2021				2023		2022		2023		2022
Interest income:	Interest income:										Interest income:
Interest and fees on loans	Interest and fees on loans	$	116,664	$	89,993	$	303,183	$	269,266		Interest and fees on loans	$	149,220	$	99,655	$	289,576	$	186,519
Interest on securities	Interest on securities										Interest on securities
Taxable	Taxable	6,843		3,989		18,762		10,652			Taxable	6,480		6,499		13,050		11,919
Tax-exempt	Tax-exempt	1,818		1,883		5,526		5,772			Tax-exempt	1,808		1,842		3,612		3,708
Other	Other	3,158		800		6,353		2,089			Other	12,675		2,218		23,425		3,195
Total interest income	Total interest income	128,483		96,665		333,824		287,779			Total interest income	170,183		110,214		329,663		205,341

Interest expense:	Interest expense:										Interest expense:
Deposits	Deposits	13,133		6,596		25,186		24,341			Deposits	65,257		6,591		118,120		12,053
Borrowings	Borrowings	3,966		1,593		6,901		5,823			Borrowings	3,383		1,452		6,340		2,935
Total interest expense	Total interest expense	17,099		8,189		32,087		30,164			Total interest expense	68,640		8,043		124,460		14,988
Net interest income	Net interest income	111,384		88,476		301,737		257,615			Net interest income	101,543		102,171		205,203		190,353
Provision for credit losses		8,189		(2,832)		10,241		(27,349)
Provision for credit losses on loans HFI											Provision for credit losses on loans HFI	2,575		8,181		7,572		2,052
Provision for credit losses on unfunded commitments	Provision for credit losses on unfunded commitments	3,178		301		9,197		(2,875)			Provision for credit losses on unfunded commitments	(3,653)		4,137		(8,159)		6,019
Net interest income after provisions for credit losses	Net interest income after provisions for credit losses	100,017		91,007		282,299		287,839			Net interest income after provisions for credit losses	102,621		89,853		205,790		182,282

Noninterest income:	Noninterest income:										Noninterest income:
Mortgage banking income	Mortgage banking income	12,384		45,384		64,474		136,215			Mortgage banking income	12,232		22,559		24,318		52,090
Service charges on deposit accounts	Service charges on deposit accounts	3,208		2,612		9,030		7,217			Service charges on deposit accounts	3,185		2,908		6,238		5,822
Investment services and trust income											Investment services and trust income	2,777		2,275		5,155		4,407
ATM and interchange fees	ATM and interchange fees	2,614		4,868		13,054		14,590			ATM and interchange fees	2,629		5,353		5,025		10,440
Investment services and trust income		2,227		2,511		6,634		7,518
(Loss) gain from securities, net	(Loss) gain from securities, net	(140)		51		(401)		278			(Loss) gain from securities, net	(28)		(109)		41		(261)
Gain (loss) on sales or write-downs of other real estate owned		435		2,005		(89)		2,478
(Loss) gain from other assets		(6)		177		76		162
Gain (loss) on sales or write-downs of other real estate owned and other assets											Gain (loss) on sales or write-downs of other real estate owned and other assets	533		(8)		350		(442)

Other income	Other income	1,870		1,398		4,420		6,578			Other income	2,485		236		6,035		2,550
Total noninterest income	Total noninterest income	22,592		59,006		97,198		175,036			Total noninterest income	23,813		33,214		47,162		74,606

Noninterest expenses:	Noninterest expenses:										Noninterest expenses:
Salaries, commissions and employee benefits	Salaries, commissions and employee benefits	51,028		62,818		165,652		189,756			Salaries, commissions and employee benefits	52,020		55,181		100,808		114,624
Occupancy and equipment expense	Occupancy and equipment expense	6,011		5,979		17,267		17,184			Occupancy and equipment expense	6,281		5,853		12,190		11,256
Legal and professional fees	Legal and professional fees	4,448		2,177		10,171		6,701			Legal and professional fees	2,199		3,116		5,307		5,723
Data processing	Data processing	2,334		2,595		7,219		7,456			Data processing	2,345		2,404		4,458		4,885

Amortization of core deposit and other intangibles	Amortization of core deposit and other intangibles	1,108		1,344		3,546		4,178			Amortization of core deposit and other intangibles	940		1,194		1,930		2,438

Advertising	Advertising	2,050		4,200		8,114		10,012			Advertising	2,001		2,031		4,134		6,064
Mortgage restructuring expense	Mortgage restructuring expense	—		—		12,458		—			Mortgage restructuring expense	—		12,458		—		12,458
Other expense	Other expense	14,868		15,894		43,689		47,378			Other expense	15,506		14,760		32,905		28,821
Total noninterest expense	Total noninterest expense	81,847		95,007		268,116		282,665			Total noninterest expense	81,292		96,997		161,732		186,269
Income before income taxes	Income before income taxes	40,762		55,006		111,381		180,210			Income before income taxes	45,142		26,070		91,220		70,619
Income tax expense	Income tax expense	8,931		9,716		24,961		38,744			Income tax expense	9,835		6,717		19,532		16,030
Net income applicable to FB Financial Corporation and noncontrolling interest	Net income applicable to FB Financial Corporation and noncontrolling interest	31,831		45,290		86,420		141,466			Net income applicable to FB Financial Corporation and noncontrolling interest	35,307		19,353		71,688		54,589
Net income applicable to noncontrolling interest	Net income applicable to noncontrolling interest	—		—		8		8			Net income applicable to noncontrolling interest	8		8		8		8
Net income applicable to FB Financial Corporation	Net income applicable to FB Financial Corporation	$	31,831	$	45,290	$	86,412	$	141,458		Net income applicable to FB Financial Corporation	$	35,299	$	19,345	$	71,680	$	54,581

Earnings per common share
Earnings per common share:											Earnings per common share:
Basic	Basic	$	0.68	$	0.96	$	1.83	$	2.99		Basic	$	0.75	$	0.41	$	1.53	$	1.15
Diluted	Diluted	0.68		0.94		$	1.83	$	2.95		Diluted	0.75		0.41		1.53		1.15

See the accompanying notes to the consolidated financial statements.

FB Financial Corporation and subsidiaries

Consolidated statements of comprehensive income (loss) ~~income~~

(Unaudited)

(Amounts are in thousands)

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Net income $ 31,831 $ 45,290 $ 86,420 $ 141,466
Other comprehensive loss, net of tax:
Net change in unrealized loss in available-for-sale
securities, net of tax benefits of $(23,750), $(2,054), $(68,576) and $(4,708)
(67,353) (5,818) (194,761) (15,380)
Reclassification adjustment for gain on sale of securities
included in net income, net of tax expenses of $0, $19, $1 and $23
(1) (56) (3) (67)
Net change in unrealized gain in hedging activities, net of tax
expenses of $145, $38, $517 and $173
409 106 1,466 489
Total other comprehensive loss, net of tax (66,945) (5,768) (193,298) (14,958)
Comprehensive (loss) income applicable to FB Financial Corporation
and noncontrolling interest (35,114) 39,522 (106,878) 126,508
Comprehensive income applicable to noncontrolling interest — — 8 8
Comprehensive (loss) income applicable to FB Financial Corporation $ (35,114) $ 39,522 $ (106,886) $ 126,500


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income	$	35,307	$	19,353	$	71,688	$	54,589
Other comprehensive (loss) income, net of tax:
Net unrealized (loss) gain in available-for-sale securities, net of tax (benefit) expense of $(4,890), $(17,343), $2,169 and $(44,826)	(13,858)		(49,233)		6,206		(127,408)
Reclassification adjustment for gain on sale of securities included in net income(1)	—		(1)		—		(2)
Net unrealized gain (loss) in hedging activities, net of tax expense (benefit) of $6, $99, $(64) and $372	17		283		(180)		1,057

Total other comprehensive (loss) income, net of tax	(13,841)		(48,951)		6,026		(126,353)
Comprehensive income (loss) applicable to FB Financial Corporation and noncontrolling interest	21,466		(29,598)		77,714		(71,764)
Comprehensive income applicable to noncontrolling interest	8		8		8		8
Comprehensive income (loss) applicable to FB Financial Corporation	$	21,458	$	(29,606)	$	77,706	$	(71,772)

(1) The tax expense for all periods shown was not meaningful.

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
loss, net Total common
shareholders' equity Noncontrolling interest Total shareholders' equity
Balance at June 30, 2022 $ 46,882 $ 864,614 $ 528,851 $ (120,495) $ 1,319,852 $ 93 $ 1,319,945
Net income attributable to FB
Financial Corporation and
noncontrolling interest — — 31,831 — 31,831 — 31,831
Other comprehensive income, net of
taxes — — — (66,945) (66,945) — (66,945)
Stock based compensation expense 1 2,532 — — 2,533 — 2,533
Restricted stock units vested and
distributed, net of shares withheld 31 (520) — — (489) — (489)
Shares issued under employee stock
purchase program 12 513 — — 525 — 525
Dividends declared ($0.13 per share) — — (6,146) — (6,146) — (6,146)
Balance at September 30, 2022 $ 46,926 $ 867,139 $ 554,536 $ (187,440) $ 1,281,161 $ 93 $ 1,281,254
Balance at December 31, 2021 $ 47,549 $ 892,529 $ 486,666 $ 5,858 $ 1,432,602 $ 93 $ 1,432,695
Net income attributable to FB
Financial Corporation and
noncontrolling interest — — 86,412 — 86,412 8 86,420
Other comprehensive income, net of
taxes — — — (193,298) (193,298) — (193,298)
Repurchase of common stock (795) (31,948) — — (32,743) — (32,743)
Stock based compensation expense 3 8,150 — — 8,153 — 8,153
Restricted stock units vested and
distributed, net of shares withheld 142 (2,777) — — (2,635) — (2,635)
Shares issued under employee stock
purchase program 27 1,185 — — 1,212 — 1,212
Dividends declared ($0.39 per share) — — (18,542) — (18,542) — (18,542)
Noncontrolling interest distribution — — — — — (8) (8)
Balance at September 30, 2022 $ 46,926 $ 867,139 $ 554,536 $ (187,440) $ 1,281,161 $ 93 $ 1,281,254


	Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive income (loss), net		Total common shareholders' equity		Noncontrolling interest		Total shareholders' equity






















Balance at March 31, 2022:	$	47,488	$	888,168	$	515,664	$	(71,544)	$	1,379,776	$	93	$	1,379,869
Net income attributable to FB Financial Corporation and noncontrolling interest	—		—		19,345		—		19,345		8		19,353
Other comprehensive loss, net of taxes	—		—		—		(48,951)		(48,951)		—		(48,951)
Repurchase of common stock	(650)		(25,890)		—		—		(26,540)		—		(26,540)
Stock based compensation expense	1		3,037		—		—		3,038		—		3,038
Restricted stock units vested, net of taxes	43		(701)		—		—		(658)		—		(658)
Dividends declared ($0.13 per share)	—		—		(6,158)		—		(6,158)		—		(6,158)
Noncontrolling interest distribution	—		—		—		—		—		(8)		(8)
Balance at June 30, 2022	$	46,882	$	864,614	$	528,851	$	(120,495)	$	1,319,852	$	93	$	1,319,945
Balance at March 31, 2023:	$	46,763	$	856,628	$	615,871	$	(149,566)	$	1,369,696	$	93	$	1,369,789
Net income attributable to FB Financial Corporation and noncontrolling interest	—		—		35,299		—		35,299		8		35,307
Other comprehensive loss, net of taxes	—		—		—		(13,841)		(13,841)		—		(13,841)

Stock based compensation expense	5		3,243		—		—		3,248		—		3,248
Restricted stock units vested, net of taxes	23		(177)		—		—		(154)		—		(154)
Performance-based restricted stock units vested, net of taxes	8		(178)		—		—		(170)		—		(170)

Dividends declared ($0.15 per share)	—		—		(7,127)		—		(7,127)		—		(7,127)
Noncontrolling interest distribution	—		—		—		—		—		(8)		(8)
Balance at June 30, 2023	$	46,799	$	859,516	$	644,043	$	(163,407)	$	1,386,951	$	93	$	1,387,044

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 interest Total shareholders' equity
Balance at June 30, 2021 $ 47,361 $ 902,782 $ 403,173 $ 18,405 $ 1,371,721 $ 93 $ 1,371,814
Net income attributable to FB
Financial Corporation and
noncontrolling interest — — 45,290 — 45,290 — 45,290
Other comprehensive loss, net of
     taxes — — — (5,768) (5,768) — (5,768)
Repurchase of common stock (11) (425) — — (436) — (436)
Stock based compensation
expense 1 2,883 — — 2,884 — 2,884
Restricted stock units vested and
distributed net of shares withheld 342 (8,444) — — (8,102) — (8,102)
Shares issued under employee
stock purchase program 15 632 — — 647 — 647
Dividends declared ($0.11 per
     share)
— — (5,323) — (5,323) — (5,323)
Balance at September 30, 2021 $ 47,708 $ 897,428 $ 443,140 $ 12,637 $ 1,400,913 $ 93 $ 1,401,006
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 — — 141,458 — 141,458 8 141,466
Other comprehensive loss, net of
     taxes — — — (14,958) (14,958) — (14,958)
Repurchase of common stock (11) (425) — — (436) — (436)
Stock based compensation
expense 6 8,059 — — 8,065 — 8,065
Restricted stock units vested and
distributed net of shares withheld 454 (10,496) — — (10,042) — (10,042)
Shares issued under employee
stock purchase program 37 1,443 — — 1,480 — 1,480
Dividends declared ($0.33 per
     share)
— — (15,943) — (15,943) — (15,943)
Noncontrolling interest distribution — — — — — (8) (8)
Balance at September 30, 2021 $ 47,708 $ 897,428 $ 443,140 $ 12,637 $ 1,400,913 $ 93 $ 1,401,006


	Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive income (loss), net		Total common shareholders' equity		Noncontrolling interest		Total shareholders' equity

Balance at December 31, 2021:	$	47,549	$	892,529	$	486,666	$	5,858	$	1,432,602	$	93	$	1,432,695
Net income attributable to FB Financial Corporation and noncontrolling interest	—		—		54,581		—		54,581		8		54,589
Other comprehensive loss, net of taxes	—		—		—		(126,353)		(126,353)		—		(126,353)
Repurchase of common stock	(795)		(31,948)		—		—		(32,743)		—		(32,743)
Stock based compensation expense	2		5,618		—		—		5,620		—		5,620
Restricted stock units vested, net of taxes	111		(2,257)		—		—		(2,146)		—		(2,146)
Shares issued under employee stock purchase program	15		672		—		—		687		—		687
Dividends declared ($0.26 per share)	—		—		(12,396)		—		(12,396)		—		(12,396)
Noncontrolling interest distribution	—		—		—		—		—		(8)		(8)
Balance at June 30, 2022	$	46,882	$	864,614	$	528,851	$	(120,495)	$	1,319,852	$	93	$	1,319,945

Balance at December 31, 2022:	$	46,738	$	861,588	$	586,532	$	(169,433)	$	1,325,425	$	93	$	1,325,518
Net income attributable to FB Financial Corporation and noncontrolling interest	—		—		71,680		—		71,680		8		71,688
Other comprehensive income, net of taxes	—		—		—		6,026		6,026		—		6,026
Repurchase of common stock	(136)		(4,808)		—		—		(4,944)		—		(4,944)
Stock based compensation expense	6		5,527		—		—		5,533		—		5,533
Restricted stock units vested, net of taxes	115		(1,721)		—		—		(1,606)		—		(1,606)
Performance-based restricted stock units vested, net of taxes	68		(1,383)		—		—		(1,315)		—		(1,315)
Shares issued under employee stock purchase program	8		313		—		—		321		—		321
Dividends declared ($0.30 per share)	—		—		(14,169)		—		(14,169)		—		(14,169)
Noncontrolling interest distribution	—		—		—		—		—		(8)		(8)
Balance at June 30, 2023	$	46,799	$	859,516	$	644,043	$	(163,407)	$	1,386,951	$	93	$	1,387,044

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,
		2022		2021				2023		2022
Cash flows from operating activities:	Cash flows from operating activities:						Cash flows from operating activities:
Net income applicable to FB Financial Corporation and noncontrolling interest	Net income applicable to FB Financial Corporation and noncontrolling interest	$	86,420	$	141,466		Net income applicable to FB Financial Corporation and noncontrolling interest	$	71,688	$	54,589
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:							Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of fixed assets and software	Depreciation and amortization of fixed assets and software	6,105		6,288			Depreciation and amortization of fixed assets and software	4,680		4,048
Amortization of core deposit and other intangibles	Amortization of core deposit and other intangibles	3,546		4,178			Amortization of core deposit and other intangibles	1,930		2,438
Amortization of issuance costs on subordinated debt							Amortization of issuance costs on subordinated debt	194		193
Capitalization of mortgage servicing rights	Capitalization of mortgage servicing rights	(19,523)		(31,382)			Capitalization of mortgage servicing rights	(4,061)		(15,070)
Net change in fair value of mortgage servicing rights	Net change in fair value of mortgage servicing rights	(36,392)		788			Net change in fair value of mortgage servicing rights	5,993		(28,096)
Stock-based compensation expense	Stock-based compensation expense	8,153		8,065			Stock-based compensation expense	5,533		5,620
Provision for credit losses		10,241		(27,349)
Provision for credit losses on loans HFI							Provision for credit losses on loans HFI	7,572		2,052
Provision for credit losses on unfunded commitments	Provision for credit losses on unfunded commitments	9,197		(2,875)			Provision for credit losses on unfunded commitments	(8,159)		6,019
Provision for mortgage loan repurchases	Provision for mortgage loan repurchases	(1,989)		(266)			Provision for mortgage loan repurchases	(450)		(1,189)
Amortization of premiums and accretion of discounts on acquired loans, net		1,339		127
(Accretion) amortization of discounts and premiums on acquired loans, net							(Accretion) amortization of discounts and premiums on acquired loans, net	(305)		2,288
Amortization of premiums and accretion of discounts on securities, net	Amortization of premiums and accretion of discounts on securities, net	5,178		6,521			Amortization of premiums and accretion of discounts on securities, net	2,691		3,692
Loss (gain) from securities, net		401		(278)
(Gain) loss from securities, net							(Gain) loss from securities, net	(41)		261
Originations of loans held for sale	Originations of loans held for sale	(2,129,129)		(4,926,390)			Originations of loans held for sale	(641,962)		(1,719,488)
Repurchases of loans held for sale		(194)		(384)

Proceeds from sale of loans held for sale	Proceeds from sale of loans held for sale	2,796,313		4,939,323			Proceeds from sale of loans held for sale	679,456		2,213,443
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	(43,648)		(126,983)			Gain on sale and change in fair value of loans held for sale	(17,495)		(35,410)

Net loss (gain) or write-downs of other real estate owned		89		(2,478)
Gain on other assets		(76)		(162)
Net (gain) loss on write-downs of other real estate owned and other assets							Net (gain) loss on write-downs of other real estate owned and other assets	(350)		442

Provision for deferred income taxes	Provision for deferred income taxes	15,879		20,904			Provision for deferred income taxes	2,629		12,461
Earnings on bank-owned life insurance	Earnings on bank-owned life insurance	(1,099)		(1,156)			Earnings on bank-owned life insurance	(983)		(728)
Changes in:	Changes in:						Changes in:
Operating leases		4,485		(781)
Operating lease assets and liabilities, net							Operating lease assets and liabilities, net	1,033		166
Other assets and interest receivable	Other assets and interest receivable	(23,220)		(1,352)			Other assets and interest receivable	(2,727)		13,566
Accrued expenses and other liabilities	Accrued expenses and other liabilities	51,583		(46,867)			Accrued expenses and other liabilities	(250)		7,279
Net cash provided by (used in) operating activities		743,659		(41,043)
Net cash provided by operating activities							Net cash provided by operating activities	106,616		528,576
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	Sales	1,218		8,855			Sales	—		1,218
Maturities, prepayments and calls	Maturities, prepayments and calls	170,701		216,032			Maturities, prepayments and calls	58,415		126,349
Purchases	Purchases	(242,639)		(645,658)			Purchases	(905)		(243,209)
Net change in loans	Net change in loans	(1,523,815)		(177,953)			Net change in loans	(15,832)		(990,402)
Net change in commercial loans held for sale		43,006		116,158

Sales of FHLB stock	Sales of FHLB stock	—		4,294			Sales of FHLB stock	26,368		—
Purchases of FHLB stock	Purchases of FHLB stock	(26,370)		(663)			Purchases of FHLB stock	(7,993)		(2,364)

Purchases of premises and equipment	Purchases of premises and equipment	(6,060)		(5,193)			Purchases of premises and equipment	(12,576)		(3,224)
Proceeds from the sale of premises and equipment	Proceeds from the sale of premises and equipment	875		—			Proceeds from the sale of premises and equipment	—		875
Proceeds from the sale of other real estate owned	Proceeds from the sale of other real estate owned	4,753		8,834			Proceeds from the sale of other real estate owned	5,155		418
Proceeds from the sale of other assets	Proceeds from the sale of other assets	4		—			Proceeds from the sale of other assets	775		—
Proceeds from bank-owned life insurance							Proceeds from bank-owned life insurance	236		—

Net cash provided by (used in) investing activities							Net cash provided by (used in) investing activities	53,643		(1,110,339)
Cash flows from financing activities:							Cash flows from financing activities:
Net increase (decrease) in deposits							Net increase (decrease) in deposits	15,489		(287,478)
Net increase (decrease) in securities sold under agreements to repurchase and federal funds purchased							Net increase (decrease) in securities sold under agreements to repurchase and federal funds purchased	29,275		(9,010)

Net decrease in short-term FHLB advances							Net decrease in short-term FHLB advances	(50,000)		—

Net cash used in investing activities		(1,578,327)		(475,294)
Cash flows from financing activities:
Net (decrease) increase in demand deposits		(852,629)		863,646
Net increase (decrease) in time deposits		31,989		(249,765)
Net (decrease) increase in securities sold under agreements to repurchase		(11,708)		9,531

Net increase in short-term FHLB advances		540,000		—

Payments on subordinated debt		—		(60,000)

Amortization of issuance costs and (accretion) of subordinated debt fair value premium, net		291		(79)
Payments on other borrowings		—		(15,000)
Share based compensation withholding payments	Share based compensation withholding payments	(2,635)		(10,042)			Share based compensation withholding payments	(2,921)		(2,146)
Net proceeds from sale of common stock under employee stock purchase program	Net proceeds from sale of common stock under employee stock purchase program	1,212		1,480			Net proceeds from sale of common stock under employee stock purchase program	321		687
Repurchase of common stock	Repurchase of common stock	(32,743)		(436)			Repurchase of common stock	(4,944)		(32,743)
Dividends paid on common stock	Dividends paid on common stock	(18,401)		(15,617)			Dividends paid on common stock	(14,011)		(12,304)
Dividend equivalent payments made upon vesting of equity compensation	Dividend equivalent payments made upon vesting of equity compensation	(150)		(707)			Dividend equivalent payments made upon vesting of equity compensation	(158)		(114)
Noncontrolling interest distribution	Noncontrolling interest distribution	(8)		(8)			Noncontrolling interest distribution	(8)		(8)
Net cash (used in) provided by financing activities		(344,782)		523,003
Net cash used in financing activities							Net cash used in financing activities	(26,957)		(343,116)
Net change in cash and cash equivalents	Net change in cash and cash equivalents	(1,179,450)		6,666			Net change in cash and cash equivalents	133,302		(924,879)
Cash and cash equivalents at beginning of the period	Cash and cash equivalents at beginning of the period	1,797,740		1,317,898			Cash and cash equivalents at beginning of the period	1,027,052		1,797,740
Cash and cash equivalents at end of the period	Cash and cash equivalents at end of the period	$	618,290	$	1,324,564		Cash and cash equivalents at end of the period	$	1,160,354	$	872,861
Supplemental cash flow information:	Supplemental cash flow information:						Supplemental cash flow information:
Interest paid	Interest paid	$	31,322	$	34,542		Interest paid	$	116,211	$	15,638
Taxes paid		808		55,609
Taxes paid, net							Taxes paid, net	29,338		726
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	$	984	$	4,945		Transfers from loans to other real estate owned	$	593	$	563

Loans provided for sales of other real estate owned		—		685
Transfers from loans to loans held for sale		42,997		10,408
Transfers from loans held for sale to loans		23,183		52,151
Rebooked GNMA loans under optional repurchase program		26,485		—
Transfers from loans to other assets							Transfers from loans to other assets	$	1,391	$	—

Trade date payable - securities		—		5,996
Loans provided for sales of other assets							Loans provided for sales of other assets	424		—
Transfers from loans to loans held for sale							Transfers from loans to loans held for sale	10,545		20,016
Transfers from loans held for sale to loans							Transfers from loans held for sale to loans	2,755		14,179
Decrease in rebooked GNMA loans under optional repurchase program							Decrease in rebooked GNMA loans under optional repurchase program	(5,986)		—

Dividends declared not paid on restricted stock units	Dividends declared not paid on restricted stock units	173		340			Dividends declared not paid on restricted stock units	158		118

Right-of-use assets obtained in exchange for operating lease liabilities	Right-of-use assets obtained in exchange for operating lease liabilities	24,605		839			Right-of-use assets obtained in exchange for operating lease liabilities	3,477		2,317

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 primarily through its wholly-owned ~~subsidiaries,~~subsidiary, FirstBank ~~(the "Bank")~~ and ~~FirstBank Risk Management, Inc.~~the Bank's subsidiaries. As of ~~September~~June 30, ~~2022,~~2023, the Bank had 82 full-service branches throughout Tennessee, 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 U.S. 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 financial statements and the reported results of operations for the reporting periods and the related disclosures. Although management's estimates contemplate current conditions and how they are expected to change in the future, it is reasonably possible that actual conditions could vary from those anticipated, which could ~~affect~~cause the Company's financial condition and results of ~~operations. Actual results could differ~~operations to vary 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.

Earnings per share

Basic 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 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.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

The following is a summary of the basic and diluted earnings per common share ~~calculation~~calculations 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,
			2022		2021		2022		2021					2023		2022		2023		2022
Basic earnings per common share calculation:
Basic earnings per common share:												Basic earnings per common share:
Net income applicable to FB Financial Corporation	Net income applicable to FB Financial Corporation		$	31,831	$	45,290	$	86,412	$	141,458		Net income applicable to FB Financial Corporation		$	35,299	$	19,345	$	71,680	$	54,581
Dividends paid on and undistributed earnings allocated to participating securities	Dividends paid on and undistributed earnings allocated to participating securities		—		—		—		—			Dividends paid on and undistributed earnings allocated to participating securities		—		—		—		—
Earnings available to common shareholders	Earnings available to common shareholders		$	31,831	$	45,290	$	86,412	$	141,458		Earnings available to common shareholders		$	35,299	$	19,345	$	71,680	$	54,581
Weighted average basic shares outstanding	Weighted average basic shares outstanding		46,908,520		47,412,214		47,181,853		47,345,984			Weighted average basic shares outstanding		46,779,388		47,111,055		46,729,778		47,320,784
Basic earnings per common share	Basic earnings per common share		$	0.68	$	0.96	$	1.83	$	2.99		Basic earnings per common share		$	0.75	$	0.41	$	1.53	$	1.15
Diluted earnings per common share:	Diluted earnings per common share:											Diluted earnings per common share:
Earnings available to common shareholders	Earnings available to common shareholders		$	31,831	$	45,290	$	86,412	$	141,458		Earnings available to common shareholders		$	35,299	$	19,345	$	71,680	$	54,581
Weighted average basic shares outstanding	Weighted average basic shares outstanding		46,908,520		47,412,214		47,181,853		47,345,984			Weighted average basic shares outstanding		46,779,388		47,111,055		46,729,778		47,320,784
Weighted average diluted shares contingently issuable(1)	Weighted average diluted shares contingently issuable(1)		116,091		594,933		133,247		637,510			Weighted average diluted shares contingently issuable(1)		35,466		100,595		47,825		145,507
Weighted average diluted shares outstanding	Weighted average diluted shares outstanding		47,024,611		48,007,147		47,315,100		47,983,494			Weighted average diluted shares outstanding		46,814,854		47,211,650		46,777,603		47,466,291
Diluted earnings per common share	Diluted earnings per common share		$	0.68	$	0.94	$	1.83	$	2.95		Diluted earnings per common share		$	0.75	$	0.41	$	1.53	$	1.15

(1)Excludes ~~15,408~~315,989 and ~~11,888~~250,074 restricted stock units outstanding considered to be antidilutive for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~15,974~~202,661 and ~~20,448~~10,678 restricted stock units outstanding considered to be antidilutive for ~~three and nine months ended September 30, 2021.~~

~~Recently modified accounting policies:~~

~~The Company did not modify or adopt any new accounting policies during~~ the three and ~~nine~~six months ended ~~September~~June 30, ~~2022 that were not disclosed in the Company's 2021 audited consolidated financial statements included on Form 10-K, other than as described below.~~

During the three months ended March 31, 2022, the Company appended the following language to the below referenced existing accounting policy related to derivative financial instruments and hedging activities described in Note 1 of the Company's 2021 Annual Report on Form 10-K as a result of entering into designated fair value hedges during the period.

~~(A) Derivative financial instruments and hedging activities:~~

The Company enters into fair value hedge relationships to mitigate the effect of changing interest rates on the fair values of fixed rate securities and loans. The gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged asset or liability attributable to the hedged risk are recognized in current earnings. The gain or loss on the derivative instrument is presented on the same income statement line item as the earnings effect of the hedged item.

~~During the three months ended September 30, 2022, the Company modified the below referenced existing accounting policy.~~

~~(B) Loans held for sale:~~

~~Mortgage loans held for sale~~

Mortgage loans originated and intended for sale in the secondary market are carried at fair value as permitted under the guidance in ASC 825, “Financial Instruments” (“ASC 825”). The change in fair value of both mortgage loans held for sale and the related derivative instruments used to hedge exposure to market related risks are recorded in “Mortgage banking income” in the Consolidated Statements of Income. Gains and losses on sale are recognized at the time the loan is closed. Pass through origination costs and related loan fees are also included in “Mortgage banking income”.

Periodically, the Company transfers mortgage loans originated for sale in the secondary markets into the loan HFI portfolio based on current market conditions, overall secondary marketability and status of the loan. The loans are transferred into the portfolio at fair value at the date of transfer. Additionally, occasionally the Company will transfer loans from the held for investment portfolio into loans held for sale. At the time of the transfer, loans are marked to fair value through the allowance for credit losses and reclassified to loans held for sale.

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

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

The Company sells mortgage loans originated for sale on the secondary market to GNMA and retains servicing rights after sale. Under the GNMA optional repurchase program, financial institutions are permitted to buy back individual delinquent mortgage loans that meet certain criteria from the securitized loan pool for which the institution provides servicing. 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 recorded on the balance sheet, regardless of whether the Company intends to exercise the buy-back option if the buyback options provides the transferor a more-than-trivial benefit. Prior to September 30, 2022, the Company deemed there was not a more than trivial benefit associated with repurchasing these loans based on quarterly analyses and as such, these were not rebooked to the balance sheet. During the quarter ended September 30, 2022, the Company revised its accounting estimate by applying the removal of accounts provision regardless of whether the transferor is provided a more-than-trivial benefit to align with developing industry best practice and regulatory expectations. Upon application of the change, as of September 30, 2022 the Company recorded $26,485 of optional rights to repurchase delinquent GNMA loans. The fair value option election does not apply to the GNMA optional repurchase loans which do not meet the requirements under FASB ASC Topic 825. These loans are reported at current unpaid principal balance in LHFS on the consolidated balance sheets with the offsetting liability being reported in borrowings. These are considered nonperforming assets as the Company does not earn any interest on the unexercised option to repurchase these loans. This change in accounting estimate was applied prospectively without modification to prior periods.2022.

Recently adopted accounting standards:

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 is intended to provide relief for companies preparing for discontinuation of interest rates based on LIBOR. The ~~Company did not adopt~~ASU provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or other reference rates expected to be discontinued. ASU 2020-04 also provides for a one-time sale and/or transfer to AFS or trading to be made for HTM debt securities that both reference an eligible reference rate and were classified as HTM before January 1, 2020. ASU 2020-04 was effective for all entities as of March 12, 2020 and through December 31, 2022. Companies can apply the ASU as of the beginning of the interim period that includes March 12, 2020 or any ~~new accounting standards that were not disclosed in~~date thereafter. The guidance requires companies to apply the ~~Company's 2021 audited consolidated financial statements included on Form 10-K.~~

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

guidance prospectively to contract modifications and hedging relationships while the one-time election to sell and/or transfer debt securities classified as HTM may be made any time after March 12, 2020. In ~~June~~December 2022, the FASB issued ASU ~~2022-03, “Fair Value Measurement~~2022-06, "Reference rate Reform (Topic ~~820)~~848): ~~Fair Value Measurement~~Deferral of ~~Equity Securities Subject~~the Sunset Date of Topic 848" to ~~Contractual Sale Restrictions”. The FASB is issuing this update~~extend the date to ~~clarify~~December 31, 2024 for companies to apply the ~~guidance~~relief in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, to amend a related illustrative example, and to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820.848. The ~~ASU becomes effective January 1, 2024 and the Company is evaluating the potential impact~~application of this ~~standard on its~~guidance has not had and is not expected to have a material impact to the consolidated financial statements ~~and~~or related disclosures.

In March 2022, the FASB issued ASU 2022-01, "Derivatives and Hedging (Topic 815): Fair Value Hedging-Portfolio Layer Method", to expand the current single-layer method of electing hedge accounting to allow multiple hedged layers of a single closed portfolio under the method. To reflect that expansion, the last-of-layer method is renamed the portfolio layer method. The amendments in this update are effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early adoption is permitted on any date on or after the issuance of ASU No. 2022-01 for any entity that has adopted the amendments in ASU No.2017-12 for the corresponding period. ~~Adoption~~The Company adopted the update effective January 1, 2023. The adoption of this ~~update will~~standard did not have an impact on the ~~Company's~~ consolidated financial statements or ~~related~~ disclosures.

Additionally, in March 2022, the FASB issued ASU 2022-02, ~~"'Financial~~"Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures" related to troubled debt restructurings and vintage disclosures for financing receivables. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan modifications and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require disclosure of current-period gross write-offs for financing receivables ~~and net investment in leases~~ by year of origination in the vintage disclosures. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The Company ~~is currently evaluating~~prospectively adopted the ~~effect that ASU 2022-02 will have on~~amendment effective January 1, 2023 and updated its ~~consolidated financial statements and related disclosures.~~disclosures

1211

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

In March 2022, the SEC released SAB 121 to add interpretive guidance for entities to consider when they have obligations to safeguard crypto-assets held for clients. The new guidance requires reporting entities who allow clients to transact in crypto-assets and act as a custodian to record a liabilitybeginning with a corresponding asset regardless of whether they control the crypto-asset. The crypto-asset will need to be marked at fair value for each reporting period. The new guidance requires disclosures in the footnotes to address the amount of crypto-assets reported, and the safeguarding and recordkeeping of the assets. The guidance in this update requires that reporting companies implement SAB 121 no later than the financial statements covering the first ~~interim or annual period ending after June 15, 2022, with retrospective application back~~quarter of 2023. Refer to ~~the beginning~~Note 3 for further information. The adoption of ~~the fiscal year. During the three months ended March 31, 2022, the Company became~~this standard did not have a founding member of the USDF Consortium (the "Consortium"), which plans to utilize blockchain and technology to streamline peer-to-peer financial transactions. The USDF Consortium is a membership-based association of insured depository institutions with a mission to build a network of banks to further the adoption and interoperability of a bank-minted tokenized deposit. While the Company does not currently hold or facilitate transactions with crypto-assets, the Company is evaluating the potential future financial statement and disclosurematerial impact ~~from adopting this guidance when it becomes applicable based~~ on the Company's ~~crypto-asset activities.~~consolidated financial statements.

Newly issued not yet effective accounting standards:

In ~~March 2020,~~June 2022, the FASB issued ASU ~~2020-04, “Reference Rate Reform~~2022-03, “Fair Value Measurement (Topic ~~848)~~820): ~~Facilitation~~Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”. The FASB issued this update to clarify the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, to amend a related illustrative example, and to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The ASU becomes effective January 1, 2024 and the adoption is not expected to have a significant impact on the Company's consolidated financial statements or related disclosures.

In March 2023, the FASB issued ASU 2023-01, “Leases (Topic 842): Common Control Arrangements” as part of the ~~Effects~~Post-Implementation Review process of ~~Reference Rate Reform on Financial Reporting.”~~Topic 842 around related party arrangements between entities under common control. Under previous guidance, a lessee is generally required to amortize leasehold improvements that it owns over the shorter of the useful life of those improvements or the lease term. However, due to the nature of leasehold improvements made under leases between entities under common control, ASU ~~2020-04 is intended~~2023-01 requires a lessee in a common-control arrangement to ~~provide relief for companies preparing for discontinuation~~amortize such leasehold improvements that it owns over the improvements' useful life to the common control group, regardless of ~~interest rates based on LIBOR.~~the lease term. The ASU provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or other reference rates expected to be discontinued. ASU 2020-04 also provides for a onetime sale and/or transfer to AFS or trading to be made for HTM debt securities that both reference an eligible reference rate and were classified as HTM beforebecomes effective January 1, ~~2020. ASU 2020-04 was effective for all entities as of March 12, 2020~~2024 and through December 31, 2022. Companies can apply the ASU as of the beginning of the interim period that includes March 12, 2020 or any date thereafter. The guidance requires companies to apply the guidance prospectively to contract modifications and hedging relationships while the one-time election to sell and/or transfer debt securities classified as HTM may be made any time after March 12, 2020.

Our LIBOR Transition Committee was established to transition from LIBOR to alternative rates and has continued its efforts consistent with industry timelines. As part of these efforts, during the fourth quarter of 2021, we ceased utilization of LIBOR as an index in newly originated loans or loans that are refinanced. Additionally, we identified existing products that utilize LIBOR and are reviewing contractual language to facilitate the transition to alternative reference rates. ASU 2020-04 and ASU 2021-01 areis not expected to have a material impact on ~~our~~the Company's consolidated financial ~~statements.~~statements or related disclosures.

Additionally, in March 2023, the FASB issued ASU 2023-02, "Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method". The amendments in this update permit reporting entities to elect to account for tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. The ASU becomes effective January 1, 2024. The adoption of this accounting pronouncement will have no impact on the Company's historical consolidated financial statements but could influence the Company's decisions with respect to investments in certain tax credits prospectively.

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 that occurred after ~~September~~June 30, ~~2022,~~2023, but prior to the issuance of these financial statements that would have a material impact on the Company’s consolidated financial statements.

1312

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

Note (2)—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~~loss at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


		September 30, 2022											June 30, 2023
		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	$	45,161	$	—	$	(5,330)	$	—	$	39,831	U.S. government agency securities	$	45,185	$	—	$	(4,656)	$	—	$	40,529
Mortgage-backed securities - residential	Mortgage-backed securities - residential	1,257,521		—		(199,758)		—		1,057,763		Mortgage-backed securities - residential	1,165,901		—		(186,501)		—		979,400
Mortgage-backed securities - commercial	Mortgage-backed securities - commercial	19,453		—		(1,606)		—		17,847		Mortgage-backed securities - commercial	18,747		—		(1,493)		—		17,254
Municipal securities	Municipal securities	297,451		100		(45,408)		—		252,143		Municipal securities	294,032		387		(27,322)		—		267,097
U.S. Treasury securities	U.S. Treasury securities	113,198		—		(5,901)		—		107,297		U.S. Treasury securities	113,508		—		(5,287)		—		108,221
Corporate securities	Corporate securities	8,001		—		(711)		—		7,290		Corporate securities	8,000		—		(1,141)		—		6,859
Total	Total	$	1,740,785	$	100	$	(258,714)	$	—	$	1,482,171	Total	$	1,645,373	$	387	$	(226,400)	$	—	$	1,419,360


		December 31, 2021											December 31, 2022
		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	$	34,023	$	18	$	(171)	$	—	$	33,870	U.S. government agency securities	$	45,167	$	—	$	(5,105)	$	—	$	40,062
Mortgage-backed securities - residential	Mortgage-backed securities - residential	1,281,285		6,072		(17,985)		—		1,269,372		Mortgage-backed securities - residential	1,224,522		—		(190,329)		—		1,034,193
Mortgage-backed securities - commercial	Mortgage-backed securities - commercial	15,024		272		(46)		—		15,250		Mortgage-backed securities - commercial	19,209		—		(1,565)		—		17,644
Municipal securities	Municipal securities	322,052		16,718		(160)		—		338,610		Municipal securities	295,375		458		(31,413)		—		264,420
U.S. Treasury securities	U.S. Treasury securities	14,914		—		(6)		—		14,908		U.S. Treasury securities	113,301		—		(5,621)		—		107,680
Corporate securities	Corporate securities	6,500		40		(25)		—		6,515		Corporate securities	8,000		—		(813)		—		7,187
Total	Total	$	1,673,798	$	23,120	$	(18,393)	$	—	$	1,678,525	Total	$	1,705,574	$	458	$	(234,846)	$	—	$	1,471,186

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, ~~2022~~2023 and December 31, ~~2021,~~2022, total accrued interest receivable on debt securities was ~~$5,535~~$5,358 and ~~$5,051, respectively.~~

~~As of September 30, 2022 and December 31, 2021, the Company had $2,962 and $3,367, in marketable equity securities recorded at fair value,~~$5,470, respectively.

Securities pledged at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 had carrying amounts of ~~$1,213,747~~$1,138,262 and ~~$1,226,646,~~$1,191,021, respectively, and were pledged to secure a Federal Reserve Bank line of credit, public deposits and repurchase agreements.

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

Investment securities transactions are recorded as of the trade date. At ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, there were no trade date receivables ~~nor~~or payables that related to sales or purchases settled after period end.

1413

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~~as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 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 summary.


		September 30,				December 31,					June 30,				December 31,
		2022				2021					2023				2022
		Available-for-sale				Available-for-sale					Available-for-sale				Available-for-sale
		Amortized cost		Fair value		Amortized cost		Fair value			Amortized cost		Fair value		Amortized cost		Fair value
Due in one year or less	Due in one year or less	$	4,011	$	3,962	$	21,851	$	21,884	Due in one year or less	$	66,285	$	64,880	$	4,277	$	4,225
Due in one to five years	Due in one to five years	155,637		146,428		54,847		55,307		Due in one to five years	106,548		98,449		161,556		152,181
Due in five to ten years	Due in five to ten years	62,157		56,759		45,714		46,975		Due in five to ten years	60,725		57,675		61,290		57,859
Due in over ten years	Due in over ten years	242,006		199,412		255,077		269,737		Due in over ten years	227,167		201,702		234,720		205,084
		463,811		406,561		377,489		393,903			460,725		422,706		461,843		419,349
Mortgage-backed securities - residential	Mortgage-backed securities - residential	1,257,521		1,057,763		1,281,285		1,269,372		Mortgage-backed securities - residential	1,165,901		979,400		1,224,522		1,034,193
Mortgage-backed securities - commercial	Mortgage-backed securities - commercial	19,453		17,847		15,024		15,250		Mortgage-backed securities - commercial	18,747		17,254		19,209		17,644
Total debt securities	Total debt securities	$	1,740,785	$	1,482,171	$	1,673,798	$	1,678,525	Total debt securities	$	1,645,373	$	1,419,360	$	1,705,574	$	1,471,186

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

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Proceeds from sales $ — $ 8,855 $ 1,218 $ 8,855
Proceeds from maturities, prepayments and calls 44,352 68,126 170,701 216,032
Gross realized gains 1 76 4 91
Gross realized losses — 1 — 1

Additionally, changes in fair value and the sale of equity securities with readily determinable fair values resulted in a net loss of $141 and of $24 for the three months ended September 30, 2022 and 2021, respectively, and in a net loss of $405 and gain of $188 for the nine months ended September 30, 2022 and 2021, respectively.


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Proceeds from sales	$	—	$	1,218	$	—	$	1,218
Proceeds from maturities, prepayments and calls	31,588		68,906		58,415		126,349
Gross realized gains	—		1		—		3
Gross realized losses	—		—		—		—

The following tables show gross unrealized losses for which an allowance for credit losses has not been recorded at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:


		September 30, 2022													June 30, 2023
		Less than 12 months				12 months or more				Total					Less than 12 months				12 months or more				Total
		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
U.S. government agency securities	U.S. government agency securities	$	33,269	$	(4,207)	$	6,562	$	(1,123)	$	39,831	$	(5,330)	U.S. government agency securities	$	956	$	(11)	$	39,573	$	(4,645)	$	40,529	$	(4,656)
Mortgage-backed securities - residential	Mortgage-backed securities - residential	570,554		(84,615)		487,209		(115,143)		1,057,763		(199,758)		Mortgage-backed securities - residential	43,118		(2,190)		936,282		(184,311)		979,400		(186,501)
Mortgage-backed securities - commercial	Mortgage-backed securities - commercial	16,709		(1,354)		1,138		(252)		17,847		(1,606)		Mortgage-backed securities - commercial	—		—		17,254		(1,493)		17,254		(1,493)
Municipal securities	Municipal securities	238,067		(42,452)		8,533		(2,956)		246,600		(45,408)		Municipal securities	53,700		(767)		179,210		(26,555)		232,910		(27,322)
U.S. Treasury securities	U.S. Treasury securities	107,297		(5,901)		—		—		107,297		(5,901)		U.S. Treasury securities	249		(1)		107,972		(5,286)		108,221		(5,287)
Corporate securities	Corporate securities	7,290		(711)		—		—		7,290		(711)		Corporate securities	—		—		6,859		(1,141)		6,859		(1,141)
Total	Total	$	973,186	$	(139,240)	$	503,442	$	(119,474)	$	1,476,628	$	(258,714)	Total	$	98,023	$	(2,969)	$	1,287,150	$	(223,431)	$	1,385,173	$	(226,400)

1514

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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


		December 31, 2021													December 31, 2022
		Less than 12 months				12 months or more				Total					Less than 12 months				12 months or more				Total
		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized loss
U.S. government agency securities	U.S. government agency securities	$	18,360	$	(171)	$	—	$	—	$	18,360	$	(171)	U.S. government agency securities	$	23,791	$	(2,802)	$	16,271	$	(2,303)	$	40,062	$	(5,105)
Mortgage-backed securities - residential	Mortgage-backed securities - residential	$	871,368	$	(14,295)	$	102,799	$	(3,690)	$	974,167	$	(17,985)	Mortgage-backed securities - residential	316,656		(32,470)		717,537		(157,859)		1,034,193		(190,329)
Mortgage-backed securities - commercial	Mortgage-backed securities - commercial	7,946		(46)		—		—		7,946		(46)		Mortgage-backed securities - commercial	11,104		(968)		6,540		(597)		17,644		(1,565)
Municipal securities	Municipal securities	11,414		(160)		—		—		11,414		(160)		Municipal securities	196,419		(26,811)		36,726		(4,602)		233,145		(31,413)
U.S. Treasury securities	U.S. Treasury securities	14,908		(6)		—		—		14,908		(6)		U.S. Treasury securities	94,248		(4,122)		13,432		(1,499)		107,680		(5,621)
Corporate securities	Corporate securities	4,119		(25)		—		—		4,119		(25)		Corporate securities	4,008		(492)		3,179		(321)		7,187		(813)
Total	Total	$	928,115	$	(14,703)	$	102,799	$	(3,690)	$	1,030,914	$	(18,393)	Total	$	646,226	$	(67,665)	$	793,685	$	(167,181)	$	1,439,911	$	(234,846)

As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company’s debt securities portfolio consisted of ~~504~~505 and ~~511~~503 securities, ~~487~~452 and 80454 of which were in an unrealized loss position, respectively.

During the three months ended ~~September~~June 30, 2023, the Company's available-for-sale debt securities portfolio net unrealized value decreased $18,748 to a net unrealized loss position of $226,013 from a net unrealized loss position of $207,265 as of March 31, 2023. During the six months ended June 30, 2023, the Company's available-for-sale debt securities portfolio net unrealized value increased $8,375 from a net unrealized loss position of $234,388 as of December 31, 2022.

During the three months ended June 30, 2022, the Company's available-for-sale debt securities portfolio net unrealized value declined ~~$91,104~~$66,577 to ~~an unrealized loss position of $258,614 as of September 30, 2022 from an~~a net unrealized loss position of $167,510 as of June 30, 2022 from a net unrealized loss position of $100,933 as of March 31, 2022. During the ~~nine~~six months ended ~~September~~June 30, 2022, the Company's available-for-sale debt securities portfolio net unrealized value declined ~~$263,341~~$172,237 from ana net unrealized gain position of $4,727 as of December 31, 2021.

During the three months ended September 30, 2021, the Company's available-for-sale debt securities portfolio unrealized value decreased $7,947 to an unrealized gain position of $14,374 as of September 30, 2021 from an unrealized gain position of $22,321 as of June 30, 2021. During the nine months ended September 30, 2021, the Company's available-for-sale debt securities portfolio unrealized value declined $20,178 from an unrealized gain position of $34,552 as of December 31, 2020.

