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 commercialCommercial and industrial loans are typically made to smallsmall- and medium-sized manufacturing, wholesale, retail and service businesses, and farmers for working capital and operating needs and business expansions, including the purchase of capital equipment and loans made to farmers relating to their operations.expansions. This category also includes loans secured by manufactured housing receivables.receivables made primarily to manufactured housing communities. Commercial and industrial loans generally include lines of credit and loans with maturities of five years or less. Commercial and industrial loans are generally made with operating cash flows as the primary source of repayment, but may also include collateralization by inventory, accounts receivable, equipment and personal guarantees. Growth in our commercial and industrial loans portfolio is expected to decrease as we position for potential economic headwinds in 2023 and beyond. | | | | | | | | | | Construction loans. | Our constructionConstruction 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 ourthe Company's assessment of the value of the property on an as-completed basis. These loans can carry riskbasis and repayment depends upon project completion and sale, refinancing, or operation of repayment when projects incur cost overruns, have an increase in the price of building materials, encounter zoning and environmental issues, or encounter other factors that may affect the completion of a project on time and on budget. Additionally, repayment risk may be negatively impacted when the market experiences a deterioration in the value of real estate. We expect to make construction loans at a more moderate pace compared to recent periods due to our current macroeconomic forecasts, the potential of a recession in near future, and the heightened inherent risk associated with these loans. | | | | | | | | | | | 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 deteriorationRepayment depends primarily upon the cash flow of housing values in our markets and increased unemployment or underemployment.the borrower as well as the value of the real estate collateral. | | | | | | 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 lineRepayment depends primarily upon the cash flow 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 linethe borrower as well as the value of credit loans may also be affected by unemployment or underemployment and deteriorating market values ofthe real estate.estate collateral. | | | | |
| | | | | | Multi-family residential loans. | Our multi-family residential loans are primarily secured by multi-family properties, such as apartments and condominium buildings. TheRepayment depends primarily upon the cash flow of the borrower as well as the value of these loans and growth in this area of our portfolio may be affected by unemployment or underemployment and deteriorating market values ofthe real estate.estate collateral. | | | | 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.borrower. | | | | | | | | 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 or refinancing of the completed property or rental proceedsincome 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.property. | | | | | | | | | | Consumer and other loans. | Consumer and other loans include consumer loans made to individuals for personal, family and household purposes, including car, boat and other recreational vehicle loans, manufactured homes (without real estate) and other recreational vehicle loans and personal lines of credit. TheseConsumer 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.goods, with repayment depending primarily on the cash flow of the borrower. Other loans also include loans to states and political subdivisions in the U.S. These loansand are generally subject to the risk that the borrowing municipalityrepaid through tax revenues 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.refinancing.
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As part of our lending policy and risk management activities, the Company tracks lending exposure of commercial and industrial and owner-occupied commercial real estate by industry classification (as defined by the North American Industry Classification System) and type to determine potential risks associated with industry concentrations, and if any risk issues could lead to additional credit loss exposure. The table below provides a summary of our commercial and industrial and owner-occupied commercial real estate portfolios by industry classification. | | | | | | | | | | | | | | | | | | | | | | | December 31, 2023 | (dollars in thousands) | | Committed | | Amount Outstanding | | Nonperforming | Commercial and industrial | | | | | | | Real estate rental and leasing | | $ | 534,638 | | | $ | 335,619 | | | $ | 173 | | Finance and insurance | | 493,237 | | | 327,194 | | | — | | Construction | | 471,837 | | | 146,185 | | | 3,928 | | Manufacturing | | 266,628 | | | 172,955 | | | 4,512 | | Wholesale trade | | 161,955 | | | 93,842 | | | 189 | | Retail trade | | 156,342 | | | 117,409 | | | 9,761 | | Professional, scientific and technical services | | 136,748 | | | 70,453 | | | 2,393 | | Information | | 114,889 | | | 54,547 | | | — | | Transportation and warehousing | | 97,286 | | | 81,163 | | | 177 | | Administrative and support and waste management and remediation services | | 95,441 | | | 60,759 | | | 130 | | Other services (except public administration) | | 91,073 | | | 52,295 | | | — | | Health care and social assistance | | 89,693 | | | 56,893 | | | 135 | | Educational services | | 64,972 | | | 37,850 | | | — | | Accommodation and food services | | 41,073 | | | 29,979 | | | — | | Arts, entertainment and recreation | | 32,275 | | | 29,329 | | | — | | Agriculture, forestry, fishing and hunting | | 28,485 | | | 20,524 | | | 315 | | Other | | 106,395 | | | 33,737 | | | 17 | | Total | | $ | 2,982,967 | | | $ | 1,720,733 | | | $ | 21,730 | | | | | | | | | Commercial real estate owner-occupied | | | | | | | Real estate rental and leasing | | $ | 254,514 | | | $ | 247,196 | | | $ | — | | Other services (except public administration) | | 181,870 | | | 178,266 | | | 130 | | Retail trade | | 156,501 | | | 150,745 | | | — | | Health care and social assistance | | 127,194 | | | 125,933 | | | 243 | | Accommodation and food services | | 103,404 | | | 103,246 | | | — | | Manufacturing | | 89,691 | | | 85,485 | | | 82 | | Wholesale trade | | 69,316 | | | 65,702 | | | — | | Construction | | 67,069 | | | 61,119 | | | 5 | | Transportation and warehousing | | 53,648 | | | 25,103 | | | — | | Professional, scientific and technical services | | 41,586 | | | 40,221 | | | 199 | | Arts, entertainment and recreation | | 34,944 | | | 33,419 | | | — | | Agriculture, forestry, fishing and hunting | | 24,563 | | | 22,164 | | | 1,083 | | Educational services | | 23,579 | | | 21,769 | | | — | | Finance and insurance | | 17,921 | | | 17,619 | | | — | | Information | | 16,126 | | | 14,250 | | | 871 | | Management of companies and enterprises | | 16,057 | | | 14,187 | | | — | | Other | | 27,520 | | | 25,647 | | | 575 | | Total | | $ | 1,305,503 | | | $ | 1,232,071 | | | $ | 3,188 | |
Additionally, the Company tracks lending exposure of non-owner occupied commercial real estate and construction by collateral property type to determine potential risks associated with collateral types, and if any risk issues could lead to additional credit loss exposure. The following table provides a summary of our non-owner occupied commercial real estate and construction loan portfolios by collateral property type: | | | | | | | | | | | | | | | | | | | | | | | December 31, 2023 | (dollars in thousands) | | Committed | | Amount Outstanding | | Nonperforming | Commercial real estate non-owner occupied | | | | | | | Retail | | $ | 492,336 | | | $ | 481,541 | | | $ | 381 | | Office | | 374,213 | | | 348,205 | | | 35 | | Warehouse/industrial | | 340,351 | | | 312,728 | | | — | | Hotel | | 310,522 | | | 308,875 | | | 2,935 | | Self-storage | | 114,178 | | | 109,112 | | | — | | Land-mobile home park | | 113,528 | | | 107,633 | | | — | | Assisted living and special care facilities | | 82,045 | | | 81,626 | | | — | | Healthcare facility | | 76,899 | | | 76,481 | | | — | | Restaurants, bars and event venues | | 30,833 | | | 28,944 | | | — | | Recreation/sport/entertainment | | 29,973 | | | 29,973 | | | — | | Other | | 61,613 | | | 58,407 | | | — | | Total | | $ | 2,026,491 | | | $ | 1,943,525 | | | $ | 3,351 | | | | | | | | | Construction | | | | | | | Consumer: | | | | | | | Construction | | $ | 211,443 | | | $ | 144,232 | | | $ | 695 | | Land | | 38,325 | | | 37,274 | | | 75 | | Commercial: | | | | | | | Multi-family | | 407,800 | | | 167,385 | | | — | | Land | | 274,187 | | | 243,270 | | | — | | Retail | | 39,227 | | | 26,922 | | | — | | Self Storage | | 34,830 | | | 23,474 | | | — | | Hotel | | 23,668 | | | 18,804 | | | — | | Recreation/sport/entertainment | | 18,952 | | | 1,901 | | | — | | Convenience Store/Gas Station | | 16,654 | | | 11,579 | | | — | | Office | | 15,355 | | | 12,334 | | | — | | Car Washes | | 15,324 | | | 8,741 | | | — | | Healthcare Facility | | 9,300 | | | 8,357 | | | — | | Other | | 26,327 | | | 11,317 | | | 350 | | Residential Development: | | | | | | | Construction | | 788,010 | | | 532,732 | | | 1,917 | | Land | | 151,833 | | | 109,353 | | | — | | Lots | | 51,942 | | | 39,638 | | | — | | Total | | $ | 2,123,177 | | | $ | 1,397,313 | | | $ | 3,037 | |
Loan maturity and sensitivities The following table presents the contractual maturities of our loan portfolio as of December 31, 2022.2023. Loans with scheduled maturities are reported in the maturity category in which the payment is due. Demand loans with no stated maturity and overdrafts are reported in the “due in 1 year or less” category. Loans that have adjustable rates are shown as amortizing to final maturity rather than when the interest rates are next subject to change. The tables do not include prepayment assumptions or scheduled repayments. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Loan type (dollars in thousands) | | Maturing in one year or less | | Maturing in one to five years | | Maturing in five to fifteen years | | Maturing after fifteen years | | Total | As of December 31, 2022 | | | | | | | | | | | Commercial and industrial | | $ | 608,008 | | | $ | 843,288 | | | $ | 193,492 | | | $ | 995 | | | $ | 1,645,783 | | Commercial real estate: | | | | | | | | | | | Owner-occupied | | 124,064 | | | 537,673 | | | 423,648 | | | 29,195 | | | 1,114,580 | | Non-owner occupied | | 193,062 | | | 823,537 | | | 919,179 | | | 28,232 | | | 1,964,010 | | Residential real estate: | | | | | | | | | | | 1-to-4 family mortgage | | 87,480 | | | 419,183 | | | 297,574 | | | 768,884 | | | 1,573,121 | | Residential line of credit | | 35,554 | | | 97,101 | | | 363,489 | | | 516 | | | 496,660 | | Multi-family mortgage | | 41,787 | | | 270,171 | | | 133,831 | | | 33,783 | | | 479,572 | | Construction | | 917,133 | | | 557,487 | | | 176,765 | | | 6,103 | | | 1,657,488 | | Consumer and other | | 34,779 | | | 67,274 | | | 67,730 | | | 197,215 | | | 366,998 | | Total ($) | | $ | 2,041,867 | | | $ | 3,615,714 | | | $ | 2,575,708 | | | $ | 1,064,923 | | | $ | 9,298,212 | | Total (%) | | 22.0 | % | | 38.9 | % | | 27.7 | % | | 11.4 | % | | 100.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 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 | | $ | 757,697 | | | $ | 825,135 | | | $ | 136,928 | | | $ | 973 | | | $ | 1,720,733 | | Construction | | 877,916 | | | 440,735 | | | 71,418 | | | 7,244 | | | 1,397,313 | | Residential real estate: | | | | | | | | | | | 1-to-4 family mortgage | | 69,867 | | | 429,307 | | | 248,361 | | | 821,017 | | | 1,568,552 | | Residential line of credit | | 42,881 | | | 97,115 | | | 390,621 | | | 295 | | | 530,912 | | Multi-family mortgage | | 89,138 | | | 362,551 | | | 136,891 | | | 15,224 | | | 603,804 | | Commercial real estate: | | | | | | | | | | | Owner-occupied | | 122,077 | | | 638,791 | | | 446,580 | | | 24,623 | | | 1,232,071 | | Non-owner occupied | | 162,595 | | | 978,007 | | | 785,530 | | | 17,393 | | | 1,943,525 | | Consumer and other | | 20,457 | | | 68,902 | | | 68,249 | | | 254,265 | | | 411,873 | | Total ($) | | $ | 2,142,628 | | | $ | 3,840,543 | | | $ | 2,284,578 | | | $ | 1,141,034 | | | $ | 9,408,783 | | Total (%) | | 22.8 | % | | 40.8 | % | | 24.3 | % | | 12.1 | % | | 100.0 | % |
For loans due after one year or more, the following table presents the interest rate composition for loans outstanding as of December 31, 2022.2023. | | | December 31, 2023 | | | | December 31, 2023 | Loan type (dollars in thousands) | Loan type (dollars in thousands) | | Fixed interest rate | | Floating interest rate | | Total | Loan type (dollars in thousands) | | Fixed interest rate | | Floating interest rate | | Total | As of December 31, 2022 | | | | | | | Commercial and industrial | Commercial and industrial | | $ | 517,618 | | | $ | 520,157 | | | $ | 1,037,775 | | Commercial real estate: | | Owner-occupied | | 767,304 | | | 223,212 | | | 990,516 | | Non-owner occupied | | 951,952 | | | 818,996 | | | 1,770,948 | | Construction | | Residential real estate: | Residential real estate: | | 1-to-4 family mortgage | | 1-to-4 family mortgage | | 1-to-4 family mortgage | 1-to-4 family mortgage | | 1,175,605 | | | 310,036 | | | 1,485,641 | | Residential line of credit | Residential line of credit | | 4,680 | | | 456,426 | | | 461,106 | | Multi-family mortgage | Multi-family mortgage | | 307,597 | | | 130,188 | | | 437,785 | | Construction | | 276,492 | | | 463,863 | | | 740,355 | | Commercial real estate: | | Owner-occupied | | Owner-occupied | | Owner-occupied | | Non-owner occupied | | Consumer and other | Consumer and other | | 318,354 | | | 13,865 | | | 332,219 | | Total ($) | Total ($) | | $ | 4,319,602 | | | $ | 2,936,743 | | | $ | 7,256,345 | | Total (%) | Total (%) | | 59.5 | % | | 40.5 | % | | 100.0 | % | Total (%) | | 58.7 | % | | 41.3 | % | | 100.0 | % |
The following table presents the contractual maturities of our loan portfolio segregated into fixed and floating interest rate loans as of December 31, 2022.2023. As of December 31, 2022, and 2021, we had $17.4 million and $21.5 million, respectively, in fixed-rate loans in which we have entered into variable rate swap contracts. There were no such loans outstanding as of December 31, 2023. | | | | | | | | | | | | | | | | | | | | | (dollars in thousands) | | Fixed interest rate | | Floating interest rate | | Total | As of December 31, 2022 | | | | | | | One year or less | | $ | 637,515 | | $ | 1,404,352 | | $ | 2,041,867 | One to five years | | 2,252,295 | | 1,363,419 | | 3,615,714 | Five to fifteen years | | 1,303,577 | | 1,272,131 | | 2,575,708 | Over fifteen years | | 763,730 | | 301,193 | | 1,064,923 | Total ($) | | $ | 4,957,117 | | $ | 4,341,095 | | $ | 9,298,212 | Total (%) | | 53.3 | % | | 46.7 | % | | 100.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | December 31, 2023 | (dollars in thousands) | | Fixed interest rate | | Floating interest rate | | Total | As of December 31, 2023 | | | | | | | One year or less | | $ | 584,894 | | $ | 1,557,734 | | $ | 2,142,628 | One to five years | | 2,299,058 | | 1,541,485 | | 3,840,543 | Five to fifteen years | | 1,161,075 | | 1,123,503 | | 2,284,578 | Over fifteen years | | 804,743 | | 336,291 | | 1,141,034 | Total ($) | | $ | 4,849,770 | | $ | 4,559,013 | | $ | 9,408,783 | Total (%) | | 51.5 | % | | 48.5 | % | | 100.0 | % |
Of the loans shown above with floating interest rates as of December 31, 2022,2023, many have interest rate floors as follows: | Loans with interest rate floors (dollars in thousands) | Loans with interest rate floors (dollars in thousands) | | Maturing in one year or less | Weighted average level of support (bps) | Maturing in one to five years | Weighted average level of support (bps) | Maturing in five years to fifteen years | Weighted average level of support (bps) | Maturing after fifteen years | Weighted average level of support (bps) | Total | Weighted average level of support (bps) | Loans with interest rate floors (dollars in thousands) | | Maturing in one year or less | Weighted average level of support (bps) | Maturing in one to five years | Weighted average level of support (bps) | Maturing in five years to fifteen years | Weighted average level of support (bps) | Maturing after fifteen years | Weighted average level of support (bps) | Total | Weighted average level of support (bps) | Loans with current rates above floors: | Loans with current rates above floors: | | | 1-25 bps | 1-25 bps | | $ | 12 | | 5.00 | | $ | 2,344 | | 17.12 | | $ | 20 | | 25.00 | | $ | — | | — | | $ | 2,376 | | 17.12 | | | 1-25 bps | | | 1-25 bps | | 26-50 bps | 26-50 bps | | 1,034 | | 50.00 | | — | | — | | 1,509 | | 39.36 | | — | | — | | 2,543 | | 43.68 | | 51-75 bps | 51-75 bps | | — | | — | | 9,609 | | 71.52 | | 399 | | 55.56 | | 2,155 | | 53.90 | | 12,163 | | 67.87 | | 76-100 bps | 76-100 bps | | 859 | | 100.00 | | 6,836 | | 99.91 | | 17,390 | | 85.20 | | 4,669 | | 88.07 | | 29,754 | | 89.46 | | 101-125 bps | | 8,530 | | 125.00 | | 16,239 | | 120.38 | | 23,127 | | 114.75 | | 3,495 | | 106.10 | | 51,391 | | 117.64 | | 126-150 bps | | 8,227 | | 136.22 | | 14,080 | | 148.29 | | 13,181 | | 134.18 | | 2,538 | | 128.78 | | 38,026 | | 139.49 | | 151-200 bps | | 20,079 | | 199.46 | | 35,936 | | 180.08 | | 70,463 | | 171.75 | | 3,722 | | 198.71 | | 130,200 | | 179.10 | | 201-250 bps | | 33,686 | | 236.20 | | 74,115 | | 228.80 | | 38,595 | | 224.62 | | 14,820 | | 223.23 | | 161,216 | | 228.83 | | 251-300 bps | | 74,535 | | 287.75 | | 91,652 | | 277.09 | | 135,221 | | 274.21 | | 20,685 | | 276.14 | | 322,093 | | 278.28 | | 301-350 bps | | 224,859 | | 343.14 | | 170,872 | | 341.62 | | 153,009 | | 331.98 | | 30,868 | | 334.72 | | 579,608 | | 339.30 | | 351 bps and above | | 661,055 | | 413.24 | | 559,681 | | 412.15 | | 471,609 | | 411.76 | | 172,978 | | 430.73 | | 1,865,323 | | 414.16 | | 101-200 bps | | 201-300 bps | | 301-400 bps | | 401-500 bps | | 501-600 bps | | 601 bps and above | | Total loans with current rates above floors | Total loans with current rates above floors | | $ | 1,032,876 | | 373.78 | | $ | 981,364 | | 349.84 | | $ | 924,523 | | 334.04 | | $ | 255,930 | | 374.41 | | $ | 3,194,693 | | 354.97 | | Loans at interest rate floors providing support: | Loans at interest rate floors providing support: | | | | | | | | | | | | 1-25 bps | 1-25 bps | | $ | — | | — | | $ | — | | — | | $ | 434 | | 22.00 | | $ | 139 | | 22.00 | | $ | 573 | | 22.00 | | 1-25 bps | | 1-25 bps | | | 51-75 bps | | 51-75 bps | | 51-75 bps | | | 101-200 bps | | 101-200 bps | | 101-200 bps | | | 101-125 bps | | — | | — | | — | | — | | 287 | | 122.00 | | — | | — | | 287 | | 122.00 | | 126-150 bps | | — | | — | | 41 | | 137.00 | | — | | — | | — | | — | | 41 | | 137.00 | | | Total loans at interest rate floors providing support | Total loans at interest rate floors providing support | | $ | — | | — | | $ | 41 | | 137.00 | | $ | 721 | | 61.81 | | $ | 139 | | 22.00 | | $ | 901 | | 59.04 | | | Total loans at interest rate floors providing support | | | Total loans at interest rate floors providing support | |
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 thisloans. 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 December 31, 20222023 and 2021,2022, we had $87.5$86.5 million and $63.0$87.5 million, respectively, in nonperforming assets. Nonperforming loans are those on which the accrual of interest has stopped, as well as loans that are contractually 90 days past due on which interest continues to accrue. Generally, the accrual of interest is discontinued when the full collection of principal or interest is in doubt or when the payment of principal or interest has been contractually 90 days past due, unless the obligation is both well secured and in the process of collection. In our loan review process, we seek to identify and proactively address nonperforming loans. Accrued interest receivable written off as an adjustment to interest income amounted to $1.1 million and $0.8 million for both the years ended December 31, 20222023 and 2021, respectively.2022. Additionally, we had net interest recoveries on nonperforming assets previously charged off of $2.7$1.4 million and $2.3$2.7 million for the years ended December 31, 20222023 and 2021,2022, respectively.
Nonperforming loans HFI increased $15.1 million to $60.9 million as of December 31, 2023 compared to $45.8 million as of December 31, 2022. The increase is primarily attributable to three commercial and industrial relationships moving to nonaccrual status. In addition to loans HFI, we also includeincluded loans HFS that have stopped accruing interest or become 90 days or more past due. As such, ourOur nonperforming commercial loans HFS representrepresented a pool of previously acquired shared national credits and institutional healthcarecommercial loans. These loans that amounted to $9.3 million and $5.2 million as of December 31, 2022 and 2021, respectively. During the year ended2022. There were no such loans outstanding as of December 31, 2022, we identified a more-than-trivial benefit associated with serviced GNMA loans previously sold that are contractually delinquent greater than 90 days and recorded this right to repurchase option on the balance sheet. See Note 1, "Basis of presentation" within this Report for additional information. 2023.
As of December 31, 2023 and 2022, we had $21.2 million and $26.2 million, respectively, of these delinquent GNMA optional repurchase 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. Rebooked GNMA optional repurchase loans do not meet the requirements under FASB ASC Topic 825 to be accounted for under the fair value option. As of December 31, 2021, there was $91.9 million of delinquent GNMA loans previously sold that we did not record on our consolidated balance sheets as we determined there not to be a more-than-trivial benefit based on an analysis of interest rates2023 and an assessment of potential reputational risk associated with these loans. These rebooked GNMA optional repurchase loans negatively impacted our NPA ratio by 20 bps as of December 31, 2022. As of December 31, 2022, and 2021, other real estate owned included $2.1$0.1 million and $3.3$2.1 million, respectively, of excess land and facilities held for sale resulting from branch consolidations from our prior acquisitions. Other nonperformingrepossessed assets also included other repossessed non-real estate amounting to $0.4$1.1 million and $0.7$0.4 million as of December 31, 20222023 and 2021,2022, respectively.
The following table provides details of our nonperforming assets, the ratio of such loans and other nonperforming assets to total assets, and certain other related information as of the dates presented: | | | | | | | | | | | | | | | | | | | | | | December 31, | | | | | | | | | (dollars in thousands) | | 2022 | | 2021 | | | | | | | | | Loan Type | | | | | | | | | | | | Commercial and industrial | | $ | 1,443 | | $ | 1,583 | | | | | | | | | | Construction | | 389 | | 4,340 | | | | | | | | | | Residential real estate: | | | | | | | | | | | | 1-to-4 family mortgage | | 23,115 | | 13,956 | | | | | | | | | | Residential line of credit | | 1,531 | | 1,736 | | | | | | | | | | Multi-family mortgage | | 42 | | 49 | | | | | | | | | | Commercial real estate: | | | | | | | | | | | | Owner-occupied | | 5,410 | | 6,710 | | | | | | | | | | Non-owner occupied | | 5,956 | | 14,084 | | | | | | | | | | Consumer and other | | 7,960 | | 4,845 | | | | | | | | | | Total nonperforming loans held for investment | | $ | 45,846 | | $ | 47,303 | | | | | | | | | | Commercial loans held for sale | | 9,289 | | 5,217 | | | | | | | | | | Mortgage loans held for sale(1) | | 26,211 | | — | | | | | | | | | | Other real estate owned | | 5,794 | | 9,777 | | | | | | | | | | Other | | 351 | | 686 | | | | | | | | | | Total nonperforming assets | | $ | 87,491 | | $ | 62,983 | | | | | | | | | | Nonperforming loans held for investment as a percentage of total loans HFI | | 0.49 | % | 0.62 | % | | | | | | | | | Nonperforming assets as a percentage of total assets | | 0.68 | % | 0.50 | % | | | | | | | | | Nonaccrual loans HFI as a percentage of loans HFI | | 0.30 | % | 0.47 | % | | | | | | | | | Loans restructured as troubled debt restructurings | | $ | 13,854 | | $ | 32,435 | | | | | | | | | | Troubled debt restructurings as a percentage of total loans held for investment | | 0.15 | % | 0.43 | % | | | | | | | | | (1) Represents optional right to repurchase government guaranteed GNMA mortgage loans previously sold that have become past due greater than 90 days as of December 31, 2022. | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | December 31, | | | | | | | | | (dollars in thousands) | | 2023 | | 2022 | | | | | | | | | Loan Type: | | | | | | | | | | | | Commercial and industrial | | $ | 21,730 | | $ | 1,443 | | | | | | | | | | Construction | | 3,037 | | 389 | | | | | | | | | | Residential real estate: | | | | | | | | | | | | 1-to-4 family mortgage | | 16,073 | | 23,115 | | | | | | | | | | Residential line of credit | | 2,473 | | 1,531 | | | | | | | | | | Multi-family mortgage | | 32 | | 42 | | | | | | | | | | Commercial real estate: | | | | | | | | | | | | Owner-occupied | | 3,188 | | 5,410 | | | | | | | | | | Non-owner occupied | | 3,351 | | 5,956 | | | | | | | | | | Consumer and other | | 11,039 | | 7,960 | | | | | | | | | | Total nonperforming loans HFI | | $ | 60,923 | | $ | 45,846 | | | | | | | | | | Commercial loans held for sale | | — | | 9,289 | | | | | | | | | | Mortgage loans held for sale(1) | | 21,229 | | 26,211 | | | | | | | | | | Other real estate owned | | 3,192 | | 5,794 | | | | | | | | | | Other repossessed assets | | 1,139 | | 351 | | | | | | | | | | Total nonperforming assets | | $ | 86,483 | | $ | 87,491 | | | | | | | | | | Nonperforming loans held for investment as a percentage of total loans HFI | | 0.65 | % | 0.49 | % | | | | | | | | | Nonperforming assets as a percentage of total assets | | 0.69 | % | 0.68 | % | | | | | | | | | Nonaccrual loans HFI as a percentage of loans HFI | | 0.51 | % | 0.30 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (1) Represents optional right to repurchase government guaranteed GNMA mortgage loans previously sold that have become past due greater than 90 days. | | | | | | |
We have evaluated our nonperforming loans held for investmentHFI classified as nonperforming and believe all nonperforming loans have been adequately reserved for in the allowance for credit losses on loans HFI as of December 31, 20222023 and 2021.2022. Management also continually monitors past due loans for potential credit quality deterioration. Loans not considered nonperforming include loans 30-89 days past due that continue to accrue interest amounting to $47.0 million at December 31, 2023 as compared to $31.3 million at December 31, 2022 as compared to $26.5 million at2022. The increase from December 31, 2021.2022 to December 31, 2023 was primarily noted in our 1-to-4 family mortgage and our construction portfolios.
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.conditions. Loan losses are charged against the allowance when we believe the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance for credit losses is based on the loan's amortized cost basis, excluding accrued interest receivable, as we promptly charge off uncollectible accrued interest receivable determinedreceivable. We calculate our expected credit loss using a lifetime loss rate methodology. We utilize probability-weighted forecasts, which consider multiple macroeconomic variables from Moody's that are applicable to be uncollectible. We determine the appropriatenesseach type 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.loan. See "Critical“Critical Accounting Estimates - Allowance for credit losses"losses” and Note 53 “Loans and allowance for credit losses“losses” in the notes to the consolidated financial statements for additional information regarding our methodology. The following table presents the allocation of the allowance for credit losses on loans HFI by loan category as well as the ratio of loans by loan category compared to the total loan portfolio as of the dates indicated: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, | | | 2022 | | 2021 | (dollars in thousands) | | Amount | | % of Loans | | ACL as a % of loans HFI category | | Amount | | % of Loans | | ACL as a % of loans HFI category | | | | | | | | | | | | | | Loan Type: | | | | | | | | | | | | | Commercial and industrial | | $ | 11,106 | | | 18 | % | | 0.67 | % | | $ | 15,751 | | | 17 | % | | 1.22 | % | Construction | | 39,808 | | | 18 | % | | 2.40 | % | | 28,576 | | | 17 | % | | 2.15 | % | Residential real estate: | | | | | | | | | | | | | 1-to-4 family mortgage | | 26,141 | | | 17 | % | | 1.66 | % | | 19,104 | | | 17 | % | | 1.50 | % | Residential line of credit | | 7,494 | | | 5 | % | | 1.51 | % | | 5,903 | | | 5 | % | | 1.54 | % | Multi-family mortgage | | 6,490 | | | 5 | % | | 1.35 | % | | 6,976 | | | 4 | % | | 2.14 | % | Commercial real estate: | | | | | | | | | | | | | Owner occupied | | 7,783 | | | 12 | % | | 0.70 | % | | 12,593 | | | 13 | % | | 1.32 | % | Non-owner occupied | | 21,916 | | | 21 | % | | 1.12 | % | | 25,768 | | | 23 | % | | 1.49 | % | Consumer and other | | 13,454 | | | 4 | % | | 3.67 | % | | 10,888 | | | 4 | % | | 3.35 | % | Total allowance | | $ | 134,192 | | | 100 | % | | 1.44 | % | | $ | 125,559 | | | 100 | % | | 1.65 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 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 | | $ | 19,599 | | | | | 1.14 | % | | $ | 11,106 | | | | | 0.67 | % | Construction | | 35,372 | | | | | 2.53 | % | | 39,808 | | | | | 2.40 | % | Residential real estate: | | | | | | | | | | | | | 1-to-4 family mortgage | | 26,505 | | | | | 1.69 | % | | 26,141 | | | | | 1.66 | % | Residential line of credit | | 9,468 | | | | | 1.78 | % | | 7,494 | | | | | 1.51 | % | Multi-family mortgage | | 8,842 | | | | | 1.46 | % | | 6,490 | | | | | 1.35 | % | Commercial real estate: | | | | | | | | | | | | | Owner-occupied | | 10,653 | | | | | 0.86 | % | | 7,783 | | | | | 0.70 | % | Non-owner occupied | | 22,965 | | | | | 1.18 | % | | 21,916 | | | | | 1.12 | % | Consumer and other | | 16,922 | | | | | 4.11 | % | | 13,454 | | | | | 3.67 | % | Total allowance for credit losses on loans HFI | | $ | 150,326 | | | | | 1.60 | % | | $ | 134,192 | | | | | 1.44 | % |
The following table summarizes activity in our allowance for credit losses on loans HFI during the periods indicated: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | | | | | | | | | | | | (dollars in thousands) | | | | | | 2022 | | | 2021 | | | | | 2020 | | | | | | | | | | | | | Allowance for credit losses at beginning of period | | | | | | $ | 125,559 | | | $ | 170,389 | | | | | $ | 31,139 | | | | | | | | | | | | | | Impact of adopting ASC 326 on non-purchased credit deteriorated loans | | | | | | — | | | — | | | | | 30,888 | | | | | | | | | | | | | | Impact of adopting ASC 326 on purchased credit deteriorated loans | | | | | | — | | | — | | | | | 558 | | | | | | | | | | | | | | Charge-offs: | | | | | | | | | | | | | | | | | | | | | | | | | Commercial and industrial | | | | | | (2,087) | | | (4,036) | | | | | (11,735) | | | | | | | | | | | | | | Construction | | | | | | — | | | (30) | | | | | (18) | | | | | | | | | | | | | | Residential real estate: | | | | | | | | | | | | | | | | | | | | | | | | | 1-to-4 family mortgage | | | | | | (77) | | | (154) | | | | | (403) | | | | | | | | | | | | | | Residential line of credit | | | | | | — | | | (18) | | | | | (22) | | | | | | | | | | | | | | Multi-family mortgage | | | | | | — | | | (1) | | | | | — | | | | | | | | | | | | | | Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | | | | Owner occupied | | | | | | (15) | | | — | | | | | (304) | | | | | | | | | | | | | | Non-owner occupied | | | | | | (268) | | | (1,566) | | | | | (711) | | | | | | | | | | | | | | Consumer and other | | | | | | (2,254) | | | (2,063) | | | | | (2,112) | | | | | | | | | | | | | | Total charge-offs | | | | | | $ | (4,701) | | | $ | (7,868) | | | | | $ | (15,305) | | | | | | | | | | | | | | Recoveries: | | | | | | | | | | | | | | | | | | | | | | | | | Commercial and industrial | | | | | | $ | 2,005 | | | $ | 861 | | | | | $ | 1,712 | | | | | | | | | | | | | | Construction | | | | | | 11 | | | 3 | | | | | 205 | | | | | | | | | | | | | | Residential real estate: | | | | | | | | | | | | | | | | | | | | | | | | | 1-to-4 family mortgage | | | | | | 54 | | | 125 | | | | | 122 | | | | | | | | | | | | | | Residential line of credit | | | | | | 17 | | | 115 | | | | | 125 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | | | | Owner-occupied | | | | | | 88 | | | 156 | | | | | 83 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Consumer and other | | | | | | 766 | | | 773 | | | | | 756 | | | | | | | | | | | | | | Total recoveries | | | | | | $ | 2,941 | | | $ | 2,033 | | | | | $ | 3,003 | | | | | | | | | | | | | | Net charge-offs | | | | | | (1,760) | | | (5,835) | | | | | (12,302) | | | | | | | | | | | | | | Provision for credit losses | | | | | | 10,393 | | | (38,995) | | | | | 94,606 | | | | | | | | | | | | | | Initial allowance for credit losses on loans purchased with credit deterioration | | | | | | — | | | — | | | | | 25,500 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Allowance for credit losses at the end of period(1) | | | | | | $ | 134,192 | | | $ | 125,559 | | | | | $ | 170,389 | | | | | | | | | | | | | | Ratio of net charge-offs during the period to average loans outstanding during the period | | | | | | (0.02) | % | | (0.08) | % | | | | (0.22) | % | | | | | | | | | | | | | Allowance for credit losses as a percentage of loans at end of period(1) | | | | | | 1.44 | % | | 1.65 | % | | | | 2.41 | % | | | | | | | | | | | | | Allowance for credit losses as a percentage of nonaccrual loans HFI(1) | | | | | | 489.2 | % | | 353.0 | % | | | | 335.7 | % | | | | | | | | | | | | | Allowance for credit losses as a percentage of nonperforming loans at end of period(1) | | | | | | 292.7 | % | | 265.4 | % | | | | 264.3 | % | | | | | | | | | | | | | (1) Excludes reserve for credit losses on unfunded commitments of $23.0 million, $14.4 million, and $16.4 million recorded in accrued expenses and other liabilities on our consolidated balance sheets as of December 31, 2022, 2021, and 2020 respectively. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | | | | | | | | | | | | (dollars in thousands) | | | | | | 2023 | | | 2022 | | | | | 2021 | | | | | | | | | | | | | Allowance for credit losses on loans HFI at beginning of period | | | | | | $ | 134,192 | | | $ | 125,559 | | | | | $ | 170,389 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Charge-offs: | | | | | | | | | | | | | | | | | | | | | | | | | Commercial and industrial | | | | | | (462) | | | (2,087) | | | | | (4,036) | | | | | | | | | | | | | | Construction | | | | | | — | | | — | | | | | (30) | | | | | | | | | | | | | | Residential real estate: | | | | | | | | | | | | | | | | | | | | | | | | | 1-to-4 family mortgage | | | | | | (46) | | | (77) | | | | | (154) | | | | | | | | | | | | | | Residential line of credit | | | | | | — | | | — | | | | | (18) | | | | | | | | | | | | | | Multi-family mortgage | | | | | | — | | | — | | | | | (1) | | | | | | | | | | | | | | Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | | | | Owner-occupied | | | | | | (144) | | | (15) | | | | | — | | | | | | | | | | | | | | Non-owner occupied | | | | | | — | | | (268) | | | | | (1,566) | | | | | | | | | | | | | | Consumer and other | | | | | | (2,851) | | | (2,254) | | | | | (2,063) | | | | | | | | | | | | | | Total charge-offs | | | | | | $ | (3,503) | | | $ | (4,701) | | | | | $ | (7,868) | | | | | | | | | | | | | | Recoveries: | | | | | | | | | | | | | | | | | | | | | | | | | Commercial and industrial | | | | | | $ | 273 | | | $ | 2,005 | | | | | $ | 861 | | | | | | | | | | | | | | Construction | | | | | | 10 | | | 11 | | | | | 3 | | | | | | | | | | | | | | Residential real estate: | | | | | | | | | | | | | | | | | | | | | | | | | 1-to-4 family mortgage | | | | | | 100 | | | 54 | | | | | 125 | | | | | | | | | | | | | | Residential line of credit | | | | | | 1 | | | 17 | | | | | 115 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | | | | Owner-occupied | | | | | | 109 | | | 88 | | | | | 156 | | | | | | | | | | | | | | Non-owner occupied | | | | | | 1,833 | | | — | | | | | — | | | | | | | | | | | | | | Consumer and other | | | | | | 573 | | | 766 | | | | | 773 | | | | | | | | | | | | | | Total recoveries | | | | | | $ | 2,899 | | | $ | 2,941 | | | | | $ | 2,033 | | | | | | | | | | | | | | Net charge-offs | | | | | | (604) | | | (1,760) | | | | | (5,835) | | | | | | | | | | | | | | Provision for (reversal of) credit losses on loans HFI | | | | | | 16,738 | | | 10,393 | | | | | (38,995) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Allowance for credit losses on loans HFI at the end of period | | | | | | $ | 150,326 | | | $ | 134,192 | | | | | $ | 125,559 | | | | | | | | | | | | | | Ratio of net charge-offs during the period to average loans outstanding during the period | | | | | | (0.01) | % | | (0.02) | % | | | | (0.08) | % | | | | | | | | | | | | | Allowance for credit losses on loans HFI as a percentage of loans at end of period | | | | | | 1.60 | % | | 1.44 | % | | | | 1.65 | % | | | | | | | | | | | | | Allowance for credit losses on loans HFI as a percentage of nonaccrual loans HFI | | | | | | 311.7 | % | | 489.2 | % | | | | 353.0 | % | | | | | | | | | | | | | Allowance for credit losses on loans HFI as a percentage of nonperforming loans at end of period | | | | | | 246.7 | % | | 292.7 | % | | | | 265.4 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following tables details our provision for credit losses on loans HFI and net charge-offs(charge-offs) recoveries to average loans HFI outstanding by loan category during the periods indicated: | | Provision for credit losses(1) | | Net (charge-offs) recoveries | | Average loans HFI | | Ratio of annualized net (charge-offs) recoveries to average loans HFI | | | Provision for (reversal of) credit losses on loans HFI | | | | Provision for (reversal of) credit losses on loans HFI | | Net (charge-offs) recoveries | | Average loans HFI | | Ratio of annualized net (charge-offs) recoveries to average loans HFI | (dollars in thousands) | (dollars in thousands) | | Provision for credit losses(1) | | Net (charge-offs) recoveries | | Average loans HFI | | Ratio of annualized net (charge-offs) recoveries to average loans HFI | | | Year ended December 31, 2022 | | Year Ended December 31, 2023 | | | Year Ended December 31, 2023 | | | Year Ended December 31, 2023 | | Commercial and industrial | | Commercial and industrial | | Commercial and industrial | Commercial and industrial | | $ | (4,563) | | | $ | (82) | | | $ | 1,466,685 | | | (0.01) | % | | $ | 8,682 | | | $ | | $ | (189) | | | $ | | $ | 1,678,832 | | | (0.01) | | (0.01) | % | Construction | Construction | | 11,221 | | | 11 | | | 1,549,622 | | | — | % | Construction | | (4,446) | | | 10 | | 10 | | | 1,594,317 | | 1,594,317 | | | — | | — | % | Residential real estate: | Residential real estate: | | 1-to-4 family mortgage | | 1-to-4 family mortgage | | 1-to-4 family mortgage | 1-to-4 family mortgage | | 7,060 | | | (23) | | | 1,438,801 | | | — | % | | 310 | | | 54 | | 54 | | | 1,558,477 | | 1,558,477 | | | — | | — | % | Residential line of credit | Residential line of credit | | 1,574 | | | 17 | | | 431,826 | | | — | % | Residential line of credit | | 1,973 | | | 1 | | 1 | | | 507,884 | | 507,884 | | | — | | — | % | Multi-family mortgage | Multi-family mortgage | | (486) | | | — | | | 411,509 | | | — | % | Multi-family mortgage | | 2,352 | | | — | | — | | | 519,554 | | 519,554 | | | — | | — | % | Commercial real estate: | Commercial real estate: | | Owner-occupied | Owner-occupied | | (4,883) | | | 73 | | | 1,060,523 | | | 0.01 | % | Owner-occupied | | Owner-occupied | | | 2,905 | | | (35) | | | 1,169,680 | | | — | % | Non-owner occupied | Non-owner occupied | | (3,584) | | | (268) | | | 1,839,577 | | | (0.01) | % | Non-owner occupied | | (784) | | | 1,833 | | 1,833 | | | 1,925,759 | | 1,925,759 | | | 0.10 | | 0.10 | % | Consumer and other | Consumer and other | | 4,054 | | | (1,488) | | | 343,107 | | | (0.43) | % | Consumer and other | | 5,746 | | | (2,278) | | (2,278) | | | 381,474 | | 381,474 | | | (0.60) | | (0.60) | % | Total | Total | | $ | 10,393 | | | $ | (1,760) | | | $ | 8,541,650 | | | (0.02) | % | Total | | $ | 16,738 | | | $ | | $ | (604) | | | $ | | $ | 9,335,977 | | | (0.01) | | (0.01) | % | Year ended December 31, 2021 | | | | Year ended December 31, 2022 | | Commercial and industrial | | Commercial and industrial | | Commercial and industrial | Commercial and industrial | | $ | 4,178 | | | $ | (3,175) | | | $ | 1,271,476 | | | (0.25) | % | | $ | (4,563) | | | $ | | $ | (82) | | | $ | | $ | 1,466,685 | | | (0.01) | | (0.01) | % | Construction | Construction | | (29,874) | | | (27) | | | 1,138,769 | | | — | % | Construction | | 11,221 | | | 11 | | 11 | | | 1,549,622 | | 1,549,622 | | | — | | — | % | Residential real estate: | Residential real estate: | | 1-to-4 family mortgage | | 1-to-4 family mortgage | | 1-to-4 family mortgage | | | 7,060 | | | (23) | | | 1,438,801 | | | — | % | Residential line of credit | | Residential line of credit | | 1,574 | | | 17 | | | 431,826 | | | — | % | Multi-family mortgage | | Multi-family mortgage | | (486) | | | — | | | 411,509 | | | — | % | Commercial real estate: | | Owner-occupied | | Owner-occupied | | Owner-occupied | | | (4,883) | | | 73 | | | 1,060,523 | | | 0.01 | % | Non-owner occupied | | Non-owner occupied | | (3,584) | | | (268) | | | 1,839,577 | | | (0.01) | % | Consumer and other | | Consumer and other | | 4,054 | | | (1,488) | | | 343,107 | | | (0.43) | % | Total | | Total | | $ | 10,393 | | | $ | (1,760) | | | $ | 8,541,650 | | | (0.02) | % | Year Ended December 31, 2021 | | Commercial and industrial | | Commercial and industrial | | Commercial and industrial | | | $ | 4,178 | | | $ | (3,175) | | | $ | 1,271,476 | | | (0.25) | % | Construction | | Construction | | (29,874) | | | (27) | | | 1,138,769 | | | — | % | Residential real estate: | | 1-to-4 family mortgage | | 1-to-4 family mortgage | | 1-to-4 family mortgage | 1-to-4 family mortgage | | (87) | | | (29) | | | 1,130,019 | | | — | % | | (87) | | | (29) | | (29) | | | 1,130,019 | | 1,130,019 | | | — | | — | % | Residential line of credit | Residential line of credit | | (4,728) | | | 97 | | | 392,907 | | | 0.02 | % | Residential line of credit | | (4,728) | | | 97 | | 97 | | | 392,907 | | 392,907 | | | 0.02 | | 0.02 | % | Multi-family mortgage | Multi-family mortgage | | (197) | | | (1) | | | 310,874 | | | — | % | Multi-family mortgage | | (197) | | | (1) | | (1) | | | 310,874 | | 310,874 | | | — | | — | % | Commercial real estate: | Commercial real estate: | | Owner occupied | Owner occupied | | 7,588 | | | 156 | | | 917,334 | | | 0.02 | % | Non-owner occupied | | (16,813) | | | (1,566) | | | 1,683,413 | | | (0.09) | % | Consumer and other | | 938 | | | (1,290) | | | 352,421 | | | (0.37) | % | Total | | $ | (38,995) | | | $ | (5,835) | | | $ | 7,197,213 | | | (0.08) | % | Year ended December 31, 2020 | | | | Commercial and industrial | | $ | 13,830 | | | $ | (10,023) | | | $ | 1,278,794 | | | (0.78) | % | Construction | | 40,807 | | | 187 | | | 787,881 | | | 0.02 | % | Residential real estate: | | 1-to-4 family mortgage | | 6,408 | | | (281) | | | 874,270 | | | (0.03) | % | Residential line of credit | | 5,649 | | | 103 | | | 301,449 | | | 0.03 | % | Multi-family mortgage | | 5,506 | | | — | | | 127,257 | | | — | % | Commercial real estate: | | Owner occupied | | Owner occupied | Owner occupied | | (1,739) | | | (221) | | | 708,874 | | | (0.03) | % | | 7,588 | | | 156 | | 156 | | | 917,334 | | 917,334 | | | 0.02 | | 0.02 | % | Non-owner occupied | Non-owner occupied | | 17,789 | | | (711) | | | 1,239,644 | | | (0.06) | % | Non-owner occupied | | (16,813) | | | (1,566) | | (1,566) | | | 1,683,413 | | 1,683,413 | | | (0.09) | | (0.09) | % | Consumer and other | Consumer and other | | 6,356 | | | (1,356) | | | 303,663 | | | (0.45) | % | Consumer and other | | 938 | | | (1,290) | | (1,290) | | | 352,421 | | 352,421 | | | (0.37) | | (0.37) | % | Total | Total | | $ | 94,606 | | | $ | (12,302) | | | $ | 5,621,832 | | | (0.22) | % | Total | | $ | (38,995) | | | $ | | $ | (5,835) | | | $ | | $ | 7,197,213 | | | (0.08) | | (0.08) | % |
1) Excludes provision (reversalThe ACL on loans HFI was $150.3 million and $134.2 million and represented 1.60% and 1.44% of provision)loans HFI as of December 31, 2023 and 2022, respectively. For further information related to the change in the ACL refer to “Provision for credit losses” section herein and Note 3, “Loans and allowance for credit losses on unfunded commitments of $8.6 million, $(2.0) million, and $13.4 million recorded forloans HFI” in the years ended December 31, 2022, 2021, and 2020. respectively.The allowance for credit losses was $134.2 million and $125.6 million and represented 1.44% and 1.65% of loans held for investment as of December 31, 2022 and 2021, respectively.notes to our consolidated financial statements. For the year ended December 31, 2022,2023, we experienced improvednet charge-offs of $0.6 million, or 0.01% of average loans HFI, compared to net charge-offs of $1.8 million, or 0.02% of average loans HFI, compared to $5.8 million, or 0.08% for the year ended December 31, 2021.2022. Our ratio of total nonperforming loans HFI as a percentage of total loans HFI decreasedincreased by 16 basis points to 0.49% at0.65% as of December 31, 2023 compared to December 31, 2022 compared to 0.62% at December 31, 2021.
The primary reason for the increase in the allowance for credit losses isprimarily due to loan growththree commercial and a tightening monetary policy environment during the year ended December 31, 2022. Specifically, we performed qualitative evaluations within our established qualitative framework, weighting the impact uncertainty dueindustrial relationships moving to inflation, negative economic forecasts, predicted Federal Reserve rate increases, status of federal government stimulus programs, supply chain disruptions for our customers 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. nonaccrual status.
As a ratio of ACL to loans HFI by loan type, our
construction, commercial and industrial, HELOC and consumer and other and residential 1-4 family mortgage portfolios incurred the largest increases year-over-year due to weighted projections that the economy may be nearing a recession.period-over-period. These portfolios are heavily reliant on the strength of the economy; and therefore, they are adversely affected by inflation supply chain disruptions, and unemployment.high interest rates.
We also maintain an allowance for credit losses on unfunded commitments, which increaseddecreased to $8.8 million as of December 31, 2023 from $23.0 million as of December 31, 2022 from $14.4 million as of December 31, 2021 due to ana 18.5% or $657.2 million decrease in unfunded loan commitments during the period. Notably, there was a $913.2 million decrease in unfunded loan commitments in our construction loan category pipeline which resulted in a $14.2 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 year to reduce commitments in specific categories judged to be inherently higher risk considering the current and projected economic conditions. Partially offsetting the decrease in unfunded loan commitments in our construction portfolio was a $236.2 million increase in unfunded loan commitments particularly in ourfor commercial and construction unfunded pipelines, and change in macroeconomic forecasts as discussed above.industrial loans compared to December 31, 2022. Loans held for sale Commercial loans held for sale OurHistorically, our loans held for sale includesincluded a previously acquired portfolio of commercial loans, including shared national credits and institutional healthcare loans that are accounted for as held for sale. Theseloans. During the year ended December 31, 2023, we exited the final relationship. As of December 31, 2022, the loans had a fair value of $30.5 million as of December 31, 2022 compared to $79.3 million as of December 31, 2021. The change is primarily attributable to loans within the portfolio being paid off through external refinancing and pay-downs, net of loan fundings on pre-existing loan commitments.million.
This decrease for the year ended December 31, 2022 also includes a loss recognized on theThe change in fair value of the portfolio of $5.1 millionwhich is included in 'other'Other noninterest income' on the consolidated statementsstatement of income representingamounted to a decreaseloss of $10.0$2.1 million from the gain recorded in the previous year of $4.9 million recognized on the change in fair value of the portfolio. In addition to the change in fair value for the year ended December 31, 2021, we also recognized2023 compared to a loss of $5.1 million for the year ended December 31, 2022. The portfolio experienced a net gain of $6.3$7.2 million related toover the pay-off of a loan that had been partially charged off prior to acquisitionlife of the portfolio, resulting in a total gain of $11.2 million during the period included in 'other noninterest income'. As of December 31, 2022, there were three relationships remaining within this portfolio.
Subsequent to December 31, 2022, one of the remaining relationships in the commercial loans held for sale portfolio of $20.6 million was paid-off.
Mortgage loans held for sale Mortgage loans held for sale consisted of $46.6 million of residential real estate mortgage loans in the process of being sold to third-party private investors or government sponsored agencies and $21.2 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 partiesthird-party private investors or government sponsored agencies and $26.2 million of GNMA optional repurchase loans. This compares to $672.9 million of residential mortgage loans in the process of being sold as of December 31, 2021. There were no GNMA optional repurchase loans recorded on our consolidated balance sheet as of December 31, 2021. For additional information regarding GNMA optional repurchase loans, please refer to the nonperforming assets table and discussion included under the section captioned 'Asset Quality' within this MD&A.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 years ended December 31, 2023 and 2022 and 2021 totaled $2.70$1.40 billion and $7.16$2.70 billion, respectively. The decrease in interest rate lock volume during the year ended December 31, 20222023 reflects the slow down experienced across the industry compared with the year ended December 31, 2021, which benefited from historically lowdue primarily to higher interest rates pre-empted by the COVID-19 Pandemic.rates. 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 yearsyear ended December 31, 2022 and 2021 totaled $0.66 billion and $3.75 billion, respectively. Additional details related to the Mortgage restructuring are included under the subheadings 'Noninterest income' and 'Noninterest expense', respectively, included within this management's discussion and analysis and at Note 20, "Segment reporting" in the notes to the consolidated financial statements.$663.8 million. Interest rate lock commitments in the pipeline were $69.2 million as of December 31, 2023 compared with $118.3 million as of December 31, 2022 compared with $487.4 million as of December 31, 2021. The decrease in our pipeline year-over-year was partially due to our exit from our direct-to-consumer channel, which was completed during the third quarter of 2022. Looking ahead to 2023, we expect our interest rate lock commitment volume in the remaining retail channel to be similar to what was experienced in the retail channel for the year ended 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.
Deposits Deposits represent the Bank’s primary source of funds.funding. We continue to focus on growing core customer deposits through our relationship driven banking philosophy, community-focused marketing programs and initiatives such as the development of our treasury management services. Total deposits were $10.86$10.55 billion and $10.84$10.86 billion as of December 31, 20222023 and 2021,2022, respectively. Noninterest-bearing deposits at December 31, 2023 and December 31, 2022 and 2021 were $2.68$2.22 billion and $2.74$2.68 billion, respectively, while interest-bearing deposits were $8.18$8.33 billion and $8.10$8.18 billion at December 31, 2023 and 2022, respectively. The decrease in noninterest-bearing deposits of $458.2 million from December 31, 2022 to December 31, 2023 is attributable to migration to interest-yielding products such as money market and 2021, respectively. Includedsavings deposits, which increased by $507.6 million from December 31, 2022. Also included in noninterest-bearing deposits are certain mortgage escrow deposits from our third-party mortgage servicing provider, amountingwhich amounted to $63.6 million and $75.6 million as of December 31, 2023 and $127.62022, respectively. Interest-bearing checking deposits decreased by $555.6 million atfrom December 31, 2022 and 2021, respectively. Money market and customer time deposits increased by $159.8 million and $316.5 million during the year ended December 31, 2022, respectively. These increases weredue largely offset byto decreases in non-interest bearing deposits and interest-bearing checking deposits of $63.6 million and $358.7 million during the same period. The shift in deposit composition mix impacted the banking industry as banks were competing for customers who were searching for higher yields. Further, during the year ended December 31, 2022, we exited certain high-costour deposits from municipal and governmental entities, (i.e. "public deposits"). As such, ouralso known as public funds, which decreased by $475.9 million during the period. The decrease in public funds was due to management's decision to not renew certain maturing public deposits decreased from $2.29 billion atdue to rising costs of these deposits.
Additionally, brokered and internet time deposits increased by $149.0 million to $150.8 million as of December 31, 20212023 compared to $2.08 billion at December 31, 2022.2022, which was a result of our balance sheet and liquidity management strategy, which included issuing brokered time deposits in order to increase the liquidity of our balance sheet. As a result of the rising interest rate environment our total cost of deposits increased during the year ended December 31, 2022 from the year ended December 31, 2021 by 24 basis points to 0.54%, and the shift in our deposit composition, we have experienced an increase in our cost of interest-bearing deposits increased to 0.74% from 0.40%and total deposits. Average deposit balances by type, together with the average rates per period are reflected in the same period foraverage balance sheet amounts, interest paid, and rate analysis tables included in this management's discussion and analysis under the prior year.subheading “Results of operations” discussion. During the year ended December 31, 2022, we entered into twoWe 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 December 31, 2023 and 2022 was $4.5 million and $9.8 million.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 24, "Related22, “Related party transactions"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 December 31, | | | 2022 | | | 2021 | | | 2020 | | (dollars in thousands) | | Amount | | % of total deposits | | Average rate | | Amount | | % of total deposits | | Average rate | | Amount | | % of total deposits | | Average rate | | | | | | | | | | | | | | | | | | | | Deposit Type | | | | | | | | | | | | | | | | | | | Noninterest-bearing demand | | $ | 2,676,631 | | | 25 | % | | — | % | | $ | 2,740,214 | | | 26 | % | | — | % | | $ | 2,274,103 | | | 24 | % | | — | % | Interest-bearing demand | | 3,059,984 | | | 28 | % | | 0.70 | % | | 3,418,666 | | | 32 | % | | 0.35 | % | | 2,491,765 | | | 26 | % | | 0.61 | % | Money market | | 3,226,102 | | | 30 | % | | 0.80 | % | | 3,066,347 | | | 28 | % | | 0.36 | % | | 2,902,230 | | | 30 | % | | 0.76 | % | Savings deposits | | 471,143 | | | 4 | % | | 0.05 | % | | 480,589 | | | 4 | % | | 0.06 | % | | 352,685 | | | 4 | % | | 0.08 | % | Customer time deposits | | 1,420,131 | | | 13 | % | | 0.99 | % | | 1,103,594 | | | 10 | % | | 0.67 | % | | 1,375,695 | | | 15 | % | | 1.52 | % | Brokered and internet time deposits | | 1,843 | | | — | % | | 1.36 | % | | 27,487 | | | — | % | | 1.69 | % | | 61,559 | | | 1 | % | | 0.90 | % | Total deposits | | $ | 10,855,834 | | | 100 | % | | 0.54 | % | | $ | 10,836,897 | | | 100 | % | | 0.30 | % | | $ | 9,458,037 | | | 100 | % | | 0.62 | % | | | | | | | | | | | | | | | | | | | | Total Uninsured Deposits | | $ | 5,661,186 | | | 52 | % | | | | $ | 4,877,819 | | | 45 | % | | | | $ | 4,957,766 | | | 52 | % | | | | | | | | | | | | | | | | | | | | | | Customer Time Deposits | | | | | | | | | | | | | | | | | | | 0.00-0.50% | | $ | 296,143 | | | 21 | % | | | | $ | 792,020 | | | 72 | % | | | | $ | 454,429 | | | 34 | % | | | 0.51-1.00% | | 91,596 | | | 6 | % | | | | 97,644 | | | 9 | % | | | | 253,883 | | | 18 | % | | | 1.01-1.50% | | 79,924 | | | 6 | % | | | | 78,539 | | | 7 | % | | | | 155,755 | | | 11 | % | | | 1.51-2.00% | | 261,797 | | | 18 | % | | | | 36,090 | | | 3 | % | | | | 169,414 | | | 12 | % | | | 2.01-2.50% | | 44,901 | | | 3 | % | | | | 44,653 | | | 4 | % | | | | 159,699 | | | 12 | % | | | Above 2.50% | | 645,770 | | | 46 | % | | | | 54,648 | | | 5 | % | | | | 182,515 | | | 13 | % | | | Total customer time deposits | | $ | 1,420,131 | | | 100 | % | | | | $ | 1,103,594 | | | 100 | % | | | | $ | 1,375,695 | | | 100 | % | | | Brokered and Internet Time Deposits | | | | | | | | | | | | | | | | | | | 0.00-0.50% | | $ | 99 | | | 5 | % | | | | $ | 99 | | | — | % | | | | $ | — | | | — | % | | | 0.51-1.00% | | — | | | — | % | | | | — | | | — | % | | | | — | | | — | % | | | 1.01-1.50% | | 247 | | | 14 | % | | | | 595 | | | 2 | % | | | | 5,660 | | | 9 | % | | | 1.51-2.00% | | 500 | | | 27 | % | | | | 16,358 | | | 60 | % | | | | 42,311 | | | 69 | % | | | 2.01-2.50% | | 498 | | | 27 | % | | | | 4,464 | | | 16 | % | | | | 5,312 | | | 9 | % | | | Above 2.50% | | 499 | | | 27 | % | | | | 5,971 | | | 22 | % | | | | 8,276 | | | 13 | % | | | Total brokered and internet time deposits | | $ | 1,843 | | | 100 | % | | | | $ | 27,487 | | | 100 | % | | | | $ | 61,559 | | | 100 | % | | | Total time deposits | | $ | 1,421,974 | | | | | | | $ | 1,131,081 | | | | | | | $ | 1,437,254 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, | | | 2023 | | | 2022 | | | 2021 | | (dollars in thousands) | | Amount | | % of total deposits | | Average rate(1) | | Amount | | % of total deposits | | Average rate(1) | | Amount | | % of total deposits | | Average rate(1) | Deposit Type | | | | | | | | | | | | | | | | | | | Noninterest-bearing demand | | $ | 2,218,382 | | | 21 | % | | — | % | | $ | 2,676,631 | | | 25 | % | | — | % | | $ | 2,740,214 | | | 26 | % | | — | % | Interest-bearing demand | | 2,504,421 | | | 24 | % | | 2.86 | % | | 3,059,984 | | | 28 | % | | 0.70 | % | | 3,418,666 | | | 32 | % | | 0.35 | % | Money market | | 3,819,814 | | | 36 | % | | 3.53 | % | | 3,226,102 | | | 30 | % | | 0.80 | % | | 3,066,347 | | | 28 | % | | 0.36 | % | Savings deposits | | 385,037 | | | 4 | % | | 0.06 | % | | 471,143 | | | 4 | % | | 0.05 | % | | 480,589 | | | 4 | % | | 0.06 | % | Customer time deposits | | 1,469,811 | | | 14 | % | | 3.15 | % | | 1,420,131 | | | 13 | % | | 0.99 | % | | 1,103,594 | | | 10 | % | | 0.67 | % | Brokered and internet time deposits | | 150,822 | | | 1 | % | | 5.27 | % | | 1,843 | | | — | % | | 1.36 | % | | 27,487 | | | — | % | | 1.69 | % | Total deposits | | $ | 10,548,287 | | | 100 | % | | 2.39 | % | | $ | 10,855,834 | | | 100 | % | | 0.54 | % | | $ | 10,836,897 | | | 100 | % | | 0.30 | % | | | | | | | | | | | | | | | | | | | | Total Uninsured Deposits | | $ | 4,899,349 | | | 46 | % | | | | $ | 5,644,534 | | | 52 | % | | | | $ | 4,877,819 | | | 45 | % | | | | | | | | | | | | | | | | | | | | | | Customer Time Deposits(2) | | | | | | | | | | | | | | | | | | | 0.00-1.00% | | $ | 62,464 | | | 4 | % | | | | $ | 387,739 | | | 27 | % | | | | $ | 889,664 | | | 81 | % | | | 1.01-2.00% | | 114,521 | | | 8 | % | | | | 341,721 | | | 24 | % | | | | 114,629 | | | 10 | % | | | 2.01-3.00% | | 51,346 | | | 4 | % | | | | 89,916 | | | 6 | % | | | | 91,007 | | | 8 | % | | | 3.01-4.00% | | 268,550 | | | 18 | % | | | | 342,576 | | | 24 | % | | | | 8,288 | | | 1 | % | | | 4.01-5.00% | | 812,781 | | | 55 | % | | | | 224,308 | | | 16 | % | | | | 6 | | | — | % | | | Above 5.00% | | 160,149 | | | 11 | % | | | | 33,871 | | | 3 | % | | | | — | | | — | % | | | Total customer time deposits | | $ | 1,469,811 | | | 100 | % | | | | $ | 1,420,131 | | | 100 | % | | | | $ | 1,103,594 | | | 100 | % | | | Brokered and Internet Time Deposits(2) | | | | | | | | | | | | | | | | | | | 0.00-1.00% | | $ | 99 | | | — | % | | | | $ | 99 | | | 5 | % | | | | $ | 99 | | | — | % | | | 1.01-2.00% | | — | | | — | % | | | | 747 | | | 41 | % | | | | 16,953 | | | 62 | % | | | 2.01-3.00% | | 248 | | | — | % | | | | 747 | | | 41 | % | | | | 6,201 | | | 23 | % | | | 3.01-4.00% | | — | | | — | % | | | | 250 | | | 13 | % | | | | 4,234 | | | 15 | % | | | 4.01-5.00% | | — | | | — | % | | | | — | | | — | % | | | | — | | | — | % | | | Above 5.00% | | 150,475 | | | 100 | % | | | | — | | | — | % | | | | — | | | — | % | | | Total brokered and internet time deposits | | $ | 150,822 | | | 100 | % | | | | $ | 1,843 | | | 100 | % | | | | $ | 27,487 | | | 100 | % | | | Total time deposits | | $ | 1,620,633 | | | | | | | $ | 1,421,974 | | | | | | | $ | 1,131,081 | | | | | |
At(1) Average rates are presented for the years ended December 31, 2023, 2022, we held an estimated $5.66 billion in uninsured deposits. Asand 2021, respectively.
(2) Rates are presented as of December 31, 2022,period-end. Further details related to our deposit customer base is presented below as of the dates indicated: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, | | | 2023 | | | 2022 | | (dollars in thousands) | | Amount | | % of total deposits | | Amount | | % of total deposits | Deposits by customer segment(1) | | | | | | | | | Consumer | | $ | 4,880,890 | | | 46 | % | | $ | 4,985,544 | | | 46 | % | Commercial | | 4,069,724 | | | 39 | % | | 3,796,698 | | | 35 | % | Public | | 1,597,673 | | | 15 | % | | 2,073,592 | | | 19 | % | Total deposits | | $ | 10,548,287 | | | 100 | % | | $ | 10,855,834 | | | 100 | % | (1) Segments are determined based on the customer account level.
The tables below set forth maturity information on time deposits and amounts in excess of the FDIC insurance limit as of December 31, 2023: | | | | | | | | | | | | | | | | | December 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 | | $ | 142,229 | | | 3.15 | % | Over Three to Six | | 258,108 | | | 3.84 | % | Over Six to Twelve | | 318,942 | | | 3.86 | % | Over Twelve | | 256,766 | | | 3.53 | % | Total | | $ | 976,045 | | | 3.66 | % | | | | | | Time deposits of greater than $250 | | | | | Months to maturity: | | | | | Three or less | | $ | 84,439 | | | 4.16 | % | Over Three to Six | | 249,085 | | | 4.73 | % | Over Six to Twelve | | 226,453 | | | 4.55 | % | Over Twelve | | 84,611 | | | 3.92 | % | Total | | $ | 644,588 | | | 4.49 | % |
Uninsured deposits are defined as the portion of deposit accounts in U.S. offices that exceed the FDIC insurance limit and amounts in any other uninsured investment or deposit account that are classified as deposits and are not subject to any federal or state deposit insurance regimes. Collateralized deposits are included within our total uninsured deposits. As of December 31, 2023, the estimated portion of time deposits outstanding that are otherwise uninsured by maturity were as follows: | | | | | | | | | | | | | | | (dollars in thousands) | | Individual Instruments in Denominations that Meet or Exceed the FDIC Insurance Limit | | Estimated Aggregate Time Deposits that Exceed the FDIC Insurance Limit and Otherwise Uninsured Time Deposits | Months to maturity: | | | | | Three or less | | $ | 49,851 | | | $ | 51,068 | | Over Three to Six | | 217,258 | | | 218,724 | | Over Six to Twelve | | 128,030 | | | 114,471 | | Over Twelve | | 161,398 | | | 144,624 | | Total | | $ | 556,537 | | | $ | 528,887 | |
| | | | | | | | | | | | | December 31, 2023 | (dollars in thousands) | | | | Amount | Months to maturity: | | | | | Three or less | | | | $ | 57,368 | | Over Three to Six | | | | 147,821 | | Over Six to Twelve | | | | 148,948 | | Over Twelve | | | | 83,473 | | Total | | | | $ | 437,610 | |
Further details related to our estimated insured or collateralized deposits and uninsured and uncollateralized deposits is presented below as of the dates indicated: | | | | | | | | | | | | | | | | | | | | | | December 31, | | | 2023 | | | 2022 | | Estimated insured or collateralized deposits(1) | | $ | 7,414,224 | | | $ | 7,288,641 | | Estimated uninsured deposits(2) | | $ | 4,899,349 | | | $ | 5,644,534 | | Estimated uninsured and uncollateralized deposits(1) | | $ | 3,134,063 | | | $ | 3,567,193 | | Estimated uninsured and uncollateralized deposits as a % of total deposits(1) | | 29.7 | % | | 32.9 | % |
(1) Amounts are shown on a fully consolidated basis and exclude deposits of affiliates that are eliminated in consolidation. (2) Amounts are shown on an unconsolidated basis consistent with regulatory reporting requirements.
Other earning assets Securities purchased under agreements to resell ("(“reverse repurchase agreements"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.funds. Securities purchased under agreements to resell totaled $75.4$47.8 million and $74.2$75.4 million at December 31, 20222023 and 2021,2022, respectively. InvestmentFederal Funds Sold
Federal funds may fluctuate from period to period depending upon our liquidity position at the time and our strategy for deploying liquidity. Federal funds sold totaled $35.5 million and $135.1 million at December 31, 2023 and 2022, respectively. AFS 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 certain deposit types, various lines of credit and other borrowings. The investment objectives guide the portfolio allocation among securitiessecurity types, maturities, and other attributes. The fair value of our available-for-saleAFS debt securities portfolio was $1.47 billion as of both December 31, 2023 and $1.68 billion2022. Included in the fair value of AFS debt securities were net unrealized losses of $186.8 million and $234.4 million as of December 31, 2023 and 2022, and 2021, respectively. As of December 31, 2022 and 2021, we had $3.0 million and $3.4 million, respectively, in marketable equity securities recorded at fair value that primarily consisted of mutual funds.Current net unrealized losses are due to interest rate increases. During the yearsyear ended December 31, 20222023, we sold $100.5 million of AFS debt securities. The sales contributed to a pre-tax loss on securities of $14.0 million. We primarily sold collateralized mortgage obligations, U.S. government agency securities and 2021,municipal securities. We reinvested the proceeds from the sales primarily into U.S. government agency AFS debt securities in order increase the effective yield of our portfolio. Including the reinvestment of these proceeds, we purchased $242.9$202.1 million and $847.2 million in investmentof AFS debt securities respectively. The trade value of available-for-sale securities sold was $1.2 million during the year ended December 31, 2022 compared to $8.9 million during2023 and had maturities and calls of securities which totaled $128.2 million. During the year ended December 31, 2021.2022, we sold $1.2 million of AFS debt securities. During the years ended December 31, 2022 and 2021, maturitiessame period, we purchased $242.9 million of AFS debt securities. Maturities and calls of securities totaled $204.7 million and $296.3 million, respectively. Included in the fair value of available-for-sale debt securities were net unrealized losses of $234.4 million at December 31, 2022 compared to net unrealized gains of $4.7 million at December 31, 2021. Our available-for-sale debt securities portfolio incurred unrealized losses during the period due to a rising interest rate environment, but we believe we are well positioned to mitigate the impact of future rate increases due to the shorter duration of our portfolio. Duringfor the year ended December 31, 2022, the change in the fair value of equity securities resulted in a net loss of $377 thousand. During the year ended December 31, 2021, the change in the fair value of equity securities and gain on sale resulted in a net gain of $198 thousand.
2022.
The following table sets forth the fair value, scheduled maturities and weighted average yields for our available-for-saleAFS debt securities portfolio as of the dates indicated below: | | | As of December 31, | | | December 31, | | | | December 31, | | | | December 31, | | | | | 2022 | | | 2021 | | (dollars in thousands) | (dollars in thousands) | | Fair value | | % of total investment securities | | Weighted average yield (1) | | Fair value | | % of total investment securities | | Weighted average yield (1) | (dollars in thousands) | | Fair value | | % of total investment securities | | Weighted average yield (1) | | Fair value | | % of total investment securities | | Weighted average yield (1) | Treasury securities: | | | | U.S. Treasury securities: | | Maturing within one year | | Maturing within one year | | Maturing within one year | Maturing within one year | | $ | 729 | | | — | % | | 2.40 | % | | $ | — | | | — | % | | — | % | | $ | 61,466 | | | 4.2 | | 4.2 | % | | 2.50 | % | | $ | 729 | | | — | | — | % | | 2.40 | % | Maturing in one to five years | Maturing in one to five years | | 106,951 | | | 7.3 | % | | 2.10 | % | | 14,908 | | | 0.9 | % | | 1.24 | % | Maturing in one to five years | | 47,030 | | | 3.2 | | 3.2 | % | | 1.59 | % | | 106,951 | | | 7.3 | | 7.3 | % | | 2.10 | % | Maturing in five to ten years | Maturing in five to ten years | | — | | | — | % | | — | % | | — | | | — | % | | — | % | Maturing in five to ten years | | — | | | — | | — | % | | — | % | | — | | | — | | — | % | | — | % | Maturing after ten years | Maturing after ten years | | — | | | — | % | | — | % | | — | | | — | % | | — | % | Maturing after ten years | | — | | | — | | — | % | | — | % | | — | | | — | | — | % | | — | % | Total Treasury securities | | 107,680 | | | 7.3 | % | | 2.10 | % | | 14,908 | | | 0.9 | % | | 1.24 | % | Government agency securities: | | | | | Total U.S. Treasury securities | | Total U.S. Treasury securities | | 108,496 | | | 7.4 | % | | 2.10 | % | | 107,680 | | | 7.3 | % | | 2.10 | % | U.S. government agency securities: | | Maturing within one year | | Maturing within one year | | Maturing within one year | Maturing within one year | | — | | | — | % | | — | % | | — | | | — | % | | — | % | | — | | | — | | — | % | | — | % | | — | | | — | | — | % | | — | % | Maturing in one to five years | Maturing in one to five years | | 27,082 | | | 1.8 | % | | 1.50 | % | | 20,141 | | | 1.2 | % | | 1.33 | % | Maturing in one to five years | | 13,094 | | | 0.9 | | 0.9 | % | | 1.96 | % | | 27,082 | | | 1.8 | | 1.8 | % | | 1.50 | % | Maturing in five to ten years | Maturing in five to ten years | | 12,011 | | | 0.8 | % | | 1.70 | % | | 13,729 | | | 0.8 | % | | 1.40 | % | Maturing in five to ten years | | 6,000 | | | 0.4 | | 0.4 | % | | 6.40 | % | | 12,011 | | | 0.8 | | 0.8 | % | | 1.70 | % | Maturing after ten years | Maturing after ten years | | 969 | | | 0.1 | % | | 3.32 | % | | — | | | — | % | | — | % | Maturing after ten years | | 184,862 | | | 12.6 | | 12.6 | % | | 6.23 | % | | 969 | | | 0.1 | | 0.1 | % | | 3.32 | % | Total government agency securities | | 40,062 | | | 2.7 | % | | 1.60 | % | | 33,870 | | | 2.0 | % | | 1.36 | % | Total U.S. government agency securities | | Total U.S. government agency securities | | 203,956 | | | 13.9 | % | | 5.96 | % | | 40,062 | | | 2.7 | % | | 1.60 | % | Municipal securities: | Municipal securities: | | | | | Maturing within one year | | Maturing within one year | | Maturing within one year | Maturing within one year | | 3,496 | | | 0.2 | % | | 2.18 | % | | 21,884 | | | 1.3 | % | | 1.26 | % | | 2,813 | | | 0.2 | | 0.2 | % | | 2.23 | % | | 3,496 | | | 0.2 | | 0.2 | % | | 2.18 | % | Maturing in one to five years | Maturing in one to five years | | 17,775 | | | 1.2 | % | | 2.38 | % | | 19,903 | | | 1.2 | % | | 2.05 | % | Maturing in one to five years | | 11,677 | | | 0.8 | | 0.8 | % | | 5.85 | % | | 17,775 | | | 1.2 | | 1.2 | % | | 2.38 | % | Maturing in five to ten years | Maturing in five to ten years | | 39,034 | | | 2.7 | % | | 3.12 | % | | 27,086 | | | 1.6 | % | | 3.38 | % | Maturing in five to ten years | | 40,304 | | | 2.7 | | 2.7 | % | | 3.60 | % | | 39,034 | | | 2.7 | | 2.7 | % | | 3.12 | % | Maturing after ten years | Maturing after ten years | | 204,115 | | | 13.9 | % | | 3.18 | % | | 269,737 | | | 16.1 | % | | 3.14 | % | Maturing after ten years | | 187,469 | | | 12.7 | | 12.7 | % | | 2.94 | % | | 204,115 | | | 13.9 | | 13.9 | % | | 3.18 | % | Total obligations of state and municipal subdivisions | | 264,420 | | | 18.0 | % | | 3.10 | % | | 338,610 | | | 20.2 | % | | 2.97 | % | Residential and commercial mortgage backed securities guaranteed by FNMA, GNMA and FHLMC: | | | | | Total municipal securities | | Total municipal securities | | 242,263 | | | 16.4 | % | | 3.00 | % | | 264,420 | | | 18.0 | % | | 3.10 | % | Mortgage-backed securities - residential and commercial: | | Maturing within one year | | Maturing within one year | | Maturing within one year | Maturing within one year | | — | | | — | % | | — | % | | — | | | — | % | | — | % | | 126 | | | — | | — | % | | 1.57 | % | | — | | | — | | — | % | | — | % | Maturing in one to five years | Maturing in one to five years | | 3,834 | | | 0.3 | % | | 2.73 | % | | 4,041 | | | 0.2 | % | | 2.55 | % | Maturing in one to five years | | 3,239 | | | 0.2 | | 0.2 | % | | 2.91 | % | | 3,834 | | | 0.3 | | 0.3 | % | | 2.73 | % | Maturing in five to ten years | Maturing in five to ten years | | 23,683 | | | 1.6 | % | | 2.65 | % | | 17,368 | | | 1.0 | % | | 2.28 | % | Maturing in five to ten years | | 33,121 | | | 2.3 | | 2.3 | % | | 2.97 | % | | 23,683 | | | 1.6 | | 1.6 | % | | 2.65 | % | Maturing after ten years | Maturing after ten years | | 1,024,320 | | | 69.6 | % | | 1.84 | % | | 1,263,213 | | | 75.3 | % | | 1.51 | % | Maturing after ten years | | 877,446 | | | 59.6 | | 59.6 | % | | 1.86 | % | | 1,024,320 | | | 69.6 | | 69.6 | % | | 1.84 | % | Total residential and commercial mortgage backed securities guaranteed by FNMA, GNMA and FHLMC | | 1,051,837 | | | 71.5 | % | | 1.86 | % | | 1,284,622 | | | 76.5 | % | | 1.53 | % | Total mortgage-backed securities - residential and commercial | | Total mortgage-backed securities - residential and commercial | | 913,932 | | | 62.1 | % | | 1.90 | % | | 1,051,837 | | | 71.5 | % | | 1.86 | % | | Corporate securities: | Corporate securities: | | | | | | Corporate securities: | | | Corporate securities: | | Maturing within one year | | Maturing within one year | | Maturing within one year | Maturing within one year | | — | | | — | % | | — | % | | — | | | — | % | | — | % | | — | | | — | | — | % | | — | % | | — | | | — | | — | % | | — | % | Maturing in one to five years | Maturing in one to five years | | 373 | | | — | % | | 5.00 | % | | 355 | | | — | % | | 5.06 | % | Maturing in one to five years | | — | | | — | | — | % | | — | % | | 373 | | | — | | — | % | | 5.00 | % | Maturing in five to ten years | Maturing in five to ten years | | 6,814 | | | 0.5 | % | | 3.87 | % | | 6,160 | | | 0.4 | % | | 4.05 | % | Maturing in five to ten years | | 3,326 | | | 0.2 | | 0.2 | % | | 4.33 | % | | 6,814 | | | 0.5 | | 0.5 | % | | 3.87 | % | Maturing after ten years | Maturing after ten years | | — | | | — | % | | — | % | | — | | | — | % | | — | % | Maturing after ten years | | — | | | — | | — | % | | — | % | | — | | | — | | — | % | | — | % | Total Corporate securities | | 7,187 | | | 0.5 | % | | 3.94 | % | | 6,515 | | | 0.4 | % | | 4.13 | % | Total available-for-sale debt securities | | $ | 1,471,186 | | | 100.0 | % | | 2.10 | % | | $ | 1,678,525 | | | 100.0 | % | | 1.83 | % | Total corporate securities | | Total corporate securities | | 3,326 | | | 0.2 | % | | 4.33 | % | | 7,187 | | | 0.5 | % | | 3.94 | % | Total AFS debt securities | | Total AFS debt securities | | $ | 1,471,973 | | | 100.0 | % | | 2.66 | % | | $ | 1,471,186 | | | 100.0 | % | | 2.10 | % |
(1)Yields on a tax-equivalent basis.
Equity Securities We had $3.0 million in marketable equity securities recorded at fair value that primarily consisted of mutual funds as of December 31, 2022. There were no such securities outstanding as of December 31, 2023. During the years ended December 31, 2023 and 2022, the change in the fair value of equity securities resulted in net gain of $0.1 million and a net loss of $0.4 million, respectively. 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, borrow from the Federal Reserve’s Discount Window, leverage the Bank Term Funding Program from the Federal Reserve, purchase federal funds and engage in overnight borrowing from the Federal Reserve,with 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 sourcesources of funds to satisfy those needs, in addition to the overall interest rate environment and cost of public funds. Borrowings can include securities sold under agreements to repurchase, lines of credit, advances from the FHLB, federal funds purchased, and subordinated debt.
Securities sold under agreements to repurchase and federal funds purchased We enter into agreements with certain customers to sell certain securities under agreements to repurchase the security the following day. These agreements are made to provide customers with comprehensive treasury management programsproducts as a short-term return for their excess funds. Securities sold under agreements to repurchase totaled $21.9$19.3 million and $40.7$21.9 million at December 31, 20222023 and 2021,2022, respectively. We also maintain lines with certain correspondent banks that provide borrowing capacity in the form of federal funds purchased. Federal funds purchased are short-term borrowings that typically mature within one to ninety days. Borrowings against these lines (i.e., federal funds purchased) totaled $89.4 million and $65.0 million as of December 31, 2022. Subsequent to December 31,2023 and 2022, these were paid off in full. There were no such borrowings as of December 31, 2021.respectively. FHLB short-term borrowingsadvances As a member of the FHLB Cincinnati,system, 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 December 31, 2023 and 2022 and 2021 had total borrowing capacity of $1.27$1.76 billion and $1.23$1.27 billion, respectively. As of December 31, 20222023 and 2021,2022, we had qualifying loans pledged as collateral securing these lines amounting to $2.67$3.01 billion and $2.72$2.67 billion, respectively. Overnight cash advances against this line totaled $175.0 million as of December 31, 2022. Subsequent to December 31, 2022, these advances were paid off in full. There were no FHLB advances outstanding as of December 31, 2021.2023. Bank Term Funding Program In March 2023, the Federal Reserve established the Bank Term Funding Program to make available funding to eligible depository institutions in order to help assure they have the ability to meet the needs of their depositors following the March 2023 high-profile bank failures. The program allows for advances for up to one year secured by eligible high-quality securities at par value extended at the one-year overnight index swap rate, plus 10 basis points, as of the day the advance is made. The interest rate is fixed for the term of the advance and there are no prepayment penalties. At December 31, 2023, we had outstanding borrowings of $130.0 million under the BTFP at a borrowing rate of 4.85% and a maturity date of December 26, 2024. Subordinated debt During the year-endedyear 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 Truststrusts 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 year ended December 31, 2022, we began mitigatingWe mitigate our interest rate exposure associated with these notes through the use of fair value hedging instruments. See Note 17, "Derivatives"15, “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 December 31, 20222023 is detailed below: | | | | | | | | | | | | | | | | | | | | | Name | Year Established | Maturity | Call Date | Total Debt Outstanding ( in thousands) | 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 | | 8.00% | 3-month LIBOR plus 3.25% | FBK Trust II (1) | 2003 | 06/26/2033 | 6/26/2008(3) | 21,650 | | 7.87% | 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 | | | (999) | | | | Fair Value Hedge (See Note 17, "Derivatives" ) | (3,830) | | | | Total Subordinated Debt, net | | | | $ | 126,101 | | | | (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. |
| | | | | | | | | | | | | | | | | | | | | (dollars in thousands) | Year established | Maturity | Call date | Total debt outstanding | Interest rate | Coupon structure | Subordinated debt issued by trust preferred securities: | | | FBK Trust I (1) | 2003 | 06/09/2033 | 6/09/2008 | $ | 9,280 | | 8.84% | 3-month SOFR plus 3.51% | FBK Trust II (1) | 2003 | 06/26/2033 | 6/26/2008 | 21,650 | | 8.77% | 3-month SOFR plus 3.41% | Additional subordinated debt: | | | | | | | FBK subordinated debt I(2) | 2020 | 09/01/2030 | 9/1/2025 | 100,000 | | 4.50% | Semi-annual fixed(3) | Unamortized debt issuance costs | (612) | | | | Fair value hedge (See Note 15, “Derivatives”) | (673) | | | | Total subordinated debt, net | $ | 129,645 | | | | (1)The Company classifies $30.0 million of the Trusts' subordinated debt as Tier 1 capital. (2)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. (3)Beginning on September 1, 2025 the coupon structure migrates to the 3-month SOFR plus a spread of 439 basis points through the end of the term of the debenture. |
Other borrowings Other borrowings on our consolidated balance sheets includes our finance lease liability totaling $1.4$1.3 million and $1.5$1.4 million as of December 31, 20222023 and 2021,2022, respectively. In addition, other borrowings on our consolidated balance sheets includesinclude guaranteed rebooked GNMA loans previously sold that have become past due over 90 days and are eligible for repurchase totaling $21.2 million and $26.2 million as of December 31, 2022. There were no such borrowings meeting the criteria for repurchase as of December 31, 2021 as there was deemed not to be a more-than-trivial benefit associated with repurchase based on our internal analysis.2023 and 2022, respectively. See Note 9, "Leases"7, “Leases” and Note 18, "Fair16, “Fair value of financial instruments"instruments” within the Notesnotes to our consolidated financial statements herein for additional information regarding our finance lease and guaranteed GNMA loans eligible for repurchase, respectively. Liquidity and capital resources Bank liquidity management
We are expected to maintain adequate liquidity at the Bank to meet the cash flow requirements of clients who may be either depositors wishing to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs. Our Liquidity 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 ofoptimize our shareholders.net interest margin. We also monitor our liquidity requirements in light of interest rate trends, changes in the economy and the scheduled maturity and interest rate sensitivity of the investment and loan portfolios and deposits. As part of our liquidity management strategy, we also focus on minimizing our costs of liquidity and attempt to decrease these costs by growing our noninterest-bearing and other low-cost deposits, while replacing higher cost funding sources including borrowed funds.sources. While we do not control the types of deposit instruments our clients choose, we do influence those choices with the rates and the deposit specials we offer. Increasing interest rates generally attracts customers to higher cost interest-bearing deposit products as they seek to maximize their yield. Our investment portfolio is another alternative for meeting liquidity needs. These assets generally have readily available markets that offer conversions to cash as needed. SecuritiesAFS debt securities within our investment portfolio are also used to secure certain deposit types and short-term borrowings. As of December 31, 2022 and 2021, securities with a carrying value of $1.19 billion and $1.23 billion, respectively, were pledged to secure government, public, trust and other deposits and as collateral for short-term borrowings, letters of credit and derivative instruments. As of December 31, 2023 and 2022, we had pledged securities related to these items with carrying values of $929.5 million and $1.19 billion, respectively. Additional sources of liquidity include federal funds purchased, repurchase agreements, FHLB borrowings, and lines of credit. Interest is charged at the prevailing market rate on federal funds purchased, reverse repurchase agreements and FHLB advances. Funds andOvernight 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 December 31, 2022, we had outstanding overnight cash advances from the FHLB totaling $175.0 million. There were no such advances with the FHLB as
As of December 31, 2021. There2023, there were no outstanding cash advances from the FHLB. As of December 31, 2023, there was $1.27$1.76 billion and $1.23 billion asavailable to borrow against with a remaining capacity of $1.30 billion. As of December 31, 2022, and 2021, respectively,there was $1.27 billion available to borrow against. against with a remaining capacity of $830.0 million. We also maintainmaintained unsecured lines of credit with other commercial banks totaling $350.0$370.0 million and $325.0$350.0 million as of December 31, 20222023 and 2021,2022, respectively. 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 $89.4 million and $65.0 million as of December 31, 2022. There were no such borrowings as of December 31, 2021.2023 and 2022, respectively. As of both December 31, 20222023 and 2021,2022, we also had an additional $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. Holding companyOur current on-balance sheet liquidity managementand available sources of liquidity are summarized in the table below:
| | | | | | | | | | | | | | | | | | | | | | December 31, | (dollars in thousands) | | 2023 | | | 2022 | | Current on-balance sheet liquidity: | | | | | Cash and cash equivalents | | $ | 810,932 | | | $ | 1,027,052 | | Unpledged available-for-sale debt securities | | 542,427 | | | 280,165 | | Equity securities, at fair value | | — | | | 2,990 | | Total on-balance sheet liquidity | | $ | 1,353,359 | | | $ | 1,310,207 | | | | | | | Available sources of liquidity: | | | | | Unsecured borrowing capacity(1) | | $ | 3,350,026 | | | $ | 3,595,812 | | FHLB remaining borrowing capacity | | 1,297,702 | | | 829,959 | | Federal Reserve discount window | | 2,431,084 | | | 2,470,000 | | Total available sources of liquidity | | $ | 7,078,812 | | | $ | 6,895,771 | | | | | | | On-balance sheet liquidity as a percentage of total assets | | 10.7 | % | | 10.2 | % | On-balance sheet liquidity and available sources of liquidity as a percentage of estimated uninsured and uncollateralized deposits(2) | | 269.0 | % | | 230.0 | % | | | | | | | | | | | | | | | | | | | | |
(1)Includes capacity available per internal policy in the form of brokered deposits and unsecured lines of credit. (2)Amounts are shown on a fully consolidated basis and exclude deposits of affiliates that are eliminated in consolidation. The Company also maintains the ability to access capital markets to meet its liquidity needs. The Company may utilize various methods to raise capital, including through the sale of common stock, preferred stock, depository shares, debt securities, rights, warrants and units. Specific terms and prices would be determined at the time of any such offering. In the past, the Company has utilized capital markets to generate liquidity in the form of common stock and subordinated debt primarily for the purpose of funding acquisitions. The Company is a corporation separate and apart from the Bank and, therefore, it must provide for its own liquidity. The Company’s main source of funding is dividends declared and paid to it by the Bank.Bank to the Company. Statutory and regulatory limitations exist that affect the ability of the Bank to pay dividends to the Company. Management believes that these limitations will not impact the Company’s ability to meet its ongoing short-term cash obligations. For additional information regarding dividend restrictions, see the “Item 1. Business - Supervision and regulation,” "Item“Item 1A. Risk Factors - Risks related to our
business" business” and " Item“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 inDividends,” within this Report.
Due to state banking laws, the Bank may not declare dividends in any calendar year in an amount exceeding the total of its net income for that year combined with its retained net income of the preceding two years, without the prior approval of the Tennessee Department of Financial Institutions.TDFI. Based upon this regulation, as of December 31, 2023 and December 31, 2022, and 2021, $161.3$218.4 million and $170.8$161.3 million of the Bank’s retained earnings were available for the payment of dividends without such prior approval. In addition, dividends paid by the Bank to the Company would be prohibited if the effect thereof would cause the Bank’s capital to be reduced below applicable minimum capital requirements. During both the yearyears ended December 31, 2023 and 2022, there were $49.0 million in cash dividends approved by the board for payment from the Bank to the holding company. During the year ended December 31, 2021, there were $122.5 million in cash dividends approved by the boardBoard for payment from the Bank to the holding company. None of these required approval from the TDFI. Subsequent to December 31, 2022,2023, the boardBoard approved a dividend from the Bank to the holding company to be paid in the first quarter of 2023 for $8.5 million that also did not require approval from the TDFI.
During the year ended December 31, 2023, the Company declared shareholder dividends of $0.60 per share, or $28.3 million. During the year ended December 31, 2022, the Company declared and paid shareholder dividends of $0.52 per share, or $24.7 million, respectively. During the year ended December 31, 2021, the Company declared and paid dividends of $0.44 per share, or $21.2 million, respectively.million. Subsequent to December 31, 2022,2023, the Company declared a quarterly dividend in the amount of $0.15$0.17 per share, payable on February 21, 2023,27, 2024, to stockholders of record as of February 7, 2023.13, 2024. Shareholders’ equity and capital management Our total shareholders’ equity was $1.45 billion as of December 31, 2023 and $1.33 billion atas of December 31, 2022 and $1.43 billion at December 31, 2021.2022. Book value per common share was $28.36 at$31.05 as of December 31, 20222023 and $30.13 at$28.36 as of December 31, 2021, respectively.2022. The decreaseincrease in shareholders’ equity was primarily attributable to a decreasean increase in accumulated other comprehensive income related to unrealized losses on our available-for-sale securities portfolio. Additionally, our capital was impacted by retained net income, net of dividends declared and paid and $40.0an increase in unrealized value of $47.6 million in common stock repurchases during the year endedwithin our AFS debt securities portfolio from December 31, 2022. The increase in shareholders’ equity as of December 31, 2023 was partially off-set by dividends declared and paid of $28.3 million. 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 December 31, 20222023 and 2021,2022, we met all capital adequacy requirements for which we arewere subject. See additional discussion regarding our capital adequacy and ratios at within Note 21, "Minimum19, “Minimum capital requirements"requirements” in the notes to our consolidated financial statements contained herein. | | | | | | | | | | | | | | | | | | | | | December 31, 2023 | | FB Financial Corporation | | FirstBank | |
To be Well-Capitalized(1) | Total Risk-Based Capital ratio | | 14.5 | % | | 14.2 | % | | 10.0 | % | Tier 1 Capital ratio | | 12.5 | % | | 12.2 | % | | 8.0 | % | Common Equity Tier 1 ratio (CET1) | | 12.2 | % | | 12.2 | % | | 6.5 | % | Leverage ratio | | 11.3 | % | | 11.1 | % | | 5.0 | % |
(1) Applicable to Bank level capital. Capital ratios are well above regulatory requirements for well-capitalized institutions. Management uses risk-based capital ratios in its analysis of the measures to assess the quality of capital and believes that investors may find it useful in their analysis of the Company. Critical accounting estimates Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles and general practices within the banking industry. A summary of our accounting policies is included in "Part II- Item“Item 8. Financial Statements and Supplementary Data - Note 1, "BasisBasis of presentation"presentation” of this Report. Certain of these policies require management to apply significant judgement and estimates, which can have a material impact on the carrying value of certain assets and liabilities, and we consider the below policies to be our critical accounting policies. Allowance for credit losses Description of policy and management's estimates:
The allowance for credit losses represents the portionmanagement’s best estimate of the loan's amortized cost basis that we do not expect to collect due toexpected credit losses over the loan's life considering past events, current conditions, and reasonable and supportable forecasts of futureour loan portfolios as measured at each respective recent balance sheet date. However, significant downturns in circumstances relating to loan quality or economic conditions considering macroeconomic forecasts. Loan losses are charged againstcould necessitate additional provisions or reductions in the allowance when management believes the uncollectibility ofACL. Unanticipated changes and events could have a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance for credit losses is basedsignificant impact on the loan's amortized cost basis, excluding accrued interest receivable,financial performance of our loan customers and their ability to perform as we promptly charge off uncollectible accrued interest receivable. Management’s determination of the appropriateness of the allowance is based on periodic evaluation of the loan portfolio, lending-related commitments and other relevant factors, including macroeconomicagreed. The economic indices sourced from economic forecasts and historical loss rates. In future quarters, we may update information and forecasts that may cause significantused in developing the ACL include the unemployment rate, changes in the estimateU.S. gross domestic product, changes in those future quarters.commercial real estate prices and BBB spread. Our methodology to determineGiven the overall appropriateness of the allowance for credit losses includes the use of lifetime loss rate models. The quantitative models require tailored loan data anddynamic relationship between macroeconomic variables basedwithin our modeling framework it is difficult to estimate the impact of a change in any one individual variable on the inherentACL. However, to illustrate a hypothetical sensitivity, we calculated a quantitative allowance using an alternative negative economic scenario. Under this alternative negative economic scenario, a significant deterioration in economic conditions was assumed which would negatively impact the
credit risks in each portfoliounderlying economic variables, compared to more accurately measure the credit risks associated with each. Eachour baseline forecast. Below is a comparison of the quantitative models pools loans with similar risk characteristics and collectively assesses the lifetime loss rate for each pool to estimate its expected credit loss. When a loan no longer shares similar risk characteristics with other loans in any given pool, the loan is individually assessed.
We utilize probability-weighted forecasts, which consider multiple macroeconomic variables from a third-party vendor that are applicable to the type of loan. The choice and weighting of thekey economic forecastassumptions between these scenarios macroeconomic variables, and the reasonable and supportable period at the macroeconomic variable-level are reviewed and approved byend of each period noted below.
| | | | | | | | | | | | | | | | | | | | | | | December 31, | | | 2023 | | 2024 | | 2025 | Baseline forecast: | | | | | | | Unemployment rate | | 3.70% | | 4.00% | | 4.10% | GDP | | 2.40% | | 1.70% | | 1.70% | CRE price index | | 343.2 | | 321.8 | | 344.6 | BBB spread | | 2.00% | | 2.50% | | 2.50% | | | | | | | | Negative economic scenario: | | | | | | | Unemployment rate | | 3.70% | | 5.70% | | 5.30% | GDP | | 2.40% | | 0.20% | | 1.50% | CRE price index | | 343.2 | | 288.5 | | 320.7 | BBB spread | | 2.00% | | 3.00% | | 2.70% |
Excluding the forecast governance committee based on expectationsimpact of futurequalitative considerations, using only the negative economic conditions.scenario would result in a hypothetical increase over ending ACL of approximately $52.7 million at December 31, 2023. We consider the need to qualitatively adjustThe preceding sensitivity analysis results do not represent our modeled quantitative expected credit loss estimate for information not already captured in the model loss estimation process. These qualitative factor adjustments may increase or decrease our estimateview of expected credit losses. We review the qualitative adjustments so aslosses nor is it intended to validate that information that has already been considered and included in the modeled quantitative loss estimation process is not also included in the qualitative adjustment. We consider the qualitative factors that are relevant to the institution as of the reporting date, which may include, but are not limited to: levels of and trends in delinquencies and performance of loans; levels of and trends in write-offs and recoveries collected; trends in volume and terms of loans; effects of anyestimate future changes in reasonable and supportable economic forecasts; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; available relevant information sources that contradict our own forecast; effects of changes in prepayment expectations or other factors affecting assessments of loan contractual term; industry conditions; and effects of changes in credit concentrations.
Sensitivity of estimates:
Evaluations of the portfolio and individual credits are inherently subjective, as they require estimates, assumptions and judgments as to the facts and circumstances associated with particular situations. Determining the ACL is complex and requires judgement by management about the effect of matters that are inherently uncertain. While management utilizes its best judgment and information available, the ultimate adequacy of the our ACL is dependent on a variety of factors beyond its control. Management leverages a variety predetermined economic forecasts provided by a third party. Management selects a combination of macroeconomic forecasts that is most reflective of expectations as of the evaluation date and determines the weighted structure that most appropriately fits the Company’s expectation of future economic conditions. The weighting decision of these economic scenarios has the largest effect on our ACL. This weighting is approved by the ALCO Forecasting Subcommittee. Once the weighted economic scenario has been approved, management further assesses the ACL within the following pool classifications: Commercial and Industrial, Retail, and Commercial Real Estate (see Note 5, "Loans and allowance for credit losses" within our notes to our consolidated financial statements for additional information related to our ACL pools). At each pool classification management assess for individual factors such as prepayment speeds, inflation, unemployment, average FICO scores, delinquency composition, and other economic variables. Based on management's assessment of these variables, the level of the ACL could significantly increase or decrease.
It is difficult to estimate how potential changes in any one economic factor or input might affect the overall allowance because a wide variety of factors and inputs are considered in estimating the allowance and changes in those factors and inputs considered may not occur at the same rate and may not be consistent across all product types. Additionally, changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others. Given the nature of the many factors, forecasts and assumptions in the ACL methodology, it is not possible to provide meaningful estimates of the impact of any such potential change.
Additional discussion can be found under the subheading "Asset quality" contained within management's discussion and analysis and within the notes to our consolidated financial statements contained herein, including Note 1, "Basis of presentation" and Note 5, "Loans and allowance for credit losses".
Fair Value Measurements
Description of policy and management's estimates:
Investment securities
Debt securities are classified as held to maturity and carried at amortized cost, excluding accrued interest, when management has the positive intent and ability to hold them to maturity. Debt securities are classified as available-for-sale when they might be sold before maturity. Available-for-sale debt securities are carried at fair value, with unrealized holding
gains and losses reported in other comprehensive income, net of applicable taxes. Unrealized losses resulting from credit losses for available-for-sale debt securities are recognized in earnings as a provision for credit losses. Unrealized losses that do not result from credit losses are excluded from earnings and reported as accumulated other comprehensive income, net of applicable taxes, which is included in equity. Accrued interest receivable is separated from other components of amortized cost and presented separately on the consolidated balance sheets.
Equity securities with readily determinable market values are carried at fair value on the balance sheet with any periodic changes in value made through adjustments to the statement of income. Equity securities without readily determinable market values are carried at cost less impairment and included in other assets on the consolidated balance sheets.
Interest income includes the amortization and accretion of purchase premium and discount. Premiums and discounts on securities are amortized on the level-yield method anticipating prepayments based upon the prior three month average monthly prepayments when available. Gains and losses on sales are recorded on the trade date and determined using the specific identification method.
We evaluate available-for-sale securities for expected credit losses at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. For securities in an unrealized loss position, consideration is given to the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuer’s financial condition, we consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition.
When credit losses are expected to occur, the amount of the expected credit loss recognized in earnings depends on our intention to sell the security or if it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If we intend to sell the security or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis, the expected credit loss recognized in earnings is equal to the entire difference between its amortized cost basis and its fair value at the date it was determined to be impaired due to credit losses or other factors. The previous amortized cost basis less the impairment recognized in earnings becomes the new amortized cost basis of the investment.
However, if we do not intend to sell the security and it is not more likely than not to be required to sell the security before recovery of its amortized cost basis, the difference between the amortized cost and the fair value is separated into the amount representing the credit loss and the amount related to all other factors. If we determine a decline in fair value below the amortized cost basis of an available-for-sale investment security has resulted from credit related factors, we record a credit loss through an allowance for credit losses. The allowanceprovisioning for credit losses is limited by the amount that the fair value is less than amortized cost. The amountdue to:
•highly uncertain and speculative economic environment; •inter-relatedness and non-linearity of the allowance for credit losses is determined based on the present value of cash flows expectedeconomic variables resulting inability to be collectedextrapolate to additional changes in variables; and is recognized as a charge to earnings. The amount of the impairment related to other, non-credit related, factors is recognized in other comprehensive income, net of applicable taxes. Loans held for sale
Loans originated and intended for sale in the secondary market, primarily mortgage loans, are carried at fair value as permitted under the guidance in ASC 825, “Financial Instruments” (“ASC 825”). Net gains (losses) resulting from fair value changes of these mortgage loans are recorded in income. The amount•sensitivity analysis does not reflect changes in fair values of related derivative instruments used to hedge exposure to market-related risksconsider any quantitative or qualitative adjustments and associated with these mortgage loans. The change in fair value of both mortgage loans held for sale and the related derivative instruments are recorded in “Mortgage banking income” in the Consolidated Statements of Income. Gains and losses on sale are recognized at the time the loan is closed. Pass through origination costs and related loan fees are also included in “Mortgage banking income”. Other expenses are classified in the appropriate noninterest expense accounts. Periodically, