FB Financial Corp - Quarter Report: 2023 March (Form 10-Q)

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 March 31, 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, Suite 300 Nashville, Tennessee			37201
(Address of principal executive offices)			(Zip Code)

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

___________________________________________________________

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

Title of each class

Trading Symbol(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 April 28, 2023 was 46,781,020.

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 Marc h 31 , 202 3 (Unaudited) and December 31, 202 2	4
	Consolidated Statements of Income (Unaudited) for the three months ended Ma rch 3 1 , 202 3 and 202 2	5
	Consolidated Statements of Comprehensive Income (Unaudited) for the three months ended March 31 , 202 3 and 202 2	6
	Consolidated Statements of Changes in Shareholders' Equity (Unaudited) for the three months ended March 31 , 202 3 and 202 2	7
	Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31 , 202 3 and 202 2	8
	Condensed Notes to Consolidated Financial Statements (Unaudited)	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operation	46
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	79
Item 4.	Controls and Procedures	81
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	81
Item 1A.	Risk Factors	81
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	82
Item 6.	Exhibits	83
SIGNATURES		84

PART I

GLOSSARY OF ABBREVIATIONS AND ACRONYMS

As used in this Quarterly Report on Form 10-Q for the quarter ended March 31, 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) 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

FHLB

Federal Home Loan Bank

AFS

Available-for-sale

FHLMC

Federal Home Loan Mortgage Corporation

ALCO

Asset Liability Management Committee

FNMA

Federal National Mortgage Association

ASC

Accounting Standard Codification

GAAP

U.S. generally accepted accounting principles

ASU

Accounting Standard Update

GNMA

Government National Mortgage Association

Certificate of Deposit

IRLC

Interest rate lock commitment

CECL

Current expected credit losses

LIBOR

London Interbank Offered Rate

CEO

Chief Executive Officer

MSR

Mortgage servicing rights

CET1

Common Equity Tier 1

NIM

Net interest margin

COVID-19

Coronavirus pandemic

OREO

Other real estate owned

CPR

Conditional prepayment rate

PSU

Performance-based restricted stock units

EPS

Earnings per share

Report

Form 10-Q for the quarterly period ended March 31, 2023

ESPP

Employee Stock Purchase Plan

RSU

Restricted stock units

EVE

Economic value of equity

SEC

U.S. Securities and Exchange Commission

FASB

Financial Accounting Standards Board

SOFR

Secured overnight financing rate

FDIC

Federal Deposit Insurance Corporation

TDFI

Tennessee Department of Financial Institutions

Federal Reserve

Board of Governors of the Federal Reserve
System

TDR

Troubled debt restructuring

FB Financial Corporation and subsidiaries

Consolidated balance sheets

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


	March 31,		December 31,
	2023 (Unaudited)		2022
ASSETS
Cash and due from banks	$	133,874	$	259,872
Federal funds sold and reverse repurchase agreements	63,994		210,536
Interest-bearing deposits in financial institutions	1,122,083		556,644
Cash and cash equivalents	1,319,951		1,027,052
Investments:
Available-for-sale debt securities, at fair value	1,471,005		1,471,186
Equity securities, at fair value	3,059		2,990
Federal Home Loan Bank stock, at cost	43,369		58,641
Loans held for sale (includes $61,987 and $113,240 at fair value, respectively)	82,515		139,451
Loans held for investment	9,365,996		9,298,212
Less: allowance for credit losses	138,809		134,192
Net loans held for investment	9,227,187		9,164,020
Premises and equipment, net	153,397		146,316
Other real estate owned, net	4,085		5,794
Operating lease right-of-use assets	57,054		60,043
Interest receivable	44,737		45,684
Mortgage servicing rights, at fair value	164,879		168,365
Goodwill	242,561		242,561
Core deposit and other intangibles, net	11,378		12,368
Bank-owned life insurance	74,963		75,329
Other assets	201,007		227,956
Total assets	$	13,101,147	$	12,847,756
LIABILITIES
Deposits
Noninterest-bearing	$	2,489,149	$	2,676,631
Interest-bearing checking	3,292,883		3,059,984
Money market and savings	3,904,013		3,697,245
Customer time deposits	1,496,024		1,420,131
Brokered and internet time deposits	846		1,843
Total deposits	11,182,915		10,855,834
Borrowings	312,131		415,677
Operating lease liabilities	67,345		69,754
Accrued expenses and other liabilities	168,967		180,973
Total liabilities	11,731,358		11,522,238
Commitments and contingencies (Note 8)
SHAREHOLDERS' EQUITY
Common stock, $1 par value per share; 75,000,000 shares authorized; 46,762,626 and 46,737,912 shares issued and outstanding, respectively	46,763		46,738
Additional paid-in capital	856,628		861,588
Retained earnings	615,871		586,532
Accumulated other comprehensive loss, net	(149,566)		(169,433)
Total FB Financial Corporation common shareholders' equity	1,369,696		1,325,425
Noncontrolling interest	93		93
Total equity	1,369,789		1,325,518
Total liabilities and shareholders' equity	$	13,101,147	$	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 per share amounts)


	Three Months Ended March 31,
		2023		2022
Interest income:
Interest and fees on loans		$	140,356	$	86,864
Interest on securities
Taxable		6,570		5,420
Tax-exempt		1,804		1,866
Other		10,750		977
Total interest income		159,480		95,127

Interest expense:
Deposits		52,863		5,462
Borrowings		2,957		1,483
Total interest expense		55,820		6,945
Net interest income		103,660		88,182
Provision for credit losses		4,997		(6,129)
Provision for credit losses on unfunded commitments		(4,506)		1,882
Net interest income after provisions for credit losses		103,169		92,429

Noninterest income:
Mortgage banking income		12,086		29,531
Service charges on deposit accounts		3,053		2,914
ATM and interchange fees		2,396		5,087
Investment services and trust income		2,378		2,132
Gain (loss) from securities, net		69		(152)
Loss on sales or write-downs of other real estate owned and other assets		(183)		(434)

Other income		3,550		2,314
Total noninterest income		23,349		41,392

Noninterest expenses:
Salaries, commissions and employee benefits		48,788		59,443
Occupancy and equipment expense		5,909		5,403
Legal and professional fees		3,108		2,607
Data processing		2,113		2,481

Amortization of core deposit and other intangibles		990		1,244





Advertising		2,133		4,033

Other expense		17,399		14,061
Total noninterest expense		80,440		89,272
Income before income taxes		46,078		44,549
Income tax expense		9,697		9,313
Net income applicable to FB Financial Corporation and noncontrolling interest		36,381		35,236
Net income applicable to noncontrolling interest		—		—
Net income applicable to FB Financial Corporation		$	36,381	$	35,236

Earnings per common share
Basic		$	0.78	$	0.74
Diluted		0.78		0.74

See the accompanying notes to the consolidated financial statements.

FB Financial Corporation and subsidiaries

Consolidated statements of comprehensive income (loss)

(Unaudited)

(Amounts are in thousands)


	Three Months Ended March 31,
		2023		2022
Net income		$	36,381	$	35,236
Other comprehensive income (loss), net of tax:
Net unrealized gain (loss) in available-for-sale securities, net of tax expenses (benefits) of $7,059 and $(27,483)		20,064		(78,175)
Reclassification adjustment for gain on sale of securities included in net income, net of tax expenses of $— and $1		—		(1)
Net unrealized (loss) gain in hedging activities, net of tax (benefits) expenses of $(70) and $273		(197)		774

Total other comprehensive income (loss), net of tax		19,867		(77,402)
Comprehensive income (loss) applicable to FB Financial Corporation and noncontrolling interest		56,248		(42,166)
Comprehensive income applicable to noncontrolling interest		—		—
Comprehensive income (loss) applicable to FB Financial Corporation		$	56,248	$	(42,166)

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 (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	—		—		35,236		—		35,236		—		35,236
Other comprehensive loss, net of taxes	—		—		—		(77,402)		(77,402)		—		(77,402)
Repurchase of common stock	(145)		(6,058)		—		—		(6,203)		—		(6,203)
Stock based compensation expense	1		2,581		—		—		2,582		—		2,582
Restricted stock units vested and distributed, net of shares withheld	68		(1,556)		—		—		(1,488)		—		(1,488)
Shares issued under employee stock purchase program	15		672		—		—		687		—		687
Dividends declared ($0.13 per share)	—		—		(6,238)		—		(6,238)		—		(6,238)

Balance at March 31, 2022	$	47,488	$	888,168	$	515,664	$	(71,544)	$	1,379,776	$	93	$	1,379,869

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	—		—		36,381		—		36,381		—		36,381
Other comprehensive income, net of taxes	—		—		—		19,867		19,867		—		19,867
Repurchase of common stock	(136)		(4,808)		—		—		(4,944)		—		(4,944)
Stock based compensation expense	1		2,284		—		—		2,285		—		2,285
Restricted stock units vested and distributed, net of shares withheld	92		(1,544)		—		—		(1,452)		—		(1,452)
Performance-based restricted stock units vested and distributed, net of shares withheld	60		(1,205)		—		—		(1,145)		—		(1,145)
Shares issued under employee stock purchase program	8		313		—		—		321		—		321
Dividends declared ($0.15 per share)	—		—		(7,042)		—		(7,042)		—		(7,042)

Balance at March 31, 2023	$	46,763	$	856,628	$	615,871	$	(149,566)	$	1,369,696	$	93	$	1,369,789

See the accompanying notes to the consolidated financial statements.

FB Financial Corporation and subsidiaries

Consolidated statements of cash flows

(Unaudited)

(Amounts are in thousands)


	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities:
Net income applicable to FB Financial Corporation and noncontrolling interest	$	36,381	$	35,236
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization of fixed assets and software	2,228		2,036
Amortization of core deposit and other intangibles	990		1,244
Amortization of issuance costs on subordinated debt	97		97
Capitalization of mortgage servicing rights	(1,788)		(9,812)
Net change in fair value of mortgage servicing rights	5,274		(19,351)
Stock-based compensation expense	2,285		2,582
Provision for credit losses	4,997		(6,129)
Provision for credit losses on unfunded commitments	(4,506)		1,882
Provision for mortgage loan repurchases	(250)		(389)
(Accretion) amortization of discounts and premiums on acquired loans, net	(319)		2,352
Amortization of premiums and accretion of discounts on securities, net	1,382		1,992
(Gain) loss from securities, net	(69)		152
Originations of loans held for sale	(295,760)		(993,733)

Proceeds from sale of loans held for sale	340,108		1,330,701
Gain on sale and change in fair value of loans held for sale	(8,635)		(21,675)

Net loss on write-downs of other real estate owned and other assets	183		434


Provision for deferred income taxes	1,396		9,313
Earnings on bank-owned life insurance	(605)		(354)
Changes in:
Operating lease assets and liabilities, net	580		(190)
Other assets and interest receivable	62,512		(62,043)
Accrued expenses and other liabilities	(48,099)		13,900
Net cash provided by operating activities	98,382		288,245
Cash flows from investing activities:
Activity in available-for-sale securities:

Maturities, prepayments and calls	26,827		57,443
Purchases	(660)		(170,093)
Net change in loans	(52,540)		(362,408)

Sales of FHLB stock	21,637		—
Purchases of FHLB stock	(6,365)		(2,216)

Purchases of premises and equipment	(9,450)		(601)

Proceeds from the sale of other real estate owned and other assets	2,031		121

Proceeds from bank-owned life insurance	236		—

Net cash used in investing activities	(18,284)		(477,754)
Cash flows from financing activities:
Net increase in demand deposits	251,069		238,893
Net increase (decrease) in time deposits	74,896		(75,765)
Net decrease in securities sold under agreements to repurchase and federal funds purchased	(48,815)		(14,779)

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




Share based compensation withholding payments	(2,597)		(1,488)
Net proceeds from sale of common stock under employee stock purchase program	321		687
Repurchase of common stock	(4,944)		(6,203)
Dividends paid on common stock	(6,994)		(6,194)
Dividend equivalent payments made upon vesting of equity compensation	(135)		(71)

Net cash provided by financing activities	212,801		135,080
Net change in cash and cash equivalents	292,899		(54,429)
Cash and cash equivalents at beginning of the period	1,027,052		1,797,740
Cash and cash equivalents at end of the period	$	1,319,951	$	1,743,311
Supplemental cash flow information:
Interest paid	$	52,634	$	8,631
Taxes (refunded) paid, net	(904)		72
Supplemental noncash disclosures:
Transfers from loans to other real estate owned	$	235	$	563




Transfers from loans to loans held for sale	7,126		8,700
Transfers from loans held for sale to loans	776		47,956
Decrease in rebooked GNMA loans under optional repurchase program	(5,683)		—




Trade date payable - securities	245		—

Dividends declared not paid on restricted stock units	48		60


Right-of-use assets obtained in exchange for operating lease liabilities	3,375		283

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 subsidiary, FirstBank (the "Bank"). As of March 31, 2023, the Bank had 82 full-service branches throughout Tennessee, Alabama, southern Kentucky and north Georgia, and a 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 the Company's financial condition and results of operations. Actual results could differ significantly from those estimates.

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

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 calculations for each of the periods presented:


	Three Months Ended March 31,
		2023		2022
Basic earnings per common share:
Net income applicable to FB Financial Corporation		$	36,381	$	35,236
Dividends paid on and undistributed earnings allocated to participating securities		—		—
Earnings available to common shareholders		$	36,381	$	35,236
Weighted average basic shares outstanding		46,679,618		47,530,520
Basic earnings per common share		$	0.78	$	0.74
Diluted earnings per common share:
Earnings available to common shareholders		$	36,381	$	35,236
Weighted average basic shares outstanding		46,679,618		47,530,520
Weighted average diluted shares contingently issuable(1)		85,536		193,382
Weighted average diluted shares outstanding		46,765,154		47,723,902
Diluted earnings per common share		$	0.78	$	0.74

(1)Excludes 159,946 and 123,709 restricted stock units outstanding considered to be antidilutive for the three months ended March 31, 2023 and 2022, respectively.

Recently adopted accounting standards:

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. The Company adopted the update effective January 1, 2023. The adoption of this standard did not have an impact on the consolidated financial statements or disclosures.

Additionally, in March 2022, the FASB issued ASU 2022-02, "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 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 prospectively adopted the amendment effective January 1, 2023 and updated its disclosures for the first quarter of 2023. Refer to Note 3 for further information. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

Newly issued not yet effective accounting standards:

In March 2023, the FASB issued ASU 2023-01, “Leases (Topic 842): Common Control Arrangements” as part of the Post-Implementation Review process of 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 2023-01 requires a lessee in a common-control arrangement to amortize such leasehold improvements that it owns over the improvements' useful life to the common control group, regardless of the lease term. The ASU becomes effective January 1, 2024 and is not expected to have a material impact on the Company's consolidated financial statements and 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

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

which the income tax credits are received, using the proportional amortization method if certain conditions are met. The ASU becomes effective January 1, 2024 and the Company is evaluating the potential impact of this standard on its consolidated financial statements and related disclosures.

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): 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 Company is evaluating the potential impact of this standard on its consolidated financial statements and related disclosures.

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 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 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. In December 2022, the FASB issued ASU 2022-06, "Reference rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848" to extend the date to December 31, 2024 for companies to apply the relief in Topic 848.

The Company's 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, the Company ceased utilization of LIBOR as an index in newly originated loans or loans that are refinanced. Additionally, the Company identified existing products that utilize LIBOR and are implementing contract modifications to facilitate the transition to alternative reference rates. ASU 2020-04 and ASU 2021-01 are not expected to have a material impact on the Company's consolidated financial statements.

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 March 31, 2023, but prior to the issuance of these financial statements that would have a material impact on the Company’s 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 (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 loss at March 31, 2023 and December 31, 2022:


	March 31, 2023
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Allowance for credit losses for investments		Fair Value
Investment Securities
Available-for-sale debt securities
U.S. government agency securities	$	45,176	$	—	$	(4,248)	$	—	$	40,928
Mortgage-backed securities - residential	1,197,702		—		(172,314)		—		1,025,388
Mortgage-backed securities - commercial	18,979		—		(1,256)		—		17,723
Municipal securities	295,010		967		(24,983)		—		270,994
U.S. Treasury securities	113,403		—		(4,580)		—		108,823
Corporate securities	8,000		—		(851)		—		7,149
Total	$	1,678,270	$	967	$	(208,232)	$	—	$	1,471,005


	December 31, 2022
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Allowance for credit losses for investments		Fair Value
Investment Securities
Available-for-sale debt securities
U.S. government agency securities	$	45,167	$	—	$	(5,105)	$	—	$	40,062
Mortgage-backed securities - residential	1,224,522		—		(190,329)		—		1,034,193
Mortgage-backed securities - commercial	19,209		—		(1,565)		—		17,644
Municipal securities	295,375		458		(31,413)		—		264,420
U.S. Treasury securities	113,301		—		(5,621)		—		107,680
Corporate securities	8,000		—		(813)		—		7,187
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 March 31, 2023 and December 31, 2022, total accrued interest receivable on debt securities was $5,399 and $5,470, respectively.

Securities pledged at March 31, 2023 and December 31, 2022 had carrying amounts of $1,184,836 and $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. As of March 31, 2023, there were $245 in trade date payables that related to purchases settled after period end. There were no such trade date payables as of December 31, 2022.

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 as of March 31, 2023 and December 31, 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.


	March 31,				December 31,
	2023				2022
	Available-for-sale				Available-for-sale
	Amortized cost		Fair value		Amortized cost		Fair value
Due in one year or less	$	34,965	$	34,270	$	4,277	$	4,225
Due in one to five years	138,189		130,585		161,556		152,181
Due in five to ten years	58,876		56,982		61,290		57,859
Due in over ten years	229,559		206,057		234,720		205,084
	461,589		427,894		461,843		419,349
Mortgage-backed securities - residential	1,197,702		1,025,388		1,224,522		1,034,193
Mortgage-backed securities - commercial	18,979		17,723		19,209		17,644
Total debt securities	$	1,678,270	$	1,471,005	$	1,705,574	$	1,471,186

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


	Three Months Ended March 31,
		2023		2022
Proceeds from sales		$	—	$	—
Proceeds from maturities, prepayments and calls		26,827		57,443
Gross realized gains		—		2
Gross realized losses		—		—

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


	March 31, 2023
	Less than 12 months				12 months or more				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
U.S. government agency securities	$	4,014	$	(94)	$	36,913	$	(4,154)	$	40,927	$	(4,248)
Mortgage-backed securities - residential	101,194		(4,425)		924,189		(167,889)		1,025,383		(172,314)
Mortgage-backed securities - commercial	11,311		(740)		6,415		(516)		17,726		(1,256)
Municipal securities	43,100		(1,872)		161,743		(23,111)		204,843		(24,983)
U.S. Treasury securities	60,669		(1,276)		48,154		(3,304)		108,823		(4,580)
Corporate securities	946		(55)		6,281		(796)		7,227		(851)
Total	$	221,234	$	(8,462)	$	1,183,695	$	(199,770)	$	1,404,929	$	(208,232)

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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


	December 31, 2022
	Less than 12 months				12 months or more				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized loss
U.S. government agency securities	$	23,791	$	(2,802)	$	16,271	$	(2,303)	$	40,062	$	(5,105)
Mortgage-backed securities - residential	316,656		(32,470)		717,533		(157,859)		1,034,189		(190,329)
Mortgage-backed securities - commercial	11,104		(968)		6,541		(597)		17,645		(1,565)
Municipal securities	196,419		(26,811)		36,726		(4,602)		233,145		(31,413)
U.S. Treasury securities	94,248		(4,122)		13,434		(1,499)		107,682		(5,621)
Corporate securities	4,008		(492)		3,270		(321)		7,278		(813)
Total	$	646,226	$	(67,665)	$	793,775	$	(167,181)	$	1,440,001	$	(234,846)

As of March 31, 2023 and December 31, 2022, the Company’s debt securities portfolio consisted of 506 and 503 securities, 409 and 454 of which were in an unrealized loss position, respectively.

During the three months ended March 31, 2023, the Company's available-for-sale debt securities portfolio unrealized value increased $27,123 to an unrealized loss position of $207,265 from an unrealized loss position of $234,388 as of December 31, 2022. During the three months ended March 31, 2022, the Company's available-for-sale debt securities portfolio unrealized value declined $105,660 to an unrealized loss position of $100,933 from an unrealized gain position of $4,727 as of December 31, 2021.

The majority of the investment portfolio was either government guaranteed, 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 March 31, 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 March 31, 2023 and December 31, 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, the Company does not intend to sell those available-for-sale securities that have an unrealized loss as of March 31, 2023, and 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 months ended March 31, 2023 or 2022.

Equity Securities

As of March 31, 2023 and December 31, 2022, the Company had $3,059 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 $22,483 and $22,496 at March 31, 2023 and December 31, 2022, respectively. Additionally, the Company had $43,369 and $58,641 of Federal Home Loan Bank stock carried at cost at March 31, 2023 and December 31, 2022, respectively, included separately from the other equity securities discussed above.

The change in the fair value of equity securities and sale of equity securities with readily determinable fair values resulted in a net gain of $69 and a net loss of $154 for the three months ended March 31, 2023 and 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 (3)—Loans and allowance for credit losses:

Loans outstanding as of March 31, 2023 and December 31, 2022, by class of financing receivable are as follows:


	March 31,		December 31,
	2023		2022
Commercial and industrial	$	1,671,398	$	1,645,783
Construction	1,697,513		1,657,488
Residential real estate:
1-to-4 family mortgage	1,562,503		1,573,121
Residential line of credit	497,391		496,660
Multi-family mortgage	489,379		479,572
Commercial real estate:
Owner-occupied	1,136,978		1,114,580
Non-owner occupied	1,939,517		1,964,010
Consumer and other	371,317		366,998
Gross loans	9,365,996		9,298,212
Less: Allowance for credit losses	(138,809)		(134,192)
Net loans	$	9,227,187	$	9,164,020

As of March 31, 2023 and December 31, 2022, $849,349 and $909,734, respectively, of qualifying residential mortgage loans (including loans held for sale) and $1,709,763 and $1,763,730, respectively, of qualifying commercial mortgage loans were pledged to the Federal Home Loan Bank of Cincinnati securing advances against the Bank’s line of credit. Additionally, as of March 31, 2023 and December 31, 2022, qualifying loans of $3,164,317 and $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 March 31, 2023 and December 31, 2022, accrued interest receivable on loans held for investment amounted to $37,005 and $38,507, respectively.

Allowance for Credit Losses

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 that are applicable to the 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 Company performed qualitative evaluations within the Company's established qualitative framework, assessing the impact of the current economic outlook (including uncertainty due to inflation, recent bank failures, 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 months ended March 31, 2023 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. 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. Loss rates on residential loans and HELOC were qualitatively adjusted downwards, addressing the relative strength of asset values in the Company's predominant markets.

The Company calculates its allowance for credit losses 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 March 31, 2023, which resulted in changes in the allowance for credit losses compared to 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: Changes in asset quality are driving a minor 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.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

Effective January 1, 2023, the Company prospectively adopted the accounting guidance in ASU 2022-02, "Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures", which eliminates the 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 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 the effective yield for comparable loans with similar collection risks and the modifications to the original loan are more than minor. If a loan modification does not meet these conditions, it extends the existing loan’s amortized cost basis and accounts for the modified loan as a continuation of the existing loan.

Prior to January 1, 2023, 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 used 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 was measured by the amount which the loan’s amortized cost exceeds the discounted cash flow analysis.

As a result of the difference in methodology between periods, disclosures related to loan modifications made to borrowers experiencing financial difficulty and TDRs may not be comparative in nature.

The following tables provide the changes in the allowance for credit losses by class of financing receivable for the three months ended March 31, 2023 and 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 March 31, 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	(10)		1,217		1,073		1,540		129		103		(48)		993		4,997
Recoveries of loans previously charged-off	67		—		15		—		—		66		—		239		387
Loans charged off	(46)		—		(16)		—		—		—		—		(705)		(767)


Ending balance - March 31, 2023	$	11,117	$	41,025	$	27,213	$	9,034	$	6,619	$	7,952	$	21,868	$	13,981	$	138,809


	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 March 31, 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	(4,006)		3,206		1,908		641		(578)		(4,187)		(4,478)		1,365		(6,129)
Recoveries of loans previously charged-off	958		—		12		1		—		10		—		217		1,198
Loans charged off	(4)		—		—		—		—		—		—		(575)		(579)


Ending balance - March 31, 2022	$	12,699	$	31,782	$	21,024	$	6,545	$	6,398	$	8,416	$	21,290	$	11,895	$	120,049

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

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.

The following tables present the credit quality of the Company's commercial type loan portfolio as of March 31, 2023 and December 31, 2022 and the gross charge-offs for the three months ended March 31, 2023 by year of 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.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

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 three months ended March 31, 2023	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Total
Commercial and industrial
Pass	$	40,396	$	383,606	$	193,605	$	53,715	$	83,158	$	92,586	$	785,130	$	1,632,196
Special Mention	—		2,625		4		—		159		891		7,040		10,719
Classified	457		2,692		647		1,939		1,476		6,818		14,454		28,483

Total	40,853		388,923		194,256		55,654		84,793		100,295		806,624		1,671,398

Current-period gross charge-offs	—		46		—		—		—		—		—		46
Construction
Pass	41,824		769,011		430,782		110,280		77,147		56,628		207,940		1,693,612
Special Mention	—		2,797		—		6		—		698		—		3,501
Classified	—		78		322		—		—		—		—		400

Total	41,824		771,886		431,104		110,286		77,147		57,326		207,940		1,697,513

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

Multi-family mortgage
Pass	10,827		144,897		147,358		95,536		33,362		42,701		13,557		488,238
Special Mention	—		—		—		—		—		—		—		—
Classified	—		—		—		—		—		1,141		—		1,141

Total	10,827		144,897		147,358		95,536		33,362		43,842		13,557		489,379


Current-period gross charge-offs	—		—		—		—		—		—		—		—
Commercial real estate:
Owner occupied
Pass	24,353		227,787		229,910		114,965		158,969		310,138		43,682		1,109,804
Special Mention	—		6,295		677		—		165		3,397		5,100		15,634
Classified	—		—		1,293		—		3,501		6,646		100		11,540

Total	24,353		234,082		231,880		114,965		162,635		320,181		48,882		1,136,978

Current-period gross charge-offs	—		—		—		—		—		—		—		—
Non-owner occupied
Pass	7,627		464,026		460,997		125,499		161,560		652,952		44,748		1,917,409
Special Mention	—		—		1,032		—		—		2,507		—		3,539
Classified	—		—		1,960		—		143		16,466		—		18,569

Total	7,627		464,026		463,989		125,499		161,703		671,925		44,748		1,939,517




Current-period gross charge-offs	—		—		—		—		—		—		—		—
Total commercial loan types
Pass	125,027		1,989,327		1,462,652		499,995		514,196		1,155,005		1,095,057		6,841,259
Special Mention	—		11,717		1,713		6		324		7,493		12,140		33,393
Classified	457		2,770		4,222		1,939		5,120		31,071		14,554		60,133

Total	$	125,484	$	2,003,814	$	1,468,587	$	501,940	$	519,640	$	1,193,569	$	1,121,751	$	6,934,785
Current-period gross charge-offs	$	—	$	46	$	—	$	—	$	—	$	—	$	—	$	46

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, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Commercial and industrial
Pass	$	396,643	$	204,000	$	67,231	$	90,894	$	39,780	$	62,816	$	762,717	$	1,624,081
Special Mention	125		7		—		160		143		771		2,520		3,726
Classified	65		823		1,916		1,651		273		6,913		6,335		17,976

Total	396,833		204,830		69,147		92,705		40,196		70,500		771,572		1,645,783

Construction
Pass	682,885		495,723		142,233		84,599		17,360		44,326		188,906		1,656,032
Special Mention	—		—		15		—		—		707		—		722
Classified	80		309		—		—		—		345		—		734

Total	682,965		496,032		142,248		84,599		17,360		45,378		188,906		1,657,488

Residential real estate:

Multi-family mortgage
Pass	142,912		147,168		96,819		33,547		6,971		37,385		13,604		478,406
Special Mention	—		—		—		—		—		—		—		—
Classified	—		—		—		—		—		1,166		—		1,166

Total	142,912		147,168		96,819		33,547		6,971		38,551		13,604		479,572


Commercial real estate:
Owner occupied
Pass	237,862		223,883		110,748		148,405		66,101		246,414		57,220		1,090,633
Special Mention	101		683		—		168		2,225		1,258		5,000		9,435
Classified	—		1,293		224		4,589		1,276		7,018		112		14,512

Total	237,963		225,859		110,972		153,162		69,602		254,690		62,332		1,114,580

Non-owner occupied
Pass	467,360		440,319		131,497		159,205		210,752		473,607		60,908		1,943,648
Special Mention	—		—		—		—		82		2,459		—		2,541
Classified	—		2,258		—		146		3,270		12,147		—		17,821

Total	467,360		442,577		131,497		159,351		214,104		488,213		60,908		1,964,010

Total commercial loan types
Pass	1,927,662		1,511,093		548,528		516,650		340,964		864,548		1,083,355		6,792,800
Special Mention	226		690		15		328		2,450		5,195		7,520		16,424
Classified	145		4,683		2,140		6,386		4,819		27,589		6,447		52,209
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 the Company's consumer type loan portfolio as of March 31, 2023 and December 31, 2022 and the gross charge-offs for the three months ended March 31, 2023 by year of 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.

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 three months ended March 31, 2023	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Total





Residential real estate:
1-to-4 family mortgage
Performing	$	36,402	$	550,052	$	439,949	$	157,470	$	88,489	$	269,548	$	—	$	1,541,910
Nonperforming	—		1,945		4,671		4,834		1,115		8,028		—		20,593
Total	36,402		551,997		444,620		162,304		89,604		277,576		—		1,562,503
Current-period gross charge-offs	—		—		—		—		—		16		—		16
Residential line of credit
Performing	—		—		—		—		—		—		496,309		496,309
Nonperforming	—		—		—		—		—		—		1,082		1,082
Total	—		—		—		—		—		—		497,391		497,391
Current-period gross charge-offs	—		—		—		—		—		—		—		—
Consumer and other
Performing	24,159		108,985		53,452		39,098		27,758		105,751		4,198		363,401
Nonperforming	—		233		1,536		1,481		966		3,700		—		7,916
Total	24,159		109,218		54,988		40,579		28,724		109,451		4,198		371,317
Current-period gross charge-offs	171		339		38		81		9		65		2		705
Total consumer type loans
Performing	60,561		659,037		493,401		196,568		116,247		375,299		500,507		2,401,620
Nonperforming	—		2,178		6,207		6,315		2,081		11,728		1,082		29,591
Total	$	60,561	$	661,215	$	499,608	$	202,883	$	118,328	$	387,027	$	501,589	$	2,431,211
Current-period gross charge-offs	$	171	$	339	$	38	$	81	$	9	$	81	$	2	$	721

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, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total





Residential real estate:
1-to-4 family mortgage
Performing	$	568,210	$	448,401	$	160,715	$	93,548	$	68,113	$	211,019	$	—	$	1,550,006
Nonperforming	1,227		5,163		5,472		1,778		2,044		7,431		—		23,115
Total	569,437		453,564		166,187		95,326		70,157		218,450		—		1,573,121
Residential line of credit
Performing	—		—		—		—		—		—		495,129		495,129
Nonperforming	—		—		—		—		—		—		1,531		1,531
Total	—		—		—		—		—		—		496,660		496,660
Consumer and other
Performing	118,637		56,779		41,008		29,139		26,982		82,318		4,175		359,038
Nonperforming	166		1,396		1,460		906		1,507		2,525		—		7,960
Total	118,803		58,175		42,468		30,045		28,489		84,843		4,175		366,998
Total consumer type loans
Performing	686,847		505,180		201,723		122,687		95,095		293,337		499,304		2,404,173
Nonperforming	1,393		6,559		6,932		2,684		3,551		9,956		1,531		32,606
Total	$	688,240	$	511,739	$	208,655	$	125,371	$	98,646	$	303,293	$	500,835	$	2,436,779

Nonaccrual and Past Due Loans

Nonperforming loans include loans that are no longer accruing interest (non-accrual 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 March 31, 2023 and December 31, 2022:


March 31, 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	$	574	$	42	$	2,413	$	1,668,369	$	1,671,398
Construction	2,708		—		382		1,694,423		1,697,513
Residential real estate:
1-to-4 family mortgage	13,348		11,505		9,088		1,528,562		1,562,503
Residential line of credit	678		158		924		495,631		497,391
Multi-family mortgage	—		—		39		489,340		489,379
Commercial real estate:
Owner occupied	851		—		7,211		1,128,916		1,136,978
Non-owner occupied	—		—		5,802		1,933,715		1,939,517
Consumer and other	6,918		875		7,041		356,483		371,317
Total	$	25,077	$	12,580	$	32,900	$	9,295,439	$	9,365,996

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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


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 March 31, 2023 and December 31, 2022 by class of financing receivable.



March 31, 2023	Nonaccrual with no related allowance		Nonaccrual with related allowance		Related allowance
Commercial and industrial	$	1,804	$	609	$	11
Construction	—		382		7
Residential real estate:
1-to-4 family mortgage	1,955		7,133		143
Residential line of credit	842		82		1
Multi-family mortgage	—		39		1
Commercial real estate:
Owner occupied	7,008		203		12
Non-owner occupied	5,610		192		4
Consumer and other	110		6,931		354
Total	$	17,329	$	15,571	$	533


December 31, 2022	Nonaccrual with no related allowance		Nonaccrual with related allowance		Related allowance

Commercial and industrial	$	790	$	517	$	10
Construction	—		389		7
Residential real estate:
1-to-4 family mortgage	2,834		3,642		78
Residential line of credit	1,134		266		4
Multi-family mortgage	1		41		1
Commercial real estate:
Owner occupied	5,200		210		1
Non-owner occupied	5,755		201		5
Consumer and other	—		6,451		327
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 nonaccrual loans for the three months ended March 31, 2023 and 2022:


	Three Months Ended March 31,
	2023		2022
Commercial and industrial	$	20	$	54
Construction	6		19
Residential real estate:
1-to-4 family mortgage	79		52
Residential line of credit	24		40
Multi-family mortgage	1		—
Commercial real estate:
Owner occupied	58		25
Non-owner occupied	82		70
Consumer and other	173		15
Total	$	443	$	275

Accrued interest receivable written off as an adjustment to interest income amounted to $181 and $184 for the three months ended March 31, 2023 and 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 typically include 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 written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.

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.

There were no modifications of loans to borrowers experiencing financial difficulty during the three months ended March 31, 2023.

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 months ended March 31, 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 December 31, 2022, the Company had a recorded investment in TDRs of $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, $7,321 were classified as nonaccrual loans as of December 31, 2022. The Company has calculated $253 in allowances for credit losses on TDRs as of December 31, 2022. As of December 31, 2022, unfunded loan commitments to extend additional funds on troubled debt restructurings were not meaningful.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

The following table presents the financial effect of TDRs recorded during the three months ended March 31, 2022:


	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	80		80		—


Consumer and other	1	22		22		—
Total	2	$	102	$	102	$	—

Troubled debt restructurings for which there was a payment default within twelve months following the modification totaled $304 during the three months ended March 31, 2022. 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 months ended March 31, 2022 that did not meet the definition of a TDR. The modification of these loans usually involves either a modification of the terms of a loan to borrowers who are not experiencing financial difficulties or an insignificant delay in payments.

Collateral-Dependent Loans

For loans for which the repayment (based on the Company's assessment) is expected to be provided substantially through the operation or sale of collateral and the borrower is experiencing financial difficulty, the following 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.


	March 31, 2023
	Type of Collateral
	Real Estate		Financial Assets and Equipment		Total		Individually assessed allowance for credit loss
Commercial and industrial	$	2,597	$	800	$	3,397	$	—

Residential real estate:
1-to-4 family mortgage	5,332		—		5,332		169
Residential line of credit	1,109		—		1,109		5

Commercial real estate:
Owner occupied	7,651		—		7,651		4
Non-owner occupied	5,610		—		5,610		—
Consumer and other	132		—		132		—
Total	$	22,431	$	800	$	23,231	$	178

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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


	December 31, 2022
	Type of Collateral
	Real Estate		Financial Assets and Equipment		Total		Individually assessed allowance for credit loss
Commercial and industrial	$	2,596	$	—	$	2,596	$	—

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

Commercial real estate:
Owner occupied	5,424		—		5,424		—
Non-owner occupied	5,755		—		5,755		—
Consumer and other	134		—		134		—
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 costs to sell. The following table summarizes the other real estate owned for the three months ended March 31, 2023 and 2022:


	Three Months Ended
		March 31,
		2023		2022
Balance at beginning of period		$	5,794	$	9,777
Transfers from loans		235		563


Proceeds from sale of other real estate owned		(2,031)		(121)
Gain (loss) on sale of other real estate owned		87		(104)

Write-downs and partial liquidations		—		(394)

Balance at end of period		$	4,085	$	9,721

Foreclosed residential real estate properties totaled $798 and $840 as of March 31, 2023 and December 31, 2022, respectively. The recorded investment in residential mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process totaled $4,769 and $2,653 as of March 31, 2023 and December 31, 2022, respectively.

Note (5)—Leases:

As of March 31, 2023, the Company was the lessee in 60 operating leases and 1 finance lease of certain branch, mortgage and operations locations with original terms greater than one year. Leases with initial terms of less than one year and equipment leases are not included on the consolidated balance sheets in accordance with U.S. GAAP.

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)

Information related to the Company's leases is presented below as of March 31, 2023 and December 31, 2022:


		March 31,			December 31,
	Classification	2023			2022
Right-of-use assets:
Operating leases	Operating lease right-of-use assets	$	57,054		$	60,043
Finance leases	Premises and equipment, net	1,339			1,367
Total right-of-use assets		$	58,393		$	61,410
Lease liabilities:
Operating leases	Operating lease liabilities	$	67,345		$	69,754
Finance leases	Borrowings	1,397			1,420
Total lease liabilities		$	68,742		$	71,174
Weighted average remaining lease term (in years) - operating		11.9			12.1
Weighted average remaining lease term (in years) - finance		12.1			12.4
Weighted average discount rate - operating		3.21		%	3.08		%
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 March 31,

	Classification		2023		2022
Operating lease costs:
Amortization of right-of-use asset	Occupancy and equipment		$	1,815	$	1,710
Short-term lease cost	Occupancy and equipment		121		111
Variable lease cost	Occupancy and equipment		298		256

Gain on lease modifications and terminations	Occupancy and equipment		(72)		(18)
Finance lease costs:
Interest on lease liabilities	Interest expense on borrowings		6		9
Amortization of right-of-use asset	Occupancy and equipment		28		37

Sublease income	Occupancy and equipment		(281)		(195)
Total lease cost			$	1,915	$	1,910

During the three months ended March 31, 2023 and 2022, the Company recorded $72 and $18 in gains on lease modifications and terminations on certain vacated locations that were consolidated as a result of previous business combinations, respectively.

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 as of March 31, 2023 is as follows:


	Operating		Finance
	Leases		Lease
Lease payments due:
March 31, 2024	$	6,596	$	89
March 31, 2025	7,956		120
March 31, 2026	7,885		121
March 31, 2027	7,715		123
March 31, 2028	7,326		125
Thereafter	45,839		977
Total undiscounted future minimum lease payments	83,317		1,555
Less: imputed interest	(15,972)		(158)
Lease liability	$	67,345	$	1,397

Note (6)—Mortgage servicing rights:

Changes in the Company’s mortgage servicing rights were as follows for the three months ended March 31, 2023 and 2022:


	Three Months Ended March 31,
		2023		2022


Carrying value at beginning of period		$	168,365	$	115,512
Capitalization		1,788		9,812





Change in fair value:
Due to pay-offs/pay-downs		(2,520)		(4,471)
Due to change in valuation inputs or assumptions		(2,754)		23,822
Carrying value at end of period		$	164,879	$	144,675

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 months ended March 31, 2023 and 2022:


	Three Months Ended March 31,
		2023		2022
Servicing income:
Servicing income		$	7,768	$	7,429
Change in fair value of mortgage servicing rights		(5,274)		19,351
Change in fair value of derivative hedging instruments		1,867		(19,098)
Servicing income		4,361		7,682
Servicing expenses		1,883		2,548
Net servicing income		$	2,478	$	5,134

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 March 31, 2023 and December 31, 2022 are as follows:


	March 31,			December 31,
	2023			2022
Unpaid principal balance	$	11,028,420		$	11,086,582
Weighted-average prepayment speed (CPR)	5.96		%	5.55		%
Estimated impact on fair value of a 10% increase	$	(5,017)		$	(4,886)
Estimated impact on fair value of a 20% increase	$	(9,695)		$	(9,447)


Discount rate	8.97		%	9.10		%
Estimated impact on fair value of a 100 bp increase	$	(7,924)		$	(8,087)
Estimated impact on fair value of a 200 bp increase	$	(15,163)		$	(15,475)


Weighted-average coupon interest rate	3.35		%	3.31		%
Weighted-average servicing fee (basis points)	27			27
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 March 31, 2023 and December 31, 2022, mortgage escrow deposits totaled to $92,947 and $75,612, respectively.

Note (7)—Income taxes:

The following table presents a reconciliation of income taxes for the three months ended March 31, 2023 and 2022:


	Three Months Ended March 31,
		2023			2022
Federal taxes calculated at statutory rate			$	9,676	21.0	%	$	9,355	21.0	%
Increase (decrease) resulting from:
State taxes, net of federal benefit			251		0.6	%	951		2.1	%


Expense (benefit) from equity based compensation			115		0.3	%	(291)		(0.7)	%
Municipal interest income, net of interest disallowance			(456)		(1.0)	%	(444)		(1.0)	%
Bank-owned life insurance			(127)		(0.3)	%	(74)		(0.2)	%


Section 162(m) limitation			127		0.2	%	122		0.3	%
Other			111		0.2	%	(306)		(0.6)	%
Income tax expense, as reported			$	9,697	21.0	%	$	9,313	20.9	%

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, 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.

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. Many commitments expire without being used and are only recorded in the consolidated financial statements when drawn upon. The Company's maximum off-balance sheet exposure to credit loss is represented by the contractual amount of these instruments.


	March 31,		December 31,
	2023		2022
Commitments to extend credit, excluding interest rate lock commitments	$	3,341,445	$	3,563,982
Letters of credit	68,422		71,250
Balance at end of period	$	3,409,867	$	3,635,232

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

As of March 31, 2023 and December 31, 2022, loan commitments included above with floating interest rates totaled $2.87 billion and $2.96 billion, respectively.

The Company estimates expected credit losses on off-balance sheet loan commitments 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 months ended March 31, 2023 and 2022:


	Three Months Ended March 31,
		2023		2022
Balance at beginning of period		$	22,969	$	14,380


Provision for credit losses on unfunded commitments		(4,506)		1,882
Balance at end of period		$	18,463	$	16,262

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 $3,326 and $1,348 for the three months ended March 31, 2023 and 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 March 31,
		2023		2022
Balance at beginning of period		$	1,621	$	4,802
Provision for loan repurchases or indemnifications		(250)		(389)

Losses on loans repurchased or indemnified		(13)		(96)
Balance at end of period		$	1,358	$	4,317

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. Under such commitments, interest rates for mortgage loans are typically locked in for between 45 to 90 days with the customer. These interest rate lock commitments are recorded at fair value in the Company’s consolidated balance sheets. The Company also enters into best effort or mandatory delivery forward commitments to sell residential mortgage loans to secondary market investors. Gains and losses arising from changes in the valuation of the 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.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

The Company also enters into forward commitments, futures and options contracts as economic hedges to offset the changes in fair value of 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.

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


	March 31, 2023
	Notional Amount		Asset		Liability

Interest rate contracts	$	567,594	$	36,068	$	36,087
Forward commitments	268,000		—		691
Interest rate-lock commitments	157,213		2,640		—
Futures contracts	495,500		103		—

Total	$	1,488,307	$	38,811	$	36,778


	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

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


	Three Months Ended March 31,
		2023		2022
Included in mortgage banking income:
Interest rate lock commitments		$	1,207	$	(5,446)
Forward commitments		(295)		37,903
Futures contracts		1,937		(16,535)
Option contracts		(664)		36
Total		$	2,185	$	15,958

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.

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

March 31, 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

988

Other assets

1,255

Other Assets

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 consolidated statements of income included a gain of $197 and a loss of $139 for the three months ended March 31, 2023 and 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 into earnings during either period presented.

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


	Three Months Ended March 31,
		2023		2022

Amount of (loss) gain recognized in other comprehensive income (loss), net of tax (benefit) expense of $(70) and $273		$	(197)	$	774

Derivatives designated as fair value hedges

The Company 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 March 31, 2023 and December 31, 2022, the fair value hedges were deemed effective.


				March 31, 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- subordinated debt	0.92	1.46%	SOFR	$	100,000	$	(2,952)	$	100,000	$	(3,830)
Interest rate swap agreement- fixed rate money market deposits	1.39	1.50%	SOFR	75,000		(3,274)		75,000		(3,693)
Interest rate swap agreement- fixed rate money market deposits	1.39	1.50%	SOFR	125,000		(5,457)		125,000		(6,154)
Total	1.23	1.48%		$	300,000	$	(11,683)	$	300,000	$	(13,677)

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 March 31,
		2023		2022
Designated fair value hedge:
Interest (expense) income on deposits		$	(1,508)	$	313
Interest (expense) income on borrowings		(760)		162
Total		$	(2,268)	$	475

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

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	March 31, 2023		December 31, 2022			March 31, 2023		December 31, 2022
Borrowings	$	96,146	$	95,171	(1)	$	(2,952)	$	(3,830)
Money market and savings deposits	196,704		196,520		(2)	(8,731)		(9,847)

(1) The carrying value also includes unamortized subordinated debt issuance costs of $902 and $999 as of March 31, 2023 and December 31, 2022, respectively.

(2) The carrying value also includes an unaccreted purchase accounting fair value premium of $5,435 and $6,367 as of March 31, 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:













							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
March 31, 2023
Derivative financial assets	$	35,641	$	—	$	35,641	$	12,771	$	—	$	22,870
Derivative financial liabilities	$	18,528	$	—	$	18,528	$	12,771	$	5,757	$	—

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 March 31, 2023 and December 31, 2022, the Company had minimum collateral posting thresholds with certain derivative counterparties and had collateral posted of $18,590 and $23,325, respectively, against its obligations under these agreements. Cash pledged as collateral on derivative contracts is recorded in "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 value is determined using current secondary market prices for loans with similar characteristics for the mortgage portfolio, that is, using Level 2 inputs. The fair value of commercial loans held for sale 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. The guaranteed GNMA optional repurchase loans are excluded from the fair value option.

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
March 31, 2023	Carrying amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	1,319,951	$	1,319,951	$	—	$	—	$	1,319,951
Investment securities	1,474,064		—		1,474,064		—		1,474,064

Net loans held for investment	9,227,187		—		—		9,090,899		9,090,899
Loans held for sale, at fair value	61,987		—		52,477		9,510		61,987
Interest receivable	44,737		1,027		6,705		37,005		44,737
Mortgage servicing rights	164,879		—		—		164,879		164,879
Derivatives	39,799		—		39,799		—		39,799
Financial liabilities:
Deposits:
Without stated maturities	$	9,686,045	$	9,686,045	$	—	$	—	$	9,686,045
With stated maturities	1,496,870		—		1,485,091		—		1,485,091
Securities sold under agreements to repurchase and federal funds purchased	38,130		38,130		—		—		38,130
Federal Home Loan Bank advances	125,000		—		125,000		—		125,000
Subordinated debt, net	127,076		—		—		120,584		120,584

Interest payable	11,834		3,731		7,704		399		11,834
Derivatives	48,461		—		48,461		—		48,461


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

Net loans held for investment	9,164,020		—		—		9,048,943		9,048,943
Loans held for sale, at fair value	113,240		—		82,750		30,490		113,240
Interest receivable	45,684		126		6,961		38,597		45,684
Mortgage servicing rights	168,365		—		—		168,365		168,365
Derivatives	48,769		—		48,769		—		48,769
Financial liabilities:
Deposits:
Without stated maturities	$	9,433,860	$	9,433,860	$	—	$	—	$	9,433,860
With stated maturities	1,421,974		—		1,422,544		—		1,422,544
Securities sold under agreements to repurchase and federal funds purchased	86,945		86,945		—		—		86,945
Federal Home Loan Bank advances	175,000		—		175,000		—		175,000
Subordinated debt, net	126,101		—		—		118,817		118,817

Interest payable	8,648		2,571		4,559		1,518		8,648
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 March 31, 2023 are presented in the following table:


At March 31, 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:
Financial assets:
Available-for-sale securities:
U.S. government agency securities	$	—	$	40,928	$	—	$	40,928
Mortgage-backed securities - residential	—		1,025,388		—		1,025,388
Mortgage-backed securities - commercial	—		17,723		—		17,723
Municipal securities	—		270,994		—		270,994
U.S. Treasury securities	—		108,823		—		108,823
Corporate securities	—		7,149		—		7,149
Equity securities, at fair value	—		3,059		—		3,059
Total securities	$	—	$	1,474,064	$	—	$	1,474,064
Loans held for sale, at fair value	$	—	$	52,477	$	9,510	$	61,987
Mortgage servicing rights	—		—		164,879		164,879
Derivatives	—		39,799		—		39,799
Financial Liabilities:
Derivatives	—		48,461		—		48,461

The balances and levels of the assets measured at fair value on a non-recurring basis at March 31, 2023 are presented in the following table:


At March 31, 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:
Financial assets:
Other real estate owned	$	—	$	—	$	224	$	224
Collateral dependent net loans held for investment:


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






Total collateral dependent loans	$	—	$	—	$	389	$	389

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 December 31, 2022 are presented in the following table:


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:
Financial assets:
Available-for-sale securities:
U.S. government agency securities	$	—	$	40,062	$	—	$	40,062
Mortgage-backed securities - residential	—		1,034,193		—		1,034,193
Mortgage-backed securities - commercial	—		17,644		—		17,644
Municipal securities	—		264,420		—		264,420
U.S. Treasury securities	—		107,680		—		107,680
Corporate securities	—		7,187		—		7,187
Equity securities, at fair value	—		2,990		—		2,990
Total securities	$	—	$	1,474,176	$	—	$	1,474,176
Loans held for sale, at fair value	$	—	$	82,750	$	30,490	$	113,240
Mortgage servicing rights	—		—		168,365		168,365
Derivatives	—		48,769		—		48,769
Financial Liabilities:
Derivatives	—		63,229		—		63,229

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


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:
Financial assets:
Other real estate owned	$	—	$	—	$	2,497	$	2,497



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

Commercial real estate:

Non-owner occupied	—		—		2,494		2,494

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

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

As of March 31, 2023

Financial instrument

Fair Value

Valuation technique

Significant
unobservable inputs

Range of
inputs

Collateral dependent net loans
held for investment

389

Valuation of collateral

Discount for comparable sales

10%-35%

Other real estate owned

224

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, 2022

Financial instrument

Fair Value

Valuation technique

Significant
unobservable inputs

Range of
inputs

Collateral dependent loans
held for investment

2,860

Valuation of collateral

Discount for comparable sales

10%-35%

Other real estate owned

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 March 31, 2023 and December 31, 2022, total amortized cost of collateral dependent loans measured on a non-recurring basis amounted to $558 and $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 appraisers 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:


	March 31,		December 31,
	2023		2022
Loans held for sale under a fair value option:
Commercial loans held for sale	$	9,510	$	30,490

Mortgage loans held for sale	52,477		82,750
Total loans held for sale, at fair value	61,987		113,240
Loans held for sale not accounted for under a fair value option:
Mortgage loans held for sale - guaranteed GNMA repurchase option	20,528		26,211
Total loans held for sale	$	82,515	$	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 $51 and $16,874 resulting from fair value changes of mortgage loans were recorded in income during the three months ended March 31, 2023 and 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 losses of $421 and $7,548 for the three months ended March 31, 2023 and 2022, respectively. The change in fair value of both loans held for sale and the related derivative instruments are recorded in mortgage banking Income in the consolidated statements of income. Election of the fair value option allows the Company to reduce the accounting volatility that would otherwise result from the asymmetry created by accounting for the financial instruments at the lower of cost or fair value and the derivatives at fair value.

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.

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.

Commercial loans held for sale

The Company also has a portfolio of shared institutional healthcare loans that were acquired during a 2020 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 set forth the changes in fair value associated with this portfolio for the three months ended March 31, 2023 and 2022.











	Three Months Ended March 31, 2023
	Principal Balance		Fair Value Discount		Fair Value
Carrying value at beginning of period	$	34,357	$	(3,867)	$	30,490
Change in fair value:
Pay-downs and pay-offs	(21,890)		—		(21,890)

Changes in valuation included in other noninterest income	—		910		910
Carrying value at end of period	$	12,467	$	(2,957)	$	9,510











	Three Months Ended March 31, 2022
	Principal balance		Fair Value discount		Fair Value
Carrying value at beginning of period	$	86,762	$	(7,463)	$	79,299

Change in fair value:
Pay-downs and pay-offs	(946)		—		(946)

Changes in valuation included in other noninterest income	—		(174)		(174)
Carrying value at end of period	$	85,816	$	(7,637)	$	78,179

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.

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 March 31, 2023 and December 31, 2022:


March 31, 2023	Aggregate fair value		Aggregate Unpaid Principal Balance		Difference
Mortgage loans held for sale measured at fair value	$	52,477	$	51,298	$	1,179
Commercial loans held for sale measured at fair value	232		236		(4)

Nonaccrual commercial loans held for sale	9,278		12,231		(2,953)

December 31, 2022	Aggregate fair value		Aggregate Unpaid Principal Balance		Difference
Mortgage loans held for sale measured at fair value	$	82,750	$	81,520	$	1,230
Commercial loans held for sale measured at fair value	21,201		22,126		(925)

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

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 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.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

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

During the second quarter of 2022, the Company exited the direct-to-consumer internet delivery channel, which was one of two delivery channels in the Mortgage segment. The repositioning of the Mortgage segment did not qualify to be reported as discontinued operations. The Company continues to originate and sell residential mortgage loans within its Mortgage segment through its traditional mortgage retail channel, retain mortgage servicing rights and continues to hold residential mortgage loans in the loan HFI portfolio.

Interest rate lock commitment volume and sales volume included in the Mortgage segment are as follows for the periods indicated:


	Three Months Ended March 31,
		2023		2022
Interest rate lock commitment volume by delivery channel:
Direct-to-consumer		$	—	$	568,092
Retail		375,042		741,015
Total		$	375,042	$	1,309,107






Mortgage loan sales		$	332,307	$	1,284,482

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


Three Months Ended March 31, 2023	Banking(3)		Mortgage		Consolidated
Net interest income	$	103,660	$	—	$	103,660
Provisions for credit losses(1)	491		—		491
Mortgage banking income(2)	—		15,493		15,493
Change in fair value of mortgage servicing rights, net of hedging(2)	—		(3,407)		(3,407)
Other noninterest income	11,493		(230)		11,263
Depreciation and amortization	2,049		179		2,228
Amortization of intangibles	990		—		990

Other noninterest expense	65,311		11,911		77,222
Income (loss) before income taxes	$	46,312	$	(234)	$	46,078
Income tax expense					9,697
Net income applicable to FB Financial Corporation and noncontrolling interest					36,381
Net income applicable to noncontrolling interest(3)					—
Net income applicable to FB Financial Corporation					$	36,381
Total assets	$	12,530,039	$	571,108	$	13,101,147
Goodwill	242,561		—		242,561

(1) Includes $4,997 in provision for credit losses on loans and $(4,506) 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) 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 March 31, 2022	Banking(3)		Mortgage		Consolidated
Net interest income	$	88,184	$	(2)	$	88,182
Provisions for credit losses(1)	(4,247)		—		(4,247)
Mortgage banking income(2)	—		29,278		29,278
Change in fair value of mortgage servicing rights, net of hedging(2)	—		253		253
Other noninterest income	11,983		(122)		11,861
Depreciation and amortization	1,710		326		2,036
Amortization of intangibles	1,244		—		1,244

Other noninterest expense	56,630		29,362		85,992
Income (loss) before income taxes	$	44,830	$	(281)	$	44,549
Income tax expense					9,313


Net income applicable to FB Financial Corporation and noncontrolling interest					35,236
Net income applicable to noncontrolling interest(3)					—
Net income applicable to FB Financial Corporation					$	35,236
Total assets	$	11,890,847	$	783,344	$	12,674,191
Goodwill	242,561		—		242,561

(1)Includes $(6,129) in provision for credit losses on loans and $1,882 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)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 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 $3,931 and $5,666 for the three months ended March 31, 2023 and 2022, respectively.

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 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 Bank and Company opted out of including accumulated other comprehensive income in regulatory capital. As of March 31, 2023 and December 31, 2022, the Bank and Company met all capital adequacy requirements to which they are subject.

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 the capital transition relief over the permissible five-year period and delayed the initial impact of CECL adoption plus 25% of the quarterly increases in ACL in the first two years after adoption. Beginning on 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.

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 of March 31, 2023	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	$	1,557,049	13.6	%		$	1,205,137	10.5	%	N/A		N/A
FirstBank	1,524,500		13.3	%		1,204,213		10.5	%	$	1,146,869	10.0	%
Tier 1 Capital (to risk-weighted assets)
FB Financial Corporation	$	1,331,158	11.6	%		$	975,587	8.5	%	N/A		N/A
FirstBank	1,298,609		11.3	%		974,839		8.5	%	$	917,495	8.0	%
Tier 1 Capital (to average assets)
FB Financial Corporation	$	1,331,158	10.4	%		$	512,344	4.0	%	N/A		N/A
FirstBank	1,298,609		10.2	%		511,666		4.0	%	$	639,583	5.0	%
Common Equity Tier 1 Capital (to risk-weighted assets)
FB Financial Corporation	$	1,301,158	11.3	%		$	803,424	7.0	%	N/A		N/A
FirstBank	1,298,609		11.3	%		802,808		7.0	%	$	745,465	6.5	%


As of December 31, 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	$	1,528,344	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	%

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. 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 changes in restricted stock units for the three months ended March 31, 2023.




	Restricted Stock Units Outstanding	Weighted Average Grant Date Fair Value
Balance at beginning of period (unvested)	365,155	$	39.02
Granted	144,578	37.17
Vested	(134,601)	34.11
Forfeited	(1,428)	43.62
Balance at end of period (unvested)	373,704	$	39.05

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 $4,591 and $3,397 for the three months ended March 31, 2023 and 2022, respectively.

The compensation cost related to stock grants and vesting of restricted stock units was $1,706 and $1,856 for the three months ended March 31, 2023 and 2022, respectively. This included amounts paid related to director grants and compensation elected to be settled in stock amounting to $175 and $166 during the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, there was $12,523 of total unrecognized compensation cost related to unvested restricted stock units which is expected to be recognized over a weighted-average period of 2.9 years. Additionally, as of March 31, 2023, there were 1,571,098 shares available for issuance under the Company's stock compensation plans. As of March 31, 2023 and December 31, 2022, there were $205 and $292, 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 Restricted Stock Units

The Company awards performance-based restricted stock units 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 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 peer group will be measured based on adjusted return on average tangible common equity (non-GAAP), adjusted for unusual gains/losses, merger expenses, and other items as approved by the compensation committee of the Company's board of directors. Compensation expense for 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 performance period of the awards

The following table summarizes information about the changes in PSUs as of and for the three months ended March 31, 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)	44,319	37.17
Vested	(90,583)	36.21
Forfeited or expired	(1,153)	44.25
Balance at end of period (unvested)	200,260	$	40.98
(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's outstanding PSUs as of March 31, 2023:


Grant Year	Grant Price		Vest Year	PSUs Outstanding
2021 (1)	$	43.20	2024	54,922
2022 (2)	$	44.44	2025	59,328
2023 (2)	$	37.17	2026	86,010
(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 $579 and $726 for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, maximum unrecognized compensation cost at 200% payout related to the unvested PSUs was $14,182, and the weighted average remaining performance period over which the cost could be recognized was 2.50 years.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

Employee Stock Purchase Plan:

The Company maintains an employee stock purchase plan 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 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). There were 8,214 and 15,152 shares of common stock issued under the ESPP with proceeds from employee payroll withholdings of $305 and $588 during the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, there were 2,306,532 shares available for issuance under the ESPP.

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, 2023	$	82,559
New loans and advances	23,098

Repayments	(2,365)
Loans outstanding at March 31, 2023	$	103,292

Unfunded commitments to certain executive officers, certain management and directors and their related interests totaled $34,089 and $31,564 at March 31, 2023 and December 31, 2022, respectively.

(B) Deposits:

The Bank held deposits from related parties totaling $336,448 and $347,660 as of March 31, 2023 and December 31, 2022, respectively.

The Bank leases various office spaces from entities owned by certain directors of the Company under varying terms. Lease expense for these properties totaled $90 and $101 for the three months ended March 31, 2023 and 2022.

(D) Aviation 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. During the three months ended March 31, 2023 and 2022, the Company recognized income amounting to $7 and $11, respectively, under this agreement.

(E) Equity investment in preferred stock:

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 March 31, 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.

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

The following is a discussion of our financial condition at March 31, 2023 and December 31, 2022, and our results of operations for the three months ended March 31, 2023 and 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, 2022, that was filed with the SEC on February 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 future plans, results, strategies, and expectations, including expectations around changing economic 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, 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, (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, (8) the Company’s ability to successfully execute its various business strategies, (9) changes in state and federal legislation, regulations or policies applicable to banks and other financial service providers, including legislative developments, (10) the potential impact of the phase-out of the London Interbank Offered Rate ("LIBOR") or other changes involving LIBOR, (11) the effectiveness of the Company’s cybersecurity controls and procedures to prevent and mitigate attempted intrusions, (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, and (13) the impact of natural disasters, pandemics, and/or acts of war or terrorism, (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 (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, 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. The Company qualifies all forward-looking statements by these cautionary 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.

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 year-ended

	March 31,				December 31,
(dollars in thousands, except per share data and %)		2023			2022			2022
Selected Statement of Income Data


Net interest income		$	103,660		$	88,182		$	412,235
Provisions for credit losses		491			(4,247)			18,982
Total noninterest income		23,349			41,392			114,667
Total noninterest expense		80,440			89,272			348,346
Income before income taxes		46,078			44,549			159,574
Income tax expense		9,697			9,313			35,003
Net income applicable to noncontrolling interest		—			—			16
Net income applicable to FB Financial Corporation		$	36,381		$	35,236		$	124,555

Net interest income (tax-equivalent basis)		$	104,493		$	88,932		$	415,282
Per Common Share
Basic net income		$	0.78		$	0.74		$	2.64
Diluted net income		0.78			0.74			2.64
Book value(1)		29.29			29.06			28.36
Tangible book value(2)		23.86			23.62			22.90
Cash dividends declared		0.15			0.13			0.52






Selected Balance Sheet Data
Cash and cash equivalents		$	1,319,951		$	1,743,311		$	1,027,052
Loans HFI		9,365,996			8,004,976			9,298,212
Allowance for credit losses(4)		(138,809)			(120,049)			(134,192)
Loans held for sale		82,515			396,728			139,451
Investment securities, at fair value		1,474,064			1,686,738			1,474,176
Other real estate owned, net		4,085			9,721			5,794
Total assets		13,101,147			12,674,191			12,847,756
Interest-bearing deposits		8,693,766			8,208,580			8,179,203
Noninterest-bearing deposits		2,489,149			2,787,698			2,676,631

Total deposits		11,182,915			10,996,278			10,855,834

Estimated insured or collateralized deposits		7,926,537			7,631,005			7,288,641
Borrowings		312,131			155,733			415,677
Total common shareholders' equity		1,369,696			1,379,776			1,325,425
Selected Ratios
Return on average:
Assets(3)		1.15		%	1.13		%	1.01		%
Common shareholders' equity(3)		11.0		%	10.1		%	9.23		%
Tangible common equity(2)		13.6		%	12.4		%	11.4		%
Average shareholders' equity to average assets		10.4		%	11.2		%	10.9		%
Net interest margin (tax-equivalent basis)		3.51		%	3.04		%	3.57		%
Efficiency ratio		63.3		%	68.9		%	66.1		%
Adjusted efficiency ratio (tax-equivalent basis)(2)		63.3		%	68.1		%	62.7		%
Loans HFI to deposit ratio		83.8		%	72.8		%	85.7		%
Yield on interest-earning assets		5.38		%	3.28		%	4.16		%
Cost of interest-bearing liabilities		2.61		%	0.34		%	0.87		%
Cost of total deposits		1.94		%	0.20		%	0.54		%
Estimated uninsured and uncollateralized deposits as a percentage of total deposits(5)		29.1		%	30.6		%	32.9		%


	As of or for the three months ended,			As of or for the year ended

	March 31,			December 31,
		2023		2022		2022
Credit Quality Ratios
Allowance for credit losses as a percentage of loans HFI(4)		1.48	%	1.50	%	1.44	%
Net (charge-offs) recoveries as a percentage of average loans HFI		(0.02)	%	0.03	%	(0.02)	%

Nonperforming assets as a percentage of total assets(6)		0.61	%	0.44	%	0.68	%

Nonperforming loans HFI to total loans HFI, net of unearned income		0.49	%	0.51	%	0.49	%
Capital Ratios (Company)
Total common shareholders' equity to assets		10.5	%	10.9	%	10.3	%
Tangible common equity to tangible assets(2)		8.68	%	9.03	%	8.50	%
Tier 1 Capital (to average assets)		10.4	%	10.2	%	10.5	%
Tier 1 Capital (to risk-weighted assets(7)		11.6	%	12.3	%	11.3	%
Total capital (to risk-weighted assets)(7)		13.6	%	14.2	%	13.1	%
Common Equity Tier 1 (to risk-weighted assets) (CET1)(7)		11.3	%	12.0	%	11.0	%
Capital Ratios (Bank)
Total common shareholders' equity to assets		10.4	%	10.8	%	10.4	%
Tier 1 Capital (to average assets)		10.2	%	9.8	%	10.4	%
Tier 1 Capital (to risk-weighted assets)(7)		11.3	%	11.9	%	11.1	%
Total capital to (risk-weighted assets)(7)		13.3	%	13.8	%	12.9	%
Common Equity Tier 1 (to risk-weighted assets) (CET1) (7)		11.3	%	11.9	%	11.1	%

(1)Book value per share equals our total common shareholders’ equity as of the date presented divided by the number of shares of our common stock outstanding as of the date presented. The number of shares of our common stock outstanding was 46,762,626, 47,487,874 and 46,737,912 as of March 31, 2023, March 31, 2022 and December 31, 2022, respectively.

(2)These measures are not measures recognized under GAAP, and are therefore considered to be non-GAAP financial measures. See “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.

(3)We have 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 average equity, as 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 the period.

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

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

(6)Includes optional right to repurchase government guaranteed GNMA mortgage loans previously sold that have become past due greater than 90 days as of March 31, 2023 and December 31, 2022. See 'Nonperforming assets' under the subheading 'Asset quality' included within this management's discussion and analysis for further discussion.

(7)We calculate our risk-weighted assets using the standardized method of the Basel III Framework and reflect the election to opt-out of including accumulated other comprehensive income.

GAAP reconciliation and management explanation of non-GAAP financial measures

We identify certain financial measures discussed in this Report as being "non-GAAP financial measures." The non-GAAP financial measures presented in this Report are adjusted efficiency ratio (tax equivalent basis), tangible book value per common share, tangible common equity to tangible assets, and return on average tangible 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. As a result of differences in how companies report non-GAAP measures, presentations by other banking organizations may not be comparable with 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 restructuring expenses, and other selected items. Our management uses this measure in its analysis of our performance. Our management believes this measure provides a greater understanding of ongoing operations and enhances comparability of results with prior periods, as well as demonstrates the effects of significant gains or losses and changes. The most directly comparable financial measure calculated in accordance with GAAP is the efficiency ratio.

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


(dollars in thousands, except %)	Three Months Ended March 31,				Year Ended December 31,
		2023			2022			2022
Adjusted efficiency ratio (tax-equivalent basis)
Total noninterest expense		$	80,440		$	89,272		$	348,346


Less mortgage restructuring expenses		—			—			12,458





Adjusted noninterest expense		$	80,440		$	89,272		$	335,888
Net interest income (tax-equivalent basis)		$	104,493		$	88,932		$	415,282
Total noninterest income		23,349			41,392			114,667
Less gain (loss) on change in fair value of commercial loans held for sale		910			(174)			(5,133)




Less loss on sales or write-downs of other real estate owned and other assets		(183)			(434)			(265)

Less gain (loss) from securities, net		69			(152)			(376)
Adjusted noninterest income		$	22,553		$	42,152		$	120,441
Adjusted operating revenue		$	127,046		$	131,084		$	535,723
Efficiency ratio (GAAP)		63.3		%	68.9		%	66.1		%
Adjusted efficiency ratio (tax-equivalent basis)		63.3		%	68.1		%	62.7		%

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 March 31,						As of December 31,
(dollars in thousands, except share data and %)	2023			2022			2022
Tangible Assets
Total assets	$	13,101,147		$	12,674,191		$	12,847,756
Adjustments:
Goodwill	(242,561)			(242,561)			(242,561)
Core deposit and other intangibles	(11,378)			(15,709)			(12,368)
Tangible assets	$	12,847,208		$	12,415,921		$	12,592,827
Tangible Common Equity
Total common shareholders' equity	$	1,369,696		$	1,379,776		$	1,325,425
Adjustments:
Goodwill	(242,561)			(242,561)			(242,561)
Core deposit and other intangibles	(11,378)			(15,709)			(12,368)
Tangible common equity	$	1,115,757		$	1,121,506		$	1,070,496
Common shares outstanding	46,762,626			47,487,874			46,737,912
Book value per common share	$	29.29		$	29.06		$	28.36
Tangible book value per common share	$	23.86		$	23.62		$	22.90
Total common shareholders' equity to total assets	10.5		%	10.9		%	10.3		%
Tangible common equity to tangible assets	8.68		%	9.03		%	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 March 31,				Year Ended December 31,
(dollars in thousands, except %)		2023			2022			2022
Return on average tangible common equity
Total average common shareholders' equity		$	1,343,227		$	1,415,985		$	1,349,583
Adjustments:
Average goodwill		(242,561)			(242,561)			(242,561)
Average intangibles, net		(11,862)			(16,376)			(14,573)
Average tangible common equity		$	1,088,804		$	1,157,048		$	1,092,449
Net income applicable to FB Financial Corporation		$	36,381		$	35,236		$	124,555
Return on average common shareholders' equity		11.0		%	10.1		%	9.23		%
Return on average tangible common equity		13.6		%	12.4		%	11.4		%

Company overview

We are a financial holding company headquartered in Nashville, Tennessee. We operate primarily through our wholly-owned bank subsidiary, FirstBank. FirstBank provides a comprehensive suite of commercial and consumer banking services to clients in select markets in Tennessee, Kentucky, Alabama and North Georgia. As of March 31, 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. 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, however we have other sources of funds including unsecured credit lines, brokered CDs, and other borrowings. We generate most of our revenue in our Mortgage segment from origination fees and gains on sales in the secondary mortgage loan market, as well as from mortgage servicing revenues.

Recent developments

Recent banking events

In light of recent events in the banking sector, including recent 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 March 31, 2023, we carried on-balance sheet liquidity of $1.61 billion. We maintain the ability to access $6.78 billion of contingent liquidity from the FHLB, Federal Reserve, untapped brokered CDs, and unsecured lines of credit. Our available-for-sale debt securities portfolio is 11.2% 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 Note 12, "Minimum capital requirements," in the notes to our consolidated financial statements for additional details.

Non-performing assets were 0.61% of total assets as of March 31, 2023 and net charge-offs during the three months ended March 31, 2023 were 0.02%, reflecting our disciplined underwriting and conservative lending philosophy. Refer to the section 'Asset quality' for additional information.

While the recent bank failures 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 the Company's values and historical performance.

Overview of recent financial performance

Results of operations

Three months ended March 31, 2023 compared to the three months ended March 31, 2022

Our net income increased during the three months ended March 31, 2023 to $36.4 million from $35.2 million for the three months ended March 31, 2022. Diluted earnings per common share were $0.78 and $0.74 for the three months ended March 31, 2023 and 2022, respectively. Our net income represented a return on average assets of 1.15% and 1.13% for the three months ended March 31, 2023 and 2022, respectively, and a return on average equity of 11.0% and 10.1% for the same periods. Our return on average tangible common equity for the three months ended March 31, 2023 and 2022 were 13.6% and 12.4%, 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 March 31, 2023, our net interest income before provision for credit losses increased to $103.7 million compared with $88.2 million in the three months ended March 31, 2022. Our net interest margin, on a tax-equivalent basis, increased to 3.51% for the three months ended March 31, 2023 as compared to 3.04% for the three

months ended March 31, 2022. The increase was primarily driven by an increase in interest rates on loans HFI, which was partially offset by the impact of increasing costs of funds as competition over customer deposits has risen in the industry.

Noninterest income for the three months ended March 31, 2023 decreased by $18.0 million to $23.3 million, down from $41.4 million in the same period in the prior year. The decrease in noninterest income was primarily due to a $17.4 million decrease in mortgage banking income for the three months ended March 31, 2023 compared to the three months ended March 31, 2022. These results were impacted by increasing interest rates, compressing margins, and a decrease in demand for residential mortgages during the three months ended March 31, 2023 compared with the three months ended March 31, 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 $80.4 million for the three months ended March 31, 2023, compared with $89.3 million for the three months ended March 31, 2022. The decrease in noninterest expense is reflective of the $12.5 million decrease in salaries, commissions and employee-related costs in the Mortgage segment related to the restructuring of our Mortgage segment and reduced headcount and mortgage production.

Business segment highlights

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

Banking

Three months ended March 31, 2023 compared to the three months ended March 31, 2022

Income before taxes from the Banking segment increased for the three months ended March 31, 2023 to $46.3 million, compared to $44.8 million for the three months ended March 31, 2022. Net interest income increased by $15.5 million to $103.7 million during the three months ended March 31, 2023 compared to $88.2 million during the three months ended March 31, 2022. Our provisions for credit losses on loans HFI and unfunded loan commitments resulted in $0.5 million of expense during the three months ended March 31, 2023 compared to a $4.2 million net reversal of provision expense during the three months ended March 31, 2022. Noninterest income decreased slightly to $11.5 million in the three months ended March 31, 2023 as compared to $12.0 million in the three months ended March 31, 2022. The decrease includes a $2.7 million decrease in ATM and interchange fee income partially offset by a $1.1 million increase in the change in fair value of the commercial loans held for sale portfolio during the three months ended March 31, 2023 compared to the three months ended March 31, 2022. Noninterest expense increased to $68.4 million for three months ended March 31, 2023 compared to $59.6 million for the three months ended March 31, 2022 due to increases in regulatory fees, advertising, occupancy, and legal and professional fees.

Mortgage

Three months ended March 31, 2023 compared to the three months ended March 31, 2022

Activity in our Mortgage segment resulted in a pre-tax net loss of $0.2 million for the three months ended March 31, 2023 compared to a pre-tax net loss of $0.3 million for the three months ended March 31, 2022. Mortgage banking income decreased $17.4 million to $12.1 million during the three months ended March 31, 2023 compared to $29.5 million for the three months ended March 31, 2022. Interest rate increases, compressing margins, and a decrease in demand for residential mortgages contributed to a 71.4% decrease in interest rate lock volume during the three months ended March 31, 2023 compared with the same period in the prior year. Mortgage banking income and the decrease in interest rate lock volume reflect 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. Noninterest expense for the three months ended March 31, 2023 and 2022 was $12.1 million and $29.7 million, respectively, reflecting decreases in advertising, salaries, commissions and incentive costs associated with the decrease in production volume and headcount reduction from the Mortgage restructuring.

Further discussion on the components of mortgage banking income is included under the subheading 'Noninterest income' included within this management's discussion and analysis.

Results of operations

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

The adjustment to convert certain income to a tax-equivalent basis consists of dividing tax exempt income by one minus the combined federal and blended state statutory income tax rate of 26.06% for the three months ended March 31, 2023 and 2022.

Net interest income

Three months ended March 31, 2023 compared to the three months ended March 31, 2022

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 months ended March 31, 2023, the US Treasury yield curve remained inverted as long-term rates increased at a slower pace than short-term rates. This compares to the three months ended March 31, 2022, when the US Treasury yield curve steepened as long-term rates rose and short-term rates remained constant. The Federal Funds Target Rate range was 4.75% - 5.00% and 4.25% - 4.50% as of March 31, 2023 and December 31, 2022, respectively.

On a tax-equivalent basis, net interest income increased $15.6 million to $104.5 million for the three months ended March 31, 2023 as compared to $88.9 million for the three months ended March 31, 2022. The increase in tax-equivalent net interest income for the three months ended March 31, 2023 was primarily driven by an increase in interest rates and volume of loans HFI partially offset by increases in deposit interest expense resulting primarily from interest rate increases.

Interest income, on a tax-equivalent basis, was $160.3 million for the three months ended March 31, 2023, compared to $95.9 million for the three months ended March 31, 2022, an increase of $64.4 million. This interest income represents an increase in yield on interest-earning assets to 5.38% for the three months ended March 31, 2023 compared with 3.28% for the three months ended March 31, 2022. Interest income on loans held for investment, on a tax-equivalent basis, increased $57.0 million to $139.5 million for the three months ended March 31, 2023 from $82.5 million for the three months ended March 31, 2022 due primarily to increased interest rates. The average yield on loans HFI increased by 174 basis points period-over-period to 6.05% for the three months ended March 31, 2023. Contractual loan interest rates yielded 5.90% in the three months ended March 31, 2023 compared with 4.12% in the three months ended March 31, 2022. Additionally, average loans HFI increased to $9.35 billion for the three months ended March 31, 2023 compared to $7.76 billion for the three months ended March 31, 2022. The increase in average loans HFI is due to strong demand in our primary markets during the three months ended March 31, 2023.

The components of our loan yield for the three months ended March 31, 2023 and 2022 were as follows:


	Three Months Ended March 31,
	2023				2022
(dollars in thousands, except %)	Interest income		Average yield		Interest income		Average yield
Loans HFI yield components:
Contractual interest rate on loans HFI (1)	$	135,872	5.90	%	$	78,789	4.12	%
Origination and other loan fee income	3,101		0.13	%	4,982		0.26	%
Accretion (amortization) on purchased loans	319		0.01	%	(2,352)		(0.12)	%
Nonaccrual interest collections	175		0.01	%	1,044		0.05	%

Total loans HFI yield	$	139,467	6.05	%	$	82,463	4.31	%

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

For the three months ended March 31, 2023 and 2022, net accretion on purchased loans increased the NIM by 1 basis point and net amortization on purchased loans decreased the NIM by 8 basis points, respectively. Net accretion/amortization is due to the continued impact of purchase accounting resulting from our previously-completed business combinations, which can fluctuate based on volume of early pay-offs. As of March 31, 2023 and December 31, 2022, the remaining net discount on all acquired loans amounted to $3.0 million and $3.3 million, respectively.

Interest expense was $55.8 million for the three months ended March 31, 2023, an increase of $48.9 million as compared to the three months ended March 31, 2022. The increase was largely attributed to a rise in interest rates in interest-bearing deposit accounts, and specifically on money market and interest-bearing checking deposit products. Interest expense on money market deposits increased $22.9 million to $24.5 million for the three months ended March 31, 2023 compared to $1.6 million for the three months ended March 31, 2022 and interest expense on interest-bearing checking deposits increased $16.6 million to $19.1 million for the three months ended March 31, 2023 from $2.5 million for the three months ended March 31, 2022. The average rate on money market deposits increased 274 basis points from 0.21% for the three months ended March 31, 2022 to 2.95% for the three months ended March 31, 2023 and the average rate on interest-bearing checking deposits increased 216 basis points from 0.28% for the three months ended March 31, 2022 to 2.44% for the three months ended March 31, 2023.

Overall, our NIM, on a tax-equivalent basis, increased to 3.51% for the three months ended March 31, 2023 from 3.04% for the three months ended March 31, 2022, driven by the interest rate increases previously discussed along with a shift in balance sheet composition, including a decline 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 1 basis point for the three months ended March 31, 2023 compared to approximately 29 basis points for the three months ended March 31, 2022.

Average balance, average yield earned and average rate paid

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 March 31,
	2023						2022
(dollars in thousands on a tax-equivalent basis)	Average balances(1)		Interest income/ expense		Average yield/ rate		Average balances(1)		Interest income/ expense		Average yield/ rate
Interest-earning assets:
Loans HFI (2)(3)	$	9,346,708	$	139,467	6.05	%	$	7,762,566	$	82,463	4.31	%
Mortgage loans held for sale	56,204		927		6.69	%	470,005		3,566		3.08	%
Commercial loans held for sale	16,608		159		3.88	%	78,567		928		4.79	%
Securities:
Taxable	1,402,535		6,570		1.90	%	1,380,897		5,420		1.59	%
Tax-exempt (3)	294,652		2,440		3.36	%	318,849		2,523		3.21	%
Total securities (3)	1,697,187		9,010		2.15	%	1,699,746		7,943		1.90	%
Federal funds sold and reverse repurchase agreements	188,013		1,855		4.00	%	206,829		192		0.38	%
Interest-bearing deposits with other financial institutions	728,576		8,008		4.46	%	1,599,991		638		0.16	%
FHLB stock	47,094		887		7.64	%	32,894		147		1.81	%
Total interest earning assets (3)	12,080,390		160,313		5.38	%	11,850,598		95,877		3.28	%
Noninterest Earning Assets:
Cash and due from banks	154,270						93,419
Allowance for credit losses	(134,803)						(125,980)
Other assets (4)(5)(6)	761,757						823,452
Total noninterest earning assets	781,224						790,891
Total assets	$	12,861,614					$	12,641,489
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing checking	$	3,165,058	$	19,060	2.44	%	$	3,559,755	$	2,457	0.28	%
Money market deposits(7)	3,369,953		24,510		2.95	%	3,017,746		1,572		0.21	%
Savings deposits	458,023		64		0.06	%	487,945		64		0.05	%
Customer time deposits(7)	1,472,221		9,221		2.54	%	1,077,386		1,320		0.50	%
Brokered and internet time deposits	1,607		8		2.02	%	16,065		49		1.24	%
Time deposits	1,473,828		9,229		2.54	%	1,093,451		1,369		0.51	%
Total interest-bearing deposits	8,466,862		52,863		2.53	%	8,158,897		5,462		0.27	%
Other interest-bearing liabilities:
Securities sold under agreements to repurchase and federal funds purchased	27,139		46		0.69	%	30,056		14		0.19	%
Federal Home Loan Bank advances	41,389		499		4.89	%	—		—		—	%
Subordinated debt(8)	126,161		2,402		7.72	%	129,578		1,460		4.57	%
Other borrowings	1,688		10		2.40	%	1,502		9		2.43	%
Total other interest-bearing liabilities	196,377		2,957		6.11	%	161,136		1,483		3.73	%
Total interest-bearing liabilities	8,663,239		55,820		2.61	%	8,320,033		6,945		0.34	%
Noninterest-bearing liabilities:
Demand deposits	2,588,756						2,767,087
Other liabilities(6)	266,299						138,291
Total noninterest-bearing liabilities	2,855,055						2,905,378
Total liabilities	11,518,294						11,225,411
FB Financial Corporation common shareholders' equity	1,343,227						1,415,985
Noncontrolling interest	93						93
Shareholders' equity	1,343,320						1,416,078
Total liabilities and shareholders' equity	$	12,861,614					$	12,641,489
Net interest income (tax-equivalent basis)			$	104,493					$	88,932
Interest rate spread (tax-equivalent basis)					2.77	%					2.94	%
Net interest margin (tax-equivalent basis) (9)					3.51	%					3.04	%
Cost of total deposits					1.94	%					0.20	%
Average interest-earning assets to average interest-bearing liabilities					139.4	%					142.4	%

(1)Calculated using daily averages.

(2)Average balances of nonaccrual loans and overdrafts (before deduction of ACL) are included in average loan balances. Origination and other loan fee income of $3.1 million and $5.0 million, net accretion (amortization) of $0.3 million and $(2.4) million, and nonaccrual interest collections of $0.2 million and $1.0 million are included in interest income for the three months ended March 31, 2023 and 2022, respectively.

(3)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 $0.8 million and $0.8 million for three months ended March 31, 2023 and 2022, respectively.

(4)Includes average net unrealized losses on investment securities available for sale of $222.8 million and $24.0 million for the three months ended March 31, 2023 and 2022, respectively.

(5)Includes average of optional rights to repurchase government guaranteed GNMA mortgage loans previously sold that have become past due greater than 90 days of $23,180 for the three months ended March 31, 2023.

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

(7)Includes $0.9 million and $0.9 million of interest rate premium accretion on money market deposits, $1.5 million of interest expense and $0.3 million of interest income from fair value hedging instruments on money market deposits,and $0.1 million and $0.2 million on customer time deposits for the three months ended March 31, 2023 and 2022, respectively.

(8)Includes $0.8 million of interest expense and $0.2 million of interest income from fair value hedging for the three months ended March 31, 2023 and 2022, respectively.

(9)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 tables below present the components of the changes in net interest income for the three months ended March 31, 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 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 March 31, 2023 compared to three months ended March 31, 2022


	Three months ended March 31, 2023 compared to three months ended March 31, 2022 due to changes in
(dollars in thousands on a tax-equivalent basis)	Volume		Yield/ rate		Net increase (decrease)
Interest-earning assets:
Loans(1)(2)	$	23,638	$	33,366	$	57,004
Loans held for sale - mortgage	(6,825)		4,186		(2,639)
Loans held for sale - commercial	(593)		(176)		(769)
Securities available-for-sale and other securities:
Taxable	101		1,049		1,150
Tax Exempt(2)	(200)		117		(83)
Federal funds sold and reverse repurchase agreements	(186)		1,849		1,663
Interest-bearing deposits with other financial institutions	(9,578)		16,948		7,370
FHLB stock	267		473		740
Total interest income(2)	6,624		57,812		64,436
Interest-bearing liabilities:
Interest-bearing checking deposits	(2,377)		18,980		16,603
Money market deposits(3)	2,562		20,376		22,938
Savings deposits	(4)		4		—
Customer time deposits(3)	2,473		5,428		7,901
Brokered and internet time deposits	(72)		31		(41)
Securities sold under agreements to repurchase and federal funds purchased	(5)		37		32
Federal Home Loan Bank advances	499		—		499
Subordinated debt(4)	(65)		1,007		942
Other borrowings	1		—		1
Total interest expense	3,012		45,863		48,875
Change in net interest income(2)	$	3,612	$	11,949	$	15,561

(1)Origination and other loan fee income of $3.1 million and $5.0 million, net accretion (amortization) of $0.3 million and $(2.4) million, and nonaccrual interest collections of $0.2 million and $1.0 million are included in interest income for the three months ended March 31, 2023 and 2022, respectively.

(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 taxable-equivalent adjustment amounts included was $0.8 million and $0.8 million for three months ended March 31, 2023 and 2022, respectively.

(3)Includes $0.9 million and $0.9 million of interest rate premium accretion on money market deposits, $1.5 million of interest expense and $0.3 million of interest income from fair value hedging instruments on money market deposits, and $0.1 million and $0.2 million on customer time deposits for the three months ended March 31, 2023 and 2022, respectively.

(4)Includes $0.8 million of interest expense and $0.2 million of interest income from fair value hedging instrument for the three months ended March 31, 2023 and 2022, 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, 2022 for a detailed discussion regarding ACL methodology.

Our allowance for credit losses calculation as of March 31, 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 years, expected elevated unemployment levels, and expected interest rate increases 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 March 31, 2023 compared to three months ended March 31, 2022

We recognized a provision for credit losses on loans HFI for the three months ended March 31, 2023 of $5.0 million. This compares to a reversal in provision for credit losses on loans HFI of $6.1 million recorded for the three months ended March 31, 2022. The current period provision 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 $67.8 million increase in loans HFI outstanding from December 31, 2022 to March 31, 2023 and the deteriorating economic forecasts as discussed in further detail above. For the three months ended March 31, 2022, the reversal in total provision for credit losses was primarily the result of improving economic forecasts allowing for a reduction of our reserves.

We also estimate expected credit losses on off-balance sheet loan commitments under the CECL methodology. 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. For the three months ended March 31, 2023, we recorded a reversal in provision for credit losses on unfunded commitments of $4.5 million compared to provision expense of $1.9 million during the three months ended March 31, 2022. The decrease in the provision for credit losses on unfunded commitments is primarily due to an intentional decrease in the total loan commitments.

During the three months ended March 31, 2023, the unrealized value in our available-for-sale debt securities portfolio improved to an unrealized loss position of $207.3 million from $234.4 million as of December 31, 2022. During the three months ended March 31, 2022, our available-for-sale debt securities portfolio unrealized value declined $105.6 million from an unrealized gain position of $4.7 million as of December 31, 2021. 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 realized any losses associated with these investments. As such, 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. The Company does not intend to sell those available-for-sale securities that have an unrealized loss as of March 31, 2023, and 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. 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 three months ended March 31, 2023 or 2022.

Noninterest income

The following table sets forth the components of noninterest income for the periods indicated:


	Three Months Ended March 31,
(dollars in thousands)		2023		2022
Mortgage banking income		$	12,086	$	29,531
Service charges on deposit accounts		3,053		2,914
ATM and interchange fees		2,396		5,087
Investment services and trust income		2,378		2,132
Gain (loss) from securities, net		69		(152)
Loss on sales or write-downs of other real estate owned and other assets		(183)		(434)

Other income		3,550		2,314
Total noninterest income		$	23,349	$	41,392

Three months ended March 31, 2023 compared to three months ended March 31, 2022

Noninterest income amounted to $23.3 million for the three months ended March 31, 2023, a decrease of $18.0 million, or 43.6%, as compared to $41.4 million for the three months ended March 31, 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 $12.1 million and $29.5 million for the three months ended March 31, 2023 and 2022, respectively, representing a $17.4 million, or 59.1% decrease year-over-year.

During the second quarter of 2022, we exited our direct-to-consumer internet delivery channel within our Mortgage segment. Our direct-to-consumer channel was particularly dependent on the support of a strong refinance market and the unfavorable interest rate environment resulted in lack of demand and profitability in this delivery channel. For the three months ended March 31, 2022, direct-to-consumer comprised 43.4% our total interest rate lock volume and 50.7% of our sales volume, respectively.

During the three months ended March 31, 2023, our mortgage operations had sales of $0.33 billion which generated a gain on sales margin of 2.45%. This compares to $1.28 billion and 2.29% for the three months ended March 31, 2022. Sales of mortgage loans slowed as interest rates continue to rise and affordability constraints hinder 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 decreased to $7.7 million during the three months ended March 31, 2023 compared to $21.8 million for the three months ended March 31, 2022. Total interest rate lock volume decreased $0.93 billion, or 71.4%, during the three months ended March 31, 2023 compared to the three months ended March 31, 2022. Market conditions during the three months ended March 31, 2023, including declining consumer demand for mortgages and increased interest rates, have also shifted the mix of interest rate lock commitments by purpose down to 13.8% refinance volume for the three months ended March 31, 2023 compared with 43.0% refinance interest rate lock volume for the previous year.

Our mortgage business is directly impacted by the interest rate environment, increased regulations, consumer demand, economic conditions, and investor demand for mortgage production. As interest rates have increased, we continue to see margin compression and reduced volumes due to excess capacity in the industry, refinance fatigue and affordability constraints in our markets. Interest rate lock volume and consequently, mortgage banking income, can be materially and adversely impacted by rising interest rates, slow downs in consumer purchase activity, seasonality and excess market capacity.

Income from mortgage servicing was $7.8 million and $7.4 million for three months ended March 31, 2023 and 2022, respectively. During the three months ended March 31, 2023, the changes in fair value of MSRs and related hedging activity resulted in a loss of $3.4 million. This compares to a $0.3 million benefit from the changes in fair value of MSRs and related hedging activity for three months ended March 31, 2022.

The components of mortgage banking income for the three months ended March 31, 2023 and 2022 were as follows:


	Three Months Ended March 31,
(dollars in thousands)	2023			2022
Mortgage banking income
Gains and fees from origination and sale of mortgage loans held for sale	$	8,146		$	29,397
Net change in fair value of loans held for sale and derivatives	(421)			(7,548)
Change in fair value on MSRs	(3,407)			253
Mortgage servicing income	7,768			7,429
Total mortgage banking income	$	12,086		$	29,531
Interest rate lock commitment volume by delivery channel:
Direct-to-consumer	$	—		$	568,092

Retail	375,042			741,015

Total	$	375,042		$	1,309,107
Interest rate lock commitment volume by purpose (%):
Purchase	86.2		%	57.0		%
Refinance	13.8		%	43.0		%
Mortgage sales	$	332,307		$	1,284,482
Mortgage sale margin	2.45		%	2.29		%
Closing volume	$	295,760		$	993,733
Outstanding principal balance of mortgage loans serviced	$	11,028,420		$	11,150,118

ATM and interchange fees decreased $2.7 million to $2.4 million during the three months ended March 31, 2023 as compared to $5.1 million for the three months ended March 31, 2022. The decrease was primarily attributable to the expiration of our temporary exemption from the Durbin amendment during the 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 interchange transactions increased approximately 9.00% during the three months ended March 31, 2023 from the previous year, interchange fee income declined by 54.9%, the majority of which related to the application of the fee cap imposed by the Durbin amendment impacting the current period.

Other income increased $1.2 million to $3.6 million during the three months ended March 31, 2023 as compared to $2.3 million during the three months ended March 31, 2022. This increase is primarily related to a $0.9 million gain associated with the change in fair value of the commercial loans held for sale portfolio during the three months ended March 31, 2023 compared to a $0.2 million loss for the three months ended March 31, 2022. Additional information on our commercial loans held for sale portfolio is included under the subheading 'Loans held for sale' included within this management's discussion and analysis.

Noninterest expense

The following table sets forth the components of noninterest expense for the periods indicated:


	Three Months Ended March 31,
(dollars in thousands)		2023		2022
Salaries, commissions and employee benefits		$	48,788	$	59,443
Occupancy and equipment expense		5,909		5,403
Legal and professional fees		3,108		2,607
Data processing		2,113		2,481

Amortization of core deposit and other intangibles		990		1,244





Advertising		2,133		4,033

Other expense		17,399		14,061
Total noninterest expense		$	80,440	$	89,272

Three months ended March 31, 2023 compared to three months ended March 31, 2022

Noninterest expense decreased by $8.8 million during the three months ended March 31, 2023 to $80.4 million as compared to $89.3 million in the three months ended March 31, 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 representing 60.7% and 66.6% of total noninterest expense in the three months ended March 31, 2023 and 2022, respectively. During the three months ended March 31, 2023, salaries and employee benefits expense decreased $10.7 million, or 17.9%, to $48.8 million as compared to $59.4 million for the three months ended March 31, 2022. The decrease was attributable to a $5.2 million decrease in salaries due to the impact of the reduction in headcount from the Mortgage restructuring. Additionally, the decrease included a $5.1 million decrease in incentive and commission-based compensation during the three months ended March 31, 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 three months ended March 31, 2023, advertising expense decreased $1.9 million to $2.1 million compared to $4.0 million during the three months ended March 31, 2022. This decrease is primarily attributable to realigning our expenses after the Mortgage restructuring to reflect the decrease in production.

Other noninterest expense primarily includes mortgage servicing expenses, regulatory fees and deposit insurance assessments, software license and maintenance fees and various other miscellaneous expenses. Other noninterest expense increased $3.3 million during the three months ended March 31, 2023 to $17.4 million compared to $14.1 million during the three months ended March 31, 2022. This increase includes a $1.1 million increase in regulatory fees and assessments and other costs associated with our growth.

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 63.3% and 68.9% for the three months ended March 31, 2023 and 2022, respectively. Our adjusted efficiency ratio, on a tax-equivalent basis, was 63.3% and 68.1% for the three months ended March 31, 2023 and 2022, respectively. The decrease was primarily attributable to our focus on reducing unnecessary expenses and the restructuring of the Mortgage segment. See “GAAP reconciliation and management explanation of non-GAAP financial measures” in this Report for the calculation and discussion of the adjusted efficiency ratio.

Income taxes

Income tax expense was $9.7 million and $9.3 million for the three months ended March 31, 2023 and 2022, respectively. This represents effective tax rates of 21.0% and 20.9% for the three months ended March 31, 2023 and 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 adjustments for equity-based compensation upon vesting of restricted stock units. State taxes, net of federal benefits, increased our effective tax rate by 0.6% and 2.1% for the three months ended March 31, 2023 and 2022, respectively.

On August 16, 2022, the Inflation Reduction Act (IRA) was signed into law in the United States. Among other provisions, the IRA imposes a 1% excise tax on the fair market value of net stock repurchases made after December 31, 2022. The impact of this provision will be dependent on the extent of share repurchases made in future periods.

Financial condition

The following discussion of our financial condition compares balances as of March 31, 2023 and December 31, 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:


	March 31,						December 31,
	2023								2022
(dollars in thousands)	Committed		Amount Outstanding		% of total outstanding		Committed		Amount Outstanding		% of total outstanding
Loan Type:
Commercial and industrial	$	2,797,208	$	1,671,398	18	%	$	2,671,861	$	1,645,783	18	%
Construction	3,037,706		1,697,513		18	%	3,296,503		1,657,488		18	%
Residential real estate:
1-to-4 family mortgage	1,563,173		1,562,503		17	%	1,573,950		1,573,121		17	%
Residential line of credit	1,160,682		497,391		5	%	1,151,750		496,660		5	%
Multi-family mortgage	495,689		489,379		5	%	496,664		479,572		5	%
Commercial real estate:
Owner-occupied	1,185,041		1,136,978		12	%	1,156,534		1,114,580		12	%
Non-owner occupied	2,058,756		1,939,517		21	%	2,109,218		1,964,010		21	%
Consumer and other	397,104		371,317		4	%	393,632		366,998		4	%
Total loans	$	12,695,359	$	9,365,996	100	%	$	12,850,112	$	9,298,212	100	%

Our loans HFI portfolio is our most significant earning asset, comprising 71.5% and 72.4% of our total assets as of March 31, 2023 and December 31, 2022, respectively. Our strategy is to grow our loan portfolio by originating quality commercial and consumer loans that comply with our credit policies and that produce revenues consistent with our financial objectives. Our overall lending approach is primarily focused on providing credit to our customers directly in the markets we serve, but we are also party to loan syndications and participations from other banks (collectively, “participated loans”). As of March 31, 2023 and December 31, 2022, loans held for investment included approximately $300.0 million and $280.5 million, respectively, related to 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 March 31, 2023 and 2022, we sold $4.4 million and $0.3 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. As of March 31, 2023 and December 31, 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 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 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 March 31, 2023 and December 31, 2022.


	As a percentage (%) of tier 1 capital plus allowance for credit losses
	FirstBank		FB Financial Corporation
March 31, 2023
Construction	120.0	%	117.3	%
Commercial real estate	293.7	%	287.1	%
December 31, 2022
Construction	119.0	%	117.2	%
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. We plan to continue to make commercial and industrial loans an area of emphasis in our lending portfolio 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 continue to focus on decreasing these commitments. While commitments made in 2021 and the first quarter of 2022 have continued to fund up, commitments to extend additional funds in this category have slowed and the unfunded commitments in our construction portfolio have declined $298.8 million or 18.2% compared to December 31, 2022. We expect our outstanding balances in the construction portfolio to decrease over the coming quarters as loans mature and unfunded commitments continue to decrease.












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 may be affected by unemployment or underemployment, and market values of real 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 to be moderated compared to 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 in commercial real estate non-owner occupied loans to be reduced in comparison to historical growth due to our current macroeconomic outlook.








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. 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 represent a significant portion of our loan portfolio.

Loan maturity and sensitivities

The following table presents the contractual maturities of our loan portfolio as of March 31, 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.


	March 31, 2023
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
Commercial and industrial	$	658,527		$	817,286		$	194,600		$	985		$	1,671,398
Commercial real estate:
Owner-occupied	116,227			564,532			429,717			26,502			1,136,978
Non-owner occupied	165,618			887,871			866,862			19,166			1,939,517
Residential real estate:
1-to-4 family mortgage	83,614			420,287			285,082			773,520			1,562,503
Residential line of credit	33,577			94,987			368,440			387			497,391
Multi-family mortgage	57,835			287,093			128,812			15,639			489,379
Construction	938,585			573,838			179,523			5,567			1,697,513
Consumer and other	38,350			66,070			69,561			197,336			371,317
Total ($)	$	2,092,333		$	3,711,964		$	2,522,597		$	1,039,102		$	9,365,996
Total (%)	22.3		%	39.6		%	26.9		%	11.2		%	100.0		%

For loans due after one year or more, the following table presents the interest rate composition for loans outstanding as of March 31, 2023.


	March 31, 2023
Loan type (dollars in thousands)	Fixed interest rate			Floating interest rate			Total
Commercial and industrial	$	502,457		$	510,414		$	1,012,871
Commercial real estate:
Owner-occupied	784,961			235,790			1,020,751
Non-owner occupied	977,567			796,332			1,773,899
Residential real estate:
1-to-4 family mortgage	1,161,189			317,700			1,478,889
Residential line of credit	4,328			459,486			463,814
Multi-family mortgage	327,557			103,987			431,544
Construction	276,203			482,725			758,928
Consumer and other	319,043			13,924			332,967
Total ($)	$	4,353,305		$	2,920,358		$	7,273,663
Total (%)	59.9		%	40.1		%	100.0		%

The following table presents the contractual maturities of our loan portfolio segregated into fixed and floating interest rate loans as of March 31, 2023. As of March 31, 2023 and December 31, 2022, we had $17.2 million and $17.4 million, respectively, in fixed-rate loans in which we have entered into variable rate swap contracts.


	March 31, 2023
(dollars in thousands)	Fixed interest rate			Floating interest rate			Total
As of March 31, 2023
One year or less	$	655,944		$	1,436,389		$	2,092,333
One to five years	2,293,405			1,418,559			3,711,964
Five to fifteen years	1,303,729			1,218,868			2,522,597
Over fifteen years	756,171			282,931			1,039,102
Total ($)	$	5,009,249		$	4,356,747		$	9,365,996
Total (%)	53.5		%	46.5		%	100.0		%

Of the loans shown above with floating interest rates as of March 31, 2023, many have interest rate floors as follows:


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:

1-25 bps	$	2,112	24.92	$	—	—	$	—	—	$	—	—	$	2,112	24.92
26-50 bps	1,704		50.00	3,183		29.94	494		33.73	2,007		28.00	7,388		34.29
51-75 bps	223		75.00	2,590		67.66	17,228		60.20	4,639		63.09	24,680		61.66
76-100 bps	816		100.00	13,711		89.53	4,875		84.12	3,239		79.79	22,641		87.35
101-200 bps	23,209		169.97	95,689		161.57	87,155		150.47	10,708		169.55	216,761		158.40
201-300 bps	83,098		270.59	85,855		267.46	141,351		252.12	21,607		261.00	331,911		261.29
301-400 bps	326,557		378.40	241,584		375.47	181,356		363.67	38,384		367.84	787,881		373.60
401-500 bps	664,140		460.19	513,397		454.36	455,390		452.45	143,024		460.20	1,775,951		456.52
501-600 bps	6,446		535.80	6,740		542.72	26,664		545.20	33,184		524.94	73,034		534.94
601 bps and above	668		788.60	2,736		675.48	11,237		686.53	2,157		800.00	16,798		703.36
Total loans with current rates above floors	$	1,108,973	414.66	$	965,485	382.61	$	925,750	372.09	$	258,949	413.77	$	3,259,157	393.00
Loans at interest rate floors providing support:
1-25 bps	$	—	—	$	1,250	22.00	$	—	—	$	—	—	$	1,250	22.00
26-50 bps	—		—	—		—	428		47.00	138		47.00	566		47.00


101-200 bps	—		—	39		162.00	281		147.00	—		—	320		148.85




Total loans at interest rate floors providing support	$	—	—	$	1,289	26.28	$	709	86.61	$	138	47.00	$	2,136	47.64

Asset quality

In order to operate with a sound risk profile, we focus on originating loans that we believe to be of high quality. We have established loan approval policies and procedures to assist us in maintaining the overall quality of our loan portfolio. When delinquencies in our loans exist, we rigorously monitor the levels of such delinquencies for any negative or adverse trends. From time to time, we may modify loans to extend the term or make other concessions, including extensions or interest rate modifications, to help a borrower with a deteriorating financial condition stay current on their loan and to avoid foreclosure. Furthermore, we are committed to collecting on all of our loans, which can result in us carrying higher nonperforming assets. We believe this practice leads to higher recoveries in the long-term.

Nonperforming assets

Our nonperforming assets consist of nonperforming loans, other real estate owned and other repossessed non-earning assets. As of March 31, 2023 and December 31, 2022, we had $79.9 million and $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 for both the three months ended March 31, 2023 and 2022. Additionally, we had net interest recoveries on nonperforming assets previously charged off of $0.2 million and $1.0 million for the three months ended March 31, 2023 and 2022, respectively.

In addition to loans HFI, we also include loans HFS that have stopped accruing interest or become 90 days or more past due. Our nonperforming commercial loans HFS represent a pool of institutional healthcare loans acquired in our 2020 merger with Franklin Financial Network, Inc. that amounted to $9.3 million as of both March 31, 2023 and December 31, 2022, respectively.

As of March 31, 2023 and December 31, 2022, we had $20.5 million and $26.2 million, respectively, of delinquent GNMA loans previously sold included on our consolidated balance sheets in loans held for sale. These are considered nonperforming assets as we do not earn any interest on the unexercised option to repurchase these loans.

As of March 31, 2023 and December 31, 2022, other real estate owned included $0.5 million and $2.1 million, respectively, of excess land and facilities held for sale resulting from our prior acquisitions. Other nonperforming assets also included other repossessed non-real estate amounting to $0.5 million and $0.4 million as of March 31, 2023 and December 31, 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:


	March 31,						December 31,
(dollars in thousands)	2023			2022			2022
Loan Type
Commercial and industrial	$	2,455		$	3,940		$	1,443
Construction	382			679			389
Residential real estate:
1-to-4 family mortgage	20,593			15,023			23,115
Residential line of credit	1,082			1,577			1,531
Multi-family mortgage	39			48			42
Commercial real estate:
Owner-occupied	7,211			6,989			5,410
Non-owner occupied	5,802			7,185			5,956
Consumer and other	7,916			5,258			7,960
Total nonperforming loans held for investment	$	45,480		$	40,699		$	45,846
Commercial loans held for sale	9,278			5,087			9,289
Mortgage loans held for sale(1)	20,528			—			26,211
Other real estate owned	4,085			9,721			5,794
Other	498			453			351
Total nonperforming assets	$	79,869		$	55,960		$	87,491
Nonperforming loans held for investment as a percentage of total loans HFI	0.49		%	0.51		%	0.49		%
Nonperforming assets as a percentage of total assets	0.61		%	0.44		%	0.68		%
Nonaccrual loans HFI as a percentage of loans HFI	0.35		%	0.35		%	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 March 31, 2023 and December 31, 2022.

We have evaluated our loans held for investment classified as nonperforming and believe all nonperforming loans have been adequately reserved for in the allowance for credit losses as of March 31, 2023 and December 31, 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 $25.1 million at March 31, 2023 as compared to $31.3 million at December 31, 2022.

Allowance for credit losses

We calculate our expected credit loss using a lifetime loss rate methodology. 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 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 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“ 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 by loan category as well as the ratio of loans by loan category compared to the total loan portfolio as of the dates indicated:


	March 31,		December 31,
	2023		2022
(dollars in thousands)	Amount		ACL as a % of loans HFI category		Amount		ACL as a % of loans HFI category

Loan Type:
Commercial and industrial	$	11,117	0.67	%	$	11,106	0.67	%
Construction	41,025		2.42	%	39,808		2.40	%
Residential real estate:
1-to-4 family mortgage	27,213		1.74	%	26,141		1.66	%
Residential line of credit	9,034		1.82	%	7,494		1.51	%
Multi-family mortgage	6,619		1.35	%	6,490		1.35	%
Commercial real estate:
Owner occupied	7,952		0.70	%	7,783		0.70	%
Non-owner occupied	21,868		1.13	%	21,916		1.12	%
Consumer and other	13,981		3.77	%	13,454		3.67	%
Total allowance	$	138,809	1.48	%	$	134,192	1.44	%

The following table summarizes activity in our allowance for credit losses during the periods indicated:


	Three Months Ended March 31,				Year Ended December 31,
(dollars in thousands)		2023			2022			2022
Allowance for credit losses at beginning of period		$	134,192		$	125,559		$	125,559


Charge-offs:
Commercial and industrial		(46)			(4)			(2,087)

Residential real estate:
1-to-4 family mortgage		(16)			—			(77)


Commercial real estate:
Owner occupied		—			—			(15)
Non-owner occupied		—			—			(268)
Consumer and other		(705)			(575)			(2,254)
Total charge-offs		$	(767)		$	(579)		$	(4,701)
Recoveries:
Commercial and industrial		$	67		$	958		$	2,005
Construction		—			—			11
Residential real estate:
1-to-4 family mortgage		15			12			54
Residential line of credit		—			1			17

Commercial real estate:
Owner-occupied		66			10			88

Consumer and other		239			217			766
Total recoveries		$	387		$	1,198		$	2,941
Net (charge-offs) recoveries		(380)			619			(1,760)
Provision for credit losses		4,997			(6,129)			10,393


Allowance for credit losses at the end of period(1)		$	138,809		$	120,049		$	134,192
Ratio of net (charge-offs) recoveries during the period to average loans outstanding during the period		(0.02)		%	0.03		%	(0.02)		%
Allowance for credit losses as a percentage of loans at end of period(1)		1.48		%	1.50		%	1.44		%
Allowance for credit losses as a percentage of nonaccrual loans HFI(1)		421.9		%	431.4		%	489.2		%
Allowance for credit losses as a percentage of nonperforming loans at end of period(1)		305.2		%	295.0		%	292.7		%
(1) Excludes reserve for credit losses on unfunded commitments of $18.5 million,$16.3 million, and $23.0 million recorded in accrued expenses and other liabilities on our consolidated balance sheets as of March 31, 2023, March 31, 2022, and December 31, 2022, respectively.

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


	Provision for credit losses(1)		Net (charge-offs) recoveries		Average loans HFI		Ratio of annualized net (charge-offs) recoveries to average loans HFI
(dollars in thousands)
























Three Months Ended March 31, 2023
Commercial and industrial	$	(10)	$	21	$	1,663,572	0.01	%
Construction	1,217		—		1,687,980		—	%
Residential real estate:
1-to-4 family mortgage	1,073		(1)		1,567,471		—	%
Residential line of credit	1,540		—		497,047		—	%
Multi-family mortgage	129		—		487,394		—	%
Commercial real estate:
Owner-occupied	103		66		1,127,738		0.02	%
Non-owner occupied	(48)		—		1,951,024		—	%
Consumer and other	993		(466)		364,482		(0.52)	%
Total	$	4,997	$	(380)	$	9,346,708	(0.02)	%
Three Months Ended March 31, 2022
Commercial and industrial	$	(4,006)	$	954	$	1,314,862	0.29	%
Construction	3,206		—		1,373,379		—	%
Residential real estate:
1-to-4 family mortgage	1,908		12		1,296,550		—	%
Residential line of credit	641		1		384,592		—	%
Multi-family mortgage	(578)		—		358,449		—	%
Commercial real estate:
Owner occupied	(4,187)		10		974,227		—	%
Non-owner occupied	(4,478)		—		1,691,268		—	%
Consumer and other	1,365		(358)		369,239		(0.39)	%
Total	$	(6,129)	$	619	$	7,762,566	0.03	%
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)	%

1) Excludes (reversal of) provision for credit losses on unfunded commitments of $(4.5) million, $1.9 million and $8.6 million recorded for the three months ended March 31, 2023 and 2022 and for the year ended December 31, 2022, respectively.

The allowance for credit losses was $138.8 million and $134.2 million and represented 1.48% and 1.44% of loans held for investment as of March 31, 2023 and December 31, 2022, respectively. For the three months ended March 31, 2023, we experienced net charge-offs of $0.4 million, or 0.02% of average loans HFI, compared to net recoveries of $0.6 million, or 0.03% for the three months ended March 31, 2022. Our ratio of total nonperforming loans HFI as a percentage of total loans HFI remained constant at 0.49% as of March 31, 2023 compared to December 31, 2022.

The primary reason for the increase in the allowance for credit losses is due to loan growth and a tightening monetary policy environment during the three months ended March 31, 2023. Specifically, we performed qualitative evaluations within our established qualitative framework, weighting the impact uncertainty due to inflation, negative economic forecasts, predicted Federal Reserve rate increases, status of federal government stimulus programs, supply chain disruptions for our customers, recent bank failures and other considerations. Further, the increase in estimated required reserve was attributable to forecasted deterioration in asset quality projected over life of the loan portfolio. As a ratio of

ACL to loans HFI by loan type, our construction, consumer and other, residential 1-4 family mortgage and HELOC portfolios incurred the largest increases year-over-year due to weighted projections that the economy may be nearing a recession. These portfolios are heavily reliant on the strength of the economy; and therefore, they are adversely affected by inflation, supply chain disruptions, and unemployment.

We also maintain an allowance for credit losses on unfunded commitments, which decreased to $18.5 million as of March 31, 2023 from $23.0 million as of December 31, 2022 due to a 6.27% or $222.5 million decrease in unfunded loan commitments during the period. Notably, there was a $298.8 million decrease in unfunded commitments in our construction loan category pipeline which resulted in a $4.5 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 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 syndicated national credits and institutional healthcare loans that are accounted for as held for sale. The loans had a fair value of $9.5 million as of March 31, 2023 compared to $30.5 million as of December 31, 2022. The change is primarily attributable to loans within the portfolio being paid off through external refinancing and pay-downs. As of March 31, 2023, the remaining outstanding balance was made up of only two relationships.

As a result of the payoff of two syndicated national credits and other net changes in fair value of commercial loans held for sale during three months ended March 31, 2023, we recorded a gain of $0.9 million, compared to a loss of $0.2 million for the three months ended March 31, 2022, both of which are included in 'other noninterest income' on the consolidated statement of income.

Mortgage loans held for sale

Mortgage loans held for sale consisted of $52.5 million of residential real estate mortgage loans in the process of being sold to third parties and $20.5 million of GNMA optional repurchase loans. This compares to $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, 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 March 31, 2023 and 2022 totaled $0.38 billion and $1.31 billion, respectively. The decrease in interest rate lock volume during the three months ended March 31, 2023 reflects the slow down experienced across the industry compared with the three months ended March 31, 2022, which benefited from historically low interest rates pre-empted by the COVID-19 Pandemic. 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 three months ended March 31, 2022 totaled $0.57 billion. Interest rate lock commitments in the pipeline were $157.2 million as of March 31, 2023 compared with $118.3 million as of December 31, 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 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 $26.3 million and $75.4 million at March 31, 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 $1.47 billion as of both March 31, 2023 and December 31, 2022.

During the three months ended March 31, 2023 and 2022, we purchased $0.9 million and $170.1 million in investment securities, respectively. There were no sales of securities sold during the three months ended March 31, 2023 or 2022. During the three months ended March 31, 2023 and 2022, maturities and calls of securities totaled $26.8 million and $57.4 million, respectively.

Included in the fair value of available-for-sale debt securities were net unrealized losses of $207.3 million and $234.4 million at March 31, 2023 and December 31, 2022, respectively. Current net unrealized losses are due to interest rate increases. We believe we are well positioned to mitigate the impact of future rate increases due to the shorter duration of our portfolio.

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:


	As of March 31,						As of 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	$	31,102	2.1	%	2.25	%	$	729	—	%	2.40	%
Maturing in one to five years	77,721		5.3	%	2.04	%	106,951		7.3	%	2.10	%
Maturing in five to ten years	—		—	%	—	%	—		—	%	—	%
Maturing after ten years	—		—	%	—	%	—		—	%	—	%
Total Treasury securities	108,823		7.4	%	2.10	%	107,680		7.3	%	2.10	%
Government agency securities:
Maturing within one year	—		—	%	—	%	—		—	%	—	%
Maturing in one to five years	33,934		2.3	%	1.56	%	27,082		1.8	%	1.50	%
Maturing in five to ten years	6,032		0.4	%	1.58	%	12,011		0.8	%	1.70	%
Maturing after ten years	962		0.1	%	4.55	%	969		0.1	%	3.32	%
Total government agency securities	40,928		2.8	%	1.63	%	40,062		2.7	%	1.60	%
Municipal securities:
Maturing within one year	3,168		0.2	%	2.03	%	3,496		0.2	%	2.18	%
Maturing in one to five years	18,930		1.3	%	2.67	%	17,775		1.2	%	2.38	%
Maturing in five to ten years	43,801		3.0	%	3.13	%	39,034		2.7	%	3.12	%
Maturing after ten years	205,095		13.9	%	2.93	%	204,115		13.9	%	3.18	%
Total obligations of state and municipal subdivisions	270,994		18.4	%	2.91	%	264,420		18.0	%	3.10	%
Residential and commercial mortgage-backed securities guaranteed by FNMA, GNMA and FHLMC:
Maturing within one year	—		—	%	—	%	—		—	%	—	%
Maturing in one to five years	3,758		0.3	%	2.76	%	3,834		0.3	%	2.73	%
Maturing in five to ten years	25,725		1.7	%	2.68	%	23,683		1.6	%	2.65	%
Maturing after ten years	1,013,628		68.9	%	1.85	%	1,024,320		69.6	%	1.84	%
Total residential and commercial mortgage- backed securities guaranteed by FNMA, GNMA and FHLMC	1,043,111		70.9	%	1.87	%	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	7,149		0.5	%	3.94	%	6,814		0.5	%	3.87	%
Maturing after ten years	—		—	%	—	%	—		—	%	—	%
Total Corporate securities	7,149		0.5	%	3.94	%	7,187		0.5	%	3.94	%
Total available-for-sale debt securities	$	1,471,005	100.0	%	2.08	%	$	1,471,186	100.0	%	2.10	%

(1)Yields on a tax-equivalent basis.

Equity Securities

As of March 31, 2023 and December 31, 2022, we had $3.1 million and $3.0 million, respectively, in marketable equity securities recorded at fair value that primarily consisted of mutual funds. During the three months ended March 31, 2023, the change in the fair value of equity securities resulted in a net gain of $69 thousand. During the three months ended March 31, 2022, the change in the fair value of equity securities resulted in a net loss of $154 thousand.

Deposits

Deposits represent the Bank’s primary source of funds. We continue to focus on growing core customer deposits through our relationship driven banking philosophy, community-focused marketing programs, and initiatives such as the development of our treasury management services.

Total deposits were $11.18 billion and $10.86 billion as of March 31, 2023 and December 31, 2022, respectively, which represents a 12.2% annualized increase quarter-over-quarter. Noninterest-bearing deposits at March 31, 2023 and December 31, 2022 were $2.49 billion and $2.68 billion, respectively, while interest-bearing deposits were $8.69 billion and $8.18 billion at March 31, 2023 and December 31, 2022, respectively. Included in noninterest-bearing deposits are certain mortgage escrow deposits from our third-party mortgage servicing provider amounting to $92.9 million and $75.6 million at March 31, 2023 and December 31, 2022, respectively.

Interest-bearing checking deposits and money market increased by $232.9 million and $230.9 million during the three months ended March 31, 2023, respectively. These increases were primarily driven by increases in our deposits from municipal and governmental entities (i.e. "public deposits") which increased by $313.2 million during the period. These increases were partially offset by decreases in non-interest bearing deposits of $187.5 million during the same period. Our deposit composition continues to shift as banks are competing for customers who are searching for higher yields.

As a result of the rising interest rate environment and the shift in our deposit composition, our total cost of deposits increased during the three months ended March 31, 2023 from the three months ended March 31, 2022 by 174 basis points to 1.94%, and the cost of interest-bearing deposits increased to 2.53% from 0.27% in the same period for the prior year.

We 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 March 31, 2023 and December 31, 2022 was $8.7 million and $9.8 million, respectively.

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 March 31,						As of December 31,
	2023						2022
(dollars in thousands)	Amount		% of total deposits		Average rate		Amount		% of total deposits		Average rate

Deposit Type
Noninterest-bearing demand	$	2,489,149	23	%	—	%	$	2,676,631	25	%	—	%
Interest-bearing demand	3,292,883		29	%	2.44	%	3,059,984		28	%	0.70	%
Money market	3,457,032		31	%	2.95	%	3,226,102		30	%	0.80	%
Savings deposits	446,981		4	%	0.06	%	471,143		4	%	0.05	%
Customer time deposits	1,496,024		13	%	2.54	%	1,420,131		13	%	0.99	%
Brokered and internet time deposits	846		—	%	2.02	%	1,843		—	%	1.36	%
Total deposits	$	11,182,915	100	%	1.94	%	$	10,855,834	100	%	0.54	%



Customer Time Deposits
0.00-1.00%	$	227,624	15	%			$	387,739	27	%
1.01-2.00%	341,232		23	%			341,721		24	%
2.01-3.00%	78,959		5	%			89,916		6	%
3.01-4.00%	382,690		26	%			342,576		24	%
4.01-5.00%	431,231		29	%			224,308		16	%
Above 5.00%	34,288		2	%			33,871		3	%
Total customer time deposits	$	1,496,024	100	%			$	1,420,131	100	%
Brokered and Internet Time Deposits
0.00-1.00%	$	99	12	%			$	99	5	%
1.01-2.00%	—		—	%			747		41	%
2.01-3.00%	497		59	%			747		41	%
3.01-4.00%	250		29	%			250		13	%
4.01-5.00%	—		—	%			—		—	%
Above 5.00%	—		—	%			—		—	%
Total brokered and internet time deposits	$	846	100	%			$	1,843	100	%
Total time deposits	$	1,496,870					$	1,421,974

The below sets forth maturity information on time deposits below and in excess of the FDIC insurance limit as of March 31, 2023:


	March 31, 2023
(dollars in thousands)	Amount		Weighted average interest rate at period end
Time deposits of $250 and less
Months to maturity:
Three or less	$	100,791	0.91	%
Over Three to Six	101,432		1.79	%
Over Six to Twelve	274,520		2.75	%
Over Twelve	450,498		3.35	%
Total	$	927,241	2.73	%

Time deposits of greater than $250
Months to maturity:
Three or less	$	216,394	1.96	%
Over Three to Six	49,489		2.53	%
Over Six to Twelve	134,315		3.41	%
Over Twelve	169,431		3.69	%
Total	$	569,629	2.87	%

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. Further details related to our estimated uninsured, uncollateralized and estimated insured deposits outstanding is presented below:


	March 31,			December 31,
	2023			2022
Estimated insured or collateralized deposits	$	7,926,537		$	7,288,641
Estimated uninsured deposits(1)	$	5,662,346		$	5,644,534
Estimated uninsured and uncollateralized deposits(2)	$	3,256,378		$	3,567,193
Estimated uninsured and uncollateralized deposits as a % of total deposits(2)	29.1		%	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.

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 $26.7 million and $21.9 million at March 31, 2023 and December 31, 2022, respectively.

We 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 $11.5 million and $65.0 million as of March 31, 2023 and December 31, 2022, respectively.

FHLB short-term borrowings

As a member of the FHLB Cincinnati, we may utilize advances from the FHLB in order to provide additional liquidity and funding. Under these short-term agreements, we maintain a line of credit that as of March 31, 2023 and December 31, 2022 had total borrowing capacity of $1.20 billion and $1.27 billion, respectively. As of March 31, 2023 and December 31, 2022, we had qualifying loans pledged as collateral securing these lines amounting to $2.56 billion and $2.67 billion, respectively. Overnight cash advances against this line totaled $125.0 million and $175.0 million as of March 31, 2023 and December 31, 2022, respectively. The borrowing rate on our FHLB short-term borrowings was 4.89% and 3.89% as of March 31, 2023 and December 31, 2022, respectively.

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 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 trusts in exchange for the proceeds of the securities offerings, which represent the sole asset of the trusts.

Additionally, during the year ended December 31, 2020, we placed $100.0 million of ten year fixed-to-floating rate subordinated notes, maturing September 1, 2030. During the three months ended March 31, 2022, we began mitigating our interest rate exposure associated with these notes through the use of fair value hedging instruments. See Note 9, "Derivatives" in the notes to the consolidated financial statements for additional details related to these instruments.

Further information related to the our subordinated debt as of March 31, 2023 is detailed below:

(dollars in thousands, except %)

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

8.41%

3-month LIBOR plus 3.25%

FBK Trust II (1)

2003

06/26/2033

6/26/2008(3)

21,650

8.28%

3-month LIBOR plus 3.15%

Additional subordinated debt:

FBK subordinated debt I(4)

2020

09/01/2030

9/1/2025 (5)

100,000

4.50%

Semi-annual fixed (6)

Unamortized debt issuance costs

(902)

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

(2,952)

Total subordinated debt, net

127,076

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

(6)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 $1.3 million and $1.4 million as of March 31, 2023 and December 31, 2022, respectively. In addition, other borrowings on our consolidated balance sheets includes guaranteed rebooked GNMA loans previously sold that have become past due over 90 days and are eligible for repurchase totaling $20.5 million and $26.2 million as of March 31, 2023 and December 31, 2022, respectively. See Note 5, "Leases" and Note 10, "Fair value of financial instruments" within the Notes to our consolidated financial statements 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 Policy is intended to cause the Bank to maintain adequate liquidity and, therefore, enhance our ability to raise funds to support asset growth, meet deposit withdrawals and lending needs, maintain reserve requirements and otherwise sustain our operations. We accomplish this through management of the maturities of our interest-earning assets and interest-bearing liabilities. We believe that our present position is adequate to meet our current and future liquidity needs.

We continuously monitor our liquidity position to ensure that assets and liabilities are managed in a manner that will meet all of our short-term and long-term cash requirements. We manage our liquidity position to meet the daily cash flow needs of clients, while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of our shareholders. We also monitor our liquidity requirements in light of interest rate trends, changes in the economy and the scheduled maturity and interest rate sensitivity of the investment and loan portfolios and deposits.

As part of our liquidity management strategy, we 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 borrowed funds. While we do not control the types of deposit instruments our clients choose, we do influence those choices with the rates and the deposit specials we offer. As of both March 31, 2023 and December 31, 2022, we also had $50.0 million available through the IntraFi network, which allows us to offer banking customers access to FDIC insurance protection on deposits through our Bank which exceed FDIC insurance limits.

Our investment portfolio is another alternative for meeting liquidity needs. These assets generally have readily available markets that offer conversions to cash as needed. Available-for-sale debt securities within our investment portfolio are

used to secure government, public, trust and other deposits and as collateral for short-term borrowings, letters of credit and derivative instruments. As of March 31, 2023 and December 31, 2022, we had pledged securities related to these items with carrying values of $1.18 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. 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 March 31, 2023 and December 31, 2022, we had outstanding overnight cash advances from the FHLB totaling $125.0 million and $175.0 million, respectively. As of March 31, 2023, there was $1.20 billion available to borrow against with a remaining capacity of $473.2 million. As of December 31, 2022, there was $1.27 billion available to borrow against with a remaining capacity of $830.0 million.

We maintained unsecured lines of credit with other commercial banks totaling $350.0 million as of both March 31, 2023 and December 31, 2022. These are unsecured, uncommitted lines of credit typically maturing at various times within the next twelve months. Borrowings against these lines (i.e. federal funds purchased) totaled $11.5 million and $65.0 million as of March 31, 2023 and December 31, 2022, respectively.

Our current on-balance sheet liquidity and available sources of liquidity are summarized in the table below:


	As of March 31,			As of December 31,
(dollars in thousands)	2023			2022
Current on-balance sheet liquidity:
Cash and cash equivalents	$	1,319,951		$	1,027,052
Unpledged available-for-sale debt securities	286,169			280,165
Equity securities, at fair value	3,059			2,990
Total on-balance sheet liquidity	$	1,609,179		$	1,310,207

Available sources of liquidity:
Unsecured borrowing capacity(a)	$	3,755,059		$	3,595,812
FHLB remaining borrowing capacity	473,160			829,959
Federal Reserve discount window	2,548,886			2,470,000
Total available sources of liquidity	$	6,777,105		$	6,895,771

On-balance sheet liquidity as a percentage of total assets	12.3		%	10.2		%
On-balance sheet liquidity and available sources of liquidity as a percentage of estimated uninsured and uncollateralized deposits	257.5		%	230.0		%

(a) Borrowing capacity capped per internal policy; includes untapped brokered CD’s and unsecured lines of credit.

Holding company liquidity management

The Company is a corporation separate and apart from the Bank and, therefore, it must provide for its own liquidity. The Company’s main source of funding is dividends declared and paid to it by the Bank. Statutory and regulatory limitations exist that affect the ability of the Bank to pay dividends to the Company. Management believes that these limitations will not impact the Company’s ability to meet its ongoing short-term cash obligations. For additional information regarding dividend restrictions, see the “Item 1. Business - Supervision and regulation,” "Item 1A. Risk Factors - Risks related to our business" and " Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Dividend Policy," each of which is set forth in our Annual Report.

Due to state banking laws, the Bank may not declare dividends in any calendar year in an amount exceeding the total of its net income for that year combined with its retained net income of the preceding two years, without the prior approval of the Tennessee Department of Financial Institutions. Based upon this regulation, as of March 31, 2023 and December 31, 2022, $158.2 million and $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 months ended March 31, 2023, there were $23.5 million in cash dividends approved by the board for payment from the Bank to the holding company. During the three months ended March 31, 2022, there were $17.3 million 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 March 31, 2023, the board approved a dividend from the Bank to the holding company to be paid in the second quarter for $8.5 million that also did not require approval from the TDFI.

During the three months ended March 31, 2023, the Company declared and paid shareholder dividends of $0.15 per share, or $7.0 million, respectively. During the three months ended March 31, 2022, the Company declared and paid dividends of $0.13 per share, or $6.2 million, respectively. Subsequent to March 31, 2023, the Company declared a quarterly dividend in the amount of $0.15 per share, payable on May 23, 2023, to stockholders of record as of May 9, 2023.

Shareholders’ equity and capital management

Our total shareholders’ equity was $1.37 billion at March 31, 2023 and $1.33 billion at December 31, 2022. Book value per share was $29.29 at March 31, 2023 and $28.36 at December 31, 2022, respectively. The increase in shareholders’ equity was primarily attributable to an increase in retained net income, net of declared by dividends. In addition, the increase in shareholders’ equity was driven by a $27.1 million unrealized gain within our available-for-sale debt securities portfolio during the three months ended March 31, 2023.

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 March 31, 2023 and December 31, 2022, we met all capital adequacy requirements for which we are 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.

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:
	Net interest income (1)

Change in interest rates	March 31,		December 31,
(in basis points)	2023		2022
+400	17.9	%	20.6	%
+300	13.5	%	15.1	%
+200	10.3	%	10.8	%
+100	5.82	%	5.98	%
-100	(6.20)	%	(6.32)	%
-200	(12.5)	%	(13.2)	%


	Percentage change in:
	Economic value of equity (2)
Change in interest rates	March 31,		December 31,
(in basis points)	2023		2022
+400	(12.8)	%	(9.90)	%
+300	(8.42)	%	(7.00)	%
+200	(4.07)	%	(4.00)	%
+100	(1.09)	%	(1.66)	%
-100	(0.79)	%	0.99	%
-200	(3.46)	%	1.07	%

(1)The percentage change represents the projected net interest income for 12 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 March 31, 2023 and December 31, 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 customer deposits. Our variable rate loan portfolio is indexed to market rates and timing of repricing of loans and deposits 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 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, 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

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 March 31, 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

The following risk factor supplements and should be read in conjunction with the risk factors set forth in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2022.

Recent volatility in the banking industry, and responsive measures to manage it, could have an adverse effect on our financial position or results of operations.

In recent months, several financial institutions have failed or required outside liquidity support. These events have created the risk of additional stress to other financial institutions and the banking industry generally as a result of increased lack of confidence in the financial sector. U.S. and international regulators have taken action in an effort to strengthen public confidence in the banking system, including the creation of a new Bank Term Funding Program and international coordination to enhance the provision of liquidity via the standing U.S. dollar liquidity swap line arrangements. There can be no assurance that these actions will stabilize the financial services industry and financial markets. While we currently do not anticipate liquidity constraints of the kind that caused certain other banks to fail or require external support, constraints on our liquidity could occur as a result of unanticipated deposit withdrawals because of market distress or our inability to access other sources of liquidity, including through the capital markets due to unforeseen market dislocations or interruptions. Moreover, some of our customers may become less willing to maintain deposits at our bank because of broader market concerns with the level of insurance available on those deposits. Our business and our financial condition and results of operations could be adversely affected by continued soundness concerns regarding financial institutions

generally and our counterparties specifically and limitations resulting from further governmental action in an effort to stabilize or provide additional regulation of the financial system as well as the impact of excessive deposit withdrawals.

Additionally, the recent events in the banking sector may lead to governmental initiatives intended to prevent future bank failures and stem significant deposit outflows from the banking sector, including (i) legislation aimed at preventing similar future bank runs and failures and stabilizing confidence in the banking sector over the long term, (ii) agency rulemaking to modify and enhance relevant regulatory requirements, specifically with respect to liquidity risk management, deposit concentrations, capital adequacy, stress testing and contingency planning, and safe and sound banking practices, and (iii) enhancement of the agencies’ supervision and examination policies and priorities. Although we cannot predict with certainty which initiatives may be pursued by lawmakers and agency leadership, nor can we predict the terms and scope of any such initiatives, any of the potential changes referenced above could, among other things, subject us to additional costs, limit the types of financial services and products we may offer, and limit our future growth, any of which could materially and adversely affect our business, results of operations or financial condition.

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 March 31, 2023:


Period	(a) Total number of shares purchased(1)	(b) Average price paid per share		(c) Total number of shares purchased as part of publicly announced plans or programs	(d) Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs(2)
January 1 - January 31, 2023	136,262	$	36.29	136,262	$	61,249,538
February 1 - February 28, 2023	—	—		—	61,249,538
March 1 - March 31, 2023	—	—		—	61,249,538
Total	136,262	$	—	136,262	$	61,249,538

(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 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.

(2) Amounts are inclusive of commissions and fees related to the stock repurchases.

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)
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.

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
May 8, 2023						Michael M. Mettee Chief Financial Officer (Principal Financial Officer)

						/s/ Jonathan Pennington
May 8, 2023						Jonathan Pennington Chief Accounting Officer (Principal Accounting Officer)