The majority of the investment portfolio was either government guaranteed, or an issuance of a government sponsored entity or highly rated by major credit rating agencies and the Company has historically not recorded any losses associated with these investments. Municipal securities with market values below amortized cost at June 30, 2023 were reviewed for material credit events and/or rating downgrades with individual credit reviews performed. The issuers of these debt securities continue to make timely principal and interest payments under the contractual terms of the securities and the issuers will continue to be observed as a part of the Company’s ongoing credit monitoring. As such, as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, it was determined that all available-for-sale debt securities that experienced a decline in fair value below amortized cost basis were due to noncredit-related factors. Further, it is not likely that the Company will be required to sell the securities before recovery of their amortized cost basis. Therefore, there was no provision for credit losses recognized on available-for-sale debt securities during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 or ~~2021.~~2022.

Equity Securities

~~Note (3)—Loans and allowance for credit losses:~~

~~Loans outstanding as~~As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021, by class~~2022, the Company had $3,031 and $2,990, in marketable equity securities recorded at fair value, respectively. The Company had equity securities without readily determinable market value included in other assets on the consolidated balance sheets with carrying amounts of ~~financing receivable are as follows:~~

September 30, December 31,
2022 2021
Commercial and industrial (1)
$ 1,534,159 $ 1,290,565
Construction 1,679,497 1,327,659
Residential real estate:
1-to-4 family mortgage 1,545,252 1,270,467
Residential line of credit 460,774 383,039
Multi-family mortgage 394,366 326,551
Commercial real estate:
Owner-occupied 1,158,343 951,582
Non-owner occupied 1,954,219 1,730,165
Consumer and other 378,406 324,634
Gross loans 9,105,016 7,604,662
Less: Allowance for credit losses (134,476) (125,559)
Net loans $ 8,970,540 $ 7,479,103

~~(1)Includes $851~~$23,896 and ~~$3,990 of loans originated as part of the Paycheck Protection Program as of September~~$22,496 at June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. ~~PPP loans are federally guaranteed as part~~Additionally, the Company had $40,266 and $58,641 of Federal Home Loan Bank stock carried at cost at June 30, 2023 and December 31, 2022, respectively, included separately from the ~~CARES Act, provided PPP loan recipients receive loan forgiveness under~~other equity securities discussed above.

The change in the ~~SBA regulations. As such, there is minimal credit risk associated~~fair value of equity securities and sale of equity securities with ~~these loans.~~readily determinable fair values resulted in a net loss of $28 and of $110 for the three months ended June 30, 2023 and 2022, respectively, and in a net gain of $41 and a net loss of $264 for the six months ended June 30, 2023 and 2022, respectively.

1615

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

AsNote (3)—Loans and allowance for credit losses on loans HFI:

Loans outstanding as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021, $865,616~~2022, by class of financing receivable are as follows:


	June 30,		December 31,
	2023		2022
Commercial and industrial	$	1,693,572	$	1,645,783
Construction	1,636,970		1,657,488
Residential real estate:
1-to-4 family mortgage	1,548,614		1,573,121
Residential line of credit	507,652		496,660
Multi-family mortgage	518,025		479,572
Commercial real estate:
Owner-occupied	1,158,782		1,114,580
Non-owner occupied	1,881,978		1,964,010
Consumer and other	380,431		366,998
Gross loans	9,326,024		9,298,212
Less: Allowance for credit losses on loans HFI	(140,664)		(134,192)
Net loans	$	9,185,360	$	9,164,020

As of June 30, 2023 and ~~$1,136,294,~~December 31, 2022, $1,000,551 and $909,734, respectively, of qualifying residential mortgage loans (including loans held for sale) and ~~$1,665,345~~$1,732,824 and ~~$1,581,673,~~$1,763,730, respectively, of qualifying commercial mortgage loans were pledged to the ~~Federal Home Loan Bank of Cincinnati~~FHLB system securing advances against the Bank’s line of credit. Additionally, as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, qualifying loans of ~~$3,012,814~~$3,116,035 and ~~$2,440,097,~~$3,118,172, respectively, were pledged to the Federal Reserve ~~Bank~~ under the Borrower-in-Custody program.

The components of amortized cost for loans on the consolidated balance sheets exclude accrued interest receivable as the Company presents accrued interest receivable separately on the balance sheet. As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, accrued interest receivable on loans held for investment ~~was $32,247~~amounted to $38,057 and ~~$31,676,~~$38,507, respectively.

Allowance for Credit Losses on Loans HFI

The Company calculates its expected credit loss using a lifetime loss rate methodology. The Company utilizes probability-weighted forecasts, which consider multiple macroeconomic variables from ~~a third-party vendor~~Moody's that are applicable to ~~the~~each type of loan. 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.

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.

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 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;

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

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~~Company performed evaluations within the ~~inherent credit risks in each portfolio to more accurately measure~~Company's established qualitative framework, assessing the ~~credit risks associated with each. Each~~impact of the ~~quantitative models pools~~current economic outlook, including: uncertainty due to inflation, recent bank failures, negative economic forecasts, predicted Federal Reserve rate increases, and other considerations. The increase in the allowance for credit losses as of June 30, 2023 compared with December 31, 2022 is primarily a result of deterioration in economic forecasts between periods. These forecasts included weighted projections that the economy may be nearing a recession, reflected through deterioration in asset quality projected over life of the loan portfolio. As of June 30, 2023, the macroeconomic forecast was determined solely using the Moody’s baseline scenario, which showed a slightly more negative outlook than the comparative baseline as of December 31, 2022. As of December 31, 2022, the macroeconomic forecast used a weighting of two economic forecasts from Moody’s in order to align with management’s best estimate over the reasonable and supportable forecast period. The Moody’s baseline scenario was weighted the heaviest and the downside scenario received a smaller weighting. Additionally, as of June 30, 2023, loss rates on residential loans ~~with similar risk characteristics~~ and ~~collectively assesses~~HELOC were qualitatively adjusted downward, addressing the relative strength of asset values in the Company's predominant markets.

The Company calculates its allowance for credit losses on loans HFI using a lifetime loss rate methodology and disaggregates the loan portfolio into three pools. The following presents a summary of quantitative and qualitative factors considered as of June 30, 2023, which resulted in changes in the allowance for ~~each pool~~credit losses compared to ~~estimate its expected credit loss.~~December 31, 2022 as described below.


Pool	Source of repayment	Quantitative and Qualitative factors considered
Commercial and Industrial	Repayment is largely dependent upon the operation of the borrower's business.	Quantitative: Prepayment speeds are modeled in the form of a prepayment benchmarking that directly impacts the ACL output for all C&I loans and lines of credit. Loss rates incorporate a peer scaling factor. Qualitative: An uncertain economic outlook including the effects of inflation and the interest rate environment are driving a qualitative increase in the ACL.
Retail	Repayment is primarily dependent on the personal cash flow of the borrower.	Quantitative: Average FICO scores, remaining life of the portfolio, delinquency composition, prepayment speeds leveraging Equifax and Moody's data Qualitative: High modeled loss rates and the relatively strong housing market within the bank’s footprint are driving a qualitative decrease in the ACL.
Commercial Real Estate	Repayment is primarily dependent on lease income generated from the underlying collateral.	Quantitative: Prepayment speeds leverage a reverse-compounding formula. Loss rates incorporate a peer scaling factor. Qualitative: An uncertain economic outlook in Non-owner occupied CRE are driving a qualitative increase in the ACL.

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; and loans with other unique risk characteristics. 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 and TDRs use the same methodology. 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.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

~~The~~Effective January 1, 2023, the Company ~~performed qualitative evaluations within~~prospectively adopted the ~~Company's established qualitative framework, assessing~~accounting guidance in ASU 2022-02, "Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures", which eliminates the ~~impact~~recognition and measurement of TDRs. Upon adoption of this guidance, the Company no longer measures an allowance for credit losses for TDRs it reasonably expects will occur, and it evaluates all loan modifications according to the accounting guidance for loan refinancing and modifications to determine whether the modification should be accounted for as a new loan or a continuation of the ~~current economic outlook (including uncertainty due~~existing loan. After adoption, the Company now derecognizes the existing loan and accounts for the modified loan as a new loan if the effective yield on the modified loan is at least equal to inflation, negative economic forecasts, predicted Federal Reserve rate increases, status of federal government stimulus programs, and other considerations). The increase in estimated required reserve during the three and nine months ended September 30, 2022 was a result of increased loan growth and a tightening monetary policy environment both of which were incorporated into the Company's reasonable and supportable forecasts. Qualitative adjustments increased the reserve oneffective yield for comparable loans with ~~commercial exposure~~similar collection risks and the modifications to ~~address elevated risk in~~the original loan are more than minor. If a loan modification does not meet these ~~assets~~conditions, it extends the existing loan’s amortized cost basis and accounts for the modified loan as a continuation of the existing loan. Substantially all of its loan modifications involving borrowers experiencing financial difficulty are accounted for as a continuation of the existing loan.

Prior to January 1, 2023, loans experiencing financial difficulty for which a concession has not ~~covered~~yet been provided may be identified as reasonably expected TDRs. Reasonably expected TDRs and TDRs used the same methodology to estimate credit losses. In cases where the expected credit loss could only be captured through a discounted cash flow analysis (such as an interest rate modification for a TDR loan), the allowance was measured by the ~~model. Loss rates on residential backed loans were qualitatively adjusted downwards, addressing~~amount which the ~~relative strength of asset values in~~loan’s amortized cost exceeds the ~~Company's predominant markets. Qualitative factors also included weighted projections that the economy may be nearing a recession.~~discounted cash flow analysis.

The following tables provide the changes in the allowance for credit losses on loans HFI by class of financing receivable for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:

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, 2022
Beginning balance -
June 30, 2022
$ 10,191 $ 38,383 $ 21,398 $ 6,875 $ 6,503 $ 7,329 $ 22,536 $ 13,057 $ 126,272
Provision for credit losses 5 3,044 3,975 77 (629) 688 247 782 8,189
Recoveries of loans
previously charged-off
342 — 13 — — 51 — 70 476
Loans charged off — — (20) — — — — (441) (461)
Ending balance -
September 30, 2022
$ 10,538 $ 41,427 $ 25,366 $ 6,952 $ 5,874 $ 8,068 $ 22,783 $ 13,468 $ 134,476
Nine Months Ended September 30, 2022
Beginning balance -
December 31, 2021
$ 15,751 $ 28,576 $ 19,104 $ 5,903 $ 6,976 $ 12,593 $ 25,768 $ 10,888 $ 125,559
Provision for credit losses (4,784) 12,840 6,266 1,032 (1,102) (4,601) (2,985) 3,575 10,241
Recoveries of loans
previously charged-off
1,326 11 39 17 — 76 — 635 2,104
Loans charged off (1,755) — (43) — — — — (1,630) (3,428)
Ending balance -
September 30, 2022
$ 10,538 $ 41,427 $ 25,366 $ 6,952 $ 5,874 $ 8,068 $ 22,783 $ 13,468 $ 134,476


	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, 2023
Beginning balance - March 31, 2023	$	11,117	$	41,025	$	27,213	$	9,034	$	6,619	$	7,952	$	21,868	$	13,981	$	138,809
Provision for credit losses on loans HFI	192		(1,115)		185		151		209		643		1,009		1,301		2,575
Recoveries of loans previously charged-off	13		10		25		—		—		16		—		108		172
Loans charged off	(11)		—		(16)		—		—		(144)		—		(721)		(892)


Ending balance - June 30, 2023	$	11,311	$	39,920	$	27,407	$	9,185	$	6,828	$	8,467	$	22,877	$	14,669	$	140,664
Six Months Ended June 30, 2023
Beginning balance - December 31, 2022	$	11,106	$	39,808	$	26,141	$	7,494	$	6,490	$	7,783	$	21,916	$	13,454	$	134,192


Provision for credit losses on loans HFI	182		102		1,258		1,691		338		746		961		2,294		7,572
Recoveries of loans previously charged-off	80		10		40		—		—		82		—		347		559
Loans charged off	(57)		—		(32)		—		—		(144)		—		(1,426)		(1,659)


Ending balance - June 30, 2023	$	11,311	$	39,920	$	27,407	$	9,185	$	6,828	$	8,467	$	22,877	$	14,669	$	140,664

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, 2021
Beginning balance -
June 30, 2021
$ 13,791 $ 32,838 $ 19,672 $ 6,716 $ 13,475 $ 4,707 $ 42,856 $ 10,608 $ 144,663
Provision for loan losses 3,203 (3,080) (2,677) (952) (1,462) 7,665 (6,450) 921 (2,832)
Recoveries of loans
previously charged-off
19 3 33 1 — 4 — 169 229
Loans charged off (2,175) (1) — — — — — (438) (2,614)
Ending balance -
September 30, 2021
$ 14,838 $ 29,760 $ 17,028 $ 5,765 $ 12,013 $ 12,376 $ 36,406 $ 11,260 $ 139,446
Nine Months Ended September 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 2,667 (28,690) (2,141) (4,767) 4,839 7,384 (7,741) 1,100 (27,349)
Recoveries of loans
previously charged-off
235 3 98 16 — 143 — 554 1,049
Loans charged off (2,812) (30) (149) (18) — — — (1,634) (4,643)
Ending balance -
September 30, 2021 $ 14,838 $ 29,760 $ 17,028 $ 5,765 $ 12,013 $ 12,376 $ 36,406 $ 11,260 $ 139,446

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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


	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, 2022
Beginning balance - March 31, 2022	$	12,699	$	31,782	$	21,024	$	6,545	$	6,398	$	8,416	$	21,290	$	11,895	$	120,049
Provision for credit losses on loans HFI	(783)		6,590		383		314		105		(1,102)		1,246		1,428		8,181
Recoveries of loans previously charged-off	26		11		14		16		—		15		—		348		430
Loans charged off	(1,751)		—		(23)		—		—		—		—		(614)		(2,388)

Ending balance - June 30, 2022	$	10,191	$	38,383	$	21,398	$	6,875	$	6,503	$	7,329	$	22,536	$	13,057	$	126,272
Six Months Ended June 30, 2022
Beginning balance - December 31, 2021	$	15,751	$	28,576	$	19,104	$	5,903	$	6,976	$	12,593	$	25,768	$	10,888	$	125,559


Provision for credit losses on loans HFI	(4,789)		9,796		2,291		955		(473)		(5,289)		(3,232)		2,793		2,052
Recoveries of loans previously charged-off	984		11		26		17		—		25		—		565		1,628
Loans charged off	(1,755)		—		(23)		—		—		—		—		(1,189)		(2,967)


Ending balance - June 30, 2022	$	10,191	$	38,383	$	21,398	$	6,875	$	6,503	$	7,329	$	22,536	$	13,057	$	126,272

Credit Quality - Commercial Type Loans

The Company categorizes commercial loan types 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.			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 commercial 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.

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

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

During the nine months ended September 30, 2022, the Company revised the presentation of the below credit quality vintage tables without change to accounting or credit policies. The updated presentation disaggregates between commercial and consumer loan types with consumer loans reported as either performing or nonperforming based on their delinquency and accrual status. As such, the tables presented below as of December 31, 2021 have been revised to align with current period presentation.

The following tables present the credit quality of ~~our~~the Company's commercial type loan portfolio as of June 30, 2023 and December 31, 2022 and the gross charge-offs for the six months ended June 30, 2023 by year of ~~origination as of September 30, 2022 and December 31, 2021.~~origination. 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 tables below.

As of September 30, 2022
Commercial Term Loans
Amortized Cost Basis by Origination Year
2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Total
Commercial and industrial
Pass $ 284,399 $ 220,172 $ 83,831 $ 96,337 $ 40,939 $ 63,998 $ 718,260 $ 1,507,936
Special Mention 26 355 — 375 151 — 2,732 3,639
Classified 65 1,220 2,106 1,593 451 9,015 8,134 22,584
Total 284,490 221,747 85,937 98,305 41,541 73,013 729,126 1,534,159
Construction
Pass 570,166 569,425 215,636 71,706 18,027 46,794 183,738 1,675,492
Special Mention 428 — 18 — 7 2,530 — 2,983
Classified — 822 — — — — 200 1,022
Total 570,594 570,247 215,654 71,706 18,034 49,324 183,938 1,679,497
Residential real estate:
Multi-family mortgage
Pass 117,654 163,283 33,326 30,470 4,201 35,279 8,966 393,179
Special Mention — — — — — — — —
Classified — — — — — 1,187 — 1,187
Total 117,654 163,283 33,326 30,470 4,201 36,466 8,966 394,366
Commercial real estate:
Owner occupied
Pass 215,250 231,038 117,751 159,546 78,881 266,021 66,718 1,135,205
Special Mention 103 1,293 — 1,470 2,294 390 — 5,550
Classified — — 241 5,992 1,282 9,418 655 17,588
Total 215,353 232,331 117,992 167,008 82,457 275,829 67,373 1,158,343
Non-owner occupied
Pass 411,612 428,087 138,590 171,747 225,519 505,370 56,718 1,937,643
Special Mention — 1,015 — — 82 — — 1,097
Classified — — — 150 3,329 12,000 — 15,479
Total 411,612 429,102 138,590 171,897 228,930 517,370 56,718 1,954,219
Total commercial loans
Pass 1,599,081 1,612,005 589,134 529,806 367,567 917,462 1,034,400 6,649,455
Special Mention 557 2,663 18 1,845 2,534 2,920 2,732 13,269
Classified 65 2,042 2,347 7,735 5,062 31,620 8,989 57,860
Total commercial loans $ 1,599,703 $ 1,616,710 $ 591,499 $ 539,386 $ 375,163 $ 952,002 $ 1,046,121 $ 6,720,584
Effective January 1, 2023, the Company adopted the accounting guidance in ASU 2022-02 which requires the presentation of gross charge-offs by year of origination. The Company prospectively adopted ASU 2022-02; therefore, prior period activity of gross charge-offs by year of origination are not included in the below tables.





As of and for the six months ended June 30, 2023	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Total
Commercial and industrial
Pass	$	121,939	$	348,068	$	174,977	$	47,672	$	78,078	$	82,735	$	787,526	$	1,640,995
Special Mention	—		3,453		329		2,016		157		1,427		20,241		27,623
Classified	481		2,666		610		1,910		1,349		5,956		11,982		24,954

Total	122,420		354,187		175,916		51,598		79,584		90,118		819,749		1,693,572

Current-period gross charge-offs	—		—		46		—		—		—		11		57
Construction
Pass	83,247		772,013		374,540		66,581		70,096		51,937		213,231		1,631,645
Special Mention	—		169		—		6		—		718		—		893
Classified	—		3,215		318		899		—		—		—		4,432

Total	83,247		775,397		374,858		67,486		70,096		52,655		213,231		1,636,970

Current-period gross charge-offs	—		—		—		—		—		—		—		—
Residential real estate:

Multi-family mortgage
Pass	19,097		139,768		150,468		119,065		33,190		41,852		13,464		516,904
Special Mention	—		—		—		—		—		—		—		—
Classified	—		—		—		—		—		1,121		—		1,121

Total	19,097		139,768		150,468		119,065		33,190		42,973		13,464		518,025


Current-period gross charge-offs	—		—		—		—		—		—		—		—
Commercial real estate:
Owner occupied
Pass	41,038		233,473		227,506		119,039		164,411		295,161		50,408		1,131,036
Special Mention	—		1,324		1,859		—		162		5,332		—		8,677
Classified	—		6,178		672		—		3,501		4,519		4,199		19,069

Total	41,038		240,975		230,037		119,039		168,074		305,012		54,607		1,158,782

Current-period gross charge-offs	—		—		144		—		—		—		—		144
Non-owner occupied
Pass	14,235		444,487		447,841		121,359		153,675		642,442		42,683		1,866,722
Special Mention	—		—		—		—		399		2,474		—		2,873
Classified	188		—		1,957		—		—		10,238		—		12,383

Total	14,423		444,487		449,798		121,359		154,074		655,154		42,683		1,881,978




Current-period gross charge-offs	—		—		—		—		—		—		—		—
Total commercial loan types
Pass	279,556		1,937,809		1,375,332		473,716		499,450		1,114,127		1,107,312		6,787,302
Special Mention	—		4,946		2,188		2,022		718		9,951		20,241		40,066
Classified	669		12,059		3,557		2,809		4,850		21,834		16,181		61,959

Total	$	280,225	$	1,954,814	$	1,381,077	$	478,547	$	505,018	$	1,145,912	$	1,143,734	$	6,889,327
Current-period gross charge-offs	$	—	$	—	$	190	$	—	$	—	$	—	$	11	$	201

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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


As of December 31, 2021
		Commercial Term Loans
		Amortized Cost Basis by Origination Year
		2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total

As of December 31, 2022																		As of December 31, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Commercial and industrial	Commercial and industrial																	Commercial and industrial
Pass	Pass	$	273,232	$	95,279	$	140,938	$	52,162	$	33,997	$	57,020	$	596,667	$	1,249,295	Pass	$	396,643	$	204,000	$	67,231	$	90,894	$	39,780	$	62,816	$	762,717	$	1,624,081
Special Mention	Special Mention	79		9		949		632		3		1,519		12,367		15,558		Special Mention	125		7		—		160		143		771		2,520		3,726
Classified	Classified	918		2,391		2,376		3,089		3,370		6,425		7,143		25,712		Classified	65		823		1,916		1,651		273		6,913		6,335		17,976

Total	Total	274,229		97,679		144,263		55,883		37,370		64,964		616,177		1,290,565		Total	396,833		204,830		69,147		92,705		40,196		70,500		771,572		1,645,783

Construction	Construction																	Construction
Pass	Pass	677,258		280,828		135,768		23,916		15,313		67,818		117,176		1,318,077		Pass	682,885		495,723		142,233		84,599		17,360		44,326		188,906		1,656,032
Special Mention	Special Mention	62		184		—		—		1,208		1,384		—		2,838		Special Mention	—		—		15		—		—		707		—		722
Classified	Classified	—		—		2,922		2,882		3		737		200		6,744		Classified	80		309		—		—		—		345		—		734

Total	Total	677,320		281,012		138,690		26,798		16,524		69,939		117,376		1,327,659		Total	682,965		496,032		142,248		84,599		17,360		45,378		188,906		1,657,488

Residential real estate:	Residential real estate:																	Residential real estate:

Multi-family mortgage	Multi-family mortgage																	Multi-family mortgage
Pass	Pass	166,576		32,242		64,345		7,124		5,602		38,526		10,891		325,306		Pass	142,912		147,168		96,819		33,547		6,971		37,385		13,604		478,406
Special Mention	Special Mention	—		—		—		—		—		—		—		—		Special Mention	—		—		—		—		—		—		—		—
Classified	Classified	—		—		—		—		—		1,245		—		1,245		Classified	—		—		—		—		—		1,166		—		1,166

Total	Total	166,576		32,242		64,345		7,124		5,602		39,771		10,891		326,551		Total	142,912		147,168		96,819		33,547		6,971		38,551		13,604		479,572

Commercial real estate:	Commercial real estate:																	Commercial real estate:
Owner occupied	Owner occupied																	Owner occupied
Pass	Pass	170,773		131,471		174,257		83,698		69,939		236,998		57,123		924,259		Pass	237,862		223,883		110,748		148,405		66,101		246,414		57,220		1,090,633
Special Mention	Special Mention	—		—		1,502		3,541		885		2,555		213		8,696		Special Mention	101		683		—		168		2,225		1,258		5,000		9,435
Classified	Classified	—		—		3,102		768		3,295		9,616		1,846		18,627		Classified	—		1,293		224		4,589		1,276		7,018		112		14,512

Total	Total	170,773		131,471		178,861		88,007		74,119		249,169		59,182		951,582		Total	237,963		225,859		110,972		153,162		69,602		254,690		62,332		1,114,580

Non-owner occupied	Non-owner occupied																	Non-owner occupied
Pass	Pass	462,478		154,048		165,917		264,855		170,602		414,859		46,541		1,679,300		Pass	467,360		440,319		131,497		159,205		210,752		473,607		60,908		1,943,648
Special Mention	Special Mention	—		—		3,747		3,388		—		969		—		8,104		Special Mention	—		—		—		—		82		2,459		—		2,541
Classified	Classified	—		—		1,898		23,849		1,506		15,508		—		42,761		Classified	—		2,258		—		146		3,270		12,147		—		17,821

Total	Total	462,478		154,048		171,562		292,092		172,108		431,336		46,541		1,730,165		Total	467,360		442,577		131,497		159,351		214,104		488,213		60,908		1,964,010

Total commercial loans
Total commercial loan types																		Total commercial loan types
Pass	Pass	1,750,317		693,868		681,225		431,755		295,453		815,221		828,398		5,496,237		Pass	1,927,662		1,511,093		548,528		516,650		340,964		864,548		1,083,355		6,792,800
Special Mention	Special Mention	141		193		6,198		7,561		2,096		6,427		12,580		35,196		Special Mention	226		690		15		328		2,450		5,195		7,520		16,424
Classified	Classified	918		2,391		10,298		30,588		8,174		33,531		9,189		95,089		Classified	145		4,683		2,140		6,386		4,819		27,589		6,447		52,209
Total commercial loans		$	1,751,376	$	696,452	$	697,721	$	469,904	$	305,723	$	855,179	$	850,167	$	5,626,522
Total																		Total	$	1,928,033	$	1,516,466	$	550,683	$	523,364	$	348,233	$	897,332	$	1,097,322	$	6,861,433

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

Credit Quality - Consumer Type Loans

For consumer and residential loan classes, the company primarily evaluates credit quality based on delinquency and accrual status of the loan, credit documentation and by payment activity. The performing or nonperforming status is updated on an on-going basis dependent upon improvement and deterioration in credit quality.

The following tables present the credit quality by classification (performing or nonperforming) of ~~our~~the Company's consumer type loan portfolio as of June 30, 2023 and December 31, 2022 and the gross charge-offs for the six months ended June 30, 2023 by year of ~~origination as of September 30, 2022 and December 31, 2021.~~origination. 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 tables below.

As of September 30, 2022
Consumer Term Loans
Amortized Cost Basis by Origination Year
2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Total
Residential real estate:
1-to-4 family mortgage
Performing 507,621 454,839 166,905 96,216 72,019 228,305 — 1,525,905
Nonperforming 1,039 4,379 3,940 2,020 1,731 6,238 — 19,347
Total 508,660 459,218 170,845 98,236 73,750 234,543 — 1,545,252
Residential line of credit
Performing — — — — — — 458,894 458,894
Nonperforming — — — — — — 1,880 1,880
Total — — — — — — 460,774 460,774
Consumer and other
Performing 107,264 61,291 44,898 32,694 28,416 86,524 9,564 370,651
Nonperforming 81 1,061 1,365 936 1,591 2,720 1 7,755
Total 107,345 62,352 46,263 33,630 30,007 89,244 9,565 378,406
Total consumer loans
Performing 614,885 516,130 211,803 128,910 100,435 314,829 468,458 2,355,450
Nonperforming 1,120 5,440 5,305 2,956 3,322 8,958 1,881 28,982
Total consumer loans $ 616,005 $ 521,570 $ 217,108 $ 131,866 $ 103,757 $ 323,787 $ 470,339 $ 2,384,432
Effective January 1, 2023, the Company adopted the accounting guidance in ASU 2022-02 which requires the presentation of gross charge-offs by year of origination. The Company prospectively adopted ASU 2022-02; therefore, prior period balances for gross charge-offs by year of origination are not included below.





As of and for the six months ended June 30, 2023	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Total





Residential real estate:
1-to-4 family mortgage
Performing	$	100,265	$	531,715	$	411,194	$	152,684	$	86,026	$	248,803	$	—	$	1,530,687
Nonperforming	—		2,938		3,393		4,255		517		6,824		—		17,927
Total	100,265		534,653		414,587		156,939		86,543		255,627		—		1,548,614
Current-period gross charge-offs	—		16		—		—		—		16		—		32
Residential line of credit
Performing	—		—		—		—		—		—		506,465		506,465
Nonperforming	—		—		—		—		—		—		1,187		1,187
Total	—		—		—		—		—		—		507,652		507,652
Current-period gross charge-offs	—		—		—		—		—		—		—		—
Consumer and other
Performing	45,554		102,231		50,673		36,969		26,698		102,362		7,243		371,730
Nonperforming	—		570		1,630		1,916		1,072		3,513		—		8,701
Total	45,554		102,801		52,303		38,885		27,770		105,875		7,243		380,431
Current-period gross charge-offs	632		386		72		106		21		207		2		1,426
Total consumer type loans
Performing	145,819		633,946		461,867		189,653		112,724		351,165		513,708		2,408,882
Nonperforming	—		3,508		5,023		6,171		1,589		10,337		1,187		27,815
Total	$	145,819	$	637,454	$	466,890	$	195,824	$	114,313	$	361,502	$	514,895	$	2,436,697
Current-period gross charge-offs	$	632	$	402	$	72	$	106	$	21	$	223	$	2	$	1,458

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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


As of December 31, 2021
		Consumer Term Loans
		Amortized Cost Basis by Origination Year
		2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total

As of December 31, 2022																		As of December 31, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total

Residential real estate:	Residential real estate:																	Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage																	1-to-4 family mortgage
Performing	Performing	521,533		204,690		121,775		100,164		109,087		199,262		—		1,256,511		Performing	$	568,210	$	448,401	$	160,715	$	93,548	$	68,113	$	211,019	$	—	$	1,550,006
Nonperforming	Nonperforming	1,232		3,734		977		2,429		1,765		3,819		—		13,956		Nonperforming	1,227		5,163		5,472		1,778		2,044		7,431		—		23,115
Total	Total	522,765		208,424		122,752		102,593		110,852		203,081		—		1,270,467		Total	569,437		453,564		166,187		95,326		70,157		218,450		—		1,573,121

Residential line of credit	Residential line of credit																	Residential line of credit
Performing	Performing	—		—		—		—		—		—		381,303		381,303		Performing	—		—		—		—		—		—		495,129		495,129
Nonperforming	Nonperforming	—		—		—		—		—		—		1,736		1,736		Nonperforming	—		—		—		—		—		—		1,531		1,531
Total	Total	—		—		—		—		—		—		383,039		383,039		Total	—		—		—		—		—		—		496,660		496,660

Consumer and other	Consumer and other																	Consumer and other
Performing	Performing	82,910		55,123		38,281		32,893		21,856		74,248		14,478		319,789		Performing	118,637		56,779		41,008		29,139		26,982		82,318		4,175		359,038
Nonperforming	Nonperforming	199		345		545		1,352		861		1,496		47		4,845		Nonperforming	166		1,396		1,460		906		1,507		2,525		—		7,960
Total	Total	83,109		55,468		38,826		34,245		22,717		75,744		14,525		324,634		Total	118,803		58,175		42,468		30,045		28,489		84,843		4,175		366,998

Total consumer loans
Total consumer type loans																		Total consumer type loans
Performing	Performing	604,443		259,813		160,056		133,057		130,943		273,510		395,781		1,957,603		Performing	686,847		505,180		201,723		122,687		95,095		293,337		499,304		2,404,173
Nonperforming	Nonperforming	1,431		4,079		1,522		3,781		2,626		5,315		1,783		20,537		Nonperforming	1,393		6,559		6,932		2,684		3,551		9,956		1,531		32,606
Total consumer loans		$	605,874	$	263,892	$	161,578	$	136,838	$	133,569	$	278,825	$	397,564	$	1,978,140
Total																		Total	$	688,240	$	511,739	$	208,655	$	125,371	$	98,646	$	303,293	$	500,835	$	2,436,779

~~Non-accrual~~Nonaccrual and Past Due Loans

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

The following tables represent an analysis of the aging by class of financing receivable as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


September 30, 2022		30-89 days past due and accruing interest		90 days or more and accruing interest		Non-accrual loans		Loans current on payments and accruing interest		Total
June 30, 2023												June 30, 2023	30-89 days past due and accruing interest		90 days or more and accruing interest		Nonaccrual loans		Loans current on payments and accruing interest		Total
Commercial and industrial	Commercial and industrial	$	1,812	$	38	$	1,730	$	1,530,579	$	1,534,159	Commercial and industrial	$	822	$	—	$	2,163	$	1,690,587	$	1,693,572
Construction	Construction	1,916		—		—		1,677,581		1,679,497		Construction	2,127		111		2,649		1,632,083		1,636,970
Residential real estate:	Residential real estate:											Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	16,994		13,767		5,580		1,508,911		1,545,252		1-to-4 family mortgage	14,302		10,261		7,666		1,516,385		1,548,614
Residential line of credit	Residential line of credit	542		209		1,671		458,352		460,774		Residential line of credit	1,407		334		853		505,058		507,652
Multi-family mortgage	Multi-family mortgage	—		—		44		394,322		394,366		Multi-family mortgage	—		—		37		517,988		518,025
Commercial real estate:	Commercial real estate:											Commercial real estate:
Owner occupied	Owner occupied	982		—		4,873		1,152,488		1,158,343		Owner occupied	1,316		—		5,803		1,151,663		1,158,782
Non-owner occupied	Non-owner occupied	293		—		6,960		1,946,966		1,954,219		Non-owner occupied	3,512		—		5,554		1,872,912		1,881,978
Consumer and other	Consumer and other	8,057		1,988		5,767		362,594		378,406		Consumer and other	10,133		1,541		7,160		361,597		380,431
Total	Total	$	30,596	$	16,002	$	26,625	$	9,031,793	$	9,105,016	Total	$	33,619	$	12,247	$	31,885	$	9,248,273	$	9,326,024

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

December 31, 2021 30-89 days
past due and accruing
interest 90 days or
more and accruing
interest Non-accrual
loans Loans current on payments and accruing interest Total
Commercial and industrial $ 1,030 $ 63 $ 1,520 $ 1,287,952 $ 1,290,565
Construction 4,852 718 3,622 1,318,467 1,327,659
Residential real estate:
1-to-4 family mortgage 11,007 9,363 4,593 1,245,504 1,270,467
Residential line of credit 319 — 1,736 380,984 383,039
Multi-family mortgage — — 49 326,502 326,551
Commercial real estate:
Owner occupied 1,417 — 6,710 943,455 951,582
Non-owner occupied 427 — 14,084 1,715,654 1,730,165
Consumer and other 7,398 1,591 3,254 312,391 324,634
Total $ 26,450 $ 11,735 $ 35,568 $ 7,530,909 $ 7,604,662


December 31, 2022	30-89 days past due and accruing interest		90 days or more and accruing interest		Nonaccrual loans		Loans current on payments and accruing interest		Total
Commercial and industrial	$	1,650	$	136	$	1,307	$	1,642,690	$	1,645,783
Construction	1,246		—		389		1,655,853		1,657,488
Residential real estate:
1-to-4 family mortgage	15,470		16,639		6,476		1,534,536		1,573,121
Residential line of credit	772		131		1,400		494,357		496,660
Multi-family mortgage	—		—		42		479,530		479,572
Commercial real estate:
Owner occupied	1,948		—		5,410		1,107,222		1,114,580
Non-owner occupied	102		—		5,956		1,957,952		1,964,010
Consumer and other	10,108		1,509		6,451		348,930		366,998
Total	$	31,296	$	18,415	$	27,431	$	9,221,070	$	9,298,212

The following tables provide the amortized cost basis of loans on non-accrual status, as well as any related allowance as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 by class of financing receivable.


September 30, 2022		Non-accrual with no related allowance		Non-accrual with related allowance		Related allowance
June 30, 2023								June 30, 2023	Nonaccrual with no related allowance		Nonaccrual with related allowance		Related allowance
Commercial and industrial	Commercial and industrial	$	1,228	$	502	$	3	Commercial and industrial	$	1,313	$	850	$	12

Construction								Construction	899		1,750		198
Residential real estate:	Residential real estate:							Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	1,537		4,043		73		1-to-4 family mortgage	1,483		6,183		130
Residential line of credit	Residential line of credit	1,070		601		9		Residential line of credit	729		124		2
Multi-family mortgage	Multi-family mortgage	—		44		1		Multi-family mortgage	—		37		1
Commercial real estate:	Commercial real estate:							Commercial real estate:
Owner occupied	Owner occupied	4,710		163		1		Owner occupied	5,683		120		6
Non-owner occupied	Non-owner occupied	6,751		209		4		Non-owner occupied	5,509		45		1
Consumer and other	Consumer and other	—		5,767		291		Consumer and other	110		7,050		362
Total	Total	$	15,296	$	11,329	$	382	Total	$	15,726	$	16,159	$	712


December 31, 2021		Non-accrual with no related allowance		Non-accrual with related allowance		Related allowance
December 31, 2022								December 31, 2022	Nonaccrual with no related allowance		Nonaccrual with related allowance		Related allowance

Commercial and industrial	Commercial and industrial	$	1,085	$	435	$	6	Commercial and industrial	$	790	$	517	$	10
Construction	Construction	2,882		740		99		Construction	—		389		7
Residential real estate:	Residential real estate:							Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	378		4,215		60		1-to-4 family mortgage	2,834		3,642		78
Residential line of credit	Residential line of credit	797		939		11		Residential line of credit	1,134		266		4
Multi-family mortgage	Multi-family mortgage	—		49		2		Multi-family mortgage	1		41		1
Commercial real estate:	Commercial real estate:							Commercial real estate:
Owner occupied	Owner occupied	5,346		1,364		206		Owner occupied	5,200		210		1
Non-owner occupied	Non-owner occupied	13,898		186		7		Non-owner occupied	5,755		201		5
Consumer and other	Consumer and other	—		3,254		164		Consumer and other	—		6,451		327
Total	Total	$	24,386	$	11,182	$	555	Total	$	15,714	$	11,717	$	433

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

The following presents interest income recognized on ~~non-accrual~~nonaccrual loans for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Commercial and industrial	Commercial and industrial	$	26	$	190	$	163	$	523	Commercial and industrial	$	28	$	83	$	48	$	137
Construction	Construction	5		75		31		105		Construction	46		7		52		26
Residential real estate:	Residential real estate:									Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	78		114		185		199		1-to-4 family mortgage	70		55		149		107
Residential line of credit	Residential line of credit	37		197		98		242		Residential line of credit	27		21		51		61
Multi-family mortgage	Multi-family mortgage	—		—		2		2		Multi-family mortgage	—		2		1		2
Commercial real estate:	Commercial real estate:									Commercial real estate:
Owner occupied	Owner occupied	61		187		149		419		Owner occupied	39		63		97		88
Non-owner occupied	Non-owner occupied	89		123		235		353		Non-owner occupied	55		76		137		146
Consumer and other	Consumer and other	113		75		182		130		Consumer and other	143		54		316		69
Total	Total	$	409	$	961	$	1,045	$	1,973	Total	$	408	$	361	$	851	$	636

Accrued interest receivable written off as an adjustment to interest income amounted to ~~$151~~$163 and ~~$63~~$344 for the three and six months ended ~~September~~June 30, 2023, respectively, and $123 and $307 for the three and six months ended June 30, 2022, respectively.

Loan Modifications to Borrowers Experiencing Financial Difficulty

Occasionally, the Company may make certain modifications of loans to borrowers experiencing financial difficulty. These modifications may be in the form of an interest rate reduction, a term extension or a combination thereof.

Upon the Company's determination that a modified loan has subsequently been deemed uncollectible, the portion of the loan deemed uncollectible is charged off against the allowance for credit losses on loans HFI.

The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.

During the three and ~~2021, respectively, and $458 and $660 for the nine~~six months ended ~~September~~June 30, ~~2022 and 2021, respectively.~~2023, the Company modified two residential mortgage loans in the form of term extensions for borrowers experiencing financial difficulties with balances totaling $141.

Troubled debt restructurings

The following disclosure is presented in accordance with GAAP in effect prior to the adoption of ASU 2022-02. The Company has included this disclosure as of December 31, 2022 or for the three and six months ended June 30, 2022.

Prior to the Company's adoption of ASU 2022-02, the Company accounted for a modification to the contractual terms of a loan that resulted in granting a concession to a borrower experiencing financial difficulties as a TDR. ASU 2022-02 eliminated TDR accounting prospectively for all restructurings occurring on or after January 1, 2023. Loans that were restructured in a TDR prior to the adoption of ASU 2022-02 will continue to be accounted for under the historical TDR accounting until the loan is paid off, liquidated or subsequently modified. See Note 1, "Basis of presentation" for more information on the Company's adoption of ASU 2022-02.

As of ~~September 30, 2022 and~~ December 31, ~~2021,~~2022, the Company had a recorded investment in TDRs of ~~$14,959 and $32,435, respectively.~~$13,854. 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. Of these loans, ~~$7,592 and $11,084~~$7,321 were classified as ~~non-accrual~~nonaccrual loans as of ~~September 30, 2022 and~~ December 31, ~~2021, respectively.~~2022. The Company ~~has calculated $258 and $1,245~~included $253 in allowances for credit losses on TDRs as of ~~September 30, 2022 and~~ December 31, ~~2021, respectively. There were no significant~~2022. As of December 31, 2022, unfunded loan commitments to extend additional funds on troubled debt restructurings ~~as of September 30, 2022 or December 31, 2021.~~were not meaningful.

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

Three Months Ended September 30, 2022 Number of loans Pre-modification outstanding recorded investment Post-modification outstanding recorded investment Charge offs and specific reserves
Commercial and industrial 1 $ 207 $ 117 $ —
Residential real estate:
1-to-4 family mortgage 1 $ 252 $ 568 $ —
Total 2 $ 459 $ 685 $ —

Nine Months Ended September 30, 2022 Number of loans Pre-modification outstanding recorded investment Post-modification outstanding recorded investment Charge offs and specific reserves
Commercial and industrial 2 $ 262 $ 172 $ —
Residential real estate:
1-to-4 family mortgage 2 332 648 —
Residential line of credit 1 49 49 —
Consumer and other 1 22 22 —
Total 6 $ 665 $ 891 $ —

Three Months Ended September 30, 2021 Number of loans Pre-modification outstanding recorded investment Post-modification outstanding recorded investment Charge offs and specific reserves
Residential real estate:
1-to-4 family mortgage 1 134 134 —
Total 1 $ 134 $ 134 $ —

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, 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 $ —
Commercial real estate:
Owner occupied 4 3,550 3,550 —
Non-owner occupied 1 11,997 11,997 —
Residential real estate:
1-4 family mortgage 3 945 945 —
Residential line of credit 1 11 11 —
Total 14 $ 29,665 $ 29,665 $ —
The following table presents the financial effect of TDRs recorded during the periods indicated:


Three Months Ended June 30, 2022	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Charge offs and specific reserves
Commercial and industrial	1	$	55	$	55	$	—




Residential real estate:

Residential line of credit	1	49		49		—


Total	2	$	104	$	104	$	—


Six Months Ended June 30, 2022	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Charge offs and specific reserves
Commercial and industrial	1	$	55	$	55	$	—




Residential real estate:
1-to-4 family mortgage	1	80		80		—
Residential line of credit	1	49		49		—

Consumer and other	1	22		22		—
Total	4	$	206	$	206	$	—

Troubled debt restructurings for which there was a payment default within twelve months following the modification totaled $304 during the ~~nine~~six months ended ~~September~~June 30, 2022. ~~Troubled~~There were no loans modified as troubled debt restructurings for which there was a payment default within twelve months following the modification ~~totaled $304~~ during the three ~~and nine~~ months ended ~~September~~June 30, 2022. ~~Troubled debt restructurings for which there was a payment default within twelve months following the modification totaled $305 during the three and nine months ended September 30, 2021.~~ 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 months ended September 30, 2022 and 2021 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~~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 tables present 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, 2022						June 30, 2023
		Type of Collateral							Type of Collateral
		Real Estate		Financial Assets and Equipment		Total				Individually assessed allowance for credit loss			Real Estate		Financial Assets and Equipment		Total		Individually assessed allowance for credit loss
Commercial and industrial	Commercial and industrial	$	1,228	$	787	$	2,015			$	—	Commercial and industrial	$	2,027	$	11,881	$	13,908	$	—

Construction												Construction	1,499		—		1,499		60
Residential real estate:	Residential real estate:											Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	1,192		—		1,192				205		1-to-4 family mortgage	6,583		1,172		7,755		168
Residential line of credit	Residential line of credit	1,069		—		1,069				—		Residential line of credit	729		—		729		—

Commercial real estate:	Commercial real estate:											Commercial real estate:
Owner occupied	Owner occupied	5,823		—		5,823				—		Owner occupied	5,902				5,902		—
Non-owner occupied	Non-owner occupied	6,751		—		6,751				—		Non-owner occupied	5,510		—		5,510		—
Consumer and other	Consumer and other	139		—		139				—		Consumer and other	131		—		131		—
Total	Total	$	16,202	$	787	$	16,989			$	205	Total	$	22,381	$	13,053	$	35,434	$	228

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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


		December 31, 2021						December 31, 2022
		Type of Collateral							Type of Collateral
		Real Estate		Financial Assets and Equipment		Total				Individually assessed allowance for credit loss			Real Estate		Financial Assets and Equipment		Total		Individually assessed allowance for credit loss
Commercial and industrial	Commercial and industrial	$	799	$	1,090	$	1,889			$	—	Commercial and industrial	$	2,596	$	—	$	2,596	$	—
Construction		3,580		—		3,580				92

Residential real estate:	Residential real estate:											Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	338		—		338				—		1-to-4 family mortgage	4,467		—		4,467		194
Residential line of credit	Residential line of credit	1,400		—		1,400				10		Residential line of credit	1,135		—		1,135		—

Commercial real estate:	Commercial real estate:											Commercial real estate:
Owner occupied	Owner occupied	8,117		71		8,188				200		Owner occupied	5,424		—		5,424		—
Non-owner occupied	Non-owner occupied	13,899		—		13,899				—		Non-owner occupied	5,755		—		5,755		—
Consumer and other	Consumer and other	25		—		25				1		Consumer and other	134		—		134		—
Total	Total	$	28,158	$	1,161	$	29,319			$	303	Total	$	19,511	$	—	$	19,511	$	194

Note (4)—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 the lower of the carrying amount of the underlying loan or the fair value of the real estate less ~~estimated cost~~costs to ~~sell the property.~~sell. The following table summarizes the other real estate owned for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
		September 30,				September 30,				June 30,				June 30,
		2022		2021		2022		2021				2023		2022		2023		2022
Balance at beginning of period	Balance at beginning of period	$	9,398	$	11,986	$	9,777	$	12,111		Balance at beginning of period	$	4,085	$	9,721	$	5,794	$	9,777
Transfers from loans	Transfers from loans	421		349		984		4,945			Transfers from loans	358		—		593		563

Proceeds from sale of other real estate owned	Proceeds from sale of other real estate owned	(4,335)		(4,173)		(4,753)		(8,834)			Proceeds from sale of other real estate owned	(3,124)		(297)		(5,155)		(418)
Gain (loss) on sale of other real estate owned	Gain (loss) on sale of other real estate owned	483		2,090		353		3,190			Gain (loss) on sale of other real estate owned	655		(26)		742		(130)
Loans provided for sales of other real estate owned		—		(152)		—		(685)

Write-downs and partial liquidations	Write-downs and partial liquidations	(48)		(85)		(442)		(712)			Write-downs and partial liquidations	—		—		—		(394)

Balance at end of period	Balance at end of period	$	5,919	$	10,015	$	5,919	$	10,015		Balance at end of period	$	1,974	$	9,398	$	1,974	$	9,398

Foreclosed residential real estate properties totaled ~~$614~~$772 and ~~$775~~$840 as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. The recorded investment in residential mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process totaled ~~$755 at September 30, 2022. As of December 31, 2021, there were no such residential foreclosure proceedings in process.~~

~~Excess land~~$4,044 and ~~facilities held for sale resulting from branch consolidations totaled $2,467 and $3,348~~$2,653 as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

Note (5)—Leases:

As of ~~September~~June 30, ~~2022,~~2023, the Company was the lessee in 5958 operating leases and 1 finance lease of certain branch, mortgage and operations locations ~~of which 45 operating leases and 1 finance lease currently have remaining~~with original terms ~~varying from~~ greater than one ~~year to 33 years.~~year. Leases with initial terms of less than one year and insignificant equipment leases are not ~~included~~recorded on the Company's consolidated balance ~~sheets as these are insignificant.~~sheets.

Many leases include one 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 asset and lease liability.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

As previously disclosed, during the year ended December 31, 2020, the Company entered into an operating lease for a new corporate headquarters building located in downtown Nashville. During the three months ended September 30, 2022, construction of the exterior of the building was completed and the Company took possession of the leased space and began the build-out of the interior space. On August 1, 2022, the Company recorded an ROU asset and operating lease liability of $22,082 and $26,100, respectively, in connection with the initial term of this lease.

Information related to the Company's leases is presented below as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


			September 30,			December 31,					June 30,			December 31,
		Classification	2022			2021				Classification	2023			2022
Right-of-use assets:	Right-of-use assets:								Right-of-use assets:
Operating leases	Operating leases	Operating lease right-of-use assets	$	61,444		$	41,686		Operating leases	Operating lease right-of-use assets	$	56,560		$	60,043
Finance leases	Finance leases	Premises and equipment, net	1,394			1,487			Finance leases	Premises and equipment, net	1,311			1,367
Total right-of-use assets	Total right-of-use assets		$	62,838		$	43,173		Total right-of-use assets		$	57,871		$	61,410
Lease liabilities:	Lease liabilities:								Lease liabilities:
Operating leases	Operating leases	Operating lease liabilities	$	70,610		$	46,367		Operating leases	Operating lease liabilities	$	67,304		$	69,754
Finance leases	Finance leases	Borrowings	1,443			1,518			Finance leases	Borrowings	1,374			1,420
Total lease liabilities	Total lease liabilities		$	72,053		$	47,885		Total lease liabilities		$	68,678		$	71,174
Weighted average remaining lease term (in years) - operating	Weighted average remaining lease term (in years) - operating		12.2			12.4			Weighted average remaining lease term (in years) - operating		11.8			12.1
Weighted average remaining lease term (in years) - finance	Weighted average remaining lease term (in years) - finance		12.6			13.4			Weighted average remaining lease term (in years) - finance		11.9			12.4
Weighted average discount rate - operating	Weighted average discount rate - operating		3.05		%	2.73		%	Weighted average discount rate - operating		3.22		%	3.08		%
Weighted average discount rate - finance	Weighted average discount rate - finance		1.76		%	1.76		%	Weighted average discount rate - finance		1.76		%	1.76		%

The components of total lease expense included in 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,
		Classification	2022		2021		2022		2021				Classification	2023			2022		2023		2022
Operating lease costs:	Operating lease costs:											Operating lease costs:
Amortization of right-of-use asset	Amortization of right-of-use asset	Occupancy and equipment	$	2,269	$	1,838	$	5,830	$	5,948		Amortization of right-of-use asset	Occupancy and equipment	$	2,307		$	1,851	$	4,122	$	3,561
Short-term lease cost	Short-term lease cost	Occupancy and equipment	132		107		387		296			Short-term lease cost	Occupancy and equipment	143			144		264		255
Variable lease cost	Variable lease cost	Occupancy and equipment	215		284		764		760			Variable lease cost	Occupancy and equipment	326			293		624		549
Lease impairment	Lease impairment	Mortgage restructuring expense	—		—		364		—			Lease impairment	Mortgage restructuring expense	—			364		—		364
Gain on lease modifications and terminations	Gain on lease modifications and terminations	Occupancy and equipment	—		(14)		(18)		(801)			Gain on lease modifications and terminations	Occupancy and equipment	(1)			—		(73)		(18)
Finance lease costs:	Finance lease costs:											Finance lease costs:
Interest on lease liabilities	Interest on lease liabilities	Interest expense on borrowings	7		7		22		21			Interest on lease liabilities	Interest expense on borrowings	6			6		12		15
Amortization of right-of-use asset	Amortization of right-of-use asset	Occupancy and equipment	27		28		92		83			Amortization of right-of-use asset	Occupancy and equipment	27			28		55		65

Sublease income												Sublease income	Occupancy and equipment	(215)			(181)		(496)		(376)
Total lease cost	Total lease cost		$	2,650	$	2,250	$	7,441	$	6,307		Total lease cost		$	2,593		$	2,505	$	4,508	$	4,415

During the nine months ended September 30, 2022, the Company recorded $364 of lease impairment related to vacating two locations associated with the Mortgage restructuring and recorded gains of $18 related to early lease terminations and modifications on other vacated locations. During the three and nine months ended September 30, 2021, the Company recorded $14 and $801, respectively, in gains on lease modifications and terminations on certain vacated locations that were consolidated as a result of previous 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.

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~~liabilities as of ~~September~~June 30, ~~2022~~2023 is as follows:

Operating Finance
Leases Lease
Lease payments due:
September 30, 2023 $ 7,508 $ 29
September 30, 2024 8,257 118
September 30, 2025 7,797 120
September 30, 2026 7,650 121
September 30, 2027 7,449 123
Thereafter 48,089 1,102
Total undiscounted future minimum lease payments 86,750 1,613
Less: imputed interest (16,140) (170)
Lease liability $ 70,610 $ 1,443


	Operating		Finance
	Leases		Lease
Lease payments due:
June 30, 2024	$	5,017	$	59
June 30, 2025	7,959		120
June 30, 2026	7,876		121
June 30, 2027	7,753		123
June 30, 2028	7,390		125
Thereafter	45,689		977
Total undiscounted future minimum lease payments	81,684		1,525
Less: imputed interest	(14,380)		(151)
Lease liabilities	$	67,304	$	1,374

Note (6)—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, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,					Six Months Ended June 30,
		2022		2021		2022		2021				2023		2022			2023		2022

Carrying value at beginning of period	Carrying value at beginning of period	$	158,678	$	101,615	$	115,512	$	79,997	Carrying value at beginning of period		$	164,879	$	144,675		$	168,365	$	115,512
Capitalization	Capitalization	4,453		9,215		19,523		31,382		Capitalization		2,273		5,258			4,061		15,070

Change in fair value:	Change in fair value:									Change in fair value:
Due to pay-offs/pay-downs	Due to pay-offs/pay-downs	(3,670)		(7,302)		(13,165)		(24,488)		Due to pay-offs/pay-downs		(3,269)		(5,024)			(5,789)		(9,495)
Due to change in valuation inputs or assumptions	Due to change in valuation inputs or assumptions	11,966		7,063		49,557		23,700		Due to change in valuation inputs or assumptions		2,550		13,769			(204)		37,591
Carrying value at end of period	Carrying value at end of period	$	171,427	$	110,591	$	171,427	$	110,591	Carrying value at end of period		$	166,433	$	158,678		$	166,433	$	158,678

The following table summarizes servicing income and expense, which are included in 'Mortgage banking income' and 'Other noninterest expense', respectively, within the Mortgage segment operating results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,					Six Months Ended June 30,
		2022		2021		2022		2021				2023		2022			2023		2022
Servicing income:	Servicing income:									Servicing income:
Servicing income	Servicing income	$	8,104	$	7,539	$	23,499	$	21,258	Servicing income		$	7,586	$	7,966		$	15,354	$	15,395
Change in fair value of mortgage servicing rights	Change in fair value of mortgage servicing rights	8,296		(239)		36,392		(788)		Change in fair value of mortgage servicing rights		(719)		8,745			(5,993)		28,096
Change in fair value of derivative hedging instruments	Change in fair value of derivative hedging instruments	(12,641)		(2,128)		(41,636)		(9,987)		Change in fair value of derivative hedging instruments		(3,503)		(9,897)			(1,636)		(28,995)
Servicing income	Servicing income	3,759		5,172		18,255		10,483		Servicing income		3,364		6,814			7,725		14,496
Servicing expenses	Servicing expenses	1,923		2,156		7,848		7,381		Servicing expenses		2,331		3,377			4,214		5,925
Net servicing income~~(1)~~	Net servicing income~~(1)~~	$	1,836	$	3,016	$	10,407	$	3,102	Net servicing income~~(1)~~		$	1,033	$	3,437		$	3,511	$	8,571

~~(1) Excludes benefit of custodial servicing 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, ~~2022~~2023 and December 31, ~~2021~~2022 are as follows:


		September 30,			December 31,				June 30,			December 31,
		2022			2021				2023			2022
Unpaid principal balance		$	11,233,249		$	10,759,286
Unpaid principal balance of mortgage loans sold and serviced for others								Unpaid principal balance of mortgage loans sold and serviced for others	$	10,961,516		$	11,086,582
Weighted-average prepayment speed (CPR)	Weighted-average prepayment speed (CPR)	5.40		%	9.31		%	Weighted-average prepayment speed (CPR)	5.89		%	5.55		%
Estimated impact on fair value of a 10% increase	Estimated impact on fair value of a 10% increase	$	(4,751)		$	(4,905)		Estimated impact on fair value of a 10% increase	$	(4,659)		$	(4,886)
Estimated impact on fair value of a 20% increase	Estimated impact on fair value of a 20% increase	$	(9,191)		$	(9,429)		Estimated impact on fair value of a 20% increase	$	(9,012)		$	(9,447)

Discount rate	Discount rate	9.6		%	9.81		%	Discount rate	9.15		%	9.10		%
Estimated impact on fair value of a 100 bp increase	Estimated impact on fair value of a 100 bp increase	$	(8,164)		$	(4,785)		Estimated impact on fair value of a 100 bp increase	$	(7,801)		$	(8,087)
Estimated impact on fair value of a 200 bp increase	Estimated impact on fair value of a 200 bp increase	$	(15,623)		$	(9,198)		Estimated impact on fair value of a 200 bp increase	$	(14,933)		$	(15,475)

Weighted-average coupon interest rate	Weighted-average coupon interest rate	3.29		%	3.23		%	Weighted-average coupon interest rate	3.40		%	3.31		%
Weighted-average servicing fee (basis points)	Weighted-average servicing fee (basis points)	27			27			Weighted-average servicing fee (basis points)	27			27
Weighted-average remaining maturity (in months)	Weighted-average remaining maturity (in months)	331			330			Weighted-average remaining maturity (in months)	333			332

The Company economically 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 9, "Derivatives" for additional information on these hedging instruments.

As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, mortgage escrow deposits totaled to ~~$140,768~~$113,692 and ~~$127,617,~~$75,612, respectively.

Note (7)—Income taxes:

~~An allocation of federal and state income taxes between current and deferred portions is presented below:~~
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Current $ 5,513 $ 2,350 $ 9,082 $ 17,840
Deferred 3,418 7,366 15,879 20,904
Total $ 8,931 $ 9,716 $ 24,961 $ 38,744

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, ~~2022~~2023 and ~~2021:~~2022:

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Federal taxes calculated at statutory rate $ 8,560 21.0 % $ 11,551 21.0 % $ 23,390 21.0 % $ 37,844 21.0 %
Increase (decrease) resulting from:
State taxes, net of federal
   benefit 1,018 2.5 % 3,279 6.0 % 3,551 3.2 % 6,908 3.8 %
Benefit from equity based
   compensation (82) (0.2) % (1,784) (3.2) % (388) (0.3) % (2,129) (1.2) %
Municipal interest income,
   net of interest
   disallowance (443) (1.1) % (416) (0.8) % (1,331) (1.2) % (1,259) (0.7) %
Bank-owned life insurance (78) (0.2) % (74) (0.1) % (231) (0.2) % (240) (0.1) %
NOL Carryback provision
   under CARES Act — — % (3,424) (6.2) % — — % (3,424) (1.9) %
Offering costs — — % — — % — — % 127 0.1 %
Section 162(m) limitation 39 0.1 % 1,065 1.9 % 201 0.2 % 1,313 0.7 %
Other (83) (0.2) % (481) (0.9) % (231) (0.3) % (396) (0.2) %
Income tax expense, as
   reported $ 8,931 21.9 % $ 9,716 17.7 % $ 24,961 22.4 % $ 38,744 21.5 %

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

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

The Company is subject to Internal Revenue Code Section 162(m), which limits the deductibility of compensation paid to certain individuals. It is the Company’s policy to apply the Section 162(m) limitations to stock-based compensation first and then followed by cash compensation. As a result of the vesting of these units and cash compensation paid to date, the Company has disallowed a portion of its compensation paid to the applicable individuals.

~~The components of the net deferred tax assets (liabilities) at September 30, 2022 and December 31, 2021, are as follows:~~

September 30, December 31,
2022 2021
Deferred tax assets:
Allowance for credit losses $ 39,064 $ 35,233
Operating lease liabilities 18,774 12,478
Net operating loss 1,158 1,370
Amortization of core deposit intangibles 403 —
Deferred compensation 4,390 5,484
Unrealized loss on debt securities 67,253 —
Unrealized loss on cash flow hedges — 205
Other assets 4,891 8,301
Subtotal 135,933 63,071
Deferred tax liabilities:
FHLB stock dividends $ (484) $ (484)
Operating leases - right of use assets (17,386) (11,287)
Depreciation (7,335) (7,938)
Amortization of core deposit intangibles — (116)
Unrealized gain on equity securities (2,297) (2,407)
Unrealized gain on cash flow hedges (313) —
Unrealized gain on debt securities — (1,324)
Mortgage servicing rights (44,667) (30,098)
Goodwill (15,338) (13,743)
Other liabilities (2,753) (2,494)
Subtotal (90,573) (69,891)
Net deferred tax assets (liabilities) $ 45,360 $ (6,820)

The Company had a net operating loss carryforward generated as a result of a previous acquisition amounting to $5,515 and $6,523 as of September 30, 2022 and December 31, 2021, respectively. The net operating loss carryforward can be used to offset taxable income in future periods and reduce income tax liabilities in those future periods. While net operating losses are subject to certain annual utilization limits under Section 382, the Company believes the net operating loss carryforwards 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 will begin to expire in 2029.


	Three Months Ended June 30,								Six Months Ended June 30,
	2023				2022				2023				2022
Federal taxes calculated at statutory rate	$	9,480	21.0	%	$	5,475	21.0	%	$	19,156	21.0	%	$	14,830	21.0	%
Increase (decrease) resulting from:
State taxes, net of federal benefit	647		1.4	%	1,582		6.1	%	898		1.0	%	2,533		3.6	%


Expense (benefit) from equity based compensation	69		0.2	%	(15)		(0.1)	%	184		0.2	%	(306)		(0.4)	%
Municipal interest income, net of interest disallowance	(451)		(1.0)	%	(444)		(1.7)	%	(907)		(1.0)	%	(888)		(1.3)	%
Bank-owned life insurance	(79)		(0.2)	%	(79)		(0.3)	%	(206)		(0.2)	%	(153)		(0.2)	%


Section 162(m) limitation	103		0.2	%	40		0.2	%	230		0.2	%	162		0.1	%
Other	66		0.2	%	158		0.6	%	177		0.2	%	(148)		(0.1)	%
Income tax expense, as reported	$	9,835	21.8	%	$	6,717	25.8	%	$	19,532	21.4	%	$	16,030	22.7	%

Note (8)—Commitments and contingencies:

Commitments to extend credit & letters of credit

Some financial instruments, such as loan commitments, credit lines and 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 and underwriting policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment.

September 30, December 31,
2022 2021
Commitments to extend credit, excluding interest rate lock commitments $ 3,686,559 $ 3,106,594
Letters of credit 64,692 77,427
Balance at end of period $ 3,751,251 $ 3,184,021

As These commitments are only recorded in the consolidated financial statements when drawn upon and many expire without being used. The Company's maximum off-balance sheet exposure to credit loss is represented by the contractual amount of ~~September 30, 2022 and December 31, 2021, loan commitments included above with floating interest rates totaled $2.97 billion and $2.26 billion, respectively.~~these instruments.

3130

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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


	June 30,		December 31,
	2023		2022
Commitments to extend credit, excluding interest rate lock commitments	$	3,187,583	$	3,563,982
Letters of credit	63,814		71,250
Balance at end of period	$	3,251,397	$	3,635,232

As of June 30, 2023 and December 31, 2022, loan commitments included above with floating interest rates totaled $2,711,165 and $2,961,683, respectively.

The Company estimates expected credit losses on off-balance sheet loan commitments ~~that are not accounted for as derivatives~~ under the CECL methodology. When applying this methodology, 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.

The table below presents activity within the allowance for credit losses on unfunded commitments included in accrued expenses and other liabilities on the Company's consolidated balance ~~sheets for the three and nine months ended September 30, 2022 and 2021:~~sheets:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Balance at beginning of period	Balance at beginning of period	$	20,399	$	13,202	$	14,380	$	16,378	Balance at beginning of period	$	18,463	$	16,262	$	22,969	$	14,380

Provision for credit losses on unfunded commitments	Provision for credit losses on unfunded commitments	3,178		301		9,197		(2,875)		Provision for credit losses on unfunded commitments	(3,653)		4,137		(8,159)		6,019
Balance at end of period	Balance at end of period	$	23,577	$	13,503	$	23,577	$	13,503	Balance at end of period	$	14,810	$	20,399	$	14,810	$	20,399

Loan repurchases or indemnifications

In connection with the sale of mortgage loans to third party investors, the Company makes usual and customary representations and warranties as to the propriety of its origination activities. Occasionally, the investors require the 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 recorded valuation reserve. The total principal amount of loans repurchased (or indemnified for) was ~~$4,442~~$1,371 and ~~$5,988~~$4,697 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively and ~~$2,917~~$198 and ~~$4,386~~$1,546 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively. The Company has established a reserve associated with loan repurchases.

The following table summarizes the activity in the repurchase reserve included in accrued expenses and other liabilities on the Company's consolidated balance sheets:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,					Six Months Ended June 30,
		2022		2021		2022		2021				2023		2022			2023		2022
Balance at beginning of period	Balance at beginning of period	$	3,445	$	5,489	$	4,802	$	5,928	Balance at beginning of period		$	1,358	$	4,317		$	1,621	$	4,802
Provision for loan repurchases or indemnifications	Provision for loan repurchases or indemnifications	(800)		—		(1,989)		(266)		Provision for loan repurchases or indemnifications		(200)		(800)			(450)		(1,189)

Losses on loans repurchased or indemnified	Losses on loans repurchased or indemnified	16		(120)		(152)		(293)		Losses on loans repurchased or indemnified		(29)		(72)			(42)		(168)
Balance at end of period	Balance at end of period	$	2,661	$	5,369	$	2,661	$	5,369	Balance at end of period		$	1,129	$	3,445		$	1,129	$	3,445

Legal Proceedings

Various legal claims arise from time to time in the normal course of business, which, in the opinion of management, will not have a material effect on the Company’s consolidated financial statements.

Note (9)—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 items “Other assets” or “Other liabilities” at fair value in accordance with ASC 815, “Derivatives and Hedging.”

Derivatives not designated as hedging instruments

The Company enters into interest rate-lock commitments to originate loans whereby the interest rate on the loan is determined prior to ~~funding (rate-lock commitments).~~funding. 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

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

commitments to sell residential mortgage loans to secondary market investors. Gains and losses arising from changes in the valuation of the interest 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 also enters into forward commitments, futures and options contracts as economic hedges to offset the changes in fair value of ~~Mortgage~~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 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 following tables provide details on the Company’s non-designated derivative financial instruments as of the dates presented:

September 30, 2022
Notional Amount Asset Liability
  Interest rate contracts $ 529,801 $ 45,775 $ 45,762
  Forward commitments 294,000 7,017 —
  Interest rate-lock commitments 188,430 — 222
  Futures contracts 484,700 — 3,542
    Total $ 1,496,931 $ 52,792 $ 49,526

December 31, 2021
Notional Amount Asset Liability
  Interest rate contracts $ 600,048 $ 19,265 $ 19,138
  Forward commitments 1,180,000 — 1,077
  Interest rate-lock commitments 487,396 7,197 —
  Futures contracts 429,000 922 —
    Total $ 2,696,444 $ 27,384 $ 20,215


	June 30, 2023
	Notional Amount		Asset		Liability

Interest rate contracts	$	789,547	$	43,238	$	43,039
Forward commitments	314,500		820		—
Interest rate-lock commitments	135,374		1,611		—
Futures contracts	328,500		452		—

Total	$	1,567,921	$	46,121	$	43,039


	December 31, 2022
	Notional Amount		Asset		Liability

Interest rate contracts	$	560,310	$	45,775	$	45,762
Forward commitments	207,000		306		—
Interest rate-lock commitments	118,313		1,433		—
Futures contracts	494,300		—		3,790

Total	$	1,379,923	$	47,514	$	49,552

(Losses) gains included in the consolidated statements of income related to the Company’s non-designated derivative financial instruments were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,					Six Months Ended June 30,
		2022		2021		2022		2021				2023		2022			2023		2022
Included in mortgage banking income:	Included in mortgage banking income:									Included in mortgage banking income:
Interest rate lock commitments	Interest rate lock commitments	$	(3,980)	$	(3,316)	$	(7,419)	$	(24,587)	Interest rate lock commitments		$	(1,028)	$	2,007		$	179	$	(3,439)
Forward commitments	Forward commitments	4,795		(806)		57,130		23,252		Forward commitments		1,031		14,432			736		52,335
Futures contracts	Futures contracts	(10,105)		(2,152)		(35,805)		(9,380)		Futures contracts		(2,521)		(9,165)			(584)		(25,700)
Option contracts	Option contracts	—		—		36		—		Option contracts		(461)		—			(1,125)		36
Total	Total	$	(9,290)	$	(6,274)	$	13,942	$	(10,715)	Total		$	(2,979)	$	7,274		$	(794)	$	23,232

Derivatives designated as cash flow hedges

The Company also maintains two 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%. Upon the cessation of LIBOR in June 2023, the rate will convert to SOFR plus an adjustment in accordance with market standards. 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. 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%. Given the cessation of LIBOR on June 30, 2023, the final payment date utilizing a 3-month LIBOR reset will be in the last half of 2023. Following this payment, the variable rate in these swap agreements will convert to the ISDA recommended fallback rate of SOFR plus a credit spread adjustment.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

The following presents a summary of the Company's designated cash flow hedges as of the dates presented:

September 30, 2022 December 31, 2021
Notional Amount Estimated fair value Balance sheet location Estimated fair value Balance sheet location
Interest rate swap agreements-
subordinated debt $ 30,000 $ 1,198 Other assets $ (785) Accrued expenses and other liabilities

June 30, 2023

December 31, 2022

Notional Amount

Estimated fair value

Balance sheet location

Estimated fair value

Balance sheet location

Interest rate swap agreements-
subordinated debt

30,000

1,011

Other assets

1,255

Other assets

The Company's consolidated statements of income included ~~a gain~~gains of ~~$26~~$232 and ~~loss of $214~~$429 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, and losses of ~~$148~~$101 and ~~$428~~$240 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively, in interest expense on borrowings related to these cash flow hedges. The cash flow hedges were effective during the periods presented and as a result qualified for hedge accounting treatment. As such, no amounts were reclassified from accumulated other comprehensive ~~(loss) income~~loss into earnings during either period presented.

~~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 ~~loss,~~(loss) 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,
2022 2021 2022 2021
Amount of gain recognized in other comprehensive
loss, net of tax expense of $145, $38, $517 and $173
$ 409 $ 106 $ 1,466 $ 489


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

Amount of gain (loss) recognized in other comprehensive (loss) income, net of tax expense (benefit) of $6, $99, $(64) and $372	$	17	$	283	$	(180)	$	1,057

Derivatives designated as fair value hedges

~~During the first quarter of 2022, the~~The Company ~~entered into three~~utilizes designated fair value hedges to mitigate the effect of changing rates on the fair value of various fixed rate liabilities, including certain money market deposits and subordinated debt. The hedging strategy converts the fixed interest rates of the hedged items to the daily compounded SOFR in arrears paid monthly. For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged asset or liability attributable to the hedged risk are recognized in current earnings. The gain or loss on the derivative instrument is presented on the same income statement line item as the earnings effect of the hedged item. As of ~~September~~June 30, 2023 and December 31, 2022, the fair value hedges were deemed effective.

September 30, 2022
Notional Amount Remaining Maturity (In Years) Receive Fixed Rate Pay Floating Rate Estimated fair value
Derivatives included in other liabilities:
  Interest rate swap
    agreement- subordinated
    debt $ 100,000 1.42 1.46% SOFR $ (3,831)
  Interest rate swap
    agreement- fixed rate
    money market deposits 75,000 1.89 1.50% SOFR (3,816)
  Interest rate swap
    agreement- fixed rate
    money market deposits 125,000 1.89 1.50% SOFR (6,359)
     Total $ 300,000 1.73 1.48% $ (14,006)

~~The following discloses the amount of (expense) income included in interest expense on borrowings and deposits, related to these fair value hedging instruments:~~

Three Months Ended September 30, Nine Months Ended September 30,
2022 2022
Designated fair value hedge:
     Interest expense on deposits $ (331) $ 377
     Interest expense on borrowings (181) 167
        Total $ (512) $ 544

~~The following amounts were recorded on the balance sheet related to cumulative adjustments for fair value hedges as of September 30, 2022:~~

Line item on the balance sheet Carrying Amount of the Hedged Item Cumulative Decrease in Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Item
Borrowings $ 95,074 (1) $ (3,831)
Money market and savings deposits 197,124 (2) (10,175)

~~(1) The carrying value also includes unamortized subordinated debt issuance costs of $1,095.~~

~~(2) The carrying value also includes an unaccreted purchase accounting fair value premium of $7,299.~~


				June 30, 2023				December 31, 2022
	Remaining Maturity (In Years)	Receive Fixed Rate	Pay Floating Rate	Notional Amount		Estimated fair value		Notional Amount		Estimated fair value
Derivatives included in other liabilities:
Interest rate swap agreement- fixed rate money market deposits	1.14	1.50%	SOFR	75,000		(3,343)		75,000		(3,693)
Interest rate swap agreement- fixed rate money market deposits	1.14	1.50%	SOFR	125,000		(5,572)		125,000		(6,154)
Interest rate swap agreement- subordinated debt	0.67	1.46%	SOFR	$	100,000	$	(2,590)	$	100,000	$	(3,830)
Total	0.98	1.48%		$	300,000	$	(11,505)	$	300,000	$	(13,677)

3433

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 of (expense) income included in interest expense on borrowings and deposits, related to these fair value hedging instruments:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Designated fair value hedge:
Interest (expense) income on deposits	$	(1,769)	$	395	$	(3,277)	$	708
Interest (expense) income on borrowings	(894)		186		(1,654)		348
Total	$	(2,663)	$	581	$	(4,931)	$	1,056

The following amounts were recorded on the balance sheet related to cumulative adjustments of fair value hedges as of the dates presented:



	Carrying Amount of the Hedged Item					Cumulative Decrease in Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Item
Line item on the balance sheet	June 30, 2023		December 31, 2022			June 30, 2023		December 31, 2022
Money market and savings deposits	195,589		196,520		(1)	(8,915)		(9,847)
Borrowings	$	96,605	$	95,171	(2)	$	(2,590)	$	(3,830)

(1) The carrying value also includes an unaccreted purchase accounting fair value premium of $4,504 and $6,367 as of June 30, 2023 and December 31, 2022, respectively.

(2) The carrying value also includes unamortized subordinated debt issuance costs of $805 and $999 as of June 30, 2023 and December 31, 2022, respectively.

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, had the Company elected to offset those instruments subject to an enforceable master netting agreement:

Offsetting Derivative Assets Offsetting Derivative Liabilities
September 30, 2022 December 31, 2021 September 30, 2022 December 31, 2021
Gross amounts recognized $ 46,973 $ 4,990 $ 20,272 $ 15,733
Gross amounts offset in the consolidated balance sheets — — — —
Net amounts presented in the consolidated balance sheets 46,973 4,990 20,272 15,733
Gross amounts not offset in the consolidated balance sheets
Less: financial instruments 14,100 4,297 14,100 4,297
Less: financial collateral pledged — — 6,172 11,436
Net amounts $ 32,873 $ 693 $ — $ —













							Gross amounts not offset in the consolidated balance sheets
	Gross amounts recognized		Gross amounts offset in the consolidated balance sheets		Net amounts presented in the consolidated balance sheets		Financial instruments		Financial collateral pledged		Net Amount
June 30, 2023
Derivative financial assets	$	44,150	$	—	$	44,150	$	12,613	$	—	$	31,537
Derivative financial liabilities	$	18,441	$	—	$	18,441	$	12,613	$	5,828	$	—

December 31, 2022
Derivative financial assets	$	44,273	$	—	$	44,273	$	14,229	$	—	$	30,044
Derivative financial liabilities	$	20,251	$	—	$	20,251	$	14,229	$	6,022	$	—

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. As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had minimum collateral posting thresholds with certain derivative counterparties and had collateral posted of ~~$19,169~~$14,113 and ~~$57,868,~~$23,325, respectively, against its obligations under these agreements. Cash pledged as collateral on derivative contracts is recorded in ~~other assets~~"Other assets" on 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)

Note (10)—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.

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.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

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 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 held for sale are carried at fair value. ~~Fair~~For mortgage loans HFS, 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~~Rebooked guaranteed GNMA optional repurchase loans included in loans held for ~~sale's~~sale do not meet the requirements under FASB ASC Topic 825 to be accounted for under the fair value option and are carried at their principal balance. For commercial loans held for sale, 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 fair value of the Company's interest rate swap agreements to facilitate customer transactions 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. The fair value of interest rate lock commitments associated with the mortgage pipeline 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. The fair values of the Company's designated cash flow and fair value hedges are determined by calculating the difference between the discounted fixed rate cash flows and the discounted variable rate cash flows. The fair values of both the Company's hedges, including designated cash flow hedges and designated fair value hedges are based on pricing models that utilize observable market inputs. These financial instruments are classified as Level 2.

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 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, MSRs are considered Level 3.

Collateral dependent loans						Collateral dependent 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.

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 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											Fair Value
September 30, 2022		Carrying amount		Level 1		Level 2		Level 3		Total
June 30, 2023												June 30, 2023	Carrying amount		Level 1		Level 2		Level 3		Total
Financial assets:	Financial assets:											Financial assets:
Cash and cash equivalents	Cash and cash equivalents	$	618,290	$	618,290	$	—	$	—	$	618,290	Cash and cash equivalents	$	1,160,354	$	1,160,354	$	—	$	—	$	1,160,354
Investment securities	Investment securities	1,485,133		—		1,485,133		—		1,485,133		Investment securities	1,422,391		—		1,422,391		—		1,422,391

Loans, net		8,970,540		—		—		8,859,226		8,859,226
Loans held for sale		130,733		—		97,011		33,722		130,733
Net loans held for investment												Net loans held for investment	9,185,360		—		—		8,894,367		8,894,367
Loans held for sale, at fair value												Loans held for sale, at fair value	78,906		—		69,639		9,267		78,906
Interest receivable	Interest receivable	39,034		107		6,546		32,381		39,034		Interest receivable	44,973		234		6,682		38,057		44,973
Mortgage servicing rights	Mortgage servicing rights	171,427		—		—		171,427		171,427		Mortgage servicing rights	166,433		—		—		166,433		166,433
Derivatives	Derivatives	53,990		—		53,990		—		53,990		Derivatives	47,132		—		47,132		—		47,132
Financial liabilities:	Financial liabilities:											Financial liabilities:
Deposits:	Deposits:											Deposits:
Without stated maturities	Without stated maturities	$	8,843,012	$	8,843,012	$	—	$	—	$	8,843,012	Without stated maturities	$	9,251,599	$	9,251,599	$	—	$	—	$	9,251,599
With stated maturities	With stated maturities	1,163,070		—		1,158,686		—		1,158,686		With stated maturities	1,620,656		—		1,611,764		—		1,611,764
Securities sold under agreement to repurchase and federal funds sold		29,008		29,008		—		—		29,008
Securities sold under agreements to repurchase and federal funds purchased												Securities sold under agreements to repurchase and federal funds purchased	116,220		116,220		—		—		116,220
Federal Home Loan Bank advances	Federal Home Loan Bank advances	540,000		—		540,000		—		540,000		Federal Home Loan Bank advances	125,000		—		125,000		—		125,000
Subordinated debt		126,004		—		—		117,263		117,263
Subordinated debt, net												Subordinated debt, net	127,535		—		—		117,939		117,939

Interest payable	Interest payable	3,927		730		2,822		375		3,927		Interest payable	16,897		3,503		11,894		1,500		16,897
Derivatives	Derivatives	63,532		—		63,532		—		63,532		Derivatives	54,544		—		54,544		—		54,544


		Fair Value											Fair Value
December 31, 2021		Carrying amount		Level 1		Level 2		Level 3		Total
December 31, 2022												December 31, 2022	Carrying amount		Level 1		Level 2		Level 3		Total
Financial assets:	Financial assets:											Financial assets:
Cash and cash equivalents	Cash and cash equivalents	$	1,797,740	$	1,797,740	$	—	$	—	$	1,797,740	Cash and cash equivalents	$	1,027,052	$	1,027,052	$	—	$	—	$	1,027,052
Investment securities	Investment securities	1,681,892		—		1,681,892		—		1,681,892		Investment securities	1,474,176		—		1,474,176		—		1,474,176

Loans, net		7,479,103		—		—		7,566,717		7,566,717
Loans held for sale		752,223		—		672,924		79,299		752,223
Net loans held for investment												Net loans held for investment	9,164,020		—		—		9,048,943		9,048,943
Loans held for sale, at fair value												Loans held for sale, at fair value	113,240		—		82,750		30,490		113,240
Interest receivable	Interest receivable	38,528		36		6,461		32,031		38,528		Interest receivable	45,684		126		6,961		38,597		45,684
Mortgage servicing rights	Mortgage servicing rights	115,512		—		—		115,512		115,512		Mortgage servicing rights	168,365		—		—		168,365		168,365
Derivatives	Derivatives	27,384		—		27,384		—		27,384		Derivatives	48,769		—		48,769		—		48,769
Financial liabilities:	Financial liabilities:											Financial liabilities:
Deposits:	Deposits:											Deposits:
Without stated maturities	Without stated maturities	$	9,705,816	$	9,705,816	$	—	$	—	$	9,705,816	Without stated maturities	$	9,433,860	$	9,433,860	$	—	$	—	$	9,433,860
With stated maturities	With stated maturities	1,131,081		—		1,137,647		—		1,137,647		With stated maturities	1,421,974		—		1,422,544		—		1,422,544
Securities sold under agreement to repurchase and federal funds sold		40,716		40,716		—		—		40,716

Subordinated debt		129,544		—		—		133,021		133,021
Securities sold under agreements to repurchase and federal funds purchased												Securities sold under agreements to repurchase and federal funds purchased	86,945		86,945		—		—		86,945
Federal Home Loan Bank advances												Federal Home Loan Bank advances	175,000		—		175,000		—		175,000
Subordinated debt, net												Subordinated debt, net	126,101		—		—		118,817		118,817

Interest payable	Interest payable	3,162		140		1,510		1,512		3,162		Interest payable	8,648		2,571		4,559		1,518		8,648
Derivatives	Derivatives	21,000		—		21,000		—		21,000		Derivatives	63,229		—		63,229		—		63,229

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~~as of June 30, ~~2022~~2023 are presented in the following table:


At September 30, 2022		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, 2023										At June 30, 2023	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	$	—	$	39,831	$	—	$	39,831	U.S. government agency securities	$	—	$	40,529	$	—	$	40,529
Mortgage-backed securities - residential	Mortgage-backed securities - residential	—		1,057,763		—		1,057,763		Mortgage-backed securities - residential	—		979,400		—		979,400
Mortgage-backed securities - commercial	Mortgage-backed securities - commercial	—		17,847		—		17,847		Mortgage-backed securities - commercial	—		17,254		—		17,254
Municipal securities	Municipal securities	—		252,143		—		252,143		Municipal securities	—		267,097		—		267,097
Treasury securities		—		107,297		—		107,297
U.S. Treasury securities										U.S. Treasury securities	—		108,221		—		108,221
Corporate securities	Corporate securities	—		7,290		—		7,290		Corporate securities	—		6,859		—		6,859
Equity securities, at fair value	Equity securities, at fair value	—		2,962		—		2,962		Equity securities, at fair value	—		3,031		—		3,031
Total securities	Total securities	$	—	$	1,485,133	$	—	$	1,485,133	Total securities	$	—	$	1,422,391	$	—	$	1,422,391
Loans held for sale		$	—	$	97,011	$	33,722	$	130,733
Loans held for sale, at fair value										Loans held for sale, at fair value	$	—	$	69,639	$	9,267	$	78,906
Mortgage servicing rights	Mortgage servicing rights	—		—		171,427		171,427		Mortgage servicing rights	—		—		166,433		166,433
Derivatives	Derivatives	—		53,990		—		53,990		Derivatives	—		47,132		—		47,132
Financial Liabilities:	Financial Liabilities:									Financial Liabilities:
Derivatives	Derivatives	—		63,532		—		63,532		Derivatives	—		54,544		—		54,544

The balances and levels of the assets measured at fair value on a non-recurring basis ~~at September~~as of June 30, ~~2022~~2023 are presented in the following table:


At September 30, 2022		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, 2023										At June 30, 2023	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	$	—	$	—	$	2,193	$	2,193	Other real estate owned	$	—	$	—	$	582	$	582
Collateral dependent loans:
Commercial and industrial		$	—	$	—	$	12	$	12
Collateral dependent net loans held for investment:										Collateral dependent net loans held for investment:

Construction										Construction	—		—		540		540
Residential real estate:	Residential real estate:									Residential real estate:
1-4 family mortgage	1-4 family mortgage	—		—		362		362		1-4 family mortgage	$	—	$	—	$	389	$	389

Total collateral dependent loans	Total collateral dependent loans	$	—	$	—	$	374	$	374	Total collateral dependent loans	$	—	$	—	$	929	$	929

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 atas of December 31, ~~2021~~2022 are presented in the following table:


At December 31, 2021		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, 2022										At December 31, 2022	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	$	—	$	33,870	$	—	$	33,870	U.S. government agency securities	$	—	$	40,062	$	—	$	40,062
Mortgage-backed securities - residential	Mortgage-backed securities - residential	—		1,269,372		—		1,269,372		Mortgage-backed securities - residential	—		1,034,193		—		1,034,193
Mortgage-backed securities - commercial	Mortgage-backed securities - commercial	—		15,250		—		15,250		Mortgage-backed securities - commercial	—		17,644		—		17,644
Municipal securities	Municipal securities	—		338,610		—		338,610		Municipal securities	—		264,420		—		264,420
Treasury securities		—		14,908		—		14,908
U.S. Treasury securities										U.S. Treasury securities	—		107,680		—		107,680
Corporate securities	Corporate securities	—		6,515		—		6,515		Corporate securities	—		7,187		—		7,187
Equity securities, at fair value	Equity securities, at fair value	—		3,367		—		3,367		Equity securities, at fair value	—		2,990		—		2,990
Total securities	Total securities	$	—	$	1,681,892	$	—	$	1,681,892	Total securities	$	—	$	1,474,176	$	—	$	1,474,176
Loans held for sale		$	—	$	672,924	$	79,299	$	752,223
Loans held for sale, at fair value										Loans held for sale, at fair value	$	—	$	82,750	$	30,490	$	113,240
Mortgage servicing rights	Mortgage servicing rights	—		—		115,512		115,512		Mortgage servicing rights	—		—		168,365		168,365
Derivatives	Derivatives	—		27,384		—		27,384		Derivatives	—		48,769		—		48,769
Financial Liabilities:	Financial Liabilities:									Financial Liabilities:
Derivatives	Derivatives	—		21,000		—		21,000		Derivatives	—		63,229		—		63,229

The balances and levels of the assets measured at fair value on a non-recurring basis atas of December 31, ~~2021~~2022 are presented in the following table:


At December 31, 2021		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, 2022										At December 31, 2022	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	$	—	$	—	$	6,308	$	6,308	Other real estate owned	$	—	$	—	$	2,497	$	2,497
Collateral dependent loans:
Collateral dependent net loans held for investment:										Collateral dependent net loans held for investment:

Construction		—		—		606		606

Residential real estate:	Residential real estate:									Residential real estate:
1-4 family mortgage										1-4 family mortgage	$	—	$	—	$	366	$	366

Residential line of credit		—		—		592		592
Commercial real estate:	Commercial real estate:									Commercial real estate:
Owner occupied		—		—		729		729

Non-owner occupied	Non-owner occupied	—		—		3,526		3,526		Non-owner occupied	—		—		2,494		2,494
Consumer and other		—		—		24		24

Total collateral dependent loans	Total collateral dependent loans	$	—	$	—	$	5,477	$	5,477	Total collateral dependent loans	$	—	$	—	$	2,860	$	2,860

The following tables present information as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 about significant unobservable inputs (Level 3) used in the valuation of assets measured at fair value on a nonrecurring basis:

~~As of September~~June 30, ~~2022~~2023

Financial instrument

Fair Value

Valuation technique

Significant
unobservable inputs

Range of
inputs

Collateral dependent net loans
held for investment

~~374~~929

Valuation of collateral

Discount for comparable sales

10%-35%

Other real estate owned

~~2,193~~582

Appraised value of property less costs to sell

Discount for costs to sell

0%-15%

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

~~As of~~ December 31, ~~2021~~2022

Financial instrument

Fair Value

Valuation technique

Significant
unobservable inputs

Range of
inputs

Collateral dependent loans
held for investment

~~5,477~~2,860

Valuation of collateral

Discount for comparable sales

10%-35%

Other real estate owned

~~6,308~~2,497

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 estimated selling and closing costs related to liquidation 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 borrower and borrower's business. As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, total amortized cost of collateral dependent loans measured on a non-recurring basis amounted to ~~$578~~$1,158 and ~~$5,781,~~$3,054, respectively.

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.

Fair value option

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

September 30, December 31,
2022 2021
Commercial loans held for sale, at fair value $ 33,722 $ 79,299
Mortgage loans held for sale:
Mortgage loans held for sale, at fair value 70,526 672,924
Mortgage loans held for sale - guaranteed GNMA repurchase option 26,485 —
Total loans held for sale $ 130,733 $ 752,223


	June 30,		December 31,
	2023		2022
Loans held for sale under a fair value option:
Commercial loans held for sale	$	9,267	$	30,490

Mortgage loans held for sale	69,639		82,750
Total loans held for sale, at fair value	78,906		113,240
Loans held for sale not accounted for under a fair value option:
Mortgage loans held for sale - guaranteed GNMA repurchase option	20,225		26,211
Total loans held for sale	$	99,131	$	139,451

Mortgage loans held for sale

The Company measures mortgage loans originated for sale at fair value under the fair value option as permitted under ASC 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 losses of ~~$4,276~~$129 and ~~$16,479~~$179 resulting from fair value changes of mortgage loans were recorded in income during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, compared to net ~~losses~~gains (losses) of ~~$3,908~~$4,671 and ~~$14,894~~$(12,203) during the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, 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 net change in fair value of these loans held for sale and derivatives resulted in net gains of $874 and $453 for the three and six months ended June 30, 2023, respectively, compared to net losses of $5,354 and $12,902 during the three and six months ended June 30, 2022, respectively. The change in fair value of both loans held for sale and the related derivative instruments are recorded in ~~Mortgage Banking~~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.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

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.

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

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

During the three months ended September 30, 2022, the Company revised its accounting estimate with regard to GNMA loans previously sold that are contractually delinquent greater than 90 days and began recording this guaranteed repurchase option on the balance sheet on a prospective basis without impact to prior periods. See Note 1, "Basis of presentation" for additional information regarding the Company's change in accounting estimate. Rebooked GNMA optional repurchase loans do not meet the requirements under FASB ASC Topic 825 to be accounted for under the fair value option. As such, these loans are excluded from the below disclosures. As of December 31, 2021, there were $94,648 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.

Commercial loans held for sale

The Company ~~also~~ has a portfolio of shared ~~national credits and~~ institutional healthcare loans that were acquired during a 2020 ~~in the acquisition of Franklin.~~business combination. 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 tables ~~sets~~set forth the changes in fair value associated with this portfolio for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022:


		Three Months Ended September 30, 2022							Three Months Ended June 30, 2023
		Principal Balance		Fair Value Discount		Fair Value			Principal Balance		Fair Value Discount		Fair Value
Carrying value at beginning of period	Carrying value at beginning of period	$	47,462	$	(9,647)	$	37,815	Carrying value at beginning of period	$	12,467	$	(2,957)	$	9,510
Change in fair value:	Change in fair value:							Change in fair value:
Pay-downs and pay-offs	Pay-downs and pay-offs	(3,706)		—		(3,706)		Pay-downs and pay-offs	(235)		—		(235)
Write-offs to discount		(8,729)		8,729		—

Changes in valuation included in other noninterest income	Changes in valuation included in other noninterest income	—		(387)		(387)		Changes in valuation included in other noninterest income	—		(8)		(8)
Carrying value at end of period	Carrying value at end of period	$	35,027	$	(1,305)	$	33,722	Carrying value at end of period	$	12,232	$	(2,965)	$	9,267

		Nine Months Ended September 30, 2022							Six Months Ended June 30, 2023
		Principal Balance		Fair Value Discount		Fair Value			Principal Balance		Fair Value Discount		Fair Value
Carrying value at beginning of period	Carrying value at beginning of period	$	86,762	$	(7,463)	$	79,299	Carrying value at beginning of period	$	34,357	$	(3,867)	$	30,490
Change in fair value:	Change in fair value:							Change in fair value:
Pay-downs and pay-offs	Pay-downs and pay-offs	(43,006)				(43,006)		Pay-downs and pay-offs	(22,125)		—		(22,125)
Write-offs to discount		(8,729)		8,729		—

Changes in valuation included in other noninterest income	Changes in valuation included in other noninterest income	—		(2,571)		(2,571)		Changes in valuation included in other noninterest income	—		902		902
Carrying value at end of period	Carrying value at end of period	$	35,027	$	(1,305)	$	33,722	Carrying value at end of period	$	12,232	$	(2,965)	$	9,267


		Three Months Ended September 30, 2021							Three Months Ended June 30, 2022
		Principal balance		Fair Value discount		Fair Value			Principal balance		Fair Value discount		Fair Value
Carrying value at beginning of period	Carrying value at beginning of period	$	135,972	$	(11,850)	$	124,122	Carrying value at beginning of period	$	85,816	$	(7,637)	$	78,179
Change in fair value:	Change in fair value:							Change in fair value:
Pay-downs and pay-offs	Pay-downs and pay-offs	(24,366)		—		(24,366)		Pay-downs and pay-offs	(38,354)		—		(38,354)

Changes in valuation included in other noninterest income	Changes in valuation included in other noninterest income	—		740		740		Changes in valuation included in other noninterest income	—		(2,010)		(2,010)
Carrying value at end of period	Carrying value at end of period	$	111,606	$	(11,110)	$	100,496	Carrying value at end of period	$	47,462	$	(9,647)	$	37,815

		Nine Months Ended September 30, 2021							Six Months Ended June 30, 2022
		Principal balance		Fair Value discount		Fair Value			Principal balance		Fair Value discount		Fair Value
Carrying value at beginning of period	Carrying value at beginning of period	$	239,063	$	(23,660)	$	215,403	Carrying value at beginning of period	$	86,762	$	(7,463)	$	79,299

Change in fair value:	Change in fair value:							Change in fair value:
Pay-downs and pay-offs	Pay-downs and pay-offs	(116,158)		—		(116,158)		Pay-downs and pay-offs	(39,300)		—		(39,300)
Write-offs to discount		(11,299)		11,299		—

Changes in valuation included in other noninterest income	Changes in valuation included in other noninterest income	—		1,251		1,251		Changes in valuation included in other noninterest income	—		(2,184)		(2,184)
Carrying value at end of period	Carrying value at end of period	$	111,606	$	(11,110)	$	100,496	Carrying value at end of period	$	47,462	$	(9,647)	$	37,815

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

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 interest income in the consolidated statements of income.

~~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 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, ~~2022~~2023 and December 31, ~~2021:~~2022:


September 30, 2022		Aggregate fair value		Aggregate Unpaid Principal Balance		Difference
June 30, 2023								June 30, 2023	Aggregate fair value		Aggregate Unpaid Principal Balance		Difference
Mortgage loans held for sale measured at fair value								Mortgage loans held for sale measured at fair value	$	69,639	$	68,589	$	1,050

Nonaccrual commercial loans held for sale								Nonaccrual commercial loans held for sale	9,267		12,232		(2,965)

December 31, 2022								December 31, 2022	Aggregate fair value		Aggregate Unpaid Principal Balance		Difference
Mortgage loans held for sale measured at fair value	Mortgage loans held for sale measured at fair value	$	70,526	$	72,098	$	(1,572)	Mortgage loans held for sale measured at fair value	$	82,750	$	81,520	$	1,230
Commercial loans held for sale measured at fair value	Commercial loans held for sale measured at fair value	33,722		35,027		(1,305)		Commercial loans held for sale measured at fair value	21,201		22,126		(925)

Nonaccrual commercial loans held for sale	Nonaccrual commercial loans held for sale	—		—		—		Nonaccrual commercial loans held for sale	9,289		12,231		(2,942)

December 31, 2021		Aggregate fair value		Aggregate Unpaid Principal Balance		Difference
Mortgage loans held for sale measured at fair value		$	672,924	$	658,017	$	14,907
Commercial loans held for sale measured at fair value		74,082		76,863		(2,781)

Nonaccrual commercial loans held for sale		5,217		9,899		(4,682)

Note (11)—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, the Company’s chief operating decision maker. The Company has identified two 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 also ~~offers~~originates conforming residential mortgage loans through the Mortgage segment, which activities also include the servicing of residential mortgage loans and the packaging and securitization of loans to governmental agencies. The Company’s mortgage division represents a distinct reportable segment which differs from the Company’s primary business of commercial and retail banking.

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. Additionally, the Banking segment includes the results of the Company's specialty lending group, which is concentrated in manufactured housing lending. The Mortgage segment utilizes funding sources from the Banking segment in order to fund mortgage loans that are ultimately sold on the secondary market and uses proceeds from loan sales to repay obligations due to the Banking segment.

~~On May 10,~~During the second quarter of 2022, the Company ~~announced~~exited the ~~restructuring of its Mortgage segment, including the exit from the~~ direct-to-consumer internet delivery channel, which iswas one of two delivery channels in the Mortgage segment. As a result of exiting this channel, the Company incurred $12,458 of restructuring expenses during the ~~second quarter of 2022. No such expenses were incurred during the first or third quarter of~~three and six months ended June 30, 2022. The repositioning of ~~our~~the Mortgage segment ~~does~~did not qualify to be reported as discontinued operations. The Company ~~plans~~continues to ~~continue originating~~originate and ~~selling~~sell residential mortgage loans within its Mortgage segment through its traditional mortgage retail channel, retain mortgage servicing rights and ~~continue holding~~continues to hold residential ~~1-4 family~~ mortgage loans in the loan HFI portfolio.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

~~The Mortgage segment's interest~~Interest rate lock commitment volume and sales volume ~~by line of business~~included in the Mortgage segment are as follows for the ~~three and nine months ended September 30, 2022 and 2021 is as follows:~~periods indicated:


		Three months ended September 30,						Nine months ended September 30,							Three Months Ended June 30,				Six Months Ended June 30,
		2022			2021			2022			2021				2023		2022		2023		2022
Interest rate lock commitment volume by line of business:
Interest rate lock commitment volume by delivery channel:														Interest rate lock commitment volume by delivery channel:
Direct-to-consumer	Direct-to-consumer	$	—		$	1,085,180		$	663,848		$	2,948,530		Direct-to-consumer	$	—	$	95,756	$	—	$	663,848
Retail	Retail	408,879			926,723			1,755,008			2,726,956			Retail	402,951		605,114		777,993		1,346,129
Total	Total	$	408,879		$	2,011,903		$	2,418,856		$	5,675,486		Total	$	402,951	$	700,870	$	777,993	$	2,009,977
Interest rate lock commitment volume % by line of business:
Direct-to-consumer		—		%	53.9		%	27.4		%	52.0		%
Retail		100.0		%	46.1		%	72.6		%	48.0		%
Mortgage sales by line of business:
Direct-to-consumer		$	48,490		$	809,887		$	1,024,838		$	2,562,681
Retail		521,165			726,010			1,698,987			2,226,795
Total		$	569,655		$	1,535,897		$	2,723,825		$	4,789,476
Mortgage sales % by line of business:
Direct-to-consumer		8.5		%	52.7		%	37.6		%	53.5		%
Retail		91.5		%	47.3		%	62.4		%	46.5		%

Mortgage loan sales														Mortgage loan sales	$	330,326	$	869,688	$	662,633	$	2,154,170

The following tables provide segment financial information for the periods indicated:

Three Months Ended September 30, 2022
Banking(4)
Mortgage Consolidated
Net interest income $ 111,384 $ — $ 111,384
Provisions for credit losses(1)
11,367 — 11,367
Mortgage banking income(2)
— 16,729 16,729
Change in fair value of mortgage servicing rights, net of hedging(2)
— (4,345) (4,345)
Other noninterest income 10,293 (85) 10,208
Depreciation and amortization 1,867 190 2,057
Amortization of intangibles 1,108 — 1,108
Other noninterest expense 62,911 15,771 78,682
Income (loss) before income taxes $ 44,424 $ (3,662) $ 40,762
Income tax expense 8,931
Net income applicable to FB Financial Corporation and noncontrolling
interest
31,831
Net income applicable to noncontrolling interest(3)
—
Net income applicable to FB Financial Corporation $ 31,831
Total assets $ 11,648,610 $ 609,472 $ 12,258,082
Goodwill 242,561 — 242,561

~~(1)Includes $3,178 in provision for credit losses on unfunded commitments.~~

~~(2)~~


Three Months Ended June 30, 2023	Banking(2)		Mortgage		Consolidated
Net interest income	$	101,543	$	—	$	101,543
Provisions for credit losses	(1,078)		—		(1,078)
Mortgage banking income	—		16,454		16,454
Change in fair value of mortgage servicing rights, net of hedging(1)	—		(4,222)		(4,222)
Other noninterest income	11,480		101		11,581
Depreciation and amortization	2,220		232		2,452
Amortization of intangibles	940		—		940

Other noninterest expense	64,493		13,407		77,900
Income (loss) before income taxes	$	46,448	$	(1,306)	$	45,142
Income tax expense					9,835
Net income applicable to FB Financial Corporation and noncontrolling interest					35,307
Net income applicable to noncontrolling interest(2)					8
Net income applicable to FB Financial Corporation					$	35,299
Total assets	$	12,302,812	$	584,583	$	12,887,395
Goodwill	242,561		—		242,561

(1) 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)~~(2) Banking segment includes noncontrolling interest.


Three Months Ended June 30, 2022	Banking(3)		Mortgage		Consolidated
Net interest income	$	102,171	$	—	$	102,171
Provisions for credit losses	12,318		—		12,318
Mortgage banking income	—		23,711		23,711
Change in fair value of mortgage servicing rights, net of hedging(1)	—		(1,152)		(1,152)
Other noninterest income	10,699		(44)		10,655
Depreciation and amortization	1,731		281		2,012
Amortization of intangibles	1,194		—		1,194

Other noninterest expense(2)	56,395		37,396		93,791
Income (loss) before income taxes	$	41,232	$	(15,162)	$	26,070
Income tax expense					6,717
Net income applicable to FB Financial Corporation and noncontrolling interest					19,353
Net income applicable to noncontrolling interest(3)					8
Net income applicable to FB Financial Corporation					$	19,345
Total assets	$	11,469,762	$	724,100	$	12,193,862
Goodwill	242,561		—		242,561

(1) 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.

(2) Includes $12,458 in Mortgage restructuring expenses in the Mortgage segment related to the exit from the direct-to-consumer internet delivery channel.

(3) Banking segment includes noncontrolling interest.

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 September 30, 2021		Banking(3)		Mortgage		Consolidated
Six Months Ended June 30, 2023								Six Months Ended June 30, 2023	Banking(2)		Mortgage		Consolidated
Net interest income	Net interest income	$	88,576	$	(100)	$	88,476	Net interest income	$	205,203	$	—	$	205,203
Provisions for credit losses~~(1)~~	Provisions for credit losses~~(1)~~	(2,531)		—		(2,531)		Provisions for credit losses~~(1)~~	(587)		—		(587)
Mortgage banking income~~(2)~~	Mortgage banking income~~(2)~~	—		47,751		47,751		Mortgage banking income~~(2)~~	—		31,947		31,947
Change in fair value of mortgage servicing rights, net of hedging~~(2)~~(1)	Change in fair value of mortgage servicing rights, net of hedging~~(2)~~(1)	—		(2,367)		(2,367)		Change in fair value of mortgage servicing rights, net of hedging~~(2)~~(1)	—		(7,629)		(7,629)
Other noninterest income	Other noninterest income	13,823		(201)		13,622		Other noninterest income	22,973		(129)		22,844
Depreciation and amortization	Depreciation and amortization	1,791		349		2,140		Depreciation and amortization	4,269		411		4,680
Amortization of intangibles	Amortization of intangibles	1,344		—		1,344		Amortization of intangibles	1,930		—		1,930

Other noninterest expense	Other noninterest expense	55,642		35,881		91,523		Other noninterest expense	129,804		25,318		155,122
Income before income taxes		$	46,153	$	8,853	$	55,006
Income (loss) before income taxes								Income (loss) before income taxes	$	92,760	$	(1,540)	$	91,220
Income tax expense	Income tax expense					9,716		Income tax expense					19,532
Net income applicable to FB Financial Corporation and noncontrolling interest	Net income applicable to FB Financial Corporation and noncontrolling interest					45,290		Net income applicable to FB Financial Corporation and noncontrolling interest					71,688
Net income applicable to noncontrolling interest~~(3)~~(2)	Net income applicable to noncontrolling interest~~(3)~~(2)					—		Net income applicable to noncontrolling interest~~(3)~~(2)					8
Net income applicable to FB Financial Corporation	Net income applicable to FB Financial Corporation					$	45,290	Net income applicable to FB Financial Corporation					$	71,680
Total assets	Total assets	$	10,712,281	$	1,098,009	$	11,810,290	Total assets	$	12,302,812	$	584,583	$	12,887,395
Goodwill	Goodwill	242,561		—		242,561		Goodwill	242,561		—		242,561

(1) ~~Includes $301 in provision for credit losses on unfunded commitments.~~

~~(2)~~ 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)~~(2) Banking segment includes noncontrolling interest.

Nine Months Ended September 30, 2022
Banking(4)
Mortgage Consolidated
Net interest income $ 301,739 $ (2) $ 301,737
Provisions for credit losses(1)
19,438 — 19,438
Mortgage banking income(2)
— 69,718 69,718
Change in fair value of mortgage servicing rights, net of hedging(2)
— (5,244) (5,244)
Other noninterest income 32,975 (251) 32,724
Depreciation and amortization 5,308 797 6,105
Amortization of intangibles 3,546 — 3,546
Other noninterest expense(3)
175,936 82,529 258,465
Income (loss) before income taxes $ 130,486 $ (19,105) $ 111,381
Income tax expense 24,961
Net income applicable to FB Financial Corporation and noncontrolling
interest
86,420
Net income applicable to noncontrolling interest(4)
8
Net income applicable to FB Financial Corporation $ 86,412
Total assets $ 11,648,610 $ 609,472 $ 12,258,082
Goodwill 242,561 — 242,561

~~(1) Includes $9,197 in provision for credit losses on unfunded commitments.~~

~~(2) 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) Includes $12,458 in Mortgage restructuring expenses in the Mortgage segment related to the exit from the direct-to-consumer delivery channel.~~

~~(4) Banking segment includes noncontrolling interest.~~

~~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, 2021		Banking(3)		Mortgage		Consolidated
Six Months Ended June 30, 2022								Six Months Ended June 30, 2022	Banking(3)		Mortgage		Consolidated
Net interest income	Net interest income	$	257,726	$	(111)	$	257,615	Net interest income	$	190,355	$	(2)	$	190,353
Provisions for credit losses~~(1)~~	Provisions for credit losses~~(1)~~	(30,224)		—		(30,224)		Provisions for credit losses~~(1)~~	8,071		—		8,071
Mortgage banking income~~(2)~~	Mortgage banking income~~(2)~~	—		146,990		146,990		Mortgage banking income~~(2)~~	—		52,989		52,989
Change in fair value of mortgage servicing rights, net of hedging~~(2)~~(1)	Change in fair value of mortgage servicing rights, net of hedging~~(2)~~(1)	—		(10,775)		(10,775)		Change in fair value of mortgage servicing rights, net of hedging~~(2)~~(1)	—		(899)		(899)
Other noninterest income	Other noninterest income	39,223		(402)		38,821		Other noninterest income	22,682		(166)		22,516
Depreciation and amortization	Depreciation and amortization	5,267		1,021		6,288		Depreciation and amortization	3,441		607		4,048
Amortization of intangibles	Amortization of intangibles	4,178		—		4,178		Amortization of intangibles	2,438		—		2,438

Other noninterest expense~~(3)~~(2)	Other noninterest expense~~(3)~~(2)	163,261		108,938		272,199		Other noninterest expense~~(3)~~(2)	113,025		66,758		179,783
Income before income taxes		$	154,467	$	25,743	$	180,210
Income (loss) before income taxes								Income (loss) before income taxes	$	86,062	$	(15,443)	$	70,619
Income tax expense	Income tax expense					38,744		Income tax expense					16,030

Net income applicable to FB Financial Corporation and noncontrolling interest	Net income applicable to FB Financial Corporation and noncontrolling interest					141,466		Net income applicable to FB Financial Corporation and noncontrolling interest					54,589
Net income applicable to noncontrolling interest(3)	Net income applicable to noncontrolling interest(3)					8		Net income applicable to noncontrolling interest(3)					8
Net income applicable to FB Financial Corporation	Net income applicable to FB Financial Corporation					$	141,458	Net income applicable to FB Financial Corporation					$	54,581
Total assets	Total assets	$	10,712,281	$	1,098,009	$	11,810,290	Total assets	$	11,469,762	$	724,100	$	12,193,862
Goodwill	Goodwill	242,561		—		242,561		Goodwill	242,561		—		242,561

(1)~~Includes $(2,875) in provision for credit losses on unfunded commitments.~~

~~(2)~~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.

(2)Includes $12,458 in Mortgage restructuring expenses in the Mortgage segment related to the exit from the direct-to-consumer internet delivery channel.

(3)Banking segment includes noncontrolling interest.

The Banking segment provides the 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, is limited based on interest income earned by the Mortgage segment. The amount of interest paid by the Mortgage segment to the Banking segment under this warehouse line of credit is recorded as interest income to ~~our~~the Company's Banking segment and as interest expense to the Mortgage segment, both of which are included in the calculation of net interest income for each segment. The amount of interest paid by the Mortgage segment to the Banking segment under this warehouse line of credit was ~~$4,143~~$4,319 and ~~$14,659~~$8,250 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, and ~~$6,075~~$4,850 and ~~$17,585~~$10,516 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

Note (12)—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.

Under regulatory guidance for non-advanced ~~approaches~~approach institutions, the Bank and Company are required to maintain minimum capital ratios as outlined in the table below. ~~Additionally, under U.S. Basel III Capital Rules, the decision was made to opt out~~Minimum risk-based capital adequacy ratios below include a capital conservation buffer of ~~including accumulated other comprehensive income in regulatory capital.~~2.50%. As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Bank and Company met all capital adequacy requirements to which they are subject. Additionally, under U.S. Basel III Capital Rules, the Bank and Company opted out of including accumulated other comprehensive income in regulatory capital.

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 maintained 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~~elected to phase-in the ~~capital transition relief~~impact related to adopting FASB ASU 2016-13 over the permissible five-year transition relief period and delayed the initial impact of CECL adoption plus 25% of the quarterly increases in ACL ~~through December 31, 2021.~~in the first two years after adoption. As of January 1, 2022, the cumulative amount of the transition adjustments became fixed and are being phased out of regulatory capital calculations evenly over a three year period, with 75% of the transition provision’s impact being recognized in 2022, 50% recognized in 2023, and 25% recognized in 2024.

Actual and required capital amounts and ratios are included below as of the dates indicated.


June 30, 2023	Actual				Minimum Capital Adequacy with Capital Buffer			To be Well-Capitalized
	Amount		Ratio			Amount		Ratio		Amount		Ratio

Total Capital (to risk-weighted assets)
FB Financial Corporation	$	1,588,399	13.9	%		$	1,198,463	10.5	%	N/A		N/A
FirstBank	1,555,006		13.6	%		1,196,301		10.5	%	$	1,139,334	10.0	%
Tier 1 Capital (to risk-weighted assets)
FB Financial Corporation	$	1,363,796	11.9	%		$	970,185	8.5	%	N/A		N/A
FirstBank	1,330,403		11.7	%		968,434		8.5	%	$	911,467	8.0	%
Tier 1 Capital (to average assets)
FB Financial Corporation	$	1,363,796	10.7	%		$	510,676	4.0	%	N/A		N/A
FirstBank	1,330,403		10.4	%		510,283		4.0	%	$	637,854	5.0	%
Common Equity Tier 1 Capital (to risk-weighted assets)
FB Financial Corporation	$	1,333,796	11.7	%		$	798,976	7.0	%	N/A		N/A
FirstBank	1,330,403		11.7	%		797,534		7.0	%	$	740,567	6.5	%


December 31, 2022	Actual				Minimum Capital Adequacy with Capital Buffer			To be Well-Capitalized
	Amount		Ratio			Amount		Ratio		Amount		Ratio

Total Capital (to risk-weighted assets)
FB Financial Corporation	$	1,528,344	13.1	%		$	1,225,161	10.5	%	N/A		N/A
FirstBank	1,506,543		12.9	%		1,222,922		10.5	%	$	1,164,688	10.0	%
Tier 1 Capital (to risk-weighted assets)
FB Financial Corporation	$	1,315,386	11.3	%		$	991,797	8.5	%	N/A		N/A
FirstBank	1,293,585		11.1	%		989,985		8.5	%	$	931,750	8.0	%
Tier 1 Capital (to average assets)
FB Financial Corporation	$	1,315,386	10.5	%		$	499,648	4.0	%	N/A		N/A
FirstBank	1,293,585		10.4	%		499,194		4.0	%	$	623,992	5.0	%
Common Equity Tier 1 Capital (to risk-weighted assets)
FB Financial Corporation	$	1,285,386	11.0	%		$	816,774	7.0	%	N/A		N/A
FirstBank	1,293,585		11.1	%		815,281		7.0	%	$	757,047	6.5	%

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

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

As oAs of September 30, 2022 Actual Minimum Capital
adequacy with
capital buffer To be well capitalized
under prompt corrective
action provisions
Amount Ratio Amount Ratio Amount Ratio
Total Capital (to risk-weighted assets)
FB Financial Corporation $ 1,501,110 13.0 % $ 1,210,236 10.5 % N/A N/A
FirstBank 1,472,955 12.8 % 1,208,502 10.5 % $ 1,150,954 10.0 %
Tier 1 Capital (to risk-weighted assets)
FB Financial Corporation $ 1,287,489 11.2 % $ 979,715 8.5 % N/A N/A
FirstBank 1,259,334 10.9 % 978,311 8.5 % $ 920,764 8.0 %
Tier 1 Capital (to average assets)
FB Financial Corporation $ 1,287,489 10.7 % $ 479,489 4.0 % N/A N/A
FirstBank 1,259,334 10.5 % 479,290 4.0 % $ 599,113 5.0 %
Common Equity Tier 1 Capital
(to risk-weighted assets)
FB Financial Corporation $ 1,257,489 10.9 % $ 806,824 7.0 % N/A N/A
FirstBank 1,259,334 10.9 % 805,668 7.0 % $ 748,120 6.5 %

As of December 31, 2021 Actual Minimum Capital
adequacy with
capital buffer To be well capitalized
under prompt corrective
action provisions
Amount Ratio Amount Ratio Amount Ratio
Total Capital (to risk-weighted assets)
FB Financial Corporation $ 1,434,581 14.5 % $ 1,039,984 10.5 % N/A N/A
FirstBank 1,396,407 14.1 % 1,038,760 10.5 % $ 989,295 10.0 %
Tier 1 Capital (to risk-weighted assets)
FB Financial Corporation $ 1,251,874 12.6 % $ 841,892 8.5 % N/A N/A
FirstBank 1,213,700 12.3 % 840,901 8.5 % $ 791,436 8.0 %
Tier 1 Capital (to average assets)
FB Financial Corporation $ 1,251,874 10.5 % $ 474,831 4.0 % N/A N/A
FirstBank 1,213,700 10.2 % 474,044 4.0 % $ 592,555 5.0 %
Common Equity Tier 1 Capital
(to risk-weighted assets)
FB Financial Corporation $ 1,221,874 12.3 % $ 693,322 7.0 % N/A N/A
FirstBank 1,213,700 12.3 % 692,507 7.0 % $ 643,042 6.5 %

Note (13)—Stock-Based Compensation:

Restricted Stock Units

The Company grants RSUs under compensation arrangements for the benefit of employees, executive officers, and directors. RSU grants are subject to time-based vesting. Compensation cost associated with time-based vesting RSUs is recognized on a straight line basis based on the grant date fair value of the awards. 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 for the ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2023:


		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 (unvested)	Balance at beginning of period (unvested)	492,320	$	36.06	Balance at beginning of period (unvested)	365,155	$	39.02
Granted	Granted	143,036	43.74		Granted	163,552	36.04
Vested	Vested	(202,652)	36.12		Vested	(163,129)	39.19
Forfeited	Forfeited	(46,496)	34.51		Forfeited	(2,188)	41.19
Balance at end of period (unvested)	Balance at end of period (unvested)	386,208	$	38.99	Balance at end of period (unvested)	363,390	$	37.59

The total fair value of restricted stock units vested and released was $1,802 and $6,393 for the three and six months ended June 30, 2023, respectively, and $2,449 and $5,846 for the three and six months ended June 30, 2022, respectively.

The compensation cost related to these grants and vesting of restricted stock units was $2,188 and$3,894 for the three and six months ended June 30, 2023, respectively, and $2,196 and $4,052 for the three and six months ended June 30, 2022, respectively. This includes amounts paid related to director grants and compensation elected to be settled in stock amounting to $272 and$447 during the three and six months ended June 30, 2023, respectively, and $148 and $314 for the three and six months ended June 30, 2022, respectively.

As of June 30, 2023, there was $11,036 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 years. Additionally, as of June 30, 2023, there were 1,534,973 shares available for issuance under the Company's stock compensation plans. As of both June 30, 2023 and December 31, 2022, there was $292 accrued in other liabilities related to dividend equivalent units declared to be paid upon vesting and distribution of the underlying restricted stock units.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

~~The total fair value of restricted stock units vested and released was $1,474 and $7,320for the three and nine months ended September 30, 2022, respectively, and $10,749 and $15,941 for the three and nine months ended September 30, 2021, respectively.~~

~~The compensation cost related to stock grants and vesting of restricted stock units was~~$1,701 and $5,753 for the three and nine months ended September 30, 2022, respectively, and $2,365 and $7,024 for the three and nine months ended September 30, 2021, respectively. This included amounts paid related to director grants and compensation elected to be settled in stock amounting to~~$171 and $485 during the three and nine months ended September 30, 2022, respectively, and $168 and $467 during the three and nine months ended September 30, 2021, respectively.~~

As of September 30, 2022, there was $10,686 of total unrecognized compensation cost related to unvested restricted stock units which is expected to be recognized over a weighted-average period of 2.3 years. Additionally, as of September 30, 2022, there were 1,737,539 shares available for issuance under the Company's stock compensation plans. As of September 30, 2022 and December 31, 2021, there were $265 and $274, respectively, accrued in other liabilities related to dividend equivalent units declared to be paid upon vesting and distribution of the underlying restricted stock units.

~~Performance Based~~Performance-Based Restricted Stock Units

~~The following table summarizes information about the changes in PSUs as of and for the nine months ended September 30, 2022.~~

Performance Stock
Units
Outstanding Weighted
Average Grant
Date
Fair Value
Balance at beginning of period (unvested) 115,750 $ 40.13
Granted 69,291 44.44
Vested — —
Forfeited or expired (10,659) 42.76
Balance at end of period (unvested) 174,382 $ 41.68

The Company awards ~~performance-based restricted stock units~~PSUs to executives and other officers and employees. Under the terms of the awards, the number of units that will vest and convert to shares of common stock will be based on the Company's performance relative to a predefined peer group over a fixed ~~three-year~~three-year performance period. The number of shares issued upon vesting will range from 0% to 200% of the PSUs granted. The Company's performance relative to ~~the~~a predefined peer group will be measured based on ~~calculated~~ non-GAAP ~~adjusted~~core return on average tangible common equity ratio, which is adjusted for unusual gains/losses, merger expenses, and other items as approved by the ~~compensation committee~~Compensation Committee of the Company's board of directors. Compensation expense for PSUs is estimated each period based on the fair value of the Company's stock at the grant date and the most probable outcome of the performance condition, adjusted for the passage of time within the ~~vesting~~performance period of the awards.

AsThe following table summarizes information about the changes in PSUs as of ~~September~~and for the six months ended June 30, ~~2022,~~2023:






	Performance Stock Units Outstanding	Weighted Average Grant Date Fair Value
Balance at beginning of period (unvested)	161,667	$	41.73
Granted	86,010	37.17
Performance adjustment (1)	51,444	36.93
Vested	(104,833)	36.93
Forfeited or expired	(1,153)	44.25
Balance at end of period (unvested)	193,135	$	40.96
(1) PSUs are presented as outstanding, granted and forfeited in the table above assuming targets are met and the awards pay out at 100%. PSU awards are settled with payouts ranging from 0% and 200% of the target award value based on the Company's performance relative to a predefined peer group over a fixed three-year performance period. The performance adjustment represents the difference in shares ultimately awarded due to performance attainment above or below target.

The following table summarizes data related to the ~~Company determined the probability~~Company's outstanding PSUs as of ~~meeting the performance criteria for each grant and recorded compensation cost associated when factoring in the conversion of PSUs to shares of common stock.~~June 30, 2023:

Grant Year Vest Year Shares Outstanding
2020 2023 49,964
2021 2024 59,496
2022 2025 64,922


Grant Year	Grant Price		Performance Period	PSUs Outstanding
2021 (1)	$	43.20	2021 to 2023	52,491
2022 (2)	$	44.44	2022 to 2024	57,190
2023 (2)	$	37.17	2023 to 2025	83,454
(1)Vesting factor will be either at 0%, 25%, 100%, or 200% of PSUs outstanding based on the Company's performance relative to a predefined peer group over a fixed three-year performance period. (2)Vesting factor will be interpolated between 0% and 200% of PSUs outstanding based on the Company's performance relative to a predefined peer group over a fixed three-year performance period.

The Company recorded compensation cost of ~~$832~~$1,060 and ~~$2,400 during~~$1,639 for the ~~three and nine months ended September 30, 2022 respectively, and $551 and $1,041~~ for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2023, respectively, and $842 and $1,568 for the three and six months ended June 30, 2022, respectively. As of ~~September~~June 30, ~~2022,~~2023, maximum unrecognized compensation cost at 200% payout related to the unvested PSUs was ~~$9,753,~~$13,323, and the weighted average remaining performance period over which the cost could be recognized was ~~2.0~~2.3 years.

Employee Stock Purchase Plan:

The Company maintains an employee stock purchase plan under which employees, through payroll deductions, are able to purchase shares of Company common stock. The employee 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

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

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

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 no shares issued under the ESPP during the three ~~and nine~~ months ended ~~September~~June 30, ~~2022, there~~2023 or 2022. There were ~~11,798~~8,214 and ~~26,950~~15,152 shares of common stock ~~respectively,~~ issued under the ESPP with proceeds from employee payroll withholdings of ~~$499~~$305 and ~~$1,087. During~~$588, during the ~~three and nine~~six months ended ~~September~~June 30, ~~2021, there were 15,744~~2023 and ~~37,310 shares of common stock issued under the ESPP, respectively, with proceeds from employee payroll withholdings of $632 and $1,443,~~2022, respectively. As of ~~September~~June 30, ~~2022,~~2023, there were ~~2,314,746~~2,306,532 shares available for issuance under the ~~ESPP, respectively.~~ESPP.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

Note (14)—Related party transactions:

(A) Loans:

The Bank has made and expects to continue to make loans to the directors, certain management, significant shareholders, and executive officers of the Company and their related interests 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 related interests is presented below:


Loans outstanding at January 1, ~~2022~~2023	$	~~29,010~~82,559
New loans and advances	~~55,428~~4,524
Change in related party status	~~(9,939)~~(37,812)
Repayments	~~(2,345)~~(1,451)
Loans outstanding at ~~September~~June 30, ~~2022~~2023	$	~~72,154~~47,820

Unfunded commitments to certain executive officers, certain management and directors and their related interests totaled ~~$34,875~~$53,589 and ~~$10,994~~$31,564 at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

(B) Deposits:

The Bank held deposits from related parties totaling ~~$311,197~~$298,186 and ~~$312,956~~$347,660 as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

The Bank leases various office spaces from entities owned by certain directors of the Company under varying terms. The Company had $1 and $6 in unamortized leasehold improvements related to these leases at September 30, 2022 and December 31, 2021, respectively. These improvements are being amortized over a term not to exceed the length of the lease. Lease expense for these properties totaled ~~$96~~$103 and ~~$297~~$193 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, and ~~$128~~$100 and ~~$388~~$201 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022, respectively.

(D) Aviation ~~lease and time sharing agreement:~~lease:

During the year ended December 31, 2021, the Bank formed a subsidiary, FBK Aviation, LLC and purchased an aircraft under this entity. FBK Aviation, LLC also maintains a non-exclusive aircraft lease agreement with an entity owned by one of the Company's directors. The Company recognized income of $4 and $11 during the three and six months ended June 30, 2023, respectively, and $8 and $19 during the three and six months ended June 30, 2022, respectively, under this agreement.

(E) Equity investment in preferred stock and master loan purchase agreement:

During the year ended December 31, 2022, the Company invested in preferred stock of a privately held entity of which an executive officer of the Company is on the Board of directors of the investee. This investment is included in other assets on the consolidated balance sheets with a carrying amount of $10,000 as of both June 30, 2023 and December 31, 2022, and is being accounted for as an equity security without readily determinable market value. No gains or losses have been recognized to date associated with this investment.

Concurrently, the Company also entered a separate master loan purchase agreement with the entity to purchase up to $250,000 in manufactured loan housing production over an initial five-year term. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the Company ~~recognized income amounting to $17 and $36, respectively,~~purchased $6,449 of loans HFI under this agreement. ~~No such income was recognized during~~As of June 30, 2023, the ~~three and nine months ended September 30, 2021. Additionally,~~amortized cost of these loans HFI amounted to $6,441. There were no loans recorded under the ~~Company is a participant to an aviation time sharing~~master loan purchase agreement ~~for an aircraft owned by an entity that is owned by one~~as of the Company's directors and one of the Company's former directors. During the nine months ended September 30, 2021, the Company made payments of $32 under this agreement. No such payments were made during the three months ended September 30, 2021 nor the three and nine months ended September 30,December 31, 2022.

~~(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 nine months ended September 30, 2021, the Company paid $605 under this agreement related to the secondary offering completed during the second quarter of 2021. No such expenses were incurred during the three months ended September 30, 2021 nor three and nine months ended September 30, 2022.

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~~as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, and our results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, 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, ~~2021,~~2022, that was filed with the SEC on February ~~25, 2022,~~28, 2023, and with the accompanying unaudited notes to the condensed consolidated financial statements set forth in this Report.

Forward-looking statements

Certain statements contained in this Report that are not historical in nature may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements regarding the Company’s ~~business operations, assets, valuations, financial conditions, results of operations,~~ future plans, results, strategies, and expectations, including expectations around ~~interest rates, inflation, unemployment, mortgage markets, and~~ changing economic ~~markets generally .~~markets. 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,” “project,” 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 the Company’s control. The inclusion of these forward-looking statements should not be regarded as a representation by the Company or any other person that such expectations, estimates, and projections will be achieved. Accordingly, the Company 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 inflation, interest rate fluctuations, changes in the economy or global supply chain, supply-demand imbalances affecting local real estate prices, and high unemployment rates in the local or regional economies in which the Company operates and/or the US economy generally, (2) changes in government interest rate policies and its impact on the Company’s business, ~~NIM,~~net interest margin, and mortgage operations, (3) any continuation of the recent turmoil in the banking industry, including the associated impact to the Company and other financial institutions of any regulatory changes or other mitigation efforts taken by government agencies in response, (4) increased competition for deposits, (5) the Company’s ability to effectively manage problem credits, ~~(4)~~(6) any deterioration in commercial real estate market fundamentals, (7) the Company’s ability to identify potential candidates for, consummate, and achieve synergies from, potential future acquisitions, ~~(5) difficulties and delays in integrating acquired businesses or fully realizing costs savings, revenue synergies and other benefits from future and prior acquisitions, (6)~~(8) the Company’s ability to successfully execute its various business strategies, ~~(7)~~(9) changes in state and federal legislation, regulations or policies applicable to banks and other financial service providers, including legislative developments, ~~(8)~~(10) the potential impact of the phase-out of LIBOR or other changes involving LIBOR, ~~(9)~~(11) the effectiveness of the Company’s cybersecurity controls and procedures to prevent and mitigate attempted intrusions, ~~(10)~~(12) 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)~~and (13) the ~~adverse effects~~impact of ~~the ongoing global COVID-19 pandemic, including the effect of actions taken to mitigate its impact on individuals or the economy broadly, (12)~~ natural disasters, pandemics, and/or acts of war or terrorism, ~~(13)~~(14) international or political instability, including the impacts related to or resulting from Russia’s military action in Ukraine and additional sanctions and export controls, as well as the broader impacts to financial markets and the global macroeconomic and geopolitical environments, and ~~(14)~~(15) general competitive, economic, political, and market conditions. Further information regarding the Company and factors which could affect the forward-looking statements contained herein can be found in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021,~~2022, and in any of the Company’s subsequent filings with the SEC. Many of these factors are beyond the Company’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 Report, and the Company 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 the Company to predict their occurrence or how they will affect the ~~company.~~Company. The Company qualifies all forward-looking statements by these cautionary ~~statements.~~statements.

Critical accounting policies

Our financial statements are prepared in accordance with ~~U.S.~~ 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 if applicable, are discussed in further detail in Note 1, "Basis of presentation," in the notes to our consolidated financial statements in our Annual Report. ~~Further, any updates made to our accounting policies since our Annual report are detailed in Note 1, "Basis of presentation," within this Report herein.~~

Financial highlights

The following table presents certain selected historical consolidated income statement and balance sheet data and key performance indicators and other measures as of the dates or for the periods indicated. Our historical results for any prior period are not necessarily indicative of results to be expected in any future period.


		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 %)		2022			2021			2022			2021			2021
Statement of Income Data
(dollars in thousands, except share data)																	(dollars in thousands, except share data)	2023			2022			2023			2022			2022
Selected Statement of Income Data																	Selected Statement of Income Data

Net interest income	Net interest income	111,384			88,476			$	301,737		$	257,615		$	347,370		Net interest income	101,543			102,171			$	205,203		$	190,353		$	412,235
Provisions for credit losses	Provisions for credit losses	11,367			(2,531)			19,438			(30,224)			(40,993)			Provisions for credit losses	(1,078)			12,318			(587)			8,071			18,982
Total noninterest income	Total noninterest income	22,592			59,006			97,198			175,036			228,255			Total noninterest income	23,813			33,214			47,162			74,606			114,667
Total noninterest expense	Total noninterest expense	81,847			95,007			268,116			282,665			373,567			Total noninterest expense	81,292			96,997			161,732			186,269			348,346
Income before income taxes	Income before income taxes	40,762			55,006			111,381			180,210			243,051			Income before income taxes	45,142			26,070			91,220			70,619			159,574
Income tax expense	Income tax expense	8,931			9,716			24,961			38,744			52,750			Income tax expense	9,835			6,717			19,532			16,030			35,003
Net income applicable to noncontrolling interest	Net income applicable to noncontrolling interest	—			—			8			8			16			Net income applicable to noncontrolling interest	8			8			8			8			16
Net income applicable to FB Financial Corporation	Net income applicable to FB Financial Corporation	$	31,831		$	45,290		$	86,412		$	141,458		$	190,285		Net income applicable to FB Financial Corporation	$	35,299		$	19,345		$	71,680		$	54,581		$	124,555
Net income applicable to FB Financial Corporation and noncontrolling interest		31,831			45,290			86,420			141,466			190,301
Net interest income (tax-equivalent basis)		$	112,145		$	89,230		$	304,003		$	259,919		$	350,456

Per Common Share	Per Common Share																Per Common Share
Basic net income	Basic net income	$	0.68		$	0.96		$	1.83		$	2.99		$	4.01		Basic net income	$	0.75		$	0.41		$	1.53		$	1.15		$	2.64
Diluted net income	Diluted net income	0.68			0.94			1.83			2.95			3.97			Diluted net income	0.75			0.41			1.53			1.15			2.64
Book value(1)	Book value(1)	27.30			29.36			27.30			29.36			30.13			Book value(1)	29.64			28.15			29.64			28.15			28.36
Tangible book value(2)	Tangible book value(2)	21.85			23.90			21.85			23.90			24.67			Tangible book value(2)	24.23			22.67			24.23			22.67			22.90
Cash dividends declared	Cash dividends declared	0.13			0.11			0.39			0.33			0.44			Cash dividends declared	0.15			0.13			0.30			0.26			0.52

Selected Balance Sheet Data																	Selected Balance Sheet Data
Cash and cash equivalents																	Cash and cash equivalents	$	1,160,354		$	872,861		$	1,160,354		$	872,861		$	1,027,052
Loans HFI																	Loans HFI	9,326,024			8,624,337			9,326,024			8,624,337			9,298,212
Allowance for credit losses on loans HFI																	Allowance for credit losses on loans HFI	(140,664)			(126,272)			(140,664)			(126,272)			(134,192)

Loans held for sale(5)																	Loans held for sale(5)	99,131			260,215			99,131			260,215			139,451
Investment securities, at fair value																	Investment securities, at fair value	1,422,391			1,621,344			1,422,391			1,621,344			1,474,176

Total assets																	Total assets	12,887,395			12,193,862			12,887,395			12,193,862			12,847,756
Noninterest-bearing deposits																	Noninterest-bearing deposits	2,400,288			2,895,520			2,400,288			2,895,520			2,676,631
Interest-bearing deposits (non-brokered)																	Interest-bearing deposits (non-brokered)	8,233,082			7,646,125			8,233,082			7,646,125			8,178,453
Brokered deposits																	Brokered deposits	238,885			1,657			238,885			1,657			750

Total deposits																	Total deposits	10,872,255			10,543,302			10,872,255			10,543,302			10,855,834

Estimated insured or collateralized deposits(4)																	Estimated insured or collateralized deposits(4)	7,858,761			7,320,537			7,858,761			7,320,537			7,288,641
Borrowings																	Borrowings	390,354			160,400			390,354			160,400			415,677
Total common shareholders' equity																	Total common shareholders' equity	1,386,951			1,319,852			1,386,951			1,319,852			1,325,425
Selected Ratios																	Selected Ratios
Return on average:																	Return on average:
Assets(3)																	Assets(3)	1.10		%	0.62		%	1.13		%	0.88		%	1.01		%
Common shareholders' equity(3)																	Common shareholders' equity(3)	10.3		%	5.74		%	10.6		%	7.95		%	9.23		%
Tangible common equity(2)																	Tangible common equity(2)	12.6		%	7.09		%	13.1		%	9.78		%	11.4		%

Efficiency ratio																	Efficiency ratio	64.8		%	71.6		%	64.1		%	70.3		%	66.1		%
Adjusted efficiency ratio (tax-equivalent basis)(2)																	Adjusted efficiency ratio (tax-equivalent basis)(2)	63.5		%	61.1		%	63.4		%	64.5		%	62.7		%
Loans HFI to deposit ratio																	Loans HFI to deposit ratio	85.8		%	81.8		%	85.8		%	81.8		%	85.7		%
Net interest margin (tax-equivalent basis)																	Net interest margin (tax-equivalent basis)	3.40		%	3.52		%	3.45		%	3.28		%	3.57		%
Yield on interest-earning assets																	Yield on interest-earning assets	5.67		%	3.80		%	5.53		%	3.54		%	4.16		%
Cost of total deposits																	Cost of total deposits	2.38		%	0.25		%	2.16		%	0.22		%	0.54		%
Cost of interest-bearing liabilities																	Cost of interest-bearing liabilities	3.14		%	0.40		%	2.88		%	0.37		%	0.87		%
Estimated uninsured and uncollateralized deposits as a percentage of total deposits(4)																	Estimated uninsured and uncollateralized deposits as a percentage of total deposits(4)	27.7		%	30.6		%	27.7		%	30.6		%	32.9		%

Selected Ratios
Return on average:
Assets(3)		1.05		%	1.51		%	0.93		%	1.61		%	1.61		%
Common shareholders' equity(3)		9.45		%	12.9		%	8.45		%	14.1		%	14.0		%
Tangible common equity(2)		11.7		%	15.9		%	10.4		%	17.5		%	17.3		%
Average shareholders' equity to average assets		11.1		%	11.7		%	11.1		%	11.4		%	11.5		%
Net interest margin (tax-equivalent basis)		3.93		%	3.20		%	3.50		%	3.19		%	3.19		%
Efficiency ratio		61.1		%	64.4		%	67.2		%	65.3		%	64.9		%
Adjusted efficiency ratio (tax-equivalent basis)(2)		60.7		%	64.7		%	63.3		%	65.4		%	65.8		%
Loans held for investment to deposit ratio		91.0		%	72.4		%	91.0		%	72.4		%	70.2		%
Yield on interest-earning assets		4.53		%	3.49		%	3.86		%	3.56		%	3.53		%
Cost of interest-bearing liabilities		0.90		%	0.42		%	0.54		%	0.52		%	0.48		%
Cost of total deposits		0.52		%	0.26		%	0.32		%	0.32		%	0.30		%

Credit Quality Ratios
Allowance for credit losses to loans, net of unearned income(4)		1.48		%	1.91		%	1.48		%	1.91		%	1.65		%
Net recoveries (charge-offs) as a percentage of average loans HFI		—		%	(0.13)		%	(0.02)		%	(0.07)		%	(0.08)		%

Total nonperforming assets as a percentage of total assets(5)		0.62		%	0.50		%	0.62		%	0.50		%	0.50		%

Nonperforming loans HFI to loans HFI, net of unearned income		0.47		%	0.59		%	0.47		%	0.59		%	0.62		%

5051

As of or for the three months ended As of or for the nine months ended, As of or for the year ended
September 30, September 30, December 31,
2022 2021 2022 2021 2021
Capital Ratios (Company)
Total common shareholders' equity to assets 10.5 % 11.9 % 10.5 % 11.9 % 11.4 %
Tier 1 capital (to average assets) 10.7 % 10.4 % 10.7 % 10.4 % 10.5 %
Tier 1 capital (to risk-weighted assets(6)
11.2 % 12.7 % 11.2 % 12.7 % 12.6 %
Total capital (to risk-weighted assets)(6)
13.0 % 14.6 % 13.0 % 14.6 % 14.5 %
Tangible common equity to tangible assets(2)
8.54 % 9.87 % 8.54 % 9.87 % 9.51 %
Common Equity Tier 1 (to risk-weighted
assets) (CET1) (6)
10.9 % 12.4 % 10.9 % 12.4 % 12.3 %
Capital Ratios (Bank)
Total common Shareholders' equity to assets 10.5 % 11.7 % 10.5 % 11.7 % 11.3 %
Tier 1 capital (to average assets) 10.5 % 10.0 % 10.5 % 10.0 % 10.2 %
Tier 1 capital (to risk-weighted assets)(6)
10.9 % 12.2 % 10.9 % 12.2 % 12.3 %
Total capital to (risk-weighted assets)(6)
12.8 % 14.2 % 12.8 % 14.2 % 14.1 %
Common Equity Tier 1 (to risk-weighted
assets) (CET1) (6)
10.9 % 12.2 % 10.9 % 12.2 % 12.3 %



	As of or for the three months ended				As of or for the six months ended,				As of or for the year ended
	June 30,				June 30,				December 31,
	2023		2022		2023		2022		2022
Credit Quality Ratios
Allowance for credit losses on loans HFI as a percentage of loans HFI	1.51	%	1.46	%	1.51	%	1.46	%	1.44	%
Net charge-offs as a percentage of average loans HFI	(0.03)	%	(0.09)	%	(0.02)	%	(0.03)	%	(0.02)	%

Nonperforming assets as a percentage of total assets(5)	0.59	%	0.46	%	0.59	%	0.46	%	0.68	%

Nonperforming loans HFI to total loans HFI	0.47	%	0.51	%	0.47	%	0.51	%	0.49	%
Capital Ratios (Company)
Total common shareholders' equity to assets	10.8	%	10.8	%	10.8	%	10.8	%	10.3	%
Tangible common equity to tangible assets(2)	8.98	%	8.90	%	8.98	%	8.90	%	8.50	%
Tier 1 leverage	10.7	%	10.2	%	10.7	%	10.2	%	10.5	%
Tier 1 risk-based capital	11.9	%	11.8	%	11.9	%	11.8	%	11.3	%
Total risk-based capital	13.9	%	13.6	%	13.9	%	13.6	%	13.1	%
Common Equity Tier 1 (CET1)	11.7	%	11.5	%	11.7	%	11.5	%	11.0	%
Capital Ratios (Bank)
Total common shareholders' equity to assets	10.7	%	10.9	%	10.7	%	10.9	%	10.4	%
Tier 1 leverage	10.4	%	10.0	%	10.4	%	10.0	%	10.4	%
Tier 1 risk-based capital	11.7	%	11.5	%	11.7	%	11.5	%	11.1	%
Total risk-based capital	13.6	%	13.4	%	13.6	%	13.4	%	12.9	%
Common Equity Tier 1 (CET1)	11.7	%	11.5	%	11.7	%	11.5	%	11.1	%

(1)Book value per share equals our total common shareholders’ equity ~~as of the date presented~~ divided by the number of ~~shares~~share of our common stock outstanding as of the date presented. ~~The number of shares of our common stock outstanding was 46,926,377, 47,707,634 and 47,549,241 as of September 30, 2022, September 30, 2021 and December 31, 2021, respectively.~~

(2)~~These measures are not measures recognized under generally accepted accounting principles (United States), and are therefore considered to be non-GAAP~~Non-GAAP financial ~~measures.~~measure; See ~~“GAAP~~"GAAP reconciliation and management explanation of non-GAAP financial measures” ~~in this Report for a reconciliation of these measures to their most comparable GAAP measures.~~and non-GAAP reconciliations herein.

(3)~~We have~~ROAA and ROAE is calculated ~~our return on average assets and return on average common equity for a period~~ by dividing annualized net income or loss for that period by our average assets ~~and~~or average equity asfor the case may be, for that period. We calculate our average assets and average common equity for a period by dividing the sum of our total asset balance or total common shareholders' 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 thesame period.

(4)~~Excludes reserve for credit losses~~Amounts are shown on ~~unfunded commitments.~~a fully consolidated basis and exclude deposits of affiliates that are eliminated in consolidation.

(5)Includes optional right to repurchase ~~seriously delinquent~~government guaranteed GNMA mortgage loans previously sold ~~recorded~~that have become past due greater than 90 days as of ~~September~~June 30, 2023 and December 31, 2022. ~~Additional information on~~See 'Nonperforming assets' under the ~~Company's change in accounting estimate can be found in Note 1, "Basis of Presentation" within the Notes to the Consolidated financial statements~~subheading 'Asset quality' included within this ~~Report~~management's discussion and ~~under the "Asset Quality" subheading within this MD&A herein.~~

~~(6)We calculate our risk-weighted assets using the standardized method of the Basel III Framework.~~analysis for further discussion.

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,~~ tangible common equity to tangible assets, and return on average tangible common 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 financial highlights may differ from that of other companies reporting measures with similar names. ~~You should understand~~As a result of differences in how ~~such~~companies report non-GAAP measures, presentations by other banking organizations ~~calculate their financial measures similar or~~may not be comparable with ~~names similar to the non-GAAP financial measures we have discussed in our financial highlights when comparing such non-GAAP financial measures.~~ours. 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), ~~Mortgage~~mortgage restructuring ~~expenses, offering~~ 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:~~ratio for the periods below:


(In Thousands, Except Share Data and %)		Three Months Ended September 30,						Nine Months Ended September 30,						Year Ended December 31,
		2022			2021			2022			2021			2021
(dollars in thousands)																	(dollars in thousands)	Three Months Ended June 30,						Six Months Ended June 30,						Year Ended December 31,
																		2023			2022			2023			2022			2022
Adjusted efficiency ratio (tax-equivalent basis)	Adjusted efficiency ratio (tax-equivalent basis)																Adjusted efficiency ratio (tax-equivalent basis)
Total noninterest expense	Total noninterest expense	$	81,847		$	95,007		$	268,116		$	282,665		$	373,567		Total noninterest expense	$	81,292		$	96,997		$	161,732		$	186,269		$	348,346

Less mortgage restructuring expenses	Less mortgage restructuring expenses	—			—			12,458			—			—			Less mortgage restructuring expenses	—			12,458			—			12,458			12,458
Less offering expenses		—			—			—			605			605
Less gain on lease terminations		—			—			—			(787)			(787)
Less severance expense																	Less severance expense	1,426			—			1,426			—			—

Less certain charitable contributions		—			—			—			—			1,422

Adjusted noninterest expense	Adjusted noninterest expense	$	81,847		$	95,007		$	255,658		$	282,847		$	372,327		Adjusted noninterest expense	$	79,866		$	84,539		$	160,306		$	173,811		$	335,888
Net interest income (tax-equivalent basis)	Net interest income (tax-equivalent basis)	$	112,145		$	89,230		$	304,003		$	259,919		$	350,456		Net interest income (tax-equivalent basis)	$	102,383		$	102,926		$	206,876		$	191,858		$	415,282
Total noninterest income	Total noninterest income	22,592			59,006			97,198			175,036			228,255			Total noninterest income	23,813			33,214			47,162			74,606			114,667
Less (loss) gain on change in fair value on commercial loans held for sale		(387)			740			(2,571)			1,251			11,172
Less loss on swap cancellation		—			(1,510)			—			(1,510)			(1,510)
Less (loss) gain on change in fair value of commercial loans held for sale acquired in previous business combination																	Less (loss) gain on change in fair value of commercial loans held for sale acquired in previous business combination	(8)			(2,010)			902			(2,184)			(5,133)

Less gain (loss) on sales or write-downs of other real estate owned		435			2,005			(89)			2,478			2,504
Less (loss) gain on other assets		(6)			177			76			162			323

Less gain (loss) on sales or write-downs of other real estate owned and other assets																	Less gain (loss) on sales or write-downs of other real estate owned and other assets	533			(8)			350			(442)			(265)

Less (loss) gain from securities, net	Less (loss) gain from securities, net	(140)			51			(401)			278			324			Less (loss) gain from securities, net	(28)			(109)			41			(261)			(376)
Adjusted noninterest income	Adjusted noninterest income	$	22,690		$	57,543		$	100,183		$	172,377		$	215,442		Adjusted noninterest income	23,316			35,341			45,869			77,493			120,441
Adjusted operating revenue	Adjusted operating revenue	$	134,835		$	146,773		$	404,186		$	432,296		$	565,898		Adjusted operating revenue	$	125,699		$	138,267		$	252,745		$	269,351		$	535,723
Efficiency ratio (GAAP)	Efficiency ratio (GAAP)	61.1		%	64.4		%	67.2		%	65.3		%	64.9		%	Efficiency ratio (GAAP)	64.8		%	71.6		%	64.1		%	70.3		%	66.1		%
Adjusted efficiency ratio (tax-equivalent basis)	Adjusted efficiency ratio (tax-equivalent basis)	60.7		%	64.7		%	63.3		%	65.4		%	65.8		%	Adjusted efficiency ratio (tax-equivalent basis)	63.5		%	61.1		%	63.4		%	64.5		%	62.7		%

5253

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 our 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 common shareholders' equity to total assets.

The following table presents, as of the dates set forth below, tangible common equity compared with total common 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 common shareholders' equity to total assets:


		As of September 30,						As of December 31,				June 30,						December 31,
(In Thousands, Except Share Data and %)		2022			2021			2021
(dollars in thousands, except share data)											(dollars in thousands, except share data)	2023			2022			2022
Tangible Assets	Tangible Assets										Tangible Assets
Total assets	Total assets	$	12,258,082		$	11,810,290		$	12,597,686		Total assets	$	12,887,395		$	12,193,862		$	12,847,756
Adjustments:	Adjustments:										Adjustments:
Goodwill	Goodwill	(242,561)			(242,561)			(242,561)			Goodwill	(242,561)			(242,561)			(242,561)
Core deposit and other intangibles		(13,407)			(18,248)			(16,953)
Intangibles, net											Intangibles, net	(10,438)			(14,515)			(12,368)
Tangible assets	Tangible assets	$	12,002,114		$	11,549,481		$	12,338,172		Tangible assets	$	12,634,396		$	11,936,786		$	12,592,827
Tangible Common Equity	Tangible Common Equity										Tangible Common Equity
Total common shareholders' equity	Total common shareholders' equity	$	1,281,161		$	1,400,913		$	1,432,602		Total common shareholders' equity	$	1,386,951		$	1,319,852		$	1,325,425
Adjustments:	Adjustments:										Adjustments:
Goodwill	Goodwill	(242,561)			(242,561)			(242,561)			Goodwill	(242,561)			(242,561)			(242,561)
Core deposit and other intangibles		(13,407)			(18,248)			(16,953)
Intangibles, net											Intangibles, net	(10,438)			(14,515)			(12,368)
Tangible common equity	Tangible common equity	$	1,025,193		$	1,140,104		$	1,173,088		Tangible common equity	$	1,133,952		$	1,062,776		$	1,070,496
Common shares outstanding	Common shares outstanding	46,926,377			47,707,634			47,549,241			Common shares outstanding	46,798,751			46,881,896			46,737,912
Book value per common share	Book value per common share	$	27.30		$	29.36		$	30.13		Book value per common share	$	29.64		$	28.15		$	28.36
Tangible book value per common share	Tangible book value per common share	$	21.85		$	23.90		$	24.67		Tangible book value per common share	$	24.23		$	22.67		$	22.90
Total common shareholders' equity to total assets	Total common shareholders' equity to total assets	10.5		%	11.9		%	11.4		%	Total common shareholders' equity to total assets	10.8		%	10.8		%	10.3		%
Tangible common equity to tangible assets	Tangible common equity to tangible assets	8.54		%	9.87		%	9.51		%	Tangible common equity to tangible assets	8.98		%	8.90		%	8.50		%

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 our 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' equity:


		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,
(In Thousands, Except %)		2022			2021			2022			2021			2021
(dollars in thousands)																	(dollars in thousands)	2023			2022			2023			2022			2022
Return on average tangible common equity	Return on average tangible common equity																Return on average tangible common equity
Total average common shareholders' equity	Total average common shareholders' equity	$	1,336,143		$	1,389,201		$	1,368,025		$	1,344,613		$	1,361,637		Total average common shareholders' equity	$	1,376,818		$	1,352,701		$	1,360,108		$	1,384,269		$	1,349,583
Adjustments:	Adjustments:																Adjustments:
Average goodwill	Average goodwill	(242,561)			(242,561)			(242,561)			(242,561)			(242,561)			Average goodwill	(242,561)			(242,561)			(242,561)			(242,561)			(242,561)
Average intangibles, net	Average intangibles, net	(13,953)			(18,950)			(15,149)			(22,289)			(19,606)			Average intangibles, net	(10,913)			(15,144)			(11,385)			(15,757)			(14,573)
Average tangible common equity	Average tangible common equity	$	1,079,629		$	1,127,690		$	1,110,315		$	1,079,763		$	1,099,470		Average tangible common equity	$	1,123,344		$	1,094,996		$	1,106,162		$	1,125,951		$	1,092,449
Net income applicable to FB Financial Corporation	Net income applicable to FB Financial Corporation	$	31,831		$	45,290		$	86,412		$	141,458		$	190,285		Net income applicable to FB Financial Corporation	$	35,299		$	19,345		$	71,680		$	54,581		$	124,555
Return on average common shareholders' equity	Return on average common shareholders' equity	9.45		%	12.9		%	8.45		%	14.1		%	14.0		%	Return on average common shareholders' equity	10.3		%	5.74		%	10.6		%	7.95		%	9.23		%
Return on average tangible common equity	Return on average tangible common equity	11.7		%	15.9		%	10.4		%	17.5		%	17.3		%	Return on average tangible common equity	12.6		%	7.09		%	13.1		%	9.78		%	11.4		%

5354

Company overview

We are a financial holding company headquartered in Nashville, Tennessee. We operate primarily through our wholly-owned bank subsidiary, FirstBank and the ~~third largest bank headquartered in Tennessee, based on total assets.~~Bank's subsidiaries. FirstBank provides a comprehensive suite of commercial and consumer banking services to clients in select markets in Tennessee, Kentucky, Alabama and North ~~Georgia, and mortgage offices across the Southeast.~~Georgia. As of ~~September~~June 30, ~~2022,~~2023, our footprint included 82 full-service branches serving the following Tennessee Metropolitan Statistical Areas: Nashville, Chattanooga (including North Georgia), Knoxville, Memphis, and Jackson in addition to Bowling Green, Kentucky and Birmingham, Florence and Huntsville, Alabama. ~~We also provide~~Our banking services extend to 16 community markets throughout Tennessee and North Georgia. FirstBank also provides retail mortgage banking services utilizing its bank branch network and mortgage banking offices strategically located throughout the southeastern United States.

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, trust and investment services and deposit-related fees. Our primary source of funding for our loans is customer deposits, ~~and, to a lesser extent,~~however we have other sources of funds including unsecured credit lines, brokered ~~and internet deposits,~~CDs, 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,~~loan market, as well as from mortgage servicing revenues.

Recent developments

~~Mortgage restructuring~~Recent banking events

On May 10, 2022, we announced the restructuring of our Mortgage segment (referred to herein as "Mortgage restructuring"), including the exit from our direct-to-consumer channel, which is one of two delivery channels in the Mortgage segment. As a result of exiting this channel, we recorded restructuring expenses of $12.5 millionThe banking sector experienced significant volatility during the ~~nine~~first half of 2023, including high-profile bank failures, continuing interest rate hikes and recessionary concerns. We have proactively positioned the balance sheet to mitigate the risks affecting the Company and the overall banking industry in order to serve our clients and communities.

As of June 30, 2023, we carried on-balance sheet liquidity of $1.44 billion. We maintain the ability to access $6.42 billion of contingent liquidity from the FHLB, Federal Reserve, brokered CDs, and unsecured lines of credit. Our available-for-sale debt securities portfolio is 11.0% of total assets and we do not maintain any held-to-maturity investment securities. Management considers our current liquidity position to be more than adequate to meet both short-term and long-term liquidity needs. Refer to the section 'Liquidity and capital resources' for additional information.

Further, our capital ratios of the Company, and its subsidiary bank are well above the standards to be considered well-capitalized under regulatory requirements. Refer to the section 'Shareholders' equity and capital management' for additional details.

Non-performing assets were 0.59% of total assets as of June 30, 2023 and net charge-offs during the three and six months ended ~~September~~June 30, ~~2022. The repositioning~~2023 were 0.03% and 0.02%, respectively, which we believe reflects our disciplined underwriting and conservative lending philosophy. Refer to the section 'Asset quality' for additional information.

While the high-profile bank failures and other concerns have impacted the entire banking industry and future events cannot be predicted, we remain committed to safe and sound community banking practices that have been a cornerstone of ~~our Mortgage segment does not qualify to be reported as discontinued operations. We plan to continue originating~~the Company's values and selling residential mortgage loans within our Mortgage segment through our traditional consumer-facing mortgage retail channel, retain mortgage servicing rights and continue holding residential 1-4 family mortgage loans in our HFI loan portfolio.historical performance.

Overview of recent financial performance

Results of operations

Three months ended ~~September~~June 30, ~~2022~~2023 compared to the three months ended ~~September~~June 30, ~~2021~~2022

Our net income ~~decreased~~increased during the three months ended ~~September~~June 30, ~~2022~~2023 to ~~$31.8~~$35.3 million ~~down~~ from ~~$45.3~~$19.4 million for the three months ended ~~September~~June 30, ~~2021.~~2022. Diluted earnings per common share ~~were $0.68~~was $0.75 and ~~$0.94~~$0.41 for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Our net income represented a return on average assets, or ROAA, of ~~1.05%~~1.10% and ~~1.51%~~0.62% for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and a return on average shareholders’ equity, or ROAE, of ~~9.45%~~10.3% and ~~12.9%~~5.74% for the same periods. Our ratio of return on average tangible common equity, or ROATCE for the three months ended ~~September~~June 30, 2023 and 2022 was 12.6% and ~~2021 was 11.7% and 15.9%~~7.09%, respectively. See “GAAP reconciliation and management explanation of non-GAAP financial measures” in this Report for a discussion of tangible common equity and return on average tangible common equity.

During the three months ended ~~September~~June 30, ~~2022,~~2023, our net interest income ~~increased to $111.4~~before provisions for credit losses was $101.5 million compared with ~~$88.5~~$102.2 million for the three months ended ~~September~~June 30, ~~2021.~~2022. Our net interest margin, on a tax-equivalent basis, ~~increased~~decreased to ~~3.93%~~3.40% for the three months ended ~~September~~June 30, ~~2022,~~2023, compared with ~~3.20%~~3.52% for the three

months ended ~~September~~June 30, ~~2021.~~2022. The ~~increase~~decrease was primarily driven by ~~our loan growth, increased~~higher interest rates ~~and a shift~~increasing our total cost of funds compared to the increase in ~~balance sheet composition~~the interest income on interest-earnings assets during the three months ended ~~September~~June 30, ~~2022~~2023 compared to the three months ended ~~September~~June 30, ~~2021.~~2022.

We experienced a decrease in noninterest income of ~~$36.4~~$9.4 million to ~~$22.6~~$23.8 million for the three months ended ~~September~~June 30, ~~2022,~~2023, compared with ~~$59.0~~$33.2 million for the same period in the prior year. A decrease of ~~$33.0~~$10.3 million in mortgage banking income was the primary driver for the downward movement in noninterest income, which was the result of interest rate increases and an overall slowdown in mortgage activity experienced throughout the industry. Additionally, the change also reflects the restructuring of our mortgage business (referred to herein as "Mortgage restructuring"), including the exit of our direct-to-consumer internet delivery channel during the second quarter of 2022. Refer to the section "Business segment highlights" for additional information on the restructuring of our Mortgage segment.

Noninterest expense decreased to ~~$81.8~~$81.3 million for the three months ended ~~September~~June 30, ~~2022,~~2023, compared with ~~$95.0~~$97.0 million for the three months ended ~~September~~June 30, ~~2021.~~2022. The decrease in noninterest expense is primarily driven by the mortgage restructuring expense of $12.5 million during the three months ended June 30, 2022 and decreases in salaries, commissions and employee benefit expenses due to a decrease in mortgage production volume.

~~Nine~~Six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022

Our net income ~~decreased~~increased during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 to ~~$86.4~~$71.7 million from ~~$141.5~~$54.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. Diluted earnings per common share were ~~$1.83~~$1.53 and ~~$2.95~~$1.15 for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Our net income represented a ~~return on average assets~~ROAA of ~~0.93%~~1.13% and ~~1.61%~~0.88% for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and a ~~return on average equity~~ROAE of ~~8.45%~~10.6% and ~~14.1%~~7.95% for the same periods. Our ~~ratio of return on average tangible common equity~~ROATCE for the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022 were 13.1% and ~~2021 were 10.4% and 17.5%~~9.78%, respectively. See “GAAP reconciliation and management explanation of non-GAAP financial measures” in this Report for a discussion of tangible common equity and return on average tangible common equity.

During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, our net interest income before provisions for credit losses increased to ~~$301.7~~$205.2 million compared with ~~$257.6~~$190.4 million in the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. Our net interest margin, on a tax-equivalent basis, increased to ~~3.50%~~3.45% for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to ~~3.19%~~3.28% for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. The increase was primarily driven by an increase in ~~loan HFI origination volume,~~interest rates on loans, which was ~~slightly~~partially offset by ~~an increase in cost~~the impact of increasing costs of funds ~~of $1.9 million driven by rising interest rates~~as competition over customer deposits has risen in ~~deposits and new short-term FHLB advances borrowed during~~ the ~~period.~~industry.

Noninterest income for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 decreased by ~~$77.8~~$27.4 million to ~~$97.2~~$47.2 million, down from ~~$175.0~~$74.6 million infor the ~~same period in the prior year.~~six months ended June 30, 2022. The decrease in noninterest income was primarily ~~made up of~~due to a ~~$71.7~~$27.8 million decrease in mortgage banking income for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. These results were impacted by increasing interest rates, compressing margins, and a decrease in demand for residential mortgages ~~experienced throughout the industry~~ during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared with the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. The change also reflects the closure of our direct-to-consumer mortgage internet delivery channel in the second quarter of 2022. Refer to the section "Business segment highlights" for additional information on the restructuring of our Mortgage segment.

Noninterest expense decreased to ~~$268.1~~$161.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared with ~~$282.7~~$186.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. The decrease in noninterest expense is reflective of the ~~$31.8~~$21.7 million decrease in salaries, commissions and employee-related costs in the Mortgage segment related to the ~~reduction in~~restructuring of our Mortgage segment and reduced headcount and mortgage production which was ~~partially~~slightly offset by a $2.1 million increase in regulatory fees and assessments. Additionally, the decrease reflects $12.5 million in mortgage restructuring expenses ~~of $12.5 million~~ incurred during the ~~nine~~six months ended ~~September~~June 30, ~~2022 associated with the exit of our direct-to-consumer internet delivery channel.~~2022.

Business segment highlights

We operate our business in two business segments: Banking and Mortgage. See Note 11, “Segment reporting” in the notes to our unaudited consolidated financial statements contained herein for a description of these business segments.

Banking

Three months ended ~~September~~June 30, ~~2022~~2023 compared to three months ended ~~September~~June 30, ~~2021~~2022

Income before taxes from the Banking segment ~~decreased~~increased for the three months ended ~~September~~June 30, ~~2022~~2023 to ~~$44.4~~$46.4 million, compared to ~~$46.2~~$41.2 million for the three months ended ~~September~~June 30, ~~2021.~~2022. These results were primarily driven by ~~an increase~~a reversal in ~~provisions for credit losses of $13.9 million to $11.4 million (including a~~ provision for credit losses on loans HFI and unfunded loan commitments of ~~$3.2 million) for the three months ended September 30, 2022 compared to a net reversal in provisions for credit losses of $2.5~~$1.1 million for the three months ended ~~September~~June 30, ~~2021, reflecting growth in loans HFI during~~2023 compared to a provision expense of $12.3 million for the three months ended ~~September~~June 30, 2022, reflecting a

decrease in unfunded loan commitments in the construction and ~~changing economic outlook when compared to the three months ended September~~land development category by $379.2 million from June 30, ~~2021.~~2022. Noninterest income ~~decreased~~increased to ~~$10.3~~$11.5 million in the three months ended ~~September~~June 30, ~~2022 as~~2023 compared to ~~$13.8~~$10.7 million in the three months ended ~~September~~June 30, ~~2021. The decrease in~~2022. This includes losses associated with our ~~noninterest income during~~commercial loans held for sale portfolio of $8 thousand for the three months ended ~~September~~June 30, ~~2022 is partially attributable to a $2.3~~2023 compared with $2.0 million ~~decrease in ATM and interchange fees due to the expiration of our exemption from the Durbin amendment becoming effective~~ for the Company during the current period, which limits interchange fees for banking institutions with asset sizes greater than $10 billion. Additionally, gains on sales or write-downs of other real estate owned decreased $1.6 million to $0.4 million during the three months ended ~~September~~June 30, ~~2022, compared to gains of $2.0 million during the three months ended September 30, 2021.~~2022. Noninterest expense increased during the three months ended ~~September~~June 30, ~~2022~~2023 to ~~$65.9~~$67.7 million from ~~$58.8~~$59.3 million for three months ended ~~September~~June 30, ~~2021~~2022 due to increases in salaries, ~~marketing and~~severance, regulatory fees, occupancy, and ~~temporary increases in legal and professional~~marketing expenses.

~~Nine~~Six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022

Income before taxes from the Banking segment ~~decreased~~increased for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 to ~~$130.5~~$92.8 million, compared to ~~$154.5~~$86.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. Net interest income increased by ~~$44.0~~$14.8 million to ~~$301.7~~$205.2 million during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$257.7~~$190.4 million during the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. Our provisions for credit losses on loans HFI and unfunded loan commitments resulted in ~~$19.4~~a $0.6 million ofnet reversal during the six months ended June 30, 2023 compared to a $8.1 million provision expense during the ~~nine~~six months ended ~~September~~June 30, ~~2022 compared to $30.2 million reversal of provision expense in the same period in the previous year.~~2022. Noninterest income ~~decreased~~increased slightly to ~~$33.0~~$23.0 million in the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to ~~$39.2~~$22.7 million in the ~~nine~~six months ended ~~September~~June 30, ~~2021. Similar~~2022. Noninterest expense increased to ~~the discussion above, the decrease in ATM and interchange fees, gain on sales or write-downs of other real estate owned and the change in the fair value of our commercial loans held~~$136.0 million for ~~sale were the main drivers in the decrease in our noninterest income period-over-period. During the nine~~six months ended ~~September~~June 30, 2022, ATM and interchange fees decreased $1.5 million, gain on sales or write-downs of other real estate owned decreased $2.6 million and the change in the fair value of our commercial loans held for sale decreased $3.92023 compared to $118.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021. Noninterest expense was $184.8 million for nine months ended September 30,~~ 2022 ~~compared to $172.7 million for the same period in the previous year mainly~~ due to increases in salaries, ~~advertising,~~severance, regulatory fees and assessments, occupancy, ~~and temporary increases in~~ legal and professional ~~fees.~~fees, and marketing.

Mortgage

Three months ended ~~September~~June 30, ~~2022~~2023 compared to three months ended ~~September~~June 30, ~~2021~~2022

The Mortgage segment reported a pre-tax loss of ~~$3.7~~$1.3 million for the three months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~income~~a pre-tax loss of ~~$8.9~~$15.2 million for the three months ended ~~September~~June 30, ~~2021.~~2022. The loss in 2022 includes a $12.5 million mortgage restructuring expense associated with the exit of our direct-to-consumer internet delivery channel. Noninterest income decreased by ~~$32.9~~$10.2 million to $12.3 million for the three months ended ~~September~~June 30, ~~2022,~~2023, compared with ~~$45.2~~$22.5 million for the three months ended ~~September~~June 30, ~~2021, primarily~~2022, which was related to a decrease in mortgage banking income. Further discussion related to the change in mortgage banking income is included under the subheading 'Noninterest income' included within this management's discussion and ~~compressing margins impacted by the rising interest rate environment and a reduction in interest rate lock commitment volume.~~

analysis. Noninterest expense for the three months ended ~~September~~June 30, 2023 and 2022 ~~and 2021~~ was ~~$16.0~~$13.6 million and ~~$36.2~~$37.7 million, respectively. This ~~reflects a~~ decrease is reflective of the mortgage restructuring expense mentioned above in addition to decreases in marketing, legal and professional fees, salaries, commissions, incentives and employee benefits due to a reduction in production ~~volume.~~volume and headcount reduction from the Mortgage restructuring.

~~Nine~~Six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022

Activity in our Mortgage segment resulted in a pre-tax net loss of ~~$19.1~~$1.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022 as~~2023 compared to ~~income~~a pre-tax net loss of ~~$25.7~~$15.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021. There was a decrease in~~2022. Mortgage banking income decreased $27.8 million to $24.3 million during the six months ended June 30, 2023 compared to $52.1 million for the six months ended June 30, 2022. Further discussion on the components of mortgage banking income ~~of $71.7 million to $64.5 million during~~is included under the ~~nine months ended September 30, 2022 compared to $136.2 million for the nine months ended September 30, 2021. This was a result of interest rate increases, compressing margins,~~subheading 'Noninterest income' within this management's discussion and a decrease in demand for residential mortgages, which lead to a 57.4% decrease in interest rate lock volume during the nine months ended September 30, 2022 compared with the same period in the prior year.analysis. Noninterest expense for the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022 ~~and 2021~~ was ~~$83.3~~$25.7 million and ~~$110.0~~$67.4 million, respectively, ~~reflecting~~This decrease is reflective of the mortgage restructuring expense mentioned above in addition to decreases in marketing, legal and professional fees, occupancy, salaries, commissions and incentive costs associated with the decrease in production volume ~~partially offset by mortgage restructuring expenses of $12.5 million during the current period compared with the same period in the previous year.~~

~~Further discussion on the components of mortgage banking income~~ and ~~additional details related to~~headcount reduction from the Mortgage ~~restructuring are included under the subheadings 'Noninterest income' and 'Noninterest expense', respectively, included within this management's discussion and analysis.~~restructuring.

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, ~~2022~~2023 and ~~2021.~~2022.

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Net interest income

Net interest income is the most significant component of our earnings, generally comprising over 50% of our total revenues in a given 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 or amortization of discounts or premiums 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.

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the US Treasury yield curve remained inverted as long-term rates increased at a slower pace than short-term ~~rates. This compares~~rates which is in contrast to the ~~three and nine months ended September 30, 2021, when the~~more normalized upward sloping US Treasury yield curve ~~steepened as long-term rates rose~~during the three and ~~short-term rates remained constant.~~six months ended June 30, 2022. The Federal Funds Target Rate range was 0%5.00% - ~~0.25%~~5.25% and ~~3.00%~~1.50% - ~~3.25%~~1.75% as of ~~December 31, 2021~~June 30, 2023 and ~~September~~June 30, 2022, respectively. Effective, ~~November 2, 2022,~~July 27, 2023, the Federal Reserve increased the target range for the federal funds rate to ~~3.75% to 4.00% and additional increases in the target range are anticipated to slow inflation.~~

5.25% - 5.50%.

Three months ended ~~September~~June 30, ~~2022~~2023 compared to three months ended ~~September~~June 30, ~~2021~~2022

On a tax-equivalent basis, net interest income ~~increased by $22.9 million~~decreased slightly to ~~$112.1~~$102.4 million for the three months ended ~~September~~June 30, ~~2022~~2023 as compared to ~~$89.2~~$102.9 million for the three months ended ~~September~~June 30, ~~2021. The increase in~~2022. Interest income, on a tax-equivalent ~~net interest income~~basis, was $171.0 million for the three months ended ~~September~~June 30, 2023, compared to $111.0 million for the three months ended June 30, 2022, an increase of $60.1 million, which was primarily driven by an increase in both interest rates and volume ofon loans HFI, combined with increased interest rates for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021. These fluctuations resulted in a 150.2% average interest-earning assets to average interest-bearing liabilities ratio compared to a 142.3% average interest-earning assets to average interest-bearing liabilities ratio for the three months ended September 30, 2021.

~~Interest income, on a tax-equivalent basis, was $129.2 million for the three months ended September 30, 2022, compared to $97.4 million for the three months ended September 30, 2021,~~partially offset by an increase in our cost of ~~$31.8 million primarily driven by increased interest income on loans HFI.~~ funds.

Interest income on loans HFI, on a tax-equivalent basis, increased ~~$30.4~~$51.7 million to ~~$114.5~~$148.4 million for the three months ended ~~September~~June 30, ~~2022~~2023 from ~~$84.1~~$96.7 million for the three months ended September 30, 2021. The increase in interest income on loans HFI was driven by both an increase in volume and yield period-over-period. The average loans HFI outstanding increased by $1.56 billion to $8.81 billion for the three months ended SeptemberJune 30, 2022 ~~compared~~primarily due to ~~$7.25 billion for the three months ended September 30, 2021. The~~higher interest rates with a secondary driver of increased ~~loan HFI volume attributed $20.3 million to the total increase in interest income.~~volume. The tax-equivalent yield on loans held for investment was ~~5.16%~~6.34% for the three months ended ~~September~~June 30, ~~2022,~~2023, up 55168 basis points from the three months ended ~~September~~June 30, ~~2021. The increase in~~2022. Our estimated contractual loan interest yield was ~~primarily~~6.16% for the three months ended June 30, 2023 compared with 4.24% in the three months ended June 30, 2022. Additionally, average loans HFI increased to $9.39 billion for the three months ended June 30, 2023 compared to $8.32 billion for the three months ended June 30, 2022 due to strong demand in our primary markets and funding of prior loan commitments.

The components of our loan yield for the ~~impact~~three months ended June 30, 2023 and 2022 were as follows:


	Three Months Ended June 30,
	2023				2022
(dollars in thousands)	Interest income		Average yield		Interest income		Average yield
Loan HFI yield components:
Contractual interest rate on loans HFI(1)	$	144,322	6.16	%	$	88,005	4.24	%
Origination and other loan fee income	3,907		0.17	%	6,927		0.33	%
(Amortization) accretion on purchased loans	(14)		—	%	64		—	%
Nonaccrual interest collections	200		0.01	%	546		0.03	%
Syndicated fee income	—		—	%	1,150		0.06	%
Total loan HFI yield	$	148,415	6.34	%	$	96,692	4.66	%

(1) Includes tax equivalent adjustment using combined marginal tax rate of ~~interest rate hikes as well as loans with lower contractual rates maturing~~26.06%.

Origination and ~~new loans originated at higher interest rates. We expect~~other loan ~~yields to continue to increase due to the current interest rate environment discussed above. The increase in loan HFI tax-equivalent yield attributed $10.0 million to the total increase in interest~~fees (including syndication fee income for the three months ended ~~September~~June 30, ~~2022.~~2022) impacted our NIM by 13 basis point and 28 basis points for the three months ended June 30, 2023 and 2022, respectively.

Interest expense was ~~$17.1~~$68.6 million for the three months ended ~~September~~June 30, ~~2022,~~2023, an increase of ~~$8.9~~$60.6 million as compared to the three months ended ~~September~~June 30, ~~2021.~~2022. The primary driver ~~for the increase~~ was ~~due an increase~~increases in interest expense on ~~interest bearing checking,~~ money market ~~deposits~~ and ~~FHLB advances. Interest expense on~~ interest-bearing checking ~~deposits increased by $3.5 million to $5.8 million for the three months ended September 30, 2022, compared to $2.3 million for the three months ended September 30, 2021.~~deposit products. Interest expense on money market deposits increased ~~by $2.4~~$28.6 million to ~~$4.7~~$30.1 million for the three months ended ~~September~~June 30, ~~2022,~~2023 compared to ~~$2.3~~$1.4 million for the three months ended ~~September~~June 30, ~~2021. The driver for the increase in interest~~2022. Interest expense on ~~interest bearing~~interest-bearing checking ~~deposits and money market deposits is due~~deposit products increased $20.5 million to an increase in deposit rate which increased by 51 basis points and 42 basis points period-over-period, respectively. In addition, during three months ended September 30, 2022, we drew on FHLB advances which resulted in a $2.2$23.8 million ~~in interest expense. There was no such interest expense~~ for the three months ended ~~September~~June 30, ~~2021.~~

~~During~~2023 compared to $3.3 million for the ~~first quarter of 2022, we entered into~~ three ~~designated fair value hedges to mitigate the effect of changing rates on various fixed~~months ended June 30, 2022. These increases were most significantly influenced by increasing interest rates. The average rate ~~liabilities, including certain money market deposits and subordinated debt. The fair value hedge~~ on money market deposits increased ~~interest expense by $0.3 million during the three months ended September 30, 2022.~~323 basis

5758

~~Our~~points from 0.20% for the three months ended June 30, 2022 to 3.43% for the three months ended June 30, 2023 and the average rate on interest-bearing checking deposits increased 266 basis points from 0.39% for the three months ended June 30, 2022 to 3.05% for the three months ended June 30, 2023. Total cost of interest-bearing deposits was 3.06% for the three months ended June 30, 2023 compared to 0.33% for the three months ended June 30, 2022. As interest rates on deposits increase, we tend to experience some movement between deposit types as customers seek higher interest rates and shift from noninterest-bearing deposit accounts to interest-bearing deposit products.

Overall, our NIM, on a tax-equivalent basis, ~~increased~~decreased to ~~3.93% during~~3.40% for the three months ended ~~September~~June 30, ~~2022~~2023 from ~~3.20% in~~3.52% for the three months ended ~~September~~June 30, ~~2021,~~2022, driven by ~~a change in balance sheet mix which is reflected in~~ the increase in both interest rates and volume of loans HFI, partially offset by an increase in cost of funds previously discussed. Additionally, there was a shift in our ~~average interest-earning assets to average interest-bearing liabilities ratio discussed above. This change in~~ balance sheet ~~mix was further illustrated by~~composition, including a ~~decrease~~decline in excess liquidity, which we estimate to be interest-bearing deposits with other financial institutions in excess of 5% of average tangible assets. ~~During the three months ended September 30, 2022, we deployed excess~~Excess liquidity in our balance sheet funding strategy and as such, excess liquidity did not impact our NIM for the three months ended September 30, 2022. In contrast, we estimate excess liquidity during the three months ended September 30, 2021is estimated to have negatively impacted our NIM by approximately ~~28 basis points. Origination and other loan fees increased the NIM by 23~~3 basis point for the three months ended ~~September~~June 30, ~~2022 and 2021.~~

~~The components of our loan yield, a key driver~~2023 compared to ~~our NIM~~approximately 14 basis points for the three months ended ~~September~~June 30, ~~2022 and 2021, were as follows:~~

Three Months Ended September 30,
2022 2021
(dollars in thousands) Interest
income Average
yield Interest
income Average
yield
Loans HFI yield components:
Contractual interest rate on loans held for investment(1)(2)
$ 106,405 4.79 % $ 77,150 4.23 %
Origination and other loan fee income(2)
6,665 0.30 % 6,377 0.35 %
Accretion on purchased loans 949 0.05 % 157 0.01 %
Nonaccrual interest collections 469 0.02 % 431 0.02 %
Total loans HFI yield $ 114,488 5.16 % $ 84,115 4.61 %
2022.

1.~~Includes tax equivalent adjustment using combined marginal tax rate of 26.06%.~~

~~Includes $0.1 million of loan contractual interest and $0.4 million of loan fees related to PPP loans for three months ended September 30, 2021. Amounts in the current period are not meaningful.~~

5859

Average balance ~~sheet amounts,~~and interest ~~earned and yield~~yield/rate 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,
		2022						2021							2023				2022
(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		Interest income/ expense		Average yield/ rate		Average balances		Interest income/ expense		Average yield/ rate
Interest-earning assets:	Interest-earning assets:															Interest-earning assets:
Loans(2)(3)		$	8,810,094	$	114,488	5.16	%	$	7,245,313	$	84,115	4.61	%
Mortgage loans held for sale(4)		124,358		1,626		5.19	%	709,654		4,687		2.62	%
Commercial loans held for sale		36,291		670		7.32	%	108,863		1,282		4.67	%
Securities:(4)
Loans held for investment (1)(2)																Loans held for investment (1)(2)	$	9,387,284	$	148,415	6.34	%	$	8,323,778	$	96,692	4.66	%
Loans held for sale- mortgage																Loans held for sale- mortgage	63,407		1,005		6.36	%	215,779		2,350		4.37	%
Loans held for sale-commercial																Loans held for sale-commercial	9,377		3		0.13	%	56,460		718		5.10	%
Investment securities:																Investment securities:
Taxable	Taxable	1,469,934		6,843		1.85	%	1,117,647		3,989		1.42	%			Taxable	1,374,308		6,480		1.89	%	1,474,999		6,499		1.77	%
Tax-exempt~~(3)~~(2)	Tax-exempt~~(3)~~(2)	298,905		2,459		3.26	%	311,151		2,546		3.25	%			Tax-exempt~~(3)~~(2)	293,739		2,445		3.34	%	307,719		2,492		3.25	%
Total Securities(3)		1,768,839		9,302		2.09	%	1,428,798		6,535		1.81	%
Federal funds sold and reverse repurchase agreements’		160,597		877		2.17	%	145,315		135		0.37	%
Total investment securities(2)																Total investment securities(2)	1,668,047		8,925		2.15	%	1,782,718		8,991		2.02	%
Federal funds sold and reverse repurchase agreements																Federal funds sold and reverse repurchase agreements	61,799		1,050		6.81	%	221,929		421		0.76	%
Interest-bearing deposits with other financial institutions	Interest-bearing deposits with other financial institutions	361,684		1,850		2.03	%	1,404,772		508		0.14	%			Interest-bearing deposits with other financial institutions	857,862		10,829		5.06	%	1,081,474		1,551		0.58	%
FHLB stock	FHLB stock	49,478		431		3.46	%	28,422		157		2.19	%			FHLB stock	42,133		796		7.58	%	34,536		246		2.86	%
Total interest earning assets~~(3)~~(2)	Total interest earning assets~~(3)~~(2)	11,311,341		129,244		4.53	%	11,071,137		97,419		3.49	%			Total interest earning assets~~(3)~~(2)	12,089,909		171,023		5.67	%	11,716,674		110,969		3.80	%
Noninterest Earning Assets:	Noninterest Earning Assets:															Noninterest Earning Assets:
Cash and due from banks	Cash and due from banks	109,681						107,263								Cash and due from banks	118,872						91,230
Allowance for credit losses		(127,710)						(144,652)
Other assets(5)		744,803						881,314
Allowance for credit losses on loans HFI																Allowance for credit losses on loans HFI	(138,983)						(120,297)
Other assets (3)(4)(5)																Other assets (3)(4)(5)	756,651						739,872
Total noninterest earning assets	Total noninterest earning assets	726,774						843,925								Total noninterest earning assets	736,540						710,805
Total assets	Total assets	$	12,038,115					$	11,915,062							Total assets	$	12,826,449					$	12,427,479
Interest-bearing liabilities:	Interest-bearing liabilities:															Interest-bearing liabilities:
Interest bearing deposits:	Interest bearing deposits:															Interest bearing deposits:
Interest-bearing checking	Interest-bearing checking	$	2,821,415	$	5,831	0.82	%	$	2,937,273	$	2,298	0.31	%			Interest-bearing checking	$	3,127,219	$	23,751	3.05	%	$	3,415,135	$	3,285	0.39	%
Money market(6)		2,551,521		4,684		0.73	%	2,997,595		2,322		0.31	%
Money market deposits																Money market deposits	3,516,901		30,053		3.43	%	2,842,026		1,416		0.20	%
Savings deposits	Savings deposits	515,882		70		0.05	%	439,470		60		0.05	%			Savings deposits	433,530		63		0.06	%	508,511		68		0.05	%
Customer time deposits~~(6)~~	Customer time deposits~~(6)~~	1,151,843		2,535		0.87	%	1,200,760		1,840		0.61	%			Customer time deposits~~(6)~~	1,426,320		10,658		3.00	%	1,129,668		1,798		0.64	%
Brokered and internet time deposits~~(6)~~	Brokered and internet time deposits~~(6)~~	3,501		13		1.47	%	32,009		76		0.94	%			Brokered and internet time deposits~~(6)~~	56,455		732		5.20	%	6,387		24		1.51	%
Time deposits	Time deposits	1,155,344		2,548		0.87	%	1,232,769		1,916		0.62	%			Time deposits	1,482,775		11,390		3.08	%	1,136,055		1,822		0.64	%
Total interest-bearing deposits	Total interest-bearing deposits	7,044,162		13,133		0.74	%	7,607,107		6,596		0.34	%			Total interest-bearing deposits	8,560,425		65,257		3.06	%	7,901,727		6,591		0.33	%
Other interest-bearing liabilities:	Other interest-bearing liabilities:															Other interest-bearing liabilities:
Securities sold under agreements to repurchase and federal funds purchased	Securities sold under agreements to repurchase and federal funds purchased	29,580		12		0.16	%	40,437		20		0.20	%			Securities sold under agreements to repurchase and federal funds purchased	30,050		97		1.29	%	27,233		12		0.18	%
Federal Home Loan Bank advances	Federal Home Loan Bank advances	329,130		2,155		2.60	%	—		—		—	%			Federal Home Loan Bank advances	61,264		784		5.13	%	—		—		—	%
Subordinated debt	Subordinated debt	127,263		1,792		5.59	%	129,395		1,565		4.80	%			Subordinated debt	127,129		2,496		7.88	%	129,691		1,434		4.43	%
Other borrowings	Other borrowings	1,457		7		1.91	%	1,547		8		2.05	%			Other borrowings	1,385		6		1.74	%	1,480		6		1.63	%
Total other interest-bearing liabilities	Total other interest-bearing liabilities	487,430		3,966		3.23	%	171,379		1,593		3.69	%			Total other interest-bearing liabilities	219,828		3,383		6.17	%	158,404		1,452		3.68	%
Total Interest-bearing liabilities	Total Interest-bearing liabilities	7,531,592		17,099		0.90	%	7,778,486		8,189		0.42	%			Total Interest-bearing liabilities	8,780,253		68,640		3.14	%	8,060,131		8,043		0.40	%
Noninterest bearing liabilities:	Noninterest bearing liabilities:															Noninterest bearing liabilities:
Demand deposits	Demand deposits	2,973,650						2,596,650								Demand deposits	2,430,476						2,879,662
Other liabilities(4)	Other liabilities(4)	196,637						150,632								Other liabilities(4)	238,809						134,892
Total noninterest-bearing liabilities	Total noninterest-bearing liabilities	3,170,287						2,747,282								Total noninterest-bearing liabilities	2,669,285						3,014,554
Total liabilities	Total liabilities	10,701,879						10,525,768								Total liabilities	11,449,538						11,074,685
FB Financial Corporation common shareholders' equity	FB Financial Corporation common shareholders' equity	1,336,143						1,389,201								FB Financial Corporation common shareholders' equity	1,376,818						1,352,701
Noncontrolling interest	Noncontrolling interest	93						93								Noncontrolling interest	93						93
Shareholders' equity	Shareholders' equity	1,336,236						1,389,294								Shareholders' equity	1,376,911						1,352,794
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	12,038,115					$	11,915,062							Total liabilities and shareholders' equity	$	12,826,449					$	12,427,479
Net interest income (tax-equivalent basis)	Net interest income (tax-equivalent basis)			$	112,145					$	89,230					Net interest income (tax-equivalent basis)			$	102,383					$	102,926
Interest rate spread (tax-equivalent basis)	Interest rate spread (tax-equivalent basis)					3.63	%					3.07	%			Interest rate spread (tax-equivalent basis)					2.53	%					3.40	%
Net interest margin (tax-equivalent basis)~~(7)~~(6)	Net interest margin (tax-equivalent basis)~~(7)~~(6)					3.93	%					3.20	%			Net interest margin (tax-equivalent basis)~~(7)~~(6)					3.40	%					3.52	%
Cost of total deposits	Cost of total deposits					0.52	%					0.26	%			Cost of total deposits					2.38	%					0.25	%
Average interest-earning assets to average interest-bearing liabilities	Average interest-earning assets to average interest-bearing liabilities					150.2	%					142.3	%			Average interest-earning assets to average interest-bearing liabilities					137.7	%					145.4	%

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

~~(2)~~Average balances of nonaccrual loans and overdrafts are included in average loan ~~balances. Origination and other loan fee income~~balances (before deduction of $6.7 million and $6.4 million, net accretion of $0.9 million and $0.2 million, and nonaccrual interest collections of $0.5 million and $0.4 million are included in interest income in the three months ended September 30, 2022 and 2021, respectively.ACL).

~~(3)~~(2)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 were $0.8 million for both the three months ended ~~September~~June 30, 2023 and 2022.

(3)Includes average net unrealized losses on investment securities available for sale of $212.0 million and $135.7 million for the three months ended June 30, 2023 and 2022, ~~and 2021.~~respectively.

(4)~~Excludes the~~Includes average ~~balance for unrealized gains (losses) for~~of optional rights to repurchase government guaranteed GNMA mortgage loans ~~held~~previously sold that have become past due greater than 90 days of $20.0 million for ~~sale and investments carried at fair value.~~the three months ended June 30, 2023.

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

(6)Includes $0.9 million and $0.9 million of interest rate premium accretion on money market deposits, $180 thousand and $426 thousand of interest rate premium accretion on customer time deposits and $5 thousand and $99 thousand of interest rate premium accretion on brokered and internet deposits for the three months ended September 30, 2022 and 2021, respectively.

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

Yield/rate and volume analysis

The table below presents the components of the changes in net interest income for the three months ended June 30, 2023 and 2022. For each major category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes due to average volume and changes due to interest rates, with the changes in both volume and interest rates allocated to these two categories based on the proportionate absolute changes in each category.


	Three months ended June 30, 2023 compared to three months ended June 30, 2022 due to changes in
(dollars in thousands on a tax-equivalent basis)	Volume		Yield/ rate		Net increase (decrease)
Interest-earning assets:
Loans held for investment(1)(2)	$	16,814	$	34,909	$	51,723
Loans held for sale - mortgage	(2,415)		1,070		(1,345)
Loans held for sale - commercial	(15)		(700)		(715)
Investment securities:
Taxable	(475)		456		(19)
Tax Exempt(2)	(116)		69		(47)
Federal funds sold and reverse repurchase agreements	(2,721)		3,350		629
Interest-bearing deposits with other financial institutions	(2,823)		12,101		9,278
FHLB stock	144		406		550
Total interest income(2)	8,393		51,661		60,054
Interest-bearing liabilities:
Interest-bearing checking	(2,187)		22,653		20,466
Money market deposits	5,767		22,870		28,637
Savings deposits	(11)		6		(5)
Customer time deposits	2,217		6,643		8,860
Brokered and internet time deposits	649		59		708
Securities sold under agreements to repurchase and federal funds purchased	9		76		85
Federal Home Loan Bank advances	784		—		784
Subordinated debt	(50)		1,112		1,062

Total interest expense	7,178		53,419		60,597
Change in net interest income(2)	$	1,215	$	(1,758)	$	(543)

(1)Average loans are gross, including nonaccrual loans and overdrafts (before deduction of allowance for credit losses on loans HFI).

(2)Interest income includes the effects of the tax-equivalent adjustments to increase tax-exempt interest income to a tax-equivalent basis. The net taxable-equivalent adjustment amounts included was $0.8 million for both the three months ended June 30, 2023 and 2022.

~~Nine~~Six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~nine~~the six months ended ~~September~~June 30, ~~2021~~2022

On a tax-equivalent basis, net interest income increased ~~$44.1~~$15.0 million to ~~$304.0~~$206.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to ~~$259.9~~$191.9 million for the ~~nine~~six months ended ~~September~~June 30, 2021. The increase in tax-equivalent net interest income for the nine months ended September 30, 2022 was primarily driven by an increase in the average volume of loans held for investment outstanding. Further, the our net interest income increase was driven a change in balance sheet mix which is reflected in our average interest-bearing deposits with other financial institutions to average earning assets ratio which decreased to 8.70% for the nine months ended September 30, 2022 compared to 13.60% for the nine months ended September 30, 2021.

2022. Interest income, on a tax-equivalent basis, was ~~$336.1~~$331.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~$290.1~~$206.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, an increase of ~~$46.0 million.~~ $124.5 million, which was primarily driven by increases in both interest rates and volume on loans HFI, partially offset by an increase in our cost of deposits. Total interest income represents an increase in yield on interest-earning assets to 5.53% for the six months ended June 30, 2023 compared with 3.54% for the six months ended June 30, 2022.

Interest income on loans ~~held for investment,~~HFI, on a tax-equivalent basis, increased ~~$43.1~~$108.7 million to ~~$293.6~~$287.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 from ~~$250.5~~$179.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021. This is~~2022 due primarily to increasing interest rates, however the change was also heavily influenced by an increase in ~~the~~volume of average loans held for investment balance outstanding which increased to $8.30 billion for the nine months ended September 30, 2022 compared to $7.11 billion for the nine months ended September 30, 2021. The increase in average loan balance is due to the increased economic activity in our primary markets and combined with lower than expected payoffs during the period. We expect loan growth to slow down in future quarters relative to prior quarters to position for potential economic headwinds in 2023.HFI. The average yield on loans HFI increased by 2171 basis points period-over-period to ~~4.73%~~6.20% for the ~~nine~~six months ended ~~September~~June 30, 2023 from 4.49% for the six months ended June 30, 2022. ~~Contractual~~Our estimated contractual loan interest ~~rates yielded 4.40%~~yield was 6.03% in the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared with ~~4.31%~~4.18% in the ~~nine~~six months ended ~~September~~June 30, ~~2021. Excluding PPP~~2022. Additionally, average loans ~~which have a 1% contractual loan yield, our contractual loan yield would have been 5 points higher~~HFI increased to $9.37 billion for the ~~nine~~six months ended ~~September~~June 30, ~~2021. PPP loans did not impact our contractual loan yield~~2023 compared to $8.04 billion for the ~~nine~~six months ended ~~September~~June 30, 2022.

Our yield on interest-earning assets increased to 3.86% for the nine months ended September 30, 2022 from 3.56% for the nine months ended September 30, 2021 largely due to the change in balance sheet composition discussed above and due to the current interest rate environment. The increase discussed above was partially offset by a $425.3 million decrease in our average mortgage loans held for sale portfolio for the nine months ended September 30, 2022 compared to the same balance for the nine months ended September 30, 2021. This balance decreased due to lower mortgage origination volumes which resulted from an increasing interest rate environment, continued housing inventory shortages, and compressed margins. Interest income on mortgage loans held for sale decreased by $6.4 million period-over-period.

Interest expense was $32.1 million for the nine months ended September 30, 2022, an increase of $1.9 million as compared to the nine months ended September 30, 2021. The increase was largely attributed to the FHLB advances which we entered into during the nine months ended September 30, 2022. Interest expense on our FHLB advances was $2.2 million for the nine months ended September 30, 2022. There was no such expense for the nine months ended September 30, 2021. Interest expense on interest-bearing checking deposits increased to $11.6 million for the nine months ended September 30, 2022 from $8.0 million for the nine months ended September 30, 2021 primarily due to increase in rates period-over-period. The average rate on interest-bearing checking deposits increased 10 basis points from 0.37% for the nine months ended September 30, 2021 to 0.47% for the nine months ended September 30, 2022.

The increase in ~~interest expense~~average loans HFI is due to strong demand in our primary markets and additional funding during the period was partially offset by a $1.2 million decrease in interest expense on customer time deposits period-over-period. This decrease was largely driven by an decrease in the average customer time deposits outstanding which decreased to $1.12 billion for the ninesix months ended ~~September~~June 30, ~~2022 compared to $1.29 billion for the nine months ended September 30, 2021.~~

~~During the nine months ended September 30, 2022, we entered into three designated fair value hedges to mitigate the effect~~2023 of changing rates on various fixed rate liabilities, including certain money market deposits and subordinated debt. The fair value hedge on money market deposits decreased interest expense by $0.4 million during the nine months ended September 30, 2022.

The average balance on our subordinated debt decreased to $128.4 million for the nine months ended September 30, 2022 compared to $155.7 million for the nine months ended September 30, 2021. As a result, interest expense on subordinated debt decreased to $4.7 million for the nine months ended September 30, 2022 compared to $5.7 million for the nine months ended September 30, 2021. The fair value hedge on subordinated debt lowered interest expense by $0.2 million during the nine months ended September 30, 2022.

~~Overall, our NIM, on a tax-equivalent basis, increased to 3.50% for the nine months ended September 30, 2022 from 3.19% for the nine months ended September 30, 2021, driven by the change~~commitments made in balance sheet composition. Our average interest-earning assets to average interest-bearing liabilities increased to 145.9% for the nine months ended September 30, 2022 from 139.9% for the nine months ended September 30, 2021. The change in our balance sheet composition was further illustrated by a decrease in excess liquidity, which we estimate to be interest-bearing deposits with other financial institutions in excess of 5% of average tangible assets. Excess liquidity is estimated to have negatively impacted our NIM by approximately 13 basis points for the nine months ended September 30, 2022. This compares to excess liquidity representing 32 basis points of negative impact to our NIM during the nine months ended September 30, 2021. Our NIM for the nine months ended September 30, 2022 was negatively affected by 3 basis points from a $2.2 million in accelerated purchase accounting premium on purchased loans which was primarily driven by two purchased credit deteriorated loans with balances totaling $21.4 million paying off early.prior periods.

The components of our loan yield ~~a key driver to our net interest margin~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 were as follows:


		Nine Months Ended September 30,								Six Months Ended June 30,
		2022				2021					2023				2022
(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
Loans HFI yield components:	Loans HFI yield components:											Loans HFI yield components:
Contractual interest rate on loans held for investment (1)(2)		$	273,199	4.40	%	$	229,105	4.31	%
Contractual interest rate on loans HFI (1)												Contractual interest rate on loans HFI (1)	$	280,194	6.03	%	$	166,794	4.18	%
Origination and other loan fee income ~~(2)~~	Origination and other loan fee income ~~(2)~~	18,574		0.30	%	19,945		0.37	%			Origination and other loan fee income ~~(2)~~	7,008		0.15	%	11,909		0.30	%
Amortization on purchased loans		(1,339)		(0.02)	%	(127)		—	%
Accretion (amortization) on purchased loans												Accretion (amortization) on purchased loans	305		0.01	%	(2,288)		(0.06)	%
Nonaccrual interest collections	Nonaccrual interest collections	2,059		0.03	%	1,623		0.03	%			Nonaccrual interest collections	375		0.01	%	1,590		0.04	%
Syndicated loan fee income	Syndicated loan fee income	1,150		0.02	%	—		—	%			Syndicated loan fee income	—		—	%	1,150		0.03	%
Total loans HFI yield	Total loans HFI yield	$	293,643	4.73	%	$	250,546	4.71	%			Total loans HFI yield	$	287,882	6.20	%	$	179,155	4.49	%

(1)Includes tax equivalent adjustment using combined marginal tax rate of 26.06%.

~~(2)Includes $0.8 million of~~Origination and other loan ~~contractual interest and $3.1 million of loan~~fees (including syndication fee income ~~related to PPP loans~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2021, respectively. Amounts in the current year period are not significant.~~

~~Net amortization on purchased loans lowered the~~2022) impacted our NIM by 212 basis points and 22 basis points for the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, respectively.

Interest expense was $124.5 million for the six months ended June 30, 2023, an increase of $109.5 million as compared to $15.0 million for the six months ended June 30, 2022. ~~Amortization~~The increase was largely attributed to a rise in interest rates in interest-bearing deposit accounts, and specifically on ~~purchased loans did not impact our NIM~~money market and interest-bearing checking deposit products. Interest expense on money market deposits increased $51.6 million to $54.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021. The increase in net amortization is due~~2023 compared to $3.0 million for the continued impact of purchase accounting resulting from our mergers, which can fluctuate based on volume of early pay-offs as discussed above. As a result of the Franklin merger, a $11.3 million premium was recorded on August 15, 2020 which is being amortized as a reduction to loan interest income. As of Septembersix months ended June 30, 2022 and ~~December 31, 2021,~~interest expense on interest-bearing checking deposits increased $37.1 million to $42.8 million for the ~~remaining net discount~~six months ended June 30, 2023 from $5.7 million for the six months ended June 30, 2022. The average rate on ~~all acquired loans amounted~~money market deposits increased 298 basis points from 0.21% for the six months ended June 30, 2022 to ~~$3.6 million~~3.19% for the six months ended June 30, 2023 and ~~$2.3 million, respectively. Excluding PPP loans,~~the average rate on interest-bearing checking deposits increased 241 basis points from 0.33% for the six months ended June 30, 2022 to 2.74% for the six months ended June 30, 2023. Total cost of interest-bearing deposits was 2.80% for the six months ended June 30, 2023 compared to 0.30% for the six months ended June 30, 2022.

Overall, our NIM, ~~would~~on a tax-equivalent basis, increased to 3.45% for the six months ended June 30, 2023 from 3.28% for the six months ended June 30, 2022, driven by the interest rate increases previously discussed along with a shift in balance sheet composition, including a decline in excess liquidity as defined previously. Excess liquidity is estimated to have ~~been 5~~negatively impacted our NIM by approximately 2 basis point for the six months ended June 30, 2023 compared to approximately 22 basis points ~~higher~~ for the ~~nine~~six months ended ~~September 30, 2021. PPP loans did not impact our NIM for the nine months ended September~~June 30, 2022.

6162

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


		Nine Months Ended September 30,												Six Months Ended June 30,
		2022						2021							2023				2022
(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 a tax-equivalent basis)																(dollars in thousands on a tax-equivalent basis)	Average balances		Interest income/ expense		Average yield/ rate		Average balances		Interest income/ expense		Average yield/ rate
Interest-earning assets:	Interest-earning assets:															Interest-earning assets:
Loans (2)(3)		$	8,302,649	$	293,643	4.73	%	$	7,111,240	$	250,546	4.71	%
Loans held for investment (1)(2)																Loans held for investment (1)(2)	$	9,367,108	$	287,882	6.20	%	$	8,044,722	$	179,155	4.49	%
Mortgage loans held for sale~~(4)~~	Mortgage loans held for sale~~(4)~~	269,794		7,542		3.74	%	695,056		13,925		2.68	%			Mortgage loans held for sale~~(4)~~	59,826		1,932		6.51	%	342,190		5,916		3.49	%
Commercial loans held for sale	Commercial loans held for sale	56,951		2,316		5.44	%	152,802		5,065		4.43	%			Commercial loans held for sale	12,973		162		2.52	%	67,452		1,646		4.92	%
Securities:(4)
Investment securities:																Investment securities:
Taxable	Taxable	1,442,397		18,762		1.74	%	975,886		10,652		1.46	%			Taxable	1,388,380		13,050		1.90	%	1,428,342		11,919		1.68	%
Tax-exempt ~~(3)~~(2)	Tax-exempt ~~(3)~~(2)	308,418		7,474		3.24	%	323,034		7,806		3.23	%			Tax-exempt ~~(3)~~(2)	294,193		4,885		3.35	%	313,254		5,015		3.23	%
Total Securities (3)		1,750,815		26,236		2.00	%	1,298,920		18,458		1.90	%
Total investment securities (2)																Total investment securities (2)	1,682,573		17,935		2.15	%	1,741,596		16,934		1.96	%
Federal funds sold and reverse repurchase agreements	Federal funds sold and reverse repurchase agreements	196,282		1,490		1.01	%	128,504		196		0.20	%			Federal funds sold and reverse repurchase agreements	124,557		2,905		4.70	%	214,421		613		0.58	%
Interest-bearing deposits with other financial institutions	Interest-bearing deposits with other financial institutions	1,012,061		4,039		0.53	%	1,481,939		1,423		0.13	%			Interest-bearing deposits with other financial institutions	793,576		18,837		4.79	%	1,342,639		2,189		0.33	%
FHLB stock	FHLB stock	39,030		824		2.82	%	30,527		470		2.06	%			FHLB stock	44,600		1,683		7.61	%	33,719		393		2.35	%
Total interest earning assets ~~(3)~~(2)	Total interest earning assets ~~(3)~~(2)	11,627,582		336,090		3.86	%	10,898,988		290,083		3.56	%			Total interest earning assets ~~(3)~~(2)	12,085,213		331,336		5.53	%	11,786,739		206,846		3.54	%
Noninterest Earning Assets:	Noninterest Earning Assets:															Noninterest Earning Assets:
Cash and due from banks	Cash and due from banks	98,202						137,934								Cash and due from banks	136,474						92,318
Allowance for credit losses		(124,635)						(157,910)
Other assets (5)		759,791						896,042
Allowance for credit losses on loans HFI																Allowance for credit losses on loans HFI	(136,904)						(123,072)
Other assets (3)(4)(5)																Other assets (3)(4)(5)	759,352						777,475
Total noninterest earning assets	Total noninterest earning assets	733,358						876,066								Total noninterest earning assets	758,922						746,721
Total assets	Total assets	$	12,360,940					$	11,775,054							Total assets	$	12,844,135					$	12,533,460
Interest-bearing liabilities:	Interest-bearing liabilities:															Interest-bearing liabilities:
Interest bearing deposits:
Interest bearing checking		$	3,262,730	$	11,573	0.47	%	$	2,904,387	$	8,005	0.37	%
Interest-bearing deposits:																Interest-bearing deposits:
Interest-bearing checking																Interest-bearing checking	$	3,146,034	$	42,811	2.74	%	$	3,487,046	$	5,742	0.33	%
Money market deposits~~(6)~~	Money market deposits~~(6)~~	2,802,070		7,672		0.37	%	2,958,864		8,753		0.40	%			Money market deposits~~(6)~~	3,443,833		54,563		3.19	%	2,929,401		2,988		0.21	%
Savings deposits	Savings deposits	504,215		202		0.05	%	407,183		170		0.06	%			Savings deposits	445,709		127		0.06	%	498,285		132		0.05	%
Customer time deposits~~(6)~~	Customer time deposits~~(6)~~	1,119,905		5,653		0.67	%	1,288,348		6,892		0.72	%			Customer time deposits~~(6)~~	1,449,144		19,879		2.77	%	1,103,672		3,118		0.57	%
Brokered and internet time deposits~~(6)~~	Brokered and internet time deposits~~(6)~~	8,605		86		1.34	%	37,347		521		1.87	%			Brokered and internet time deposits~~(6)~~	29,182		740		5.11	%	11,200		73		1.31	%
Time deposits	Time deposits	1,128,510		5,739		0.68	%	1,325,695		7,413		0.75	%			Time deposits	1,478,326		20,619		2.81	%	1,114,872		3,191		0.58	%
Total interest bearing deposits		7,697,525		25,186		0.44	%	7,596,129		24,341		0.43	%
Total interest-bearing deposits																Total interest-bearing deposits	8,513,902		118,120		2.80	%	8,029,604		12,053		0.30	%
Other interest-bearing liabilities:	Other interest-bearing liabilities:															Other interest-bearing liabilities:
Securities sold under agreements to repurchase and federal funds purchased	Securities sold under agreements to repurchase and federal funds purchased	28,954		38		0.18	%	34,807		77		0.30	%			Securities sold under agreements to repurchase and federal funds purchased	28,603		143		1.01	%	28,637		26		0.18	%
Federal Home Loan Bank advances	Federal Home Loan Bank advances	110,916		2,155		2.60	%	—		—		—	%			Federal Home Loan Bank advances	51,381		1,283		5.04	%	—		—		—	%
Subordinated debt~~(7)~~	Subordinated debt~~(7)~~	128,387		4,686		4.88	%	155,704		5,725		4.92	%			Subordinated debt~~(7)~~	126,648		4,898		7.80	%	129,642		2,894		4.50	%
Other borrowings	Other borrowings	1,480		22		1.99	%	2,997		21		0.94	%			Other borrowings	1,536		16		2.10	%	1,491		15		2.03	%
Total other interest-bearing liabilities	Total other interest-bearing liabilities	269,737		6,901		3.42	%	193,508		5,823		4.02	%			Total other interest-bearing liabilities	208,168		6,340		6.14	%	159,770		2,935		3.70	%
Total interest-bearing liabilities	Total interest-bearing liabilities	7,967,262		32,087		0.54	%	7,789,637		30,164		0.52	%			Total interest-bearing liabilities	8,722,070		124,460		2.88	%	8,189,374		14,988		0.37	%
Noninterest bearing liabilities:
Noninterest-bearing liabilities:																Noninterest-bearing liabilities:
Demand deposits	Demand deposits	2,874,223						2,477,454								Demand deposits	2,509,179						2,823,685
Other liabilities(4)	Other liabilities(4)	151,337						163,257								Other liabilities(4)	252,685						136,039
Total noninterest-bearing liabilities	Total noninterest-bearing liabilities	3,025,560						2,640,711								Total noninterest-bearing liabilities	2,761,864						2,959,724
Total liabilities	Total liabilities	10,992,822						10,430,348								Total liabilities	11,483,934						11,149,098
FB Financial Corporation common shareholders' equity	FB Financial Corporation common shareholders' equity	1,368,025						1,344,613								FB Financial Corporation common shareholders' equity	1,360,108						1,384,269
Noncontrolling interest	Noncontrolling interest	93						93								Noncontrolling interest	93						93
Shareholders' equity	Shareholders' equity	1,368,118						1,344,706								Shareholders' equity	1,360,201						1,384,362
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	12,360,940					$	11,775,054							Total liabilities and shareholders' equity	$	12,844,135					$	12,533,460
Net interest income (tax-equivalent basis)	Net interest income (tax-equivalent basis)			$	304,003					$	259,919					Net interest income (tax-equivalent basis)			$	206,876					$	191,858
Interest rate spread (tax-equivalent basis)	Interest rate spread (tax-equivalent basis)					3.32	%					3.04	%			Interest rate spread (tax-equivalent basis)					2.65	%					3.17	%
Net interest margin (tax-equivalent basis) ~~(8)~~(6)	Net interest margin (tax-equivalent basis) ~~(8)~~(6)					3.50	%					3.19	%			Net interest margin (tax-equivalent basis) ~~(8)~~(6)					3.45	%					3.28	%
Cost of total deposits	Cost of total deposits					0.32	%					0.32	%			Cost of total deposits					2.16	%					0.22	%
Average interest-earning assets to average interest-bearing liabilities	Average interest-earning assets to average interest-bearing liabilities					145.9	%					139.9	%			Average interest-earning assets to average interest-bearing liabilities					138.6	%					143.9	%

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

~~(2)~~Average balances of nonaccrual loans and overdrafts (before deduction of ACL) are included in average loan balances. ~~Syndication fee~~

(2)Interest income ~~$1.2~~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 tax-equivalent adjustment amounts included in income were $1.7 million and ~~$0, origination~~$1.5 million for six months ended June 30, 2023 and 2022, respectively.

(3)Includes average net unrealized losses on investment securities available for sale of $217.4 million and $80.2 million for the six months ended June 30, 2023 and 2022, respectively.

(4)Includes average of optional rights to repurchase government guaranteed GNMA mortgage loans previously sold that have become past due greater than 90 days of $21.7 million for the six months ended June 30, 2023.

(5)Includes investments in premises and equipment, OREO, interest receivable, MSRs, core deposit and other ~~loan fee~~intangibles, goodwill, and other miscellaneous assets.

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

Yield/rate and volume analysis

The table below presents the components of ~~$18.6 million and $19.9 million,~~the changes in net ~~amortization of $1.3 million and $0.1 million, and nonaccrual interest collections of $2.1 million and $1.6 million are included in~~ interest income for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021, respectively.~~2022. For each major category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes due to average volume and changes due to interest rates, with the changes in both volume and interest rates allocated to these two categories based on the proportionate absolute changes in each category.


	Six months ended June 30, 2023 compared to six months ended June 30, 2022 due to changes in
(dollars in thousands on a tax-equivalent basis)	Volume		Yield/ rate		Net increase (decrease)
Interest-earning assets:
Loans held for investment(1)(2)	$	40,641	$	68,086	$	108,727
Loans held for sale - mortgage	(9,119)		5,135		(3,984)
Loans held for sale - commercial	(680)		(804)		(1,484)
Investment securities:
Taxable	(376)		1,507		1,131
Tax Exempt(2)	(317)		187		(130)
Federal funds sold and reverse repurchase agreements	(2,096)		4,388		2,292
Interest-bearing deposits with other financial institutions	(13,033)		29,681		16,648
FHLB stock	411		879		1,290
Total interest income(2)	15,431		109,059		124,490
Interest-bearing liabilities:
Interest-bearing checking deposits	(4,640)		41,709		37,069
Money market deposits	8,150		43,425		51,575
Savings deposits	(15)		10		(5)
Customer time deposits	4,739		12,022		16,761
Brokered and internet time deposits	456		211		667
Securities sold under agreements to repurchase and federal funds purchased	—		117		117
Federal Home Loan Bank advances	1,283		—		1,283
Subordinated debt	(116)		2,120		2,004
Other borrowings	—		1		1
Total interest expense	9,857		99,615		109,472
Change in net interest income(2)	$	5,574	$	9,444	$	15,018

(1)Average loans are gross, including nonaccrual loans and overdrafts (before deduction of allowance for credit losses on loans HFI).

~~(3)~~(2)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. ~~For the nine months ended September 30, 2022 and 2021, the~~The net taxable-equivalent adjustment amounts included was ~~$2.3~~$1.7 million and $1.5 million for ~~both~~ the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021, respectively.~~

~~(4)Excludes the average balance for unrealized gains (losses) for mortgage loans held for sale and investments carried at fair value.~~

~~(5)Includes investments in premises and equipment, OREO, interest receivable, mortgage servicing rights, core deposit and other intangibles, goodwill and other miscellaneous assets.~~

~~(6)~~Includes $2.8 million and $2.8 million of interest rate premium accretion on money market deposits, $0.6 million and $1.9 million on customer time deposits and $0.1 million and $0.4 million on brokered and internet time deposits for the nine months ended September 30, 2022, ~~and 2021, respectively.~~

~~(7)Includes $0.4 million of accretion on subordinated debt fair value premium for the nine months ended September 30, 2021. There was no such accretion for nine months ended September 30, 2022.~~

~~(8)The NIM is calculated by dividing annualized net interest income, on a tax-equivalent basis, by average total earning assets.~~

~~Rate/volume analysis~~

The tables below present the components of the changes in net interest income for the three and nine months ended September 30, 2022 and 2021. 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 30, 2022 compared to three months ended September 30, 2021~~

Three months ended September 30, 2022 compared to three months ended September 30, 2021 due to changes in
(in thousands on a tax-equivalent basis) Volume Yield/ rate Net increase
(decrease)
Interest-earning assets:
Loans(1)(2)
$ 20,334 $ 10,039 $ 30,373
Loans held for sale - residential (7,653) 4,592 (3,061)
Loans held for sale - commercial (1,340) 728 (612)
Securities available-for-sale and other securities:
Taxable 1,640 1,214 2,854
Tax Exempt(2)
(101) 14 (87)
Federal funds sold and reverse repurchase agreements 83 659 742
Time deposits in other financial institutions (5,335) 6,677 1,342
FHLB stock 183 91 274
Total interest income(2)
7,811 24,014 31,825
Interest-bearing liabilities:
Interest-bearing checking (239) 3,772 3,533
Money market(3)
(819) 3,181 2,362
Savings deposits 10 — 10
Customer time deposits(3)
(108) 803 695
Brokered and internet time deposits(3)
(106) 43 (63)
Securities sold under agreements to repurchase and federal funds
purchased (4) (4) (8)
Federal Home Loan Bank advances 2,155 — 2,155
Subordinated debt (30) 257 227
Other borrowings — (1) (1)
Total interest expense 859 8,051 8,910
Change in net interest income(2)
$ 6,952 $ 15,963 $ 22,915

~~(1)~~Average loans are gross, including nonaccrual loans and overdrafts (before deduction of allowance for credit losses). Origination and other loan fee income of $6.7 million and $6.4 million, net accretion of $0.9 million and $0.2 million, and nonaccrual interest collections of $0.5 million and $0.4 million are included in interest income in the three months ended September 30, 2022 and 2021, 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 $0.9 million of interest rate premium accretion on money market deposits, $180 thousand and $426 thousand of interest rate premium accretion on customer time deposits and $5 thousand and $99 thousand of interest rate premium accretion on brokered and internet deposits for the three months ended September 30, 2022 and 2021, respectively.

~~Nine months ended September 30, 2022 compared to nine months ended September 30, 2021~~

Nine months ended September 30, 2022 compared to nine months ended September 30, 2021 due to changes in
(dollars in thousands on a tax-equivalent basis) Volume Yield/ rate Net increase
(decrease)
Interest-earning assets:
Loans(1)
$ 42,137 $ 960 $ 43,097
Loans held for sale - residential (11,888) 5,505 (6,383)
Loans held for sale - commercial (3,898) 1,149 (2,749)
Securities available-for-sale and other securities:
Taxable 6,068 2,042 8,110
Tax Exempt(2)
(354) 22 (332)
Federal funds sold and reverse repurchase agreements 515 779 1,294
Time deposits in other financial institutions (1,875) 4,491 2,616
FHLB stock 180 174 354
Total interest income(2)
30,885 15,122 46,007
Interest-bearing liabilities:
Interest bearing checking 1,271 2,297 3,568
Money market deposits(4)
(429) (652) (1,081)
Savings deposits 39 (7) 32
Customer time deposits(4)
(850) (389) (1,239)
Brokered and internet time deposits(4)
(287) (148) (435)
Securities sold under agreements to repurchase and federal funds
purchased (8) (31) (39)
Federal Home Loan Bank advances 2,155 — 2,155
Subordinated debt(3)
(997) (42) (1,039)
Other borrowings (23) 24 1
Total interest expense 871 1,052 1,923
Change in net interest income(2)
$ 30,014 $ 14,070 $ 44,084

~~(1)~~Average loans are gross, including nonaccrual loans and overdrafts (before deduction of ACL). Syndication fee income $1.2 million and $0, origination and other loan fee income of $18.6 million and $19.9 million, net amortization of $1.3 million and $0.1 million, and nonaccrual interest collections of $2.1 million and $1.6 million are included in interest income for the nine months ended September 30, 2022 and 2021, 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 premium for the nine months ended September 30, 2021. There was no such accretion for nine months ended September 30, 2022.~~

~~(4)~~

Includes $2.8 million and $2.8 million of interest rate premium accretion on money market deposits, $0.6 million and $1.9 million on customer time deposits and $0.1 million and $0.4 million on brokered and internet time deposits for the nine months ended September 30, 2022 and 2021, respectively.

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 at an appropriate level under the current expected credit loss model. The determination of the amount 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 in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 for a detailed discussion regarding ACL methodology.

Our allowance for credit losses calculation as of ~~September~~June 30, ~~2022~~2023 resulted from management’s best estimate of losses over the life of loans and unfunded commitments in our portfolio in accordance with the CECL approach. Our calculation included qualitative adjustments for projected slower GDP growth over the next two ~~to three fiscal~~ years, expected elevated unemployment levels, and ~~expected~~potentially more interest rate increases ~~in the short-term~~ from the Federal Reserve. We also considered the current global economic environment, including continued pressures on supply chains (and more specifically, oil and energy) and increased uncertainty due primarily to inflation surrounding the potential impact and hardship on the U.S. economy. The qualitative evaluations above include considered projections that the economy may be nearing a recession. These factors may continue to lead to increased volatility in forecasted macroeconomic variables, a key input to our calculated level of allowance for credit losses.

Three months ended ~~September~~June 30, ~~2022~~2023 compared to three months ended ~~September~~June 30, ~~2021~~2022

We recognized a provision for credit losses on loans HFI of ~~$8.2~~$2.6 million ~~as compared to a reversal of provision for credit losses of $2.8~~and $8.2 million for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The ~~increase~~decrease in our provision for credit losses on loans HFI during the three months ended ~~September~~June 30, ~~2022~~2023 was a result of ~~increased~~decreased loan growth and the factors discussed above. The ~~increase~~slowed loan growth in our loans HFI combined with the economic variables signaling a possible recession in our forward-looking model compared to the ~~improving economic variables~~strong loan growth used for the three months ended ~~September~~June 30, ~~2021~~2022 are the primary drivers of the ~~increase~~decrease in the provision for credit losses on loans HFI during the three months ended ~~September~~June 30, 2022. In addition, our allowance for credit losses calculation as of September 30, 2022 considered our loans and unfunded commitments with commercial exposure to address elevated risk in these assets not covered by the model.See further discussion under the subheading "Allowance for credit losses."2023.

We also estimate 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, we consider 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. We recorded a reversal in provision for credit losses on unfunded commitments of ~~$3.2~~$3.7 million and ~~$0.3~~a provision expense of $4.1 million for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The ~~increase in expense period-over-period~~reversal is due to a ~~$328.9~~$158.0 million ~~increase~~decrease in our unfunded ~~commitment balance~~commitments during the three months ended ~~September~~June 30, ~~2022 and change~~2023, including a $197.2 million decrease in ~~macroeconomic variables discussed above.~~our construction category.

During the three months ended ~~September~~June 30, 2023, our available-for-sale debt securities portfolio net unrealized value declined $18.7 million to a net unrealized loss position of $226.0 million as of June 30, 2023 from a net unrealized loss position of $207.3 million as of March 31, 2023. During the three months ended June 30, 2022, our available-for-sale debt securities portfolio net unrealized value ~~declined $91.1~~decreased $66.6 million to ~~an unrealized loss position of $258.6 million as of September 30, 2022 from an~~a net unrealized loss position of $167.5 million as of June 30, ~~2022. During the three months ended September 30, 2021, our available-for-sale debt securities portfolio~~2022 from a net unrealized ~~value decreased $7.9 million to an unrealized gain~~loss position of ~~$14.4~~$100.9 million as of ~~September 30, 2021 from an unrealized gain position of $22.3 million as of June 30, 2021.~~March 31, 2022. The majority of the investment portfolio was either government guaranteed or an issuance of a government sponsored entity or highly rated by major credit rating agencies and we historically have not recorded any losses associated with these investments. As such, as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, it was determined that all available-for-sale debt securities that experienced a decline in fair value below amortized cost basis were due to noncredit-related factors. Further, it is unlikely that the Company will be required to sell the securities before recovery to amortized cost basis at maturity due to our liquidity position and access to other sources of funds. Therefore, there was no provision for credit losses recognized on available-for-sale debt securities during the three months ended ~~September~~June 30, ~~2022~~2023 or ~~2021.~~2022.

~~Nine~~Six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022

We recognized a provision for credit losses on loans HFI for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 of ~~$10.2~~$7.6 million. This compares to a ~~reversal in~~ provision for credit losses on loans HFI of ~~$27.3~~$2.1 million recorded for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. The current period provision on loans HFI resulted from management’s best estimate of losses over the life of loans in our portfolio in accordance with the CECL approach driven by ~~an $1.50 billion~~a $27.8 million increase in loans HFI outstanding from December 31, ~~2021~~2022 to ~~September~~June 30, ~~2022~~2023 and the ~~increased possibility of a future recession and inflationary pressures~~deteriorating economic forecasts as discussed in further detail ~~above. For~~above .For the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, the ~~reversal~~modest increase in ~~total~~the provision for credit losses on loans HFI was ~~primarily~~driven by an increase in loans HFI outstanding period-over-period coupled with the ~~result~~winding down of ~~improving economic forecasts allowing for a reduction of our reserves.~~COVID-era qualitative adjustments.

For the ~~nine~~six months ended ~~September~~June 30, ~~2022, the Company~~2023, we recorded a reversal in provision for credit losses on unfunded commitments of ~~$9.2~~$8.2 million compared to ~~a release in~~ provision expense of ~~$2.9~~$6.0 million ~~for~~during the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. The ~~increase~~decrease in the provision for credit losses on unfunded commitments is primarily due to ~~the increase~~our intentional decrease in unfunded loan commitments from December 31, 2022, including a $496.0 million decrease in our construction category and $41.0 million decrease in the ~~total loan commitment balance combined with the qualitative evaluations discussed above.~~non-owner occupied commercial real estate category.

During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the net unrealized value in our available-for-sale debt securities portfolio ~~declined $263.3~~improved to a net unrealized loss position of $226.0 million from $234.4 million as of December 31, 2022. During the six months ended June 30, 2022, our available-for-sale debt securities portfolio net unrealized value declined $172.2 million to an unrealized loss position of $167.5 million from a net unrealized gain position of $4.7 million as of December 31, 2021. During the nine months ended September 30, 2021, the Company's available-for-sale debt securities portfolio unrealized value declined $20.2 million from an unrealized gain position of $34.6 million as of December 31, 2020. Based on our evaluation of potential credit risk in the portfolio, no provision for credit losses on available-for-sale debt securities was required during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 or ~~2021.~~2022.

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,				Three Months Ended June 30,				Six Months Ended June 30,
(dollars in thousands)	(dollars in thousands)	2022		2021		2022		2021			(dollars in thousands)	2023		2022		2023		2022
Mortgage banking income	Mortgage banking income	$	12,384	$	45,384	$	64,474	$	136,215		Mortgage banking income	$	12,232	$	22,559	$	24,318	$	52,090
Service charges on deposit accounts	Service charges on deposit accounts	3,208		2,612		9,030		7,217			Service charges on deposit accounts	3,185		2,908		6,238		5,822
Investment services and trust income											Investment services and trust income	2,777		2,275		5,155		4,407
ATM and interchange fees	ATM and interchange fees	2,614		4,868		13,054		14,590			ATM and interchange fees	2,629		5,353		5,025		10,440
Investment services and trust income		2,227		2,511		6,634		7,518
(Loss) gain from securities, net	(Loss) gain from securities, net	(140)		51		(401)		278			(Loss) gain from securities, net	(28)		(109)		41		(261)
Gain (loss) on sales or write-downs of other real estate owned		435		2,005		(89)		2,478
(Loss) gain from other assets		(6)		177		76		162
Gain (loss) on sales or write-downs of other real estate owned and other assets											Gain (loss) on sales or write-downs of other real estate owned and other assets	533		(8)		350		(442)

Other income	Other income	1,870		1,398		4,420		6,578			Other income	2,485		236		6,035		2,550
Total noninterest income	Total noninterest income	$	22,592	$	59,006	$	97,198	$	175,036		Total noninterest income	$	23,813	$	33,214	$	47,162	$	74,606

Three months ended ~~September~~June 30, ~~2022~~2023 compared to three months ended ~~September~~June 30, ~~2021~~2022

Noninterest income amounted to ~~$22.6~~$23.8 million for the three months ended ~~September~~June 30, ~~2022,~~2023, a decrease of ~~$36.4~~$9.4 million, or ~~61.7%~~28.3%, as compared to ~~$59.0~~$33.2 million for the three months ended ~~September~~June 30, ~~2021.~~2022. 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 ~~loan~~ servicing fees, which includes ~~the~~ net change in fair value of MSRs and related derivatives. Mortgage banking income is initially driven by the recognition of interest rate lock commitments 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 ~~$12.4~~$12.2 million and ~~$45.4~~$22.6 million for the three months ended ~~September~~June 30, 2023 and 2022, ~~and 2021,~~ respectively.

During the quarter, we completed our wind-down from our direct-to-consumer internet delivery channel, resulting in lower volume of activity and revenue within our Mortgage segment. During the three months ended September 30, 2022, the Company’s mortgage operations had sales of $569.7 million which generated The decrease includes a sales margin of 1.95%. This compares to $1.54 billion and 2.55% for the three months ended September 30, 2021. The industry benefited greatly from historically low interest rates during the three months ended September 30, 2021, causing an increase in interest rate lock commitment volume, which slowed dramatically in 2022 across the industry. Mortgage banking incomedecrease from gains on sale and related fair value changes ~~decreased~~of $6.9 million to ~~$8.6~~$8.9 million during the three months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$40.2~~$15.7 million for the three months ended ~~September~~June 30, ~~2021. Total~~2022. This was impacted by the reduction in interest rate lock volume ~~decreased $1,603.0~~of $297.9 million, or ~~79.7% to $408.9 million for~~42.5%, during the three months ended ~~September~~June 30, ~~2022 compared to~~2023 over the same period in the previous year. ~~The exit of direct-to-consumer internet delivery channel attributed $1,085.2 million of the $1,603.0 million decrease in our interest rate lock volume.~~

~~Our mortgage business is directly~~In addition to being impacted by the interest rate environment ~~increased regulations,~~and depressed consumer demand, ~~economic conditions,~~this decrease also reflects the impact of the Mortgage restructuring and ~~investor demand for mortgage production. Mortgage production, especially refinance activity, declines in rising interest rate environments. Our~~discontinuance of our direct-to-consumer internet delivery channel. For the three months ended June 30, 2022, direct-to-consumer comprised 13.7% our total interest rate lock volume ~~during three months ended September 30, 2022 was composed~~and 37.4% of 14.2% refinancing activity compared with 66.1% during the same period in the previous year. As interest rates have increased, we continue to see margin compression and reduced volumes due to excess capacity in theour sales volume, respectively.

industry, refinance fatigue and affordability constraints in our markets. Our interest rate lock volume can be materially and adversely impacted by rising interest rates, seasonality and excess market capacity, and we expect to see further declines in interest rate lock volume in our retail channel and consequently, mortgage banking income in the last quarter of 2022.

Income from mortgage servicing of $8.1 million and $7.5 million for three months ended September 30, 2022 and 2021, respectively, was partially offset by losses on changes in fair value of MSRs and related hedging activity of $4.3 million and $2.4 million in the three months ended September 30, 2022 and 2021, respectively.

The components of mortgage banking income for three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 were as follows:


		Three Months Ended September 30,						Three Months Ended June 30,
(in thousands)		2022			2021
(dollars in thousands)									(dollars in thousands)	2023			2022
Mortgage banking income:	Mortgage banking income:								Mortgage banking income:
Origination and sales of mortgage loans		$	11,085		$	39,210
Gains and fees from origination and sale of mortgage loans held for sale									Gains and fees from origination and sale of mortgage loans held for sale	$	7,994		$	21,099
Net change in fair value of loans held for sale and derivatives	Net change in fair value of loans held for sale and derivatives	(2,460)			1,002				Net change in fair value of loans held for sale and derivatives	874			(5,354)
Change in fair value on MSRs	Change in fair value on MSRs	(4,345)			(2,367)				Change in fair value on MSRs	(4,222)			(1,152)
Mortgage servicing income	Mortgage servicing income	8,104			7,539				Mortgage servicing income	7,586			7,966
Total mortgage banking income	Total mortgage banking income	$	12,384		$	45,384			Total mortgage banking income	$	12,232		$	22,559
Interest rate lock commitment volume by line of business:
Interest rate lock commitment volume by delivery channel:									Interest rate lock commitment volume by delivery channel:
Direct-to-consumer	Direct-to-consumer	$	—		$	1,085,180			Direct-to-consumer	$	—		$	95,756

Retail	Retail	408,879			926,723				Retail	402,951			605,114

Total	Total	$	408,879		$	2,011,903			Total	$	402,951		$	700,870
Interest rate lock commitment volume by purpose (%):	Interest rate lock commitment volume by purpose (%):								Interest rate lock commitment volume by purpose (%):
Purchase	Purchase	85.8		%	33.9		%		Purchase	88.8		%	84.0		%
Refinance	Refinance	14.2		%	66.1		%		Refinance	11.2		%	16.0		%
Mortgage sales	Mortgage sales	$	569,655		$	1,535,897			Mortgage sales	$	330,326		$	869,688
Mortgage sale margin	Mortgage sale margin	1.95		%	2.55		%		Mortgage sale margin	2.42		%	2.43		%
Closing volume	Closing volume	$	409,641		$	1,617,508			Closing volume	$	346,202		$	725,755
Outstanding principal balance of mortgage loans serviced	Outstanding principal balance of mortgage loans serviced	$	11,233,249		$	10,633,805			Outstanding principal balance of mortgage loans serviced	$	10,961,516		$	11,160,382

ATM and interchange fees income for the three months ended ~~September~~June 30, ~~2022~~2023 decreased by ~~46.3%~~50.9% to $2.6 million compared to ~~$4.9~~$5.4 million for the three months ended ~~September~~June 30, ~~2021.~~2022. The decrease was ~~partially~~primarily attributable to the expiration of our temporary exemption from the Durbin amendment during the ~~current period.~~second half of 2022. The Durbin amendment limits the amount of interchange transaction fees that banks with asset sizes greater than $10 billion are permitted to charge retailers for debit card processing. Interchange fee income varies with size and volume of transactions, which can fluctuate with seasonality, consumer spending habits and economic conditions. While our volume of transactions for the three months ended ~~September~~June 30, ~~2022~~2023 increased by approximately ~~7.00%~~6.00% from the three months ended ~~September~~June 30, ~~2021,~~2022, our total interchange fee income declined ~~48.3%~~52.7% for the same period, ~~primarily driven~~the majority of which related to the application of the fee cap imposed by ~~the imposition of~~ the Durbin amendment ~~interchange fee cap in~~impacting the ~~third quarter of 2022.~~

Gain on sales or write-downs of other real estate owned decreased to $0.4 million for the three months ended September 30, 2022 compared to $2.0 million for the three months ended September 30, 2021. The change is the result of specific sales and valuation transactions. In the prior period, the gain was primarily related to the sale of one of our branch locations, which had been vacated as a result of consolidating locations following one of our acquisitions.current period.

Other noninterest income for the three months ended ~~September~~June 30, ~~2022~~2023 increased ~~$0.5~~$2.2 million to ~~$1.9~~$2.5 million compared with ~~$1.4~~$0.2 million for the three months ended ~~September~~June 30, ~~2021.~~2022. This includes ~~a $0.4 million loss~~losses associated with ~~the change in fair value in~~ our commercial loans held for sale portfolio of $8 thousand for the three months ended ~~September~~June 30, ~~2022~~2023 compared with ~~$0.7~~losses of $2.0 million ~~gain~~ for the three months ended ~~September~~June 30, ~~2021. Other noninterest income during~~2022. Additional information on our commercial loans held for sale portfolio is included under the ~~three months ended September 30, 2021 also included a $1.5 million loss on the cancellation of an interest rate swap associated with a loan HFI that was resolved during the period.~~subheading 'Loans held for sale' within this management's discussion and analysis.

~~Nine~~Six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022

Noninterest income amounted to ~~$97.2~~$47.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, a decrease of ~~$77.8~~$27.4 million, or ~~44.5%~~36.8%, as compared to ~~$175.0~~$74.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. Changes in selected components of noninterest income in the above table are discussed below.

Mortgage banking income was ~~$64.5~~$24.3 million and ~~$136.2~~$52.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, representing a ~~$71.7~~$27.8 million decrease, or ~~52.7%~~53.3% year-over-year. The total decrease ~~year-over-year.~~

~~During the nine months ended September 30, 2022, our mortgage operations had sales of $2.72 billion which generated~~includes a gain on sales margin of 2.26%. This compares to $4.79 billion and 3.06% for the nine months ended September 30, 2021. Sales of mortgage loans HFS began to slow with the continual rise of interest ratesreduction in ~~2022 and affordability constraints in many of our markets. The decrease in gain on sales is a result of over-capacity in the industry and compressing margins. Mortgage banking~~ income from gains on sale and related fair value changes, which decreased to ~~$46.2~~$16.6 million during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$125.7~~$37.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021. Total~~2022. This change was caused by a decrease in interest rate lock volume ~~decreased $3.26~~of $1.23 billion, or ~~57.4%~~61.3%, ~~during~~for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~same period in the previous year. Market conditions during the nine~~six months ended ~~September~~June 30, ~~2022, including declining~~2022. In addition to being impacted by the interest rate environment, affordability constraints and a decline in consumer demand, ~~for mortgages~~this decrease also reflects the impact of the Mortgage restructuring and ~~increased interest rates have also shifted the mix~~discontinuance of interest rate lock commitments by purpose down to 30.3% refinance volume for the nine months ended September 30, 2022 compared with 63.7% refinance interest rate lock volume for the same period in the previous year.

~~As previously discussed, we completed the process of winding down~~ our direct-to-consumer internet delivery channel within our Mortgage segment during the third quarter of 2022. Our direct-to-consumer channel was particularly dependent on the support of a strong refinance market and the current lack of demand and interest rate environment was unfavorable for future profitability in this delivery channel. For the ~~nine~~six months ended ~~September~~June 30, 2022, ~~and 2021,~~ direct-to-consumer comprised ~~27.4% and 52.0% of the Company's~~33.0% our total interest rate lock volume and ~~37.6% and 53.5%~~45.3% of ~~the Company's~~our sales volume, ~~respectively. We incurred restructuring charges of $12.5 million during the nine months ended September 30, 2022 as a result of exiting this channel.~~

Income from mortgage servicing was $23.5 million and $21.3 million for nine months ended September 30, 2022 and 2021, respectively, was partially offset by losses on changes in fair value of MSRs and related hedging activity of $5.2 million and $10.8 million for nine months ended September 30, 2022 and 2021, respectively.

The components of mortgage banking income for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 were as follows:

Nine Months Ended September 30,
(dollars in thousands) 2022 2021
Mortgage banking income
Origination and sales of mortgage loans $ 61,581 $ 146,538
Net change in fair value of loans held for sale and derivatives (15,362) (20,806)
Change in fair value on MSRs (5,244) (10,775)
Mortgage servicing income 23,499 21,258
Total mortgage banking income $ 64,474 $ 136,215
Interest rate lock commitment volume by line of business:
Direct-to-consumer $ 663,848 $ 2,948,530
Retail 1,755,008 2,726,956
Total $ 2,418,856 $ 5,675,486
Interest rate lock commitment volume by purpose (%):
Purchase 69.7 % 36.3 %
Refinance 30.3 % 63.7 %
Mortgage sales $ 2,723,825 $ 4,789,476
Mortgage sale margin 2.26 % 3.06 %
Closing volume $ 2,129,129 $ 4,926,390
Outstanding principal balance of mortgage loans serviced $ 11,233,249 $ 10,633,805


	Six Months Ended June 30,
(dollars in thousands)	2023			2022
Mortgage banking income
Gains and fees from origination and sale of mortgage loans held for sale	$	16,140		$	50,496
Net change in fair value of loans held for sale and derivatives	453			(12,902)
Change in fair value on MSRs	(7,629)			(899)
Mortgage servicing income	15,354			15,395
Total mortgage banking income	$	24,318		$	52,090
Interest rate lock commitment volume by delivery channel:
Direct-to-consumer	$	—		$	663,848

Retail	777,993			1,346,129

Total	$	777,993		$	2,009,977
Interest rate lock commitment volume by purpose (%):
Purchase	87.6		%	66.0		%
Refinance	12.4		%	34.0		%
Mortgage sales	$	662,633		$	2,154,170
Mortgage sale margin	2.44		%	2.34		%
Closing volume	$	641,962		$	1,719,488
Outstanding principal balance of mortgage loans serviced	$	10,961,516		$	11,160,382

ATM and interchange fees decreased ~~$1.5~~$5.4 million to ~~$13.1~~$5.0 million during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to ~~$14.6~~$10.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. As discussed above, this decrease iswas primarily attributable to the expiration of our temporary exemption from the Durbin amendment induring the ~~third quarter~~second half of 2022. While our volume of interchange transactions increased approximately ~~6.00%% for~~7.00% during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 from the ~~nine months ended September 30, 2021,~~previous year, interchange fee income declined by ~~10.9% in the same periods,~~53.8%, the majority of which related to the application of the fee cap imposed by the Durbin amendment inimpacting the ~~third quarter of 2022.~~current period.

Other income ~~decreased $2.2~~increased $3.5 million to ~~$4.4~~$6.0 million during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to ~~$6.6~~$2.6 million during the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. This ~~decrease~~increase is primarily related to ~~$2.6~~a $0.9 million ~~loss from~~gain associated with the change in fair value of the commercial loans held for sale ~~that were acquired through business combination~~portfolio during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$1.3~~a $2.2 million ~~gain~~loss for the ~~nine~~six months ended ~~September~~June 30, 2021. Other noninterest income during the nine months ended September 30, 2021 also included a $1.5 million loss on the cancellation of an interest rate swap associated with a loan HFI that was resolved during the period.2022.

Noninterest expense

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)	2022		2021		2022		2021			(dollars in thousands)	2023		2022		2023		2022
Salaries, commissions and employee benefits	Salaries, commissions and employee benefits	$	51,028	$	62,818	$	165,652	$	189,756		Salaries, commissions and employee benefits	$	52,020	$	55,181	$	100,808	$	114,624
Occupancy and equipment expense	Occupancy and equipment expense	6,011		5,979		17,267		17,184			Occupancy and equipment expense	6,281		5,853		12,190		11,256
Legal and professional fees	Legal and professional fees	4,448		2,177		10,171		6,701			Legal and professional fees	2,199		3,116		5,307		5,723
Data processing	Data processing	2,334		2,595		7,219		7,456			Data processing	2,345		2,404		4,458		4,885

Amortization of core deposit and other intangibles	Amortization of core deposit and other intangibles	1,108		1,344		3,546		4,178			Amortization of core deposit and other intangibles	940		1,194		1,930		2,438

Advertising	Advertising	2,050		4,200		8,114		10,012			Advertising	2,001		2,031		4,134		6,064
Mortgage restructuring expense	Mortgage restructuring expense	—		—		12,458		—			Mortgage restructuring expense	—		12,458		—		12,458
Other expense	Other expense	14,868		15,894		43,689		47,378			Other expense	15,506		14,760		32,905		28,821
Total noninterest expense	Total noninterest expense	$	81,847	$	95,007	$	268,116	$	282,665		Total noninterest expense	$	81,292	$	96,997	$	161,732	$	186,269

Three months ended ~~September~~June 30, ~~2022~~2023 compared to three months ended ~~September~~June 30, ~~2021~~2022

Noninterest expense decreased by ~~$13.2~~$15.7 million during the three months ended ~~September~~June 30, ~~2022~~2023 to ~~$81.8~~$81.3 million as compared to ~~$95.0~~$97.0 million in the three months ended ~~September~~June 30, ~~2021. Changes in selected components of noninterest expense in the above table are discussed below.~~

Salaries, commissions and employee benefits expense is the largest component of noninterest expenses representing 62.3% and 66.1% of total noninterest expense in the three months ended September 30, 2022 and 2021, respectively. During the three months ended September 30, 2022, salaries and employee benefits expense decreased $11.8 million, or 18.8%, to $51.0 million as compared to $62.8 million for the three months ended September 30, 2021. This decrease was mainly driven by a decrease of $14.5 million in salaries, commissions and employee benefits in the Mortgage segment during the three months ended September 30, 2022 from the same period in 2021, reflective of the slowdown in mortgage production and completion of the direct-to-consumer wind-down during the current period. Costs resulting from our equity compensation grants during the three months ended September 30, 2022 and 2021 amounted $2.5 million and $2.9 million, respectively. These grants mainly comprise annual restricted stock unit and performance stock unit grants to our employees, which are discussed further in Note 13, "Stock-based compensation" in the notes to the Consolidated financial statements within this Report.

Legal and professional fees increased by $2.3 million during the three months ended September 30, 2022 to $4.4 million as compared to $2.2 million for the three months ended September 30, 2021. This increase was primarily due to consulting, legal and other fees related to acceleration of some of our internal projects.

Advertising expense includes expenses related to sponsorships, advertising, marketing, customer relations and business development and public relations. During the three months ended September 30, 2022, advertising expense decreased $2.2 million to $2.1 million as compared to $4.2 million in the three months ended September 30, 2021. This decrease is primarily attributable to decreased costs of lead generation in our Mortgage segment driven by the Mortgage restructuring and reduction in production.

Occupancy and equipment expense remained relatively stable for the three months ended September 30, 2022 compared with the same period in the prior year. As previously disclosed, during the year ended December 31, 2020, we entered into an operating lease for a new corporate headquarters building located in downtown Nashville. During the three months ended September 30, 2022, construction of the exterior of the building was completed and we took possession of the leased space and began the build-out of the interior space. As such, as of August 1, 2022, we recorded a right-of-use asset and right-of-use liability of $22.1 million and $26.1 million, respectively, which will be amortized over the initial lease term of approximately 13 years. Our lease expense during this build-out phase will be elevated into the first half of 2023 until our headquarters is fully transitioned to the new location as we will be temporarily incurring lease expense related to two headquarters locations during this build-out and transition period.

During the three months ended September 30, 2022, other noninterest expense decreased $1.0 million to $14.9 million from $15.9 million for the same period in the previous year. Other noninterest expense during the three months ended September 30, 2022 was reduced by a decrease in franchise tax expense from Tennessee State tax credits amounting to $0.7 million during the period. This is a geography shift when compared to the three months ended September 30, 2021 as these tax credits were recognized as a reduction to income tax expense amounting to $0.8 million for that period.

~~Nine months ended September 30, 2022 compared to nine months ended September 30, 2021~~

~~Noninterest expense decreased by $14.6 million during the nine months ended September 30, 2022 to $268.1 million as compared to $282.7 million in the nine months ended September 30, 2021.~~2022. 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~~expense representing ~~61.8%~~64.0% and ~~67.1%~~56.9% of total noninterest expense infor the ~~nine~~three months ended ~~September~~June 30, 2023 and 2022, ~~and 2021,~~ respectively. ~~During~~For the ~~nine~~three months ended ~~September~~June 30, ~~2022,~~2023, salaries and employee benefits expense decreased ~~$24.1~~$3.2 million, or ~~12.7%~~5.7%, to ~~$165.7~~$52.0 million as compared to ~~$189.8~~$55.2 million for the ~~nine~~three months ended ~~September~~June 30, ~~2021.~~2022. This decrease ~~includes~~was mainly driven by a ~~$22.5 million~~ decrease in ~~incentive~~commissions and ~~commission compensation during the nine months ended September 30, 2022, which was driven by the decrease in mortgage production volume and decline in profitability during the period~~incentives in addition to the ~~impact of~~reduction in headcount from the Mortgage restructuring.

~~Legal and professional expense increased~~ The decrease is partially offset by ~~$3.5~~$0.6 million in severance expenses incurred during the ~~nine~~three months ended ~~September~~June 30, ~~2022 to $10.2 million as compared to $6.7 million~~2023, which includes the acceleration in the nine months ended September 30, 2021. As discussed above, the increase in legal and professional expenses was due to temporary increases on consulting, legal, and other fees related to accelerationvesting of ~~some of our internal projects.~~certain equity grants.

Mortgage restructuring ~~expenses~~expense of $12.5 million ~~were~~was reported during the ~~nine~~three months ended ~~September~~June 30, 2022 related to the exit from our direct-to-consumer internet delivery channel. These expenses primarily include $10.0 million related to salaries, commissions and employee benefits expense, including the acceleration of vesting on restricted stock units. Other components of this expense includes $1.1 million related to software license and maintenance fees, $0.4 million impairment of our operating lease right-of-use assets, and $0.9 million loss on disposal of fixed assets.

Six months ended June 30, 2023 compared to six months ended June 30, 2022

Noninterest expense decreased by $24.5 million during the six months ended June 30, 2023 to $161.7 million as compared to $186.3 million in the six months ended June 30, 2022. 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 expense representing 62.3% and 61.5% of total noninterest expense for the six months ended June 30, 2023 and 2022, respectively. For the six months ended June 30, 2023, salaries and employee benefits expense decreased $13.8 million, or 12.1%, to $100.8 million as compared to $114.6 million for the six months ended June 30, 2022. The decrease was attributable to a $8.3 million decrease in salaries in the Mortgage segment due to the Mortgage restructuring. Additionally, the decrease included a $8.8 million decrease in incentive and commission-based compensation during the six months ended June 30, 2023, which was driven by the decrease in mortgage production volume and decline in profitability during the period.

Advertising expense includes expenses related to sponsorships, advertising, marketing, customer relations and business development and public relations. During the six months ended June 30, 2023, advertising expense decreased $1.9 million to $4.1 million compared to $6.1 million during the six months ended June 30, 2022. This decrease is primarily attributable to realigning our expenses after the Mortgage restructuring to reflect the decrease in production.

Mortgage restructuring expense of $12.5 million was reported during the six months ended June 30, 2022 related to the exit from our direct-to-consumer internet delivery channel as discussed above.

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 ~~decreased $3.7~~increased $4.1 million during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 to ~~$43.7~~$32.9 million compared to ~~$47.4~~$28.8 million during the ~~nine~~six months ended September 30, 2021. The change includes a $1.8 million decrease in franchise tax expense, which reflects the impact of $2.1 million in Tennessee state tax credits. These credits have historically been reflected in the income tax expense line item and were required to be reported in our pre-tax results given the limited Tennessee state taxable income earned during the nine months ended SeptemberJune 30, 2022. This ~~compares to $2.5~~increase includes a $2.1 million increase in Tennessee State tax credits for the nine months ended September 30, 2021 which was included in income tax expense rather than other noninterest expense. Additionally, during the nine months ended September 30, 2021, we incurred $0.6 million in offering costs under our registration rights agreement from the secondary offering completed during the period. There were no such costs during the nine months ended September 30, 2022.regulatory fees and assessments.

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 ~~61.1%~~64.8% and ~~67.2%~~64.1% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, and ~~64.4%~~71.6% and ~~65.3%~~70.3% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively. Our adjusted efficiency ratio, on a tax-equivalent basis, was ~~60.7%~~63.5% and ~~63.3%~~63.4% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, and ~~64.7%~~61.1% and ~~65.4%~~64.5% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively. See “GAAP reconciliation and management explanation of non-GAAP financial measures” in this Report for a discussion of the adjusted efficiency ratio.

Income taxes

Income tax expense was ~~$8.9~~$9.8 million and ~~$9.7~~$6.7 million for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$25.0~~$19.5 million and ~~$38.7~~$16.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. This represents effective tax rates of ~~21.9%~~21.8% and ~~17.7%~~25.8% for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~22.4%~~21.4% and ~~21.5%~~22.7% for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The primary differences from the enacted rates are applicable state income taxes and certain expenses that are not deductible reduced for non-taxable income and additional deductions for equity-based compensation upon vesting of restricted stock units. State taxes, net of federal benefits, increased our effective tax rate by ~~2.5%~~1.40% and ~~6.0%~~6.07% for the three months ended ~~September~~June 30, 2023 and 2022 and ~~2021~~by 1.00% and ~~by 3.2% and 3.8%~~3.59% for the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, ~~and 2021,~~ respectively. The effect of state taxes were slightly lower during the three and nine months ended September 30, 2022 due to the impact of Tennessee state tax credits of $0.7 million and $2.1 million, respectively, which moved to other noninterest expense during the three and nine months ended September 30, 2022 versus in income tax expense in the comparable previous periods. For further information regarding our state credits, please refer to the section captioned 'Noninterest expense' within this Report. We had a net operating loss carryforward generated as a result of one of our previous acquisitions which amounted to $5.5 million and $6.5 million as of September 30, 2022 and December 31, 2021, respectively. The net operating loss carryforward can be used to offset taxable income in future periods and reducing income tax liabilities in those future periods. While net operating losses are subject to certain annual utilization limits under Section 382, we believe the net operating loss carryforwards will be realized based on the projected annual limitation and the length of the net operating loss carryover period. Our 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 will begin to expire in 2029.

The Company is subject to Section 162(m), which limits the deductibility of compensation paid to certain individuals. The restricted stock unit plans that existed prior to the corporation being public vested after the reliance period as defined in the underlying Treasury Regulations. It is our policy to apply the Section 162(m) limitations to stock-based compensation, including our restricted stock unit plan, first and then followed by cash compensation. As a result of the vesting of these units and cash compensation paid to date, we have disallowed a portion of compensation paid to the applicable individuals.

Financial condition

The following discussion of our financial condition compares balances as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

Loan portfolio

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:


		September 30,						December 31,													June 30,											December 31,
		2022								2021				2023											2022
(dollars in thousands)	(dollars in thousands)	Committed		Amount Outstanding		% of total outstanding		Committed		Amount Outstanding		% of total outstanding						(dollars in thousands)			Committed				Amount Outstanding				% of total outstanding			Committed				Amount Outstanding		% of total outstanding
Loan Type:	Loan Type:																	Loan Type:
Commercial and industrial (1)		$	2,596,816	$	1,534,159	17	%	$	2,060,028	$	1,290,565	17	%
Commercial and industrial															Commercial and industrial	$	2,862,078		$	1,693,572			18	%			$	2,671,861		$	1,645,783			18	%
Construction	Construction	3,376,230		1,679,497		18	%	2,886,088		1,327,659		17	%					Construction			2,779,952				1,636,970				18	%		3,296,503				1,657,488		18	%
Residential real estate:	Residential real estate:																	Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	1,546,120		1,545,252		17	%	1,272,477		1,270,467		17	%					1-to-4 family mortgage			1,549,408				1,548,614				17	%		1,573,950				1,573,121		17	%
Residential line of credit	Residential line of credit	1,101,608		460,774		5	%	935,571		383,039		5	%					Residential line of credit			1,183,299				507,652				5	%		1,151,750				496,660		5	%
Multi-family mortgage	Multi-family mortgage	422,773		394,366		4	%	339,882		326,551		4	%					Multi-family mortgage			522,997				518,025				6	%		496,664				479,572		5	%
Commercial real estate:	Commercial real estate:																	Commercial real estate:
Owner-occupied	Owner-occupied	1,221,800		1,158,343		13	%	1,005,534		951,582		13	%					Owner-occupied			1,209,709				1,158,782				12	%		1,156,534				1,114,580		12	%
Non-owner occupied	Non-owner occupied	2,090,382		1,954,219		22	%	1,839,990		1,730,165		23	%					Non-owner occupied			1,986,179				1,881,978				20	%		2,109,218				1,964,010		21	%
Consumer and other	Consumer and other	408,764		378,406		4	%	351,153		324,634		4	%					Consumer and other			403,737				380,431				4	%		393,632				366,998		4	%
Total loans	Total loans	$	12,764,493	$	9,105,016	100	%	$	10,690,723	$	7,604,662	100	%					Total loans			$	12,497,359			$	9,326,024			100	%		$	12,850,112			$	9,298,212	100	%

~~(1)~~
~~Includes $0.9 million and $4.0 million of PPP loans outstanding as of September 30, 2022 and December 31, 2021, respectively.~~

Our loans HFI portfolio is our most significant earning asset, comprising ~~74.3% and 60.4%~~72.4% of our total assets ~~as of September~~at both June 30, ~~2022~~2023 and December 31, ~~2021, respectively.~~2022. 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 in the markets we serve, but we are also party to loan syndications and participations from other banks (collectively, “participated loans”). ~~At September~~As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, loans held for investment included approximately ~~$292.3~~$294.7 million and ~~$263.9~~$280.5 million, respectively, related to ~~purchased~~ participated loans. We also sell loan participations to unaffiliated third parties as part of our credit risk management and balance sheet management strategy. During the three months ended June 30, 2023 and 2022, we sold $11.9 million and $7.3 million loan participations, respectively. During the six months ended June 30, 2023 and 2022, we sold $16.3 million and $7.6 million loan participations, respectively. All loans, whether or not we act as a participant, are underwritten to the same standards as all other loans we originate. We believe our loan portfolio is well-balanced, which provides us with the opportunity to grow while monitoring our loan concentrations.

Loan concentrations are considered to exist when there are amounts loaned to a number of borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. Our lending activity is heavily concentrated in the geographic market areas we serve, with highest concentration in Tennessee. This geographic concentration subjects our loan portfolio to the general economic conditions within the state. The risks created by this concentration have been considered by management in the determination of the appropriateness of the allowance for credit ~~losses.~~losses on loans HFI. As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, there were no concentrations of loans exceeding 10% of total loans other than our exposure to Tennessee and 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.

Banking regulators have established ~~thresholds~~guidelines of less than 100% of tier 1 capital plus allowance for credit losses in construction lending and less than 300% of tier 1 capital 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 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 tier 1 capital plus allowance for credit losses. Management strives to operate within the thresholds set forth above.

When ~~a company's~~our 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, ~~2022~~2023 and December 31, ~~2021.~~2022.


		As a percentage (%) of tier 1 capital plus allowance for credit losses					As a percentage (%) of tier 1 capital plus allowance for credit losses
		FirstBank		FB Financial Corporation			FirstBank		FB Financial Corporation
September 30, 2022
June 30, 2023						June 30, 2023
Construction	Construction	123.6	%	121.1	%	Construction	113.1	%	110.5	%
Commercial real estate	Commercial real estate	298.5	%	292.4	%	Commercial real estate	280.7	%	274.4	%
December 31, 2021
December 31, 2022						December 31, 2022
Construction	Construction	102.7	%	99.8	%	Construction	119.0	%	117.2	%
Commercial real estate	Commercial real estate	263.5	%	256.0	%	Commercial real estate	296.5	%	291.9	%

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. 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. ~~Growth in our~~We plan to continue to make commercial and industrial loans an area of emphasis in our lending portfolio ~~is expected to decrease as we position for potential economic headwinds.~~in the future.









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. 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. We ~~expect~~continue to ~~make~~focus on decreasing these commitments. While previous commitments have continued to fund up, new commitments to extend additional funds in this category have slowed, which is reflected in the unfunded commitments in our construction ~~loans at a more moderate pace~~portfolio as of June 30, 2023, which have declined $496.0 million or 30.3% compared to ~~prior quarters due~~December 31, 2022. We expect our outstanding balances in the construction portfolio to ~~our current macroeconomic forecasts~~decrease in the short term as loans mature and ~~our increasing expectation that the economy may be nearing a recession.~~unfunded commitments continue to decrease.










~~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. Our future origination volume could be impacted by any deterioration of housing values in our markets and increased unemployment or underemployment.





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 also be affected by unemployment or underemployment and deteriorating market values of real estate.




Multi-family residential loans.			Our multi-family residential loans are primarily secured by multi-family properties, such as apartments and condominium buildings. The value of these loans ~~and growth in this area of our portfolio~~ may be affected by unemployment or underemployment, and ~~deteriorating~~ market values of real ~~estate.~~estate among other factors. We plan to continue to make multifamily loans an area of emphasis for our loan portfolio as demand in our markets for housing increases and 1-4 family mortgages become more difficult to obtain.


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. Due to current market conditions and macroeconomic forecasts, we expect growth in commercial real estate owner-occupied loans ~~in future quarters~~ to be moderated compared to ~~prior quarters.~~historical growth.


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. ~~We expect growth~~Unfunded commitments in our commercial real estate non-owner occupied portfolio as of June 30, 2023 have declined $41.0 million or 28.2% compared to December 31, 2022. We expect our outstanding balances in the commercial real estate non-owner occupied category to decrease in the short term as loans mature and unfunded commitments continue to ~~be reduced in comparison to prior quarters due to current macroeconomic outlook.~~decrease.









Consumer and other loans.			Consumer and other loans include consumer loans made to individuals for personal, family and household purposes, including car, boat, manufactured homes (without real estate) and other recreational vehicle loans and personal lines of credit. These loans are generally secured by vehicles, manufactured homes, and other household goods. The collateral securing consumer loans may depreciate over time. ~~The company seeks~~We seek 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~~represent a significant portion of our loan portfolio.

As part of our lending policy and risk management activities, the Company tracks lending exposure of commercial and industrial and owner-occupied commercial real estate by industry classification (as defined by the North American Industry Classification System) and type to determine potential risks associated with industry concentrations, and if any risk issues could lead to additional credit loss exposure. The table below provides a summary of our commercial and industrial and owner-occupied commercial real estate portfolios by industry classification.


	June 30, 2023
(dollars in thousands)	Committed		Amount Outstanding		Nonperforming
Commercial and industrial loans
Real estate rental and leasing	$	648,396	$	419,452	$	194
Finance and insurance	487,165		305,341		—
Construction	396,547		124,186		22
Manufacturing	262,810		183,188		—
Retail trade	160,031		115,420		—
Wholesale trade	152,866		87,084		907
Professional, scientific and technical services	135,471		69,912		211
Transportation and warehousing	108,861		89,342		35
Administrative and support and waste management and remediation services	107,951		50,975		142
Health care and social assistance	86,388		56,198		162
Other services (except public administration)	55,127		28,300		—
Educational services	55,030		39,076		26
Accommodation and food services	42,294		27,470		—
Arts, entertainment and recreation	34,426		29,276		—
Information	34,186		30,071		—
Agriculture, forestry, fishing and hunting	28,708		18,189		325
Other	65,821		20,092		139
Total	$	2,862,078	$	1,693,572	$	2,163

Commercial real estate owner-occupied
Real estate rental and leasing	$	222,760	$	213,799	$	3,301
Other services (except public administration)	170,513		167,545		139
Retail trade	147,869		140,804		—
Health care and social assistance	131,522		122,427		258
Accommodation and food services	115,157		114,881		—
Manufacturing	84,468		81,317		97
Construction	68,966		63,682		7
Wholesale trade	67,884		64,800		—
Arts, entertainment and recreation	34,106		31,979		—
Professional, scientific and technical services	33,007		31,660		199
Transportation and warehousing	24,456		22,465		—
Agriculture, forestry, fishing and hunting	23,870		21,595		914
Educational services	22,438		21,998		—
Finance and insurance	16,559		16,513		—
Information	15,505		13,621		871
Management of companies and enterprises	12,321		12,321		—
Other	18,308		17,375		17
Total	$	1,209,709	$	1,158,782	$	5,803

Additionally, the Company tracks lending exposure of non-owner occupied commercial real estate and construction by collateral property type to determine potential risks associated with collateral types, and if any risk issues could lead to additional credit loss exposure. The following table provides a summary of our non-owner occupied commercial real estate and construction loan portfolios by collateral property type:


	June 30, 2023
(dollars in thousands)	Committed		Amount Outstanding		Nonperforming
Commercial real estate non-owner occupied
Retail	$	481,744	$	469,047	$	—
Office	389,354		357,357		45
Warehouse/industrial	345,108		315,482		—
Hotel	301,509		301,509		5,509
Land-mobile home park	120,865		111,756		—
Self storage	100,630		96,763		—
Healthcare facility	63,737		63,566		—
Assisted living/special care facilities	53,520		53,270		—
Restaurants, bars and event venues	42,108		26,254		—
Recreation/sport/entertainment	13,361		13,361		—
Other	74,243		73,613		—
Total	$	1,986,179	$	1,881,978	$	5,554

Construction
Consumer:
Construction	$	276,857	$	175,935	$	724
Land	44,687		43,925		76
Commercial:
Multi-family	567,689		174,456		—
Land	325,471		264,374		600
Retail	116,174		69,142		—
Hotel	59,398		19,716		—
Healthcare facility	51,821		36,788		—
Self storage	44,862		26,813		—
Assisted living/special care facilities	30,058		24,373		—
Warehouse	16,383		15,859		—
Office	16,067		11,049		—
Other	91,304		36,036		350
Residential Development:
Construction	950,585		590,415		1,010
Land	144,082		107,788		—
Lots	44,514		40,301		—
Total	$	2,779,952	$	1,636,970	$	2,760

Loan maturity and sensitivities

The following table presents the contractual maturities of our loan portfolio as of ~~September~~June 30, ~~2022.~~2023. 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.


																		June 30, 2023
Loan type (dollars in thousands)	Loan type (dollars in thousands)	Maturing in one year or less			Maturing in one to five years			Maturing in five years to fifteen years			Maturing after fifteen years			Total			Loan type (dollars in thousands)	Maturing in one year or less			Maturing in one to five years			Maturing in five to fifteen years			Maturing after fifteen years			Total
As of September 30, 2022
Commercial and industrial	Commercial and industrial	$	541,119		$	771,016		$	221,110		$	914		$	1,534,159		Commercial and industrial	$	701,588		$	796,319		$	194,689		$	976		$	1,693,572
Commercial real estate:	Commercial real estate:																Commercial real estate:
Owner-occupied	Owner-occupied	129,047			549,679			449,825			29,792			1,158,343			Owner-occupied	98,686			602,091			434,485			23,520			1,158,782
Non-owner occupied	Non-owner occupied	165,373			845,148			916,603			27,095			1,954,219			Non-owner occupied	176,507			884,833			802,687			17,951			1,881,978
Residential real estate:	Residential real estate:																Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	73,853			418,281			301,628			751,490			1,545,252			1-to-4 family mortgage	76,777			426,857			254,190			790,790			1,548,614
Residential line of credit	Residential line of credit	28,203			94,291			337,647			633			460,774			Residential line of credit	37,223			97,133			372,879			417			507,652
Multi-family mortgage	Multi-family mortgage	13,137			231,698			132,973			16,558			394,366			Multi-family mortgage	83,409			299,763			119,351			15,502			518,025
Construction	Construction	840,313			619,513			195,832			23,839			1,679,497			Construction	898,774			558,978			172,391			6,827			1,636,970
Consumer and other	Consumer and other	44,064			88,120			59,214			187,008			378,406			Consumer and other	29,534			73,032			68,304			209,561			380,431
Total ($)	Total ($)	$	1,835,109		$	3,617,746		$	2,614,832		$	1,037,329		$	9,105,016		Total ($)	$	2,102,498		$	3,739,006		$	2,418,976		$	1,065,544		$	9,326,024
Total (%)	Total (%)	20.2		%	39.7		%	28.7		%	11.4		%	100.0		%	Total (%)	22.5		%	40.1		%	25.9		%	11.5		%	100.0		%

For loans due after one year or more, the following table presents the interest rate composition for loans outstanding as of ~~September~~June 30, 2022. As of September 30, 2022 and December 31, 2021, the Company had $21.1 million and $21.5 million, respectively, in fixed-rate loans in which the Company has entered into variable rate swap contracts.2023.


												June 30, 2023
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, 2022
Commercial and industrial	Commercial and industrial	$	471,945		$	521,095		$	993,040		Commercial and industrial	$	439,832		$	552,152		$	991,984
Commercial real estate:	Commercial real estate:										Commercial real estate:
Owner-occupied	Owner-occupied	755,304			273,992			1,029,296			Owner-occupied	795,070			265,026			1,060,096
Non-owner occupied	Non-owner occupied	951,746			837,100			1,788,846			Non-owner occupied	958,179			747,292			1,705,471
Residential real estate:	Residential real estate:										Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	1,173,229			298,170			1,471,399			1-to-4 family mortgage	1,159,402			312,435			1,471,837
Residential line of credit	Residential line of credit	4,999			427,572			432,571			Residential line of credit	4,360			466,069			470,429
Multi-family mortgage	Multi-family mortgage	242,392			138,837			381,229			Multi-family mortgage	331,688			102,928			434,616
Construction	Construction	307,791			531,393			839,184			Construction	271,991			466,205			738,196
Consumer and other	Consumer and other	328,632			5,710			334,342			Consumer and other	327,566			23,331			350,897
Total ($)	Total ($)	$	4,236,038		$	3,033,869		$	7,269,907		Total ($)	$	4,288,088		$	2,935,438		$	7,223,526
Total (%)	Total (%)	58.3		%	41.7		%	100.0		%	Total (%)	59.4		%	40.6		%	100.0		%

The following table presents the contractual maturities of our loan portfolio segregated into fixed and floating interest rate loans as of ~~September~~June 30, ~~2022.~~2023. As of June 30, 2023 and December 31, 2022, we had $17.9 million and $17.4 million, respectively, in fixed-rate loans in which we have entered into variable rate swap contracts.

(dollars in thousands) Fixed
interest rate Floating
interest rate Total
As of September 30, 2022
One year or less $ 569,166 $ 1,265,943 $ 1,835,109
One to five years 2,141,724 1,476,022 3,617,746
Five to fifteen years 1,334,168 1,280,664 2,614,832
Over fifteen years 760,146 277,183 1,037,329
Total ($) $ 4,805,204 $ 4,299,812 $ 9,105,016
Total (%) 52.8 % 47.2 % 100.0 %


	June 30, 2023
(dollars in thousands)	Fixed interest rate			Floating interest rate			Total
As of June 30, 2023
One year or less	$	650,076		$	1,452,422		$	2,102,498
One to five years	2,268,633			1,470,373			3,739,006
Five to fifteen years	1,255,164			1,163,812			2,418,976
Over fifteen years	764,291			301,253			1,065,544
Total ($)	$	4,938,164		$	4,387,860		$	9,326,024
Total (%)	53.0		%	47.0		%	100.0		%

7576

Of the loans shown above with floating interest rates as of ~~September~~June 30, ~~2022,~~2023, many 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 in five years to fifteen years		Weighted average level of support (bps)	Maturing after fifteen 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 in five years to fifteen years		Weighted average level of support (bps)	Maturing after fifteen years		Weighted average level of support (bps)	Total		Weighted average level of support (bps)
Loans with current rates above floors:	Loans with current rates above floors:																Loans with current rates above floors:

1-25 bps	1-25 bps	$	1,438	24.98	$	29,791	22.45	$	3,430	13.62	$	91	25.00	$	34,750	21.69	1-25 bps	$	1,290	24.80	$	—	—	$	—	—	$	—	—	$	1,290	24.80
26-50 bps	26-50 bps	1,850		46.90	4,680		50.00	8,590		31.63	—		—	15,120		39.18	26-50 bps	4,939		50.00	1,353		50.00	—		—	—		—	6,292		50.00
51-75 bps	51-75 bps	19,485		75.00	11,308		74.32	4,883		69.92	5,744		67.91	41,420		73.23	51-75 bps	2,462		75.00	855		74.81	467		73.58	1,998		73.00	5,782		74.17
76-100 bps	76-100 bps	2,989		98.60	37,613		99.99	19,443		88.98	5,957		92.28	66,002		95.99	76-100 bps	7,666		100.00	2,737		93.18	7,791		98.03	985		96.00	19,179		98.02
101-125 bps		5,285		119.49	16,834		120.65	10,994		117.93	5,773		115.15	38,886		118.90
126-150 bps		32,563		147.73	50,762		142.88	35,921		137.40	9,014		144.17	128,260		142.67
151-200 bps		103,336		188.10	71,761		187.93	130,261		175.35	11,504		180.71	316,862		182.55
201-250 bps		259,123		235.03	330,537		233.68	299,825		236.79	125,311		241.34	1,014,796		235.89
251 bps and above		536,364		297.51	429,643		301.98	443,023		310.19	71,312		375.07	1,480,342		306.34
101-200 bps																	101-200 bps	24,221		179.86	115,270		162.06	68,035		168.78	10,518		132.45	218,044		164.70
201-300 bps																	201-300 bps	83,661		267.26	114,711		260.39	119,463		267.02	28,964		252.06	346,799		263.64
301-400 bps																	301-400 bps	157,962		369.24	143,455		362.91	122,250		355.75	28,174		359.59	451,841		362.98
401-500 bps																	401-500 bps	674,412		459.69	525,815		468.57	438,467		463.15	54,902		458.21	1,693,596		463.30
501-600 bps																	501-600 bps	99,020		520.69	82,397		519.73	120,319		526.26	151,030		524.78	452,766		523.36
601 bps and above																	601 bps and above	550		686.59	16,603		739.43	14,458		691.46	2,153		825.00	33,764		723.49
Total loans with current rates above floors	Total loans with current rates above floors	$	962,433	256.88	$	982,929	239.34	$	956,370	250.82	$	234,706	264.05	$	3,136,438	250.08	Total loans with current rates above floors	$	1,056,183	424.39	$	1,003,196	401.20	$	891,250	408.49	$	278,724	449.39	$	3,229,353	414.95
Loans at interest rate floors providing support:	Loans at interest rate floors providing support:																Loans at interest rate floors providing support:
1-25 bps	1-25 bps	$	2,132	23.60	$	6,928	25.00	$	16,886	15.12	$	140	19.00	$	26,086	18.46	1-25 bps	$	—	—	$	—	—	$	422	2.00	$	137	2.00	$	559	2.00
26-50 bps		—		—	7,015		50.00	36		50.00	—		—	7,051		50.00
51-75 bps		—		—	2,391		62.21	—		—	—		—	2,391		62.21

76-100 bps	76-100 bps	—		—	—		—	1,544		87.63	—		—	1,544		87.63	76-100 bps	—		—	1,750		77.00	—		—	—		—	1,750		77.00
101-125 bps		—		—	—		—	292		119.00	—		—	292		119.00
126-150 bps		—		—	42		134.00	—		—	—		—	42		134.00
101-200 bps																	101-200 bps	—		—	38		117.00	276		102.00	—		—	314		103.83

Total loans at interest rate floors providing support	Total loans at interest rate floors providing support	$	2,132	23.60	$	16,376	41.42	$	18,758	22.77	$	140	19.00	$	37,406	30.97	Total loans at interest rate floors providing support	$	—	—	$	1,788	77.86	$	698	41.52	$	137	—	$	2,623	64.23

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~~loans. 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~~repossessed non-earning assets. As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, we had ~~$75.7~~$76.5 million and ~~$63.0~~$87.5 million, respectively, in nonperforming 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 $0.2 million and $0.1 million for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$0.5 million and $0.7~~$0.3 million for both the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021, respectively.~~2022. Additionally, we had net interest recoveries on nonperforming assets previously charged off of $0.2 million and $0.5 million

~~and $0.4 million, respectively,~~ for the three months ended ~~September~~June 30, 2023 and 2022, respectively, and ~~2021, and $2.1~~$0.4 million and $1.6 million for the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, ~~and 2021,~~ respectively.

In addition to loans HFI, we also include loans HFS that have stopped accruing interest or become 90 days or more past due. ~~As such, our~~Our nonperforming commercial loans HFS represent a pool of ~~previously acquired shared~~commercial loans, including syndicated national credits and institutional healthcare loans ~~that~~acquired in our 2020 merger with Franklin Financial Network, Inc. These loans amounted to ~~$5.2~~$9.3 million as of both June 30, 2023 and December 31, ~~2021. Loans within this portfolio were all considered performing~~2022 and as of ~~September~~June 30, ~~2022.~~2023, there was one relationship remaining in the portfolio.

~~During the three months ended September~~As of June 30, 2023 and December 31, 2022, we ~~revised our accounting estimate~~had $20.2 million and methodology with regard to GNMA loans previously sold that are contractually delinquent greater than 90 days and began recording this right to repurchase option on the balance sheet on a prospective basis without impact to prior periods. See Note 1, "Basis of presentation" within this Report for additional information regarding our change in accounting estimate. As a result of this change, as of September 30, 2022, we recorded $26.5$26.2 million, respectively, of delinquent GNMA loans previously sold included on our ~~Consolidated~~consolidated balance sheets in loans held for ~~sale and borrowings.~~sale. These are considered nonperforming assets as ~~the Company does~~we do not earn any interest on the unexercised option to repurchase these loans. ~~Rebooked GNMA optional repurchase loans do not meet the requirements under FASB ASC Topic 825 to be accounted for under the fair value option.~~

As of December 31, 2021, there was $94.6 million of delinquent GNMA loans previously sold that we did not record on its consolidated balance sheets as we 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.

~~As of September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, other real estate owned included ~~$2.5~~$0.5 million and ~~$3.3~~$2.1 million, respectively, of excess land and facilities held for sale resulting ~~from branch consolidations~~ from our prior acquisitions. Other nonperforming assets also included other repossessed non-real estate amounting to ~~$0.6~~$0.9 million and ~~$0.7~~$0.4 million as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

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:

September 30, December 31,
(dollars in thousands) 2022 2021 2021
Loan Type
Commercial and industrial $ 1,768 $ 3,022 $ 1,583
Construction — 4,908 4,340
Residential real estate:
1-to-4 family mortgage 19,347 11,925 13,956
Residential line of credit 1,880 1,269 1,736
Multi-family mortgage 44 50 49
Commercial real estate:
Owner-occupied 4,873 6,239 6,710
Non-owner occupied 6,960 11,666 14,084
Consumer and other 7,755 3,948 4,845
Total nonperforming loans held for investment $ 42,627�� $ 43,027 $ 47,303
Commercial loans held for sale — 5,625 5,217
Mortgage loans held for sale(1)
26,485 — —
Other real estate owned 5,919 10,015 9,777
Other 639 347 686
Total nonperforming assets $ 75,670 $ 59,014 $ 62,983
Total nonperforming loans held for investment as a percentage of total loans HFI 0.47 % 0.59 % 0.62 %
Total nonperforming assets as a percentage of total assets 0.62 % 0.50 % 0.50 %
Total nonaccrual loans HFI as a percentage of loans HFI 0.29 % 0.47 % 0.47 %
Total accruing loans over 90 days delinquent as a percentage of total assets 0.13 % 0.08 % 0.09 %
Loans restructured as troubled debt restructurings $ 14,959 $ 29,645 $ 32,435
Troubled debt restructurings as a percentage of total loans held for investment 0.16 % 0.41 % 0.43 %

~~(1)~~Includes optional right to repurchase seriously delinquent government guaranteed GNMA mortgage loans previously sold as a result of a prospective revision in accounting estimate made during the third quarter of 2022.


	June 30,						December 31,
(dollars in thousands)	2023			2022			2022
Loan Type
Commercial and industrial	$	2,163		$	3,469		$	1,443
Construction	2,760			2,675			389
Residential real estate:
1-to-4 family mortgage	17,927			15,997			23,115
Residential line of credit	1,187			1,505			1,531
Multi-family mortgage	37			375			42
Commercial real estate:
Owner-occupied	5,803			7,123			5,410
Non-owner occupied	5,554			7,263			5,956
Consumer and other	8,701			5,713			7,960
Total nonperforming loans held for investment	$	44,132		$	44,120		$	45,846
Commercial loans held for sale	9,267			1,459			9,289
Mortgage loans held for sale(1)	20,225			—			26,211
Other real estate owned	1,974			9,398			5,794
Other	883			527			351
Total nonperforming assets	$	76,481		$	55,504		$	87,491
Nonperforming loans held for investment as a percentage of total loans HFI	0.47		%	0.51		%	0.49		%
Nonperforming assets as a percentage of total assets	0.59		%	0.46		%	0.68		%
Nonaccrual loans HFI as a percentage of loans HFI	0.34		%	0.34		%	0.30		%


(1) Represents optional right to repurchase government guaranteed GNMA mortgage loans previously sold that have become past due greater than 90 days as of June 30, 2023 and December 31, 2022.

We have evaluated our ~~nonperforming~~ loans held for investment classified as nonperforming and believe all nonperforming loans have been adequately reserved for in the allowance for credit losses on loans HFI as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021.~~2022. Management also continually monitors past due loans for potential credit quality deterioration. Loans not considered nonperforming include loans 30-89 days past due that continue to accrue interest amounting to ~~$30.6~~$33.6 million at ~~September~~June 30, ~~2022~~2023 as compared to ~~$26.5~~$31.3 million at December 31, ~~2021.~~2022.

Allowance for credit losses

~~The Company calculates its~~We calculate our expected credit loss using a lifetime loss rate methodology. ~~The Company utilizes~~We utilize probability-weighted forecasts, which consider multiple macroeconomic variables from a third-party vendor that are applicable to the type of loan. Each of ~~the Company's~~our 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~~our prepayment history.

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 accrued interest 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. See "Critical Accounting Estimates- Allowance for credit losses" within management's discussion and analysis in our Form 10-K and Note 3 “Loans and allowance for credit losses on loans HFI“ in the notes to the consolidated financial statements in this report for additional information regarding our methodology.

The following table presents the allocation of the allowance for credit losses on loans HFI by loan category as well as the ratio of loans by loan category compared to the total loan portfolio as of the dates indicated:


							June 30,				December 31,
		September 30, 2022						December 31, 2021							2023		2022
(dollars in thousands)	(dollars in thousands)	Amount		% of Loans		ACL as a % of loans HFI category		Amount		% of Loans		ACL as a % of loans HFI category		(dollars in thousands)	Amount		ACL as a % of loans HFI category		Amount		ACL as a % of loans HFI category

Loan Type:	Loan Type:													Loan Type:
Commercial and industrial	Commercial and industrial	$	10,538	17	%	0.69	%	$	15,751	17	%	1.22	%	Commercial and industrial	$	11,311	0.67	%	$	11,106	0.67	%
Construction	Construction	41,427		18	%	2.47	%	28,576		17	%	2.15	%	Construction	39,920		2.44	%	39,808		2.40	%
Residential real estate:	Residential real estate:													Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	25,366		17	%	1.64	%	19,104		17	%	1.50	%	1-to-4 family mortgage	27,407		1.77	%	26,141		1.66	%
Residential line of credit	Residential line of credit	6,952		5	%	1.51	%	5,903		5	%	1.54	%	Residential line of credit	9,185		1.81	%	7,494		1.51	%
Multi-family mortgage	Multi-family mortgage	5,874		4	%	1.49	%	6,976		4	%	2.14	%	Multi-family mortgage	6,828		1.32	%	6,490		1.35	%
Commercial real estate:	Commercial real estate:													Commercial real estate:
Owner occupied		8,068		13	%	0.70	%	12,593		13	%	1.32	%
Owner-occupied														Owner-occupied	8,467		0.73	%	7,783		0.70	%
Non-owner occupied	Non-owner occupied	22,783		22	%	1.17	%	25,768		23	%	1.49	%	Non-owner occupied	22,877		1.22	%	21,916		1.12	%
Consumer and other	Consumer and other	13,468		4	%	3.56	%	10,888		4	%	3.35	%	Consumer and other	14,669		3.86	%	13,454		3.67	%
Total allowance		$	134,476	100	%	1.48	%	$	125,559	100	%	1.65	%
Total allowance for credit losses on loans HFI														Total allowance for credit losses on loans HFI	$	140,664	1.51	%	$	134,192	1.44	%

The following table summarizes activity in our allowance for credit losses on loans HFI 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)	2022			2021			2022			2021			2021													(dollars in thousands)				2023					2022			2023			2022			2022
Allowance for credit losses at beginning of period		$	126,272		$	144,663		$	125,559		$	170,389		$	170,389
Allowance for credit losses on loans HFI at beginning of period																	Allowance for credit losses on loans HFI at beginning of period	$	138,809		$	120,049		$	134,192			$	125,559				$	125,559

Charge-offs:	Charge-offs:																										Charge-offs:
Commercial and industrial	Commercial and industrial	��			(2,175)			(1,755)			(2,812)			(4,036)													Commercial and industrial				(11)					(1,751)			(57)			(1,755)			(2,087)
Construction		—			(1)			—			(30)			(30)

Residential real estate:	Residential real estate:																										Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	(20)			—			(43)			(149)			(154)													1-to-4 family mortgage				(16)					(23)			(32)			(23)			(77)
Residential line of credit		—			—			—			(18)			(18)
Multi-family mortgage		—			—			—			—			(1)

Commercial real estate:	Commercial real estate:																										Commercial real estate:

Owner-occupied																	Owner-occupied	(144)			—			(144)				—					(15)
Non-owner occupied	Non-owner occupied	—			—			—			—			(1,566)													Non-owner occupied				—					—			—			—			(268)
Consumer and other	Consumer and other	(441)			(438)			(1,630)			(1,634)			(2,063)													Consumer and other				(721)					(614)			(1,426)			(1,189)			(2,254)
Total charge-offs	Total charge-offs	$	(461)		$	(2,614)		$	(3,428)		$	(4,643)		$	(7,868)												Total charge-offs				$	(892)				$	(2,388)		$	(1,659)		$	(2,967)		$	(4,701)
Recoveries:	Recoveries:																										Recoveries:
Commercial and industrial	Commercial and industrial	$	342		$	19		$	1,326		$	235		$	861												Commercial and industrial				$	13				$	26		$	80		$	984		$	2,005
Construction	Construction	—			3			11			3			3													Construction				10					11			10			11			11
Residential real estate:	Residential real estate:																										Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	13			33			39			98			125													1-to-4 family mortgage				25					14			40			26			54
Residential line of credit	Residential line of credit	—			1			17			16			115													Residential line of credit				—					16			—			17			17

Commercial real estate:	Commercial real estate:																										Commercial real estate:
Owner-occupied	Owner-occupied	51			4			76			143			156													Owner-occupied				16					15			82			25			88

Consumer and other	Consumer and other	70			169			635			554			773													Consumer and other				108					348			347			565			766
Total recoveries	Total recoveries	$	476		$	229		$	2,104		$	1,049		$	2,033												Total recoveries				$	172				$	430		$	559		$	1,628		$	2,941
Net charge-offs	Net charge-offs	15			(2,385)			(1,324)			(3,594)			(5,835)													Net charge-offs				(720)					(1,958)			(1,100)			(1,339)			(1,760)
Provision for credit losses		8,189			(2,832)			10,241			(27,349)			(38,995)
Provision for credit losses on loans HFI																	Provision for credit losses on loans HFI	2,575			8,181			7,572				2,052					10,393

Allowance for credit losses at the end of period		$	134,476		$	139,446		$	134,476		$	139,446		$	125,559
Allowance for credit losses on loans HFI at the end of period																	Allowance for credit losses on loans HFI at the end of period	$	140,664		$	126,272		$	140,664			$	126,272				$	134,192
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	—		%	(0.13)		%	(0.02)		%	(0.07)		%	(0.08)		%											Ratio of net charge-offs during the period to average loans outstanding during the period				(0.03)		%			(0.09)		%	(0.02)		%	(0.03)		%	(0.02)		%
Allowance for credit losses as a percentage of loans at end of period(1)		1.48		%	1.91		%	1.48		%	1.91		%	1.65		%
Allowance for credit losses as a percentage of nonaccrual loans HFI(1)		505.1		%	408.6		%	505.1		%	408.6		%	353.0		%
Allowance for credit losses as a percentage of nonperforming loans at end of period(1)		315.5		%	324.1		%	315.5		%	324.1		%	265.4		%
Allowance for credit losses on loans HFI as a percentage of loans at end of period																	Allowance for credit losses on loans HFI as a percentage of loans at end of period	1.51		%	1.46		%	1.51		%		1.46		%			1.44		%
Allowance for credit losses on loans HFI as a percentage of nonaccrual loans HFI																	Allowance for credit losses on loans HFI as a percentage of nonaccrual loans HFI	441.2		%	427.5		%	441.2		%		427.5		%			489.2		%
Allowance for credit losses on loans HFI as a percentage of nonperforming loans at end of period																	Allowance for credit losses on loans HFI as a percentage of nonperforming loans at end of period	318.7		%	286.2		%	318.7		%		286.2		%			292.7		%

(1) Excludes reserve for credit losses on unfunded commitments of $23.6 million, $13.5 million and $14.4 million recorded in accrued expenses and other liabilities at September 30, 2022, September 30, 2021, and December 31, 2021, respectively.

7980

The following tables details our provision for credit losses on loans HFI and net ~~charge-offs~~(charge-offs) recoveries to average loans HFI outstanding by loan category during the periods indicated:

Provision for credit losses(1)
Net charge-offs Average loans held for investment Ratio of annualized net recoveries (charge-offs) to average loans
(dollars in thousands)
Three months ended September 30, 2022
Commercial and industrial $ 5 $ 342 $ 1,505,262 0.09 %
Construction 3,044 — 1,577,025 — %
Residential real estate:
1-to-4 family mortgage 3,975 (7) 1,495,509 — %
Residential line of credit 77 — 443,881 — %
Multi-family mortgage (629) — 385,030 — %
Commercial real estate:
Owner-occupied 688 51 1,146,149 0.02 %
Non-owner occupied 247 — 1,904,720 — %
Consumer and other 782 (371) 352,518 (0.42) %
Total $ 8,189 $ 15 $ 8,810,094 — %
Three months ended September 30, 2021
Commercial and industrial $ 3,203 $ (2,156) $ 1,248,440 (0.69) %
Construction (3,080) 2 1,155,051 — %
Residential real estate:
1-to-4 family mortgage (2,677) 33 1,153,768 0.01 %
Residential line of credit (952) 1 397,300 — %
Multi-family mortgage (1,462) — 366,166 — %
Commercial real estate:
Owner-occupied 7,665 4 925,069 — %
Non-owner occupied (6,450) — 1,674,382 — %
Consumer and other 921 (269) 325,137 (0.33) %
Total $ (2,832) $ (2,385) $ 7,245,313 (0.13) %
Nine months ended September 30, 2022
Commercial and industrial $ (4,784) $ (429) $ 1,424,734 (0.04) %
Construction 12,840 11 1,491,710 — %
Residential real estate:
1-to-4 family mortgage 6,266 (4) 1,405,879 — %
Residential line of credit 1,032 17 415,006 0.01 %
Multi-family mortgage (1,102) — 383,093 — %
Commercial real estate:
Owner-occupied (4,601) 76 1,049,851 0.01 %
Non-owner occupied (2,985) — 1,798,010 — %
Consumer and other 3,575 (995) 334,366 (0.40) %
Total $ 10,241 $ (1,324) $ 8,302,649 (0.02) %
Nine months ended September 30, 2021
Commercial and industrial $ 2,667 $ (2,577) $ 1,278,041 (0.27) %
Construction (28,690) (27) 1,112,248 — %
Residential real estate:
1-to-4 family mortgage (2,141) (51) 1,110,943 (0.01) %
Residential line of credit (4,767) (2) 396,695 — %
Multi-family mortgage 4,839 — 304,709 — %
Commercial real estate:
Owner occupied 7,384 143 914,687 0.02 %
Non-owner occupied (7,741) — 1,685,293 — %
Consumer and other 1,100 (1,080) 308,624 (0.47) %
Total $ (27,349) $ (3,594) $ 7,111,240 (0.07) %
(1) Excludes provision for credit losses on unfunded commitments of $3.2 million and $0.3 million recorded for the three months ended September 30, 2022 and 2021, respectively, and $9.2 million for the nine months ended September 30, 2022. For the nine months ended September 30, 2021, excludes a reversal of provision for credit losses on unfunded commitments of $2.9 million.


	Provision for credit losses on loans HFI		Net (charge-offs) recoveries		Average loans HFI		Ratio of annualized net (charge-offs) recoveries to average loans HFI
(dollars in thousands)
Three months ended June 30, 2023
Commercial and industrial	$	192	$	2	$	1,692,181	—	%
Construction	(1,115)		10		1,688,401		—	%
Residential real estate:
1-to-4 family mortgage	185		9		1,555,754		—	%
Residential line of credit	151		—		505,134		—	%
Multi-family mortgage	209		—		506,342		—	%
Commercial real estate:
Owner-occupied	643		(128)		1,147,722		(0.04)	%
Non-owner occupied	1,009		—		1,920,016		—	%
Consumer and other	1,301		(613)		371,734		(0.66)	%
Total	$	2,575	$	(720)	$	9,387,284	(0.03)	%
Three months ended June 30, 2022
Commercial and industrial	$	(783)	$	(1,725)	$	1,430,769	(0.48)	%
Construction	6,590		11		1,510,077		—	%
Residential real estate:
1-to-4 family mortgage	383		(9)		1,403,214		—	%
Residential line of credit	314		16		413,126		0.02	%
Multi-family mortgage	105		—		405,324		—	%
Commercial real estate:
Owner-occupied	(1,102)		15		1,032,523		0.01	%
Non-owner occupied	1,246		—		1,795,905		—	%
Consumer and other	1,428		(266)		332,840		(0.32)	%
Total	$	8,181	$	(1,958)	$	8,323,778	(0.09)	%
Six Months Ended June 30, 2023
Commercial and industrial	$	182	$	23	$	1,677,865	—	%
Construction	102		10		1,688,177		—	%
Residential real estate:
1-to-4 family mortgage	1,258		8		1,561,368		—	%
Residential line of credit	1,691		—		501,297		—	%
Multi-family mortgage	338		—		497,654		—	%
Commercial real estate:
Owner-occupied	746		(62)		1,137,610		(0.01)	%
Non-owner occupied	961		—		1,935,222		—	%
Consumer and other	2,294		(1,079)		367,915		(0.59)	%
Total	$	7,572	$	(1,100)	$	9,367,108	(0.02)	%
Six Months Ended June 30, 2022
Commercial and industrial	$	(4,789)	$	(771)	$	1,383,591	(0.11)	%
Construction	9,796		11		1,446,157		—	%
Residential real estate:
1-to-4 family mortgage	2,291		3		1,354,941		—	%
Residential line of credit	955		17		399,707		0.01	%
Multi-family mortgage	(473)		—		382,753		—	%
Commercial real estate:
Owner-occupied	(5,289)		25		1,004,676		0.01	%
Non-owner occupied	(3,232)		—		1,747,587		—	%
Consumer and other	2,793		(624)		325,310		(0.39)	%
Total	$	2,052	$	(1,339)	$	8,044,722	(0.03)	%

8081

Provision for credit losses(1)
Net recoveries (charge-offs) Average loans held for investment Ratio of annualized net recoveries (charge-offs) to average loans
(dollars in thousands)
Year ended December 31, 2021
Commercial and industrial $ 4,178 $ (3,175) $ 1,271,476 (0.25) %
Construction (29,874) (27) 1,138,769 — %
Residential real estate:
1-to-4 family mortgage (87) (29) 1,130,019 — %
Residential line of credit (4,728) 97 392,907 0.02 %
Multi-family mortgage (197) (1) 310,874 — %
Commercial real estate:
Owner-occupied 7,588 156 917,334 0.02 %
Non-owner occupied (16,813) (1,566) 1,683,413 (0.09) %
Consumer and other 938 (1,290) 352,421 (0.37) %
Total $ (38,995) $ (5,835) $ 7,197,213 (0.08) %

~~1) Excludes reversal of provision for credit losses on unfunded commitments of $2.0 million recorded for the year ended December 31, 2021, respectively.~~


	Provision for credit losses on loans HFI		Net (charge-offs) recoveries		Average loans HFI		Ratio of net (charge-offs) recoveries to average loans HFI
(dollars in thousands)
Year ended December 31, 2022
Commercial and industrial	$	(4,563)	$	(82)	$	1,466,685	(0.01)	%
Construction	11,221		11		1,549,622		—	%
Residential real estate:
1-to-4 family mortgage	7,060		(23)		1,438,801		—	%
Residential line of credit	1,574		17		431,826		—	%
Multi-family mortgage	(486)		—		411,509		—	%
Commercial real estate:
Owner-occupied	(4,883)		73		1,060,523		0.01	%
Non-owner occupied	(3,584)		(268)		1,839,577		(0.01)	%
Consumer and other	4,054		(1,488)		343,107		(0.43)	%
Total	$	10,393	$	(1,760)	$	8,541,650	(0.02)	%

The allowance for credit losses on loans HFI was ~~$134.5~~$140.7 million and ~~$125.6~~$134.2 million and represented ~~1.48%~~1.51% and ~~1.65%~~1.44% of loans held for investment as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. For the three months ended June 30, 2023, we experienced net charge-offs of $0.7 million, or 0.03% of average loans HFI, compared to net charge-offs of $2.0 million, or 0.09% for the three months ended June 30, 2022. For the six months ended June 30, 2023, we experienced net charge-offs of $1.1 million, or 0.02% of average loans HFI, compared to net charge-offs of $1.3 million, or 0.03% for the six months ended June 30, 2022. Our ratio of total nonperforming loans HFI as a percentage of total loans HFI remained constant at 0.47% as of June 30, 2023 compared to December 31, 2022.

The primary reason for the increase in the allowance for credit losses on loans HFI is due to ~~loan growth and~~ a ~~tightening monetary policy environment during the three and nine months ended September~~worsening economic outlook that was incorporated into our macroeconomic forecast as of June 30, 2023 compared to December 31, 2022. Specifically, we performed ~~qualitative~~ evaluations within our established qualitative framework, ~~weighting~~assessing the impact of the current economic outlook, ~~including~~including: uncertainty due to inflation, ~~employment, global conflicts, supply chain concerns,~~recent bank failures, negative economic forecasts, predicted Federal Reserve rate increases, and other considerations. ~~Further, we increased~~As a ratio of ACL to loans HFI by loan type, our ~~required reserve~~consumer and other, residential 1-4 family mortgage and HELOC portfolios incurred the largest increases year-over-year due to ~~projected slower GDP growth over~~deteriorating asset quality within our ACL model. These portfolios are heavily reliant on the next two to three fiscal years; forecasted elevated unemployment levels; and expected further increases in interest rates in the short term. The qualitative evaluations above include weighted projections that the economy may be nearing a recession.

We experienced an improvement in credit quality indicators in our loans HFI portfolio including lower nonaccrual loans and net recoveries of $15 thousand for the three months ended September 30, 2022. Our total nonperforming loans HFI as a percentage of loans HFI as of September 30, 2022 was 0.47% compared to 0.62% as of December 31, 2021.

~~Nonperforming assets as a percentage of total assets at September 30, 2022 was 0.62% compared to 0.50% as~~strength of the December 31, 2021. The increase was solely due to our change in accounting estimate related to the rebooking of our option to repurchase seriously delinquent GNMA loans previously sold, which negatively impacted the NPA ratioeconomy; and therefore, they are adversely affected by ~~22 bps as of September 30, 2022.~~inflation and high interest rates.

We also maintain an allowance for credit losses on unfunded commitments, which ~~increased~~decreased to ~~$23.6~~$14.8 million as of ~~September~~June 30, ~~2022~~2023 from ~~$14.4~~$23.0 million as of December 31, ~~2021~~2022 due to ~~an increase~~a 10.7% or $380.6 million decrease in unfunded loan commitments ~~particularly~~during the period. Notably, there was a $496.0 million decrease in unfunded commitments in our ~~commercial~~construction loan category pipeline which resulted in a $8.1 million decrease in required ACL related to unfunded commitments. Our unfunded commitments in our construction loan category decreased as a result of management's concentrated effort over the last few quarters to reduce commitments in specific categories judged to be inherently higher risk considering the current and ~~construction unfunded pipelines, and change in macroeconomic forecasts as discussed above.~~projected economic conditions.

Loans held for sale

Commercial loans held for sale

Our loans held for sale includes a previously acquired portfolio of commercial loans, including ~~shared~~syndicated national credits and institutional healthcare loans that ~~we have elected to account~~are accounted for as held for sale. The loans had a fair value of ~~$33.7~~$9.3 million as of ~~September~~June 30, ~~2022~~2023 compared to ~~$79.3~~$30.5 million as of December 31, ~~2021.~~2022. The change is primarily attributable to loans within the portfolio being paid off through external refinancing and ~~pay-downs and~~pay-downs. As of June 30, 2023, there was ~~partially offset by loan fundings on pre-existing loan commitments.~~only one remaining relationship.

This decrease also includes ~~losses~~gains recognized on the change in fair value of the portfolio which is included in 'other noninterest income' on the consolidated statement of income of ~~$0.4~~$0.9 million for the six months ended June 30, 2023 compared to losses of $2.0 million and ~~$2.6~~$2.2 million for the three and ~~nine~~six months ended ~~September~~June 30, 2022, ~~respectively, compared to gains~~respectively. The loss recognized on the change in fair value of ~~$0.7 million and $1.3 million~~the portfolio for the three ~~and nine~~ months ended ~~September~~June 30, ~~2021, respectively.~~2023 was not meaningful.

8182

Mortgage loans held for sale

Mortgage loans held for sale consisted of ~~$70.5~~$69.6 million of residential real estate mortgage loans in the process of being sold to third parties and ~~$26.5~~$20.2 million of GNMA optional repurchase loans. This compares to ~~$672.9~~$82.8 million of residential real estate mortgage loans in the process of being sold to third parties and $26.2 million of GNMA optional repurchase loans as of December 31, 2021. There were no GNMA optional repurchase loans included within our consolidated balance sheet as of December 31, 2021. For additional information regarding GNMA optional repurchase loans, please refer to the nonperforming assets table and discussion included under the section captioned 'Asset Quality' within this MD&A. Interest rate lock volume for the three months ended September 30, 2022 and 2021 totaled $0.41 billion and $2.01 billion, respectively, and $2.42 billion and $5.68 billion for the nine months ended September 30, 2022 and 2021, respectively. 2022.

Generally, mortgage volume decreases in rising interest rate environments and slower housing markets and increases in lower interest rate environments and robust housing markets. Interest rate lock volume for the three months ended June 30, 2023 and 2022 totaled $0.40 billion and $0.70 billion, respectively, and $0.78 billion and $2.01 billion for the six months ended June 30, 2023 and 2022, respectively. The decrease in interest rate lock volume during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 reflects the slow down experienced across the industry compared with the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, which benefited from ~~historically low~~lower interest rates ~~pre-empted by~~relative to the ~~COVID-19 Pandemic.~~rising rates experienced during the three and six months ended June 30, 2023. The decrease also reflects the exit from our direct-to-consumer internet delivery channel completed during 2022. Interest rate lock volume within our direct-to-consumer internet delivery channel for the six months ended June 30, 2022 totaled $0.66 billion. Interest rate lock commitments in the pipeline were ~~$188.4~~$135.4 million as of ~~September~~June 30, ~~2022~~2023 compared with ~~$487.4~~$118.3 million as of December 31, 2021. We expect our pipeline to remain low relative to the prior year through the remainder of 2022 associated with our exit from our direct-to-consumer channel, which was completed during the third quarter of 2022.

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, 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.

Other earning assets

Securities purchased under agreements to resell ("reverse repurchase agreements")

We enter into agreements with certain customers to purchase investment securities under agreements to resell at specific dates in the future. This investment deploys some of our liquidity position into an instrument that improves the return on those funds. Securities purchased under agreements to resell totaled $26.6 million and $75.4 million at June 30, 2023 and December 31, 2022, respectively.

Federal Funds Sold

Federal funds may fluctuate from period to period depending upon our liquidity position at the time and our strategy for deploying liquidity. Federal funds sold totaled $21.7 million and $135.1 million at June 30, 2023 and December 31, 2022, respectively.

Available-for-sale debt securities 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 lines of credit and other borrowings. The investment objectives guide the portfolio allocation among security types, maturities, and other attributes.

The fair value of our available-for-sale debt securities portfolio was $1.42 billion and $1.47 billion as of June 30, 2023 and December 31, 2022, respectively.

During the three months ended June 30, 2022, we purchased $73.1 million in investment securities. No securities were purchased during the three months ended June 30, 2023. During the six months ended June 30, 2023 and 2022, we purchased $0.9 million and $243.2 million in investment securities, respectively. During the three and six months ended June 30, 2022, we sold $1.2 million in investment securities. There were no investment securities sold during three and six months ended June 30, 2023. During the three months ended June 30, 2023 and 2022, maturities and calls of securities totaled $31.6 million and $65.3 million, respectively. During the six months ended June 30, 2023 and 2022, maturities and calls of securities totaled $58.4 million and $126.3 million, respectively.

Included in the fair value of available-for-sale debt securities were net unrealized losses of $226.0 million and $234.4 million as of June 30, 2023 and December 31, 2022, respectively. Current net unrealized losses are due to interest rate increases.

The following table sets forth the fair value, scheduled maturities and weighted average yields for our available-for-sale debt securities portfolio as of the dates indicated below:


	June 30,						December 31,
	2023						2022
(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:
Maturing within one year	$	61,618	4.4	%	2.51	%	$	729	—	%	2.40	%
Maturing in one to five years	46,603		3.3	%	1.60	%	106,951		7.3	%	2.10	%
Maturing in five to ten years	—		—	%	—	%	—		—	%	—	%
Maturing after ten years	—		—	%	—	%	—		—	%	—	%
Total Treasury securities	108,221		7.7	%	2.10	%	107,680		7.3	%	2.10	%
Government agency securities:
Maturing within one year	—		—	%	—	%	—		—	%	—	%
Maturing in one to five years	33,632		2.4	%	1.56	%	27,082		1.8	%	1.50	%
Maturing in five to ten years	5,941		0.4	%	1.58	%	12,011		0.8	%	1.70	%
Maturing after ten years	956		0.1	%	5.04	%	969		0.1	%	3.32	%
Total government agency securities	40,529		2.9	%	1.64	%	40,062		2.7	%	1.60	%
Municipal securities:
Maturing within one year	3,262		0.2	%	1.88	%	3,496		0.2	%	2.18	%
Maturing in one to five years	18,214		1.3	%	4.09	%	17,775		1.2	%	2.38	%
Maturing in five to ten years	44,875		3.2	%	3.83	%	39,034		2.7	%	3.12	%
Maturing after ten years	200,746		14.1	%	3.00	%	204,115		13.9	%	3.18	%
Total obligations of state and municipal subdivisions	267,097		18.8	%	3.09	%	264,420		18.0	%	3.10	%
Residential and commercial mortgage-backed securities guaranteed by FNMA, GNMA and FHLMC:
Maturing within one year	212		—	%	1.81	%	—		—	%	—	%
Maturing in one to five years	3,386		0.2	%	2.86	%	3,834		0.3	%	2.73	%
Maturing in five to ten years	28,671		2.0	%	2.79	%	23,683		1.6	%	2.65	%
Maturing after ten years	964,385		67.9	%	1.86	%	1,024,320		69.6	%	1.84	%
Total residential and commercial mortgage- backed securities guaranteed by FNMA, GNMA and FHLMC	996,654		70.1	%	1.89	%	1,051,837		71.5	%	1.86	%






Corporate securities:
Maturing within one year	—		—	%	—	%	—		—	%	—	%
Maturing in one to five years	—		—	%	—	%	373		—	%	5.00	%
Maturing in five to ten years	6,859		0.5	%	3.94	%	6,814		0.5	%	3.87	%
Maturing after ten years	—		—	%	—	%	—		—	%	—	%
Total Corporate securities	6,859		0.5	%	3.94	%	7,187		0.5	%	3.94	%
Total available-for-sale debt securities	$	1,419,360	100.0	%	2.14	%	$	1,471,186	100.0	%	2.10	%

(1)Yields on a tax-equivalent basis.

Equity Securities

We had $3.0 million in marketable equity securities recorded at fair value that primarily consisted of mutual funds as of both June 30, 2023 and December 31, 2022. During the three months ended June 30, 2023 and 2022, the change in the fair value of equity securities resulted in a net loss of $28 thousand and $110 thousand, respectively. During the six months ended June 30, 2023 and 2022, the change in the fair value of equity securities resulted in a net gain of $41 thousand and a net loss of $264 thousand, respectively.

Deposits

Deposits represent the Bank’s primary source of ~~funds.~~funding. 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 ~~$10.01~~$10.87 billion and ~~$10.84~~$10.86 billion as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. Noninterest-bearing deposits at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 were ~~$2.97~~$2.40 billion and ~~$2.74~~$2.68 billion, respectively, while interest-bearing deposits were ~~$7.04~~$8.47 billion and ~~$8.10~~$8.18 billion at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. ~~This deposit decrease is primarily due to a~~

The decrease in ~~interest-bearing demand~~noninterest-bearing deposits of ~~$770.5~~$276.3 million ~~and decrease in money market deposits of~~ ~~$345.2 million~~from December 31, ~~2021.The decrease in the~~2022 to June 30, 2023 is attributable to migration to interest-yielding products such as money market and savings deposits, ~~and interest-bearing deposits was driven~~which increased by ~~a $677.0~~$274.7 million ~~decrease~~ from December 31, ~~2021~~2022. Also included in noninterest-bearing deposits are certain ~~high-cost~~mortgage escrow deposits from our third-party mortgage servicing provider, which amounted to $113.7 million and $75.6 million as of June 30, 2023 and December 31, 2022, respectively.

Interest-bearing checking deposits decreased by $180.6 million from December 31, 2022 due largely to decreases in our deposits from municipal and governmental entities (i.e. "public deposits") ~~that we exited. This~~which decreased by $149.4 million during the period. The decline in public funds was ~~partially offset by increases in customer~~primarily seasonal.

Additionally, brokered and internet time ~~and saving deposits of $57.1 million and $26.6 million, respectively, as of September 30, 2022 compared to balances as of December 31, 2021. In addition, as noted above, our noninterest-bearing~~ deposits increased by ~~$226.3~~$237.6 million ~~from~~to $239.5 million as of June 30, 2023 compared to December 31, ~~2021.~~

~~During~~2022, which was a result of our balance sheet and liquidity management strategy, which included purchasing brokered time deposits in order to increase the ~~three months ended September 30, 2022, we increased deposit rates on customer time~~liquidity of our balance sheet and ~~money market deposits to improve~~lower our ~~liquidity profile and future funding cost. The Company's total~~ cost of ~~deposits increased during~~funding.

As a result of the ~~three months ended September 30, 2022 from~~rising interest rate environment and the ~~three months ended September 30, 2021 by 26 basis points to 0.52%, and the~~shift in our deposit composition, we have experienced an increase in our cost of interest-bearing deposits ~~increased to 0.74% from 0.34%~~and total cost of deposits. Average deposit balances by type, together with the average rates per period are reflected in the ~~same period for~~average balance sheet amounts, interest paid and rate analysis tables included in this management's discussion and analysis under the ~~prior year.~~ subheading "Results of operations" discussion.

We ~~expect total customer time and money market deposits to increase during the fourth quarter of 2022.~~

~~During the nine months ended September 30, 2022, the Company entered into two~~utilize designated fair value hedges to mitigate interest rate exposure associated with certain fixed-rate money market deposits. The aggregate fair value of these hedges included in the carrying amount of total money market deposits as of ~~September~~June 30, ~~2022 was $10.2 million.~~

Included in noninterest-bearing deposits are certain mortgage escrow and related customer deposits that our third-party servicing provider, Specialized Loan Servicing, transfers to the Bank which totaled $140.8 million and $127.6 million at September 30, 20222023 and December 31, ~~2021,~~2022 was $8.9 million and $9.8 million, respectively. ~~Additionally, our deposits from public deposits totaled $1.61 billion at September 30, 2022, compared to $2.29 billion at December 31, 2021.~~

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 14, "Related party transactions" in the notes to our consolidated financial statements included in this Report.

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 as of the dates indicated:~~

As of September 30, As of December 31,
2022 2021
(dollars in thousands) Amount % of total deposits Average rate Amount % of total deposits Average rate
Deposit Type
Noninterest-bearing demand $ 2,966,514 30 % — % $ 2,740,214 26 % — %
Interest-bearing demand 2,648,161 26 % 0.47 % 3,418,666 32 % 0.35 %
Money market 2,721,186 27 % 0.37 % 3,066,347 28 % 0.36 %
Savings deposits 507,151 5 % 0.05 % 480,589 4 % 0.06 %
Customer time deposits 1,160,726 12 % 0.67 % 1,103,594 10 % 0.67 %
Brokered and internet time deposits 2,344 — % 1.34 % 27,487 — % 1.69 %
Total deposits $ 10,006,082 100 % 0.32 % $ 10,836,897 100 % 0.30 %
Total Uninsured Deposits $ 4,959,418 50 % $ 4,877,819 45 %
Customer Time Deposits
0.00-0.50% $ 538,237 46 % $ 792,020 72 %
0.51-1.00% 91,248 8 % 97,644 9 %
1.01-1.50% 75,289 6 % 78,539 7 %
1.51-2.00% 270,231 23 % 36,090 3 %
2.01-2.50% 48,140 4 % 44,653 4 %
Above 2.50% 137,581 13 % 54,648 5 %
Total customer time deposits $ 1,160,726 100 % $ 1,103,594 100 %
Brokered and Internet Time Deposits
0.00-0.50% $ 99 4 % $ 99 — %
0.51-1.00% — — % — — %
1.01-1.50% 247 11 % 595 2 %
1.51-2.00% 752 32 % 16,358 60 %
2.01-2.50% 747 32 % 4,464 16 %
Above 2.50% 499 21 % 5,971 22 %
Total brokered and internet time deposits $ 2,344 100 % $ 27,487 100 %
Total time deposits $ 1,163,070 $ 1,131,081

~~Other earning assets~~

~~Securities purchased under agreements to resell ("reverse repurchase agreements")~~

We enter into agreements with certain customers to purchase investment securities under agreements to resell at specific dates in the future. This investment deploys some of our liquidity position into an instrument that improves the return on those funds in low interest rate environments. Additionally, we believe it positions us more favorably for a rising interest rate environment. Securities purchased under agreements to resell totaled $74.8 million and $74.2 million at September 30, 2022 and December 31, 2021, respectively.

~~Investment portfolio~~

The fair value of our available-for-sale debt securities portfolio was $1.48 billion and $1.68 billion as of September 30, 2022 and December 31, 2021, respectively. As of September 30, 2022 and December 31, 2021, the Company had $3.0 million and $3.4 million, respectively, in equity securities recorded at fair value that primarily consisted of mutual funds.

During the three months ended September 30, 2022 and 2021, we purchased $0.9 million and $290.9 million in investment securities, respectively. During the nine months ended September 30, 2022 and 2021, we purchased $242.6 million and $645.7 million in investment securities, respectively. During the nine months ended September 30, 2022, we sold $1.2 million in investment securities. There were no investment securities sold during three months ended September 30, 2022. The trade value of securities sold was $8.9 million during three and nine months ended September 30, 2021. During the three months ended September 30, 2022 and 2021, maturities and calls of securities totaled $44.4 million and $68.1 million, respectively. During the nine months ended September 30, 2022 and 2021, maturities and calls of securities totaled $170.7 million and $216.0 million, respectively.

Included in the fair value of available-for-sale debt securities were net unrealized losses of $258.6 million at September 30, 2022 compared to net unrealized gains of $4.7 million at December 31, 2021. Our available-for-sale debt securities portfolio incurred unrealized losses during the period due to a rising interest rate environment, but we believe we are well positioned to mitigate the impact of future rate increases due to the low duration of our portfolio. During the three months ended September 30, 2022 and 2021, the change in the fair value of equity securities resulted in a net loss of $141 thousand and $24 thousand, respectively. During the nine months ended September 30, 2022 and 2021, the change in the fair value of equity securities resulted in a net loss of $405 thousand and a net gain of $188 thousand, respectively.

8485

The following table sets forth the ~~fair value, scheduled maturities and weighted average yields for~~distribution by type of our ~~available-for-sale debt securities portfolio~~deposit accounts as of the dates ~~indicated below:~~indicated:

As of September 30, As of December 31,
2022 2021
(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:
Maturing within one year $ 487 — % 2.55 % $ — — % — %
Maturing in one to five years 106,810 7.2 % 2.10 % 14,908 0.9 % 1.24 %
Maturing in five to ten years — — % — % — — % — %
Maturing after ten years — — % — % — — % — %
Total Treasury securities 107,297 7.2 % 2.10 % 14,908 0.9 % 1.24 %
Government agency securities:
Maturing within one year — — % — % — — % — %
Maturing in one to five years 20,838 1.4 % 1.58 % 20,141 1.2 % 1.33 %
Maturing in five to ten years 18,015 1.2 % 1.54 % 13,729 0.8 % 1.40 %
Maturing after ten years 978 0.1 % 1.85 % — — % — %
Total government agency securities 39,831 2.7 % 1.57 % 33,870 2.0 % 1.36 %
Municipal securities:
Maturing within one year 3,475 0.2 % 2.18 % 21,884 1.3 % 1.26 %
Maturing in one to five years 18,413 1.2 % 2.35 % 19,903 1.2 % 2.05 %
Maturing in five to ten years 31,821 2.1 % 3.42 % 27,086 1.6 % 3.38 %
Maturing after ten years 198,434 13.5 % 3.13 % 269,737 16.1 % 3.14 %
Total obligations of state and municipal subdivisions 252,143 17.0 % 3.09 % 338,610 20.2 % 2.97 %
Residential and commercial mortgage backed securities guaranteed by FNMA, GNMA and FHLMC:
Maturing within one year — — % — % — — % — %
Maturing in one to five years 3,700 0.2 % 2.74 % 4,041 0.2 % 2.55 %
Maturing in five to ten years 20,596 1.4 % 2.67 % 17,368 1.0 % 2.28 %
Maturing after ten years 1,051,314 71.0 % 1.86 % 1,263,213 75.3 % 1.51 %
Total residential and commercial mortgage backed securities guaranteed by FNMA, GNMA and FHLMC 1,075,610 72.6 % 1.88 % 1,284,622 76.5 % 1.53 %
Corporate securities:
Maturing within one year — — % — % — — % — %
Maturing in one to five years 367 — % 5.00 % 355 — % 5.06 %
Maturing in five to ten years 6,923 0.5 % 3.87 % 6,160 0.4 % 4.05 %
Maturing after ten years — — % — % — — % — %
Total Corporate securities 7,290 0.5 % 3.94 % 6,515 0.4 % 4.13 %
Total available-for-sale debt securities $ 1,482,171 100.0 % 2.10 % $ 1,678,525 100.0 % 1.83 %


	June 30,						December 31,
	2023						2022
(dollars in thousands)	Amount		% of total deposits		Average rate		Amount		% of total deposits		Average rate
Deposit Type
Noninterest-bearing demand	$	2,400,288	22	%	—	%	$	2,676,631	25	%	—	%
Interest-bearing demand	2,879,336		26	%	2.74	%	3,059,984		28	%	0.70	%
Money market	3,548,042		33	%	3.19	%	3,226,102		30	%	0.80	%
Savings deposits	423,933		4	%	0.06	%	471,143		4	%	0.05	%
Customer time deposits	1,381,176		13	%	2.77	%	1,420,131		13	%	0.99	%
Brokered and internet time deposits	239,480		2	%	5.11	%	1,843		—	%	1.36	%
Total deposits	$	10,872,255	100	%	2.16	%	$	10,855,834	100	%	0.54	%



Customer Time Deposits
0.00-1.00%	$	132,849	10	%			$	387,739	27	%
1.01-2.00%	163,644		12	%			341,721		24	%
2.01-3.00%	71,101		5	%			89,916		6	%
3.01-4.00%	394,121		28	%			342,576		24	%
4.01-5.00%	527,269		38	%			224,308		16	%
Above 5.00%	92,192		7	%			33,871		3	%
Total customer time deposits	$	1,381,176	100	%			$	1,420,131	100	%
Brokered and Internet Time Deposits
0.00-1.00%	$	2,081	1	%			$	99	5	%
1.01-2.00%	980		—	%			747		41	%
2.01-3.00%	11,005		5	%			747		41	%
3.01-4.00%	18,893		8	%			250		13	%
4.01-5.00%	20,059		8	%			—		—	%
Above 5.00%	186,462		78	%			—		—	%
Total brokered and internet time deposits	$	239,480	100	%			$	1,843	100	%
Total time deposits	$	1,620,656					$	1,421,974

Further details related to our deposit customer base is presented below as of the dates indicated:


	June 30,				December 31,
	2023				2022
(dollars in thousands)	Amount		% of total deposits		Amount		% of total deposits
Deposits by customer segment(1)
Consumer	$	4,918,641	45	%	$	4,985,544	46	%
Commercial	4,029,376		37	%	3,796,698		35	%
Public	1,924,238		18	%	2,073,592		19	%
Total deposits	$	10,872,255	100	%	$	10,855,834	100	%

(1)~~Yields~~ Segments are determined based on ~~a tax-equivalent basis.~~the customer account level.

The below sets forth maturity information on time deposits below and in excess of the FDIC insurance limit as of June 30, 2023:


	June 30, 2023
(dollars in thousands)	Amount		Weighted average interest rate at period end
Time deposits of $250 and less
Months to maturity:
Three or less	$	170,059	2.76	%
Over Three to Six	196,672		3.01	%
Over Six to Twelve	371,130		3.59	%
Over Twelve	441,054		3.71	%
Total	$	1,178,915	3.42	%

Time deposits of greater than $250
Months to maturity:
Three or less	$	56,861	2.96	%
Over Three to Six	82,866		3.39	%
Over Six to Twelve	168,639		4.02	%
Over Twelve	133,375		3.78	%
Total	$	441,741	3.69	%

Uninsured deposits are defined as the portion of deposit accounts in U.S. offices that exceed the FDIC insurance limit and amounts in any other uninsured investment or deposit account that are classified as deposits and are not subject to any federal or state deposit insurance regimes. Collateralized deposits are included within our total uninsured deposits.

Further details related to our estimated insured or collateralized deposits and uninsured and uncollateralized deposits is presented below as of the dates indicated:


	June 30,			December 31,
	2023			2022
Estimated insured or collateralized deposits(2)	$	7,858,761		$	7,288,641
Estimated uninsured deposits(1)	$	5,041,978		$	5,644,534
Estimated uninsured and uncollateralized deposits(2)	$	3,013,494		$	3,567,193
Estimated uninsured and uncollateralized deposits as a % of total deposits(2)	27.7		%	32.9		%

(1) Amounts are shown on an unconsolidated basis consistent with regulatory reporting requirements.

(2) Amounts are shown on a fully consolidated basis and exclude deposits of affiliates that are eliminated in consolidation.

Borrowed funds

Deposits and investment securities 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 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 purchased, and subordinated debt.~~

Securities sold under agreements to repurchase and federal funds purchased

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 as a short-term return for their excess funds. Securities sold under agreements to repurchase totaled ~~$29.0~~$19.4 million and ~~$40.7~~$21.9 million at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

We also maintain lines with certain correspondent banks that provide borrowing capacity in the form of federal funds purchased. Federal funds purchased are short-term borrowings that typically mature within one to ninety days. Borrowings against these lines (i.e. federal funds purchased) totaled $96.8 million and $65.0 million as of June 30, 2023 and December 31, 2022, respectively.

FHLB short-term borrowings

As a member of the FHLB ~~Cincinnati,~~system, we ~~receive~~may utilize advances from the FHLB ~~pursuant~~in order to ~~the terms of various agreements that assist in funding our mortgage~~provide additional liquidity and ~~loan commitments, as well as providing liquidity for relevant balance sheet funding strategies.~~funding. Under these short-term agreements, we ~~pledged qualifying loans of $2.53 billion as collateral securing~~maintain a line of credit ~~with a~~that as of June 30, 2023 and December 31, 2022 had total borrowing capacity of ~~$1.20~~$1.30 billion ~~as of September 30, 2022.~~and $1.27 billion, respectively. As of June 30, 2023 and December 31, ~~2021, the Company pledged~~2022, we had qualifying loans ~~of $2.72 billion~~pledged as collateral securing athese lines amounting to $2.73 billion and $2.67 billion, respectively. Overnight cash advances against this line ~~of credit with a total borrowing capacity of $1.23 billion. As of September 30, 2022, we had outstanding advances from the FHLB totaling $540.0 million. There were no such borrowings outstanding~~totaled $125.0 million and $175.0 million as of June 30, 2023 and December 31, ~~2021.~~2022.

Subordinated debt

During the year-ended December 31, 2003, we formed two separate trusts which issued $9.0 million (“Trust I”) and $21.0 million (“Trust II”) of floating rate trust preferred securities as part of a pooled offering of such securities. We ~~have two wholly-owned subsidiaries that are statutory business trusts (“Trusts”).~~issued junior subordinated debentures of $9.3 million, which included proceeds of common securities which we purchased for $0.3 million, and junior subordinated debentures of $21.7 million which included proceeds of common securities of $0.7 million. 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 us. Both issuances were to the ~~Company. As~~trusts in exchange for the proceeds of ~~September 30, 2022 and~~the securities offerings, which represent the sole asset of the trusts.

Additionally, during the year ended December 31, 2021, 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 (6.79% and 3.37% at September 30, 2022 and December 31, 2021, respectively) for the $21.7 million debenture and 3-month LIBOR plus 325 basis points (6.92% and 3.47% at September 30, 2022 and December 31, 2021, 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. The Company classified both debentures as additional Tier 1 capital as of September 30, 2022 and December 31, 2021.

~~We also have~~2020, we placed $100.0 million of ten year fixed-to-floating rate subordinated notes, ~~scheduled to mature on~~maturing September 1, 2030. This subordinated note pays interest semi-annually in arrears based on a 4.50% 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. During the first quarter of 2022, the Company entered into a designated fair value hedge to mitigate our interest rate exposure associated with these ~~notes. The estimated~~notes through the use of fair value ofhedging instruments. See Note 9, "Derivatives" in the ~~hedge included in borrowings on~~notes to the consolidated ~~balance sheet~~financial statements for additional details related to these instruments.

Further information related to the our subordinated debt as of ~~September~~June 30, 2022 was $3.8 million. The Company classified the subordinated notes issuance, net of the impact of the designated fair value hedge and unamortized issuance costs, as Tier 2 capital as of September 30, 2022, and net of unamortized issuance costs as of December 31, 2021.2023 is detailed below:

(dollars in thousands)

Year established

Maturity

Call date

Total debt outstanding

Interest rate

Coupon structure

Subordinated debt issued by trust preferred securities:

FBK Trust I (1)

2003

06/09/2033

6/09/2008(2)

9,280

8.79%

3-month LIBOR plus 3.25%(5)

FBK Trust II (1)

2003

06/26/2033

6/26/2008(3)

21,650

8.69%

3-month LIBOR plus 3.15%(5)

Additional subordinated debt:

FBK subordinated debt I(4)

2020

09/01/2030

9/1/2025 (6)

100,000

4.50%

Semi-annual fixed(7)

Unamortized debt issuance costs

(805)

Fair value hedge (See Note 9, "Derivatives" )

(2,590)

Total subordinated debt, net

127,535

(1)The Company classifies $30.0 million of the Trusts' subordinated debt as Tier 1 capital.

(2)The Company may also 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 and must be redeemed no later than 2033.

(3)The Company may also redeem the second junior subordinated debentures listed, in whole or in part on any distribution payment date, at the redemption price and must

be redeemed no later than 2033.

(4)The Company classified the issuance, net of unamortized issuance costs and the associated fair value hedge as Tier 2 capital, which will be phased out 20% per year in

the final five years before maturity.

(5)Given the cessation of LIBOR on June 30, 2023, the final payment date utilizing a 3-month LIBOR reset will be in the second half of 2023. Following the final LIBOR

payment, the variable rate in these debt securities will convert to the fallback rate of 3-month SOFR plus the credit spread adjustment noted above as outlined in the

LIBOR Act.

(6)The Company may redeem the notes in whole or in part on any interest payment date on or after September 1, 2025.

(7)Beginning on September 1, 2025 the coupon structure migrates to the 3-month Secured Overnight Financing Rate plus a spread of 439 basis points through the end of

the term of the debenture.

Other borrowings

Other borrowings on our consolidated balance sheets includes our finance lease liability totaling ~~$1.4~~$1.3 million and ~~$1.5~~$1.4 million as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. In addition, other borrowings on our consolidated balance sheets ~~includes~~include guaranteed rebooked GNMA loans previously sold that have become past due over 90 days and are eligible for repurchase totaling ~~$26.5~~$20.2 million and $26.2 million as of ~~September~~June 30, ~~2022. There were no such borrowings outstanding as of~~2023 and December 31, ~~2021.~~2022, respectively. See Note 5, "Leases" and Note 10, "Fair ~~Value~~value of financial instruments" within the Notes to our unaudited consolidated financial statements herein for additional information regarding our finance lease and guaranteed GNMA loans eligible for repurchase, respectively.

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~~optimize our ~~shareholders.~~net interest margin. 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 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.~~sources. 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. Increasing interest rates generally attracts customers to higher cost interest-bearing deposit products as they seek to maximize their yield.

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~~Available-for-sale debt securities within our investment portfolio are ~~also~~ used to secure certain deposit types and short-term borrowings. As of September 30, 2022 and December 31, 2021, securities with a carrying value of $1.21 billion and $1.23 billion, respectively, were pledged to secure government, public, trust and other deposits and as collateral for short-term borrowings, letters of credit and derivative instruments. As of June 30, 2023 and December 31, 2022, we had pledged securities related to these items with carrying values of $1.14 billion and $1.19 billion, respectively.

Additional sources of liquidity include federal funds purchased, 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~~Overnight 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. As of ~~September~~June 30, 2023 and December 31, 2022, we had outstanding overnight cash advances from the FHLB totaling ~~$540.0~~$125.0 million and $175.0 million, respectively. As of June 30, 2023, there was $1.30 billion available to borrow against with a remaining capacity of $548.1 million. ~~There were no outstanding overnight cash management advances or other advances with the FHLB as~~As of December 31, ~~2021. There~~2022, there was ~~$1.20~~$1.27 billion ~~and $1.23 billion as of September 30, 2022 and December 31, 2021, respectively~~ available to borrow ~~against.~~ against with a remaining capacity of $830.0 million.

We also ~~maintain~~maintained unsecured lines of credit with other commercial banks totaling ~~$315.0 million and $325.0~~$350.0 million as of ~~September~~both June 30, ~~2022~~2023 and December 31, ~~2021, respectively.~~2022. These are unsecured, uncommitted lines of credit typically maturing at various times within the next twelve months. ~~There were no borrowings~~Borrowings against these lines (i.e. federal funds purchased) totaled $96.8 million and $65.0 million as of ~~September~~June 30, ~~2022 or~~2023 and December 31, ~~2021. We~~2022, respectively. As of both June 30, 2023 and December 31, 2022, we also had ~~an additional~~ $50.0 million available through the ~~promontory~~IntraFi network, aswhich allows us to offer banking customers access to FDIC insurance protection on deposits through our Bank which exceed FDIC insurance limits.

Our current on-balance sheet liquidity and available sources of ~~both September 30, 2022~~liquidity are summarized in the table below:


	June 30,			December 31,
(dollars in thousands)	2023			2022
Current on-balance sheet liquidity:
Cash and cash equivalents	$	1,160,354		$	1,027,052
Unpledged available-for-sale debt securities	281,098			280,165
Equity securities, at fair value	3,031			2,990
Total on-balance sheet liquidity	$	1,444,483		$	1,310,207

Available sources of liquidity:
Unsecured borrowing capacity(1)	$	3,396,674		$	3,595,812
FHLB remaining borrowing capacity	548,052			829,959
Federal Reserve discount window	2,476,347			2,470,000
Total available sources of liquidity	$	6,421,073		$	6,895,771

On-balance sheet liquidity as a percentage of total assets	11.2		%	10.2		%
On-balance sheet liquidity and available sources of liquidity as a percentage of estimated uninsured and uncollateralized deposits(2)	261.0		%	230.0		%

(1)Includes capacity available per internal policy in the form of brokered deposits and ~~December 31, 2021.~~unsecured lines of credit.

~~Holding company~~(2)Amounts are shown on a fully consolidated basis and exclude deposits of affiliates that are eliminated in consolidation.

The Company also maintains the ability to access capital markets to meet its liquidity ~~management~~needs. The Company has an active shelf registration statement filed with the SEC which allows it to raise capital in various forms, including through the sale of common stock, preferred stock, depository shares, debt securities, rights, warrants and units. Specific terms and prices would be determined at the time of any such offering. In the past, the Company has utilized capital markets to generate liquidity in the form of common stock and subordinated debt primarily for the purpose of funding acquisitions.

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.~~Bank to the Company. 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,”~~regulation”, "Item 1A. Risk Factors - Risks related to our business" and ~~" Item~~"Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Dividend ~~Policy,"~~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. Based upon this regulation, as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021, $130.1~~2022, $185.6 million and ~~$170.8~~$161.3 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 three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, there were ~~$7.3~~$8.5 million and ~~$41.8~~$32.0 million in cash dividends approved by the board for payment from the Bank to the holding company. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, there were ~~$6.3~~$17.3 million and ~~$116.3~~$34.5 million ~~respectively,~~ in cash dividends approved by the board for payment from the Bank to the holding company. None of these required approval from the TDFI. Subsequent to ~~September~~June 30, ~~2022,~~2023, the board approved a dividend from the Bank to the holding company to be paid in the ~~fourth~~third quarter for ~~$7.3~~$8.5 million that also did not require approval from the TDFI.

During the three and ~~nine~~six months ended ~~September~~June 30, 2023, the Company declared shareholder dividends of $0.15 per share, or $7.1 million and $0.30 per share, or $14.2 million, respectively. During the three and six months ended June 30, 2022, the Company declared ~~and paid~~ shareholder dividends of $0.13 per share, or ~~$6.1~~$6.2 million and ~~$0.39~~$0.26 per share, or ~~$18.5 million, respectively. During the three and nine months ended September 30, 2021, the Company declared and paid dividends of $0.11 per share, or $5.3 million and $0.33 per share, or $15.9~~$12.4 million, respectively. Subsequent to ~~September~~June 30, ~~2022,~~2023, the Company declared a quarterly dividend in the amount of ~~$0.13~~$0.15 per share, payable on ~~November 23, 2022,~~September 5, 2023, to stockholders of record as of ~~November 9, 2022.~~August 14, 2023.

Shareholders’ equity and capital management

Our total shareholders’ equity was ~~$1.28~~$1.39 billion ~~at September~~as of June 30, ~~2022~~2023 and ~~$1.43~~$1.33 billion atas of December 31, ~~2021.~~2022. Book value per common share was ~~$27.30 at September~~$29.64 as of June 30, ~~2022~~2023 and ~~$30.13 at~~$28.36 as of December 31, ~~2021, respectively.~~2022. The ~~decrease~~increase in shareholders’ equity ~~during the first half of 2022,~~ was primarily attributable to ~~a decrease~~an increase in ~~accumulated other comprehensive income related to unrealized losses on our available-for-sale securities portfolio. Additionally, our capital was impacted by~~ retained net income, ~~dividends paid, and $32.7~~net of dividend declarations. The increase in shareholders’ equity as of June 30, 2023 also included an increase in unrealized value of $8.4 million ~~in common stock repurchases during the nine months ended September 30,~~within our available-for-sale debt securities portfolio from December 31, 2022.

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. The Federal Reserve and the FDIC have issued guidelines governing the levels of capital that banks must maintain. As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, we met all capital adequacy requirements for which we ~~are~~were subject. See additional discussion regarding our capital adequacy and ratios at within Note 12, "Minimum capital requirements" in the notes to our consolidated financial statements contained herein.


June 30, 2023	FB Financial Corporation		FirstBank		To be Well-Capitalized(1)
Total Risk-Based Capital Ratio	13.9	%	13.6	%	10.0	%
Tier 1 Capital Ratio	11.9	%	11.7	%	8.0	%
Common Equity Tier 1 Ratio(CET1)	11.7	%	11.7	%	6.5	%
Leverage Ratio	10.7	%	10.4	%	5.0	%

(1) Applicable to Bank level capital.

Capital ratios are well above regulatory requirements for well-capitalized institutions. Management’s use of risk-based capital ratios in its analysis of the measures to assess the quality of capital and believes that investors may find it useful in their analysis of the Company. The Company also performs quarterly forward-looking stress testing to evaluate capital deployment opportunities are aligned with the Company's risk appetite.

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, 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 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. Economic Value of Equity 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.

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:
		Net interest income (1)									Net interest income (1)
		Year 1				Year 2
Change in interest rates	Change in interest rates	September 30,		December 31,		September 30,		December 31,		Change in interest rates	June 30,		December 31,
(in basis points)	(in basis points)	2022		2021		2022		2021		(in basis points)	2023		2022
+400	+400	19.3	%	40.9	%	29.5	%	54.8	%	+400	14.8	%	20.6	%
+300	+300	14.2	%	30.2	%	21.9	%	40.8	%	+300	12.6	%	15.1	%
+200	+200	10.3	%	20.9	%	15.3	%	28.3	%	+200	9.61	%	10.8	%
+100	+100	5.67	%	10.8	%	8.23	%	14.7	%	+100	5.45	%	5.98	%
-100	-100	(5.83)	%	(6.32)	%	(8.59)	%	(10.2)	%	-100	(5.92)	%	(6.32)	%
-200	-200	(12.5)	%	(8.73)	%	(18.2)	%	(13.5)	%	-200	(11.9)	%	(13.2)	%


		Percentage change in:					Percentage change in:
		Economic value of equity (2)					Economic value of equity (2)
Change in interest rates	Change in interest rates	September 30,		December 31,		Change in interest rates	June 30,		December 31,
(in basis points)	(in basis points)	2022		2021		(in basis points)	2023		2022
+400	+400	(9.89)	%	5.30	%	+400	(8.17)	%	(9.90)	%
+300	+300	(6.79)	%	5.67	%	+300	(4.02)	%	(7.00)	%
+200	+200	(3.71)	%	5.72	%	+200	(0.70)	%	(4.00)	%
+100	+100	(1.33)	%	3.90	%	+100	0.82	%	(1.66)	%
-100	-100	0.50	%	(8.13)	%	-100	(3.26)	%	0.99	%
-200	-200	(0.08)	%	(21.4)	%	-200	(8.84)	%	1.07	%

(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 interest 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, ~~2022~~2023 and December 31, ~~2021~~2022 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~~customer deposits. ~~Non-interest bearing deposits continue be a strong source of funding which also increases asset sensitivity. While our~~Our variable rate loan portfolio is indexed to market rates and timing of repricing of loans and deposits ~~typically adjust at a percentage~~varies in proportion to market rate fluctuations. We actively monitor and perform stress tests on our deposit beta's as part of our overall management of interest rate risk. This requires the ~~overall movement~~use of various assumptions based on historical relationships of these variables in reaching any conclusion. Since these correlations are based on competitive pricing in the market, ~~rates.~~we anticipate that our future results will likely be different from the scenario results presented above and such differences could be material.

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.

For more information about our derivative financial instruments, see Note 9, “Derivatives” in the notes to our consolidated financial statements.

ITEM 4 — ~~Controls and Procedures~~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 Securities Exchange Act of 1934, as amended (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, Chief Financial Officer and other members of the Company’s senior management. The Company’s Chief Executive Officer and 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 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, ~~2022,~~2023, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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.

PART 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 toin the Company’s risk factors ~~set forth~~from those disclosed in the ~~"Risk Factors" section of our~~Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022, with the exception of the additional risk factor disclosed in the Company's Quarterly Report on Form 10-Q for the period ended March 31, 2023.

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 30, 2022:~~

~~Period~~

~~(a)~~

~~Total number of shares purchased(1)~~

(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(2)~~

~~July 1 - July 31, 2022~~

—

~~73,440,676~~

~~August 1 - August 31, 2022~~

—

~~73,440,676~~

~~September 1 - September 30, 2022~~

—

~~73,440,676~~

~~Total~~

—

~~73,440,676~~

~~(1)~~ On March 14, 2022, the Company announced the board of directors’ authorization of a share repurchase program pursuant to which the Company may purchase up to $100 million in shares of the Company’s issued and outstanding common stock. The purchase authorizations granted under the new repurchase plan will terminate either on the date on which the maximum dollar amount is repurchased under the new repurchase plan or on January 31, 2024, whichever date occurs earlier. ~~The new~~This repurchase plan will be conducted pursuant to a written plan and is intended to comply with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended.

The Company did not complete any share repurchases during the three months ended June 30, 2023. The dollar value of shares that may yet be repurchased under the program was $61,249,538 as of June 30, 2023.

~~(2)~~ ~~Amounts are inclusive~~

ITEM 5 — OTHER INFORMATION

Rule 10b5-1 Trading Plans

During the quarter ended June 30, 2023, none of ~~commissions and fees related~~the Company’s directors or executive officers adopted, modified, or terminated any contract, instruction, or written plan for the purchase or sale of Company securities that was intended to satisfy the ~~stock repurchases.~~affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”

9094

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 Number			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)~~amended (for SEC filing purposes only)*
3.2			Amended and Restated Bylaws of FB Financial Corporation (incorporated by reference to Exhibit 3.2 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)
4.1			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)






















31.1			Rule 13a-14(a) Certification of Chief Executive Officer*
31.2			Rule 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.

9195

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 7, 2022~~August 4, 2023						Michael M. Mettee Chief Financial Officer (Principal Financial Officer)

						/s/ ~~Keith Rainwater~~Jonathan Pennington
~~November 7, 2022~~August 4, 2023						~~Keith Rainwater~~Jonathan Pennington Chief Accounting Officer (Principal Accounting Officer)

9296


	Offsetting Derivative Assets				Offsetting Derivative Liabilities
	September 30, 2022		December 31, 2021		September 30, 2022		December 31, 2021
Gross amounts recognized	$	46,973	$	4,990	$	20,272	$	15,733
Gross amounts offset in the consolidated balance sheets	—		—		—		—
Net amounts presented in the consolidated balance sheets	46,973		4,990		20,272		15,733

Gross amounts not offset in the consolidated balance sheets
Less: financial instruments	14,100		4,297		14,100		4,297
Less: financial collateral pledged	—		—		6,172		11,436
Net amounts	$	32,873	$	693	$	—	$	—


Three Months Ended September 30, 2022	Banking(4)		Mortgage		Consolidated
Net interest income	$	111,384	$	—	$	111,384
Provisions for credit losses(1)	11,367		—		11,367
Mortgage banking income(2)	—		16,729		16,729
Change in fair value of mortgage servicing rights, net of hedging(2)	—		(4,345)		(4,345)
Other noninterest income	10,293		(85)		10,208
Depreciation and amortization	1,867		190		2,057
Amortization of intangibles	1,108		—		1,108

Other noninterest expense	62,911		15,771		78,682
Income (loss) before income taxes	$	44,424	$	(3,662)	$	40,762
Income tax expense					8,931
Net income applicable to FB Financial Corporation and noncontrolling interest					31,831
Net income applicable to noncontrolling interest(3)					—
Net income applicable to FB Financial Corporation					$	31,831
Total assets	$	11,648,610	$	609,472	$	12,258,082
Goodwill	242,561		—		242,561


As oAs of September 30, 2022	Actual				Minimum Capital adequacy with capital buffer			To be well capitalized under prompt corrective action provisions
	Amount		Ratio			Amount		Ratio		Amount		Ratio

Total Capital (to risk-weighted assets)
FB Financial Corporation	$	1,501,110	13.0	%		$	1,210,236	10.5	%	N/A		N/A
FirstBank	1,472,955		12.8	%		1,208,502		10.5	%	$	1,150,954	10.0	%
Tier 1 Capital (to risk-weighted assets)
FB Financial Corporation	$	1,287,489	11.2	%		$	979,715	8.5	%	N/A		N/A
FirstBank	1,259,334		10.9	%		978,311		8.5	%	$	920,764	8.0	%
Tier 1 Capital (to average assets)
FB Financial Corporation	$	1,287,489	10.7	%		$	479,489	4.0	%	N/A		N/A
FirstBank	1,259,334		10.5	%		479,290		4.0	%	$	599,113	5.0	%
Common Equity Tier 1 Capital (to risk-weighted assets)
FB Financial Corporation	$	1,257,489	10.9	%		$	806,824	7.0	%	N/A		N/A
FirstBank	1,259,334		10.9	%		805,668		7.0	%	$	748,120	6.5	%


Grant Year	Vest Year	Shares Outstanding
2020	2023	49,964
2021	2024	59,496
2022	2025	64,922


	Three months ended September 30, 2022 compared to three months ended September 30, 2021 due to changes in
(in thousands on a tax-equivalent basis)	Volume		Yield/ rate		Net increase (decrease)
Interest-earning assets:
Loans(1)(2)	$	20,334	$	10,039	$	30,373
Loans held for sale - residential	(7,653)		4,592		(3,061)
Loans held for sale - commercial	(1,340)		728		(612)
Securities available-for-sale and other securities:
Taxable	1,640		1,214		2,854
Tax Exempt(2)	(101)		14		(87)
Federal funds sold and reverse repurchase agreements	83		659		742
Time deposits in other financial institutions	(5,335)		6,677		1,342
FHLB stock	183		91		274
Total interest income(2)	7,811		24,014		31,825
Interest-bearing liabilities:
Interest-bearing checking	(239)		3,772		3,533
Money market(3)	(819)		3,181		2,362
Savings deposits	10		—		10
Customer time deposits(3)	(108)		803		695
Brokered and internet time deposits(3)	(106)		43		(63)
Securities sold under agreements to repurchase and federal funds purchased	(4)		(4)		(8)
Federal Home Loan Bank advances	2,155		—		2,155
Subordinated debt	(30)		257		227
Other borrowings	—		(1)		(1)
Total interest expense	859		8,051		8,910
Change in net interest income(2)	$	6,952	$	15,963	$	22,915


	Provision for credit losses(1)		Net charge-offs		Average loans held for investment		Ratio of annualized net recoveries (charge-offs) to average loans
(dollars in thousands)
Three months ended September 30, 2022
Commercial and industrial	$	5	$	342	$	1,505,262	0.09	%
Construction	3,044		—		1,577,025		—	%
Residential real estate:
1-to-4 family mortgage	3,975		(7)		1,495,509		—	%
Residential line of credit	77		—		443,881		—	%
Multi-family mortgage	(629)		—		385,030		—	%
Commercial real estate:
Owner-occupied	688		51		1,146,149		0.02	%
Non-owner occupied	247		—		1,904,720		—	%
Consumer and other	782		(371)		352,518		(0.42)	%
Total	$	8,189	$	15	$	8,810,094	—	%
Three months ended September 30, 2021
Commercial and industrial	$	3,203	$	(2,156)	$	1,248,440	(0.69)	%
Construction	(3,080)		2		1,155,051		—	%
Residential real estate:
1-to-4 family mortgage	(2,677)		33		1,153,768		0.01	%
Residential line of credit	(952)		1		397,300		—	%
Multi-family mortgage	(1,462)		—		366,166		—	%
Commercial real estate:
Owner-occupied	7,665		4		925,069		—	%
Non-owner occupied	(6,450)		—		1,674,382		—	%
Consumer and other	921		(269)		325,137		(0.33)	%
Total	$	(2,832)	$	(2,385)	$	7,245,313	(0.13)	%
Nine months ended September 30, 2022
Commercial and industrial	$	(4,784)	$	(429)	$	1,424,734	(0.04)	%
Construction	12,840		11		1,491,710		—	%
Residential real estate:
1-to-4 family mortgage	6,266		(4)		1,405,879		—	%
Residential line of credit	1,032		17		415,006		0.01	%
Multi-family mortgage	(1,102)		—		383,093		—	%
Commercial real estate:
Owner-occupied	(4,601)		76		1,049,851		0.01	%
Non-owner occupied	(2,985)		—		1,798,010		—	%
Consumer and other	3,575		(995)		334,366		(0.40)	%
Total	$	10,241	$	(1,324)	$	8,302,649	(0.02)	%
Nine months ended September 30, 2021
Commercial and industrial	$	2,667	$	(2,577)	$	1,278,041	(0.27)	%
Construction	(28,690)		(27)		1,112,248		—	%
Residential real estate:
1-to-4 family mortgage	(2,141)		(51)		1,110,943		(0.01)	%
Residential line of credit	(4,767)		(2)		396,695		—	%
Multi-family mortgage	4,839		—		304,709		—	%
Commercial real estate:
Owner occupied	7,384		143		914,687		0.02	%
Non-owner occupied	(7,741)		—		1,685,293		—	%
Consumer and other	1,100		(1,080)		308,624		(0.47)	%
Total	$	(27,349)	$	(3,594)	$	7,111,240	(0.07)	%


	Provision for credit losses(1)		Net recoveries (charge-offs)		Average loans held for investment		Ratio of annualized net recoveries (charge-offs) to average loans
(dollars in thousands)
Year ended December 31, 2021
Commercial and industrial	$	4,178	$	(3,175)	$	1,271,476	(0.25)	%
Construction	(29,874)		(27)		1,138,769		—	%
Residential real estate:
1-to-4 family mortgage	(87)		(29)		1,130,019		—	%
Residential line of credit	(4,728)		97		392,907		0.02	%
Multi-family mortgage	(197)		(1)		310,874		—	%
Commercial real estate:
Owner-occupied	7,588		156		917,334		0.02	%
Non-owner occupied	(16,813)		(1,566)		1,683,413		(0.09)	%
Consumer and other	938		(1,290)		352,421		(0.37)	%
Total	$	(38,995)	$	(5,835)	$	7,197,213	(0.08)	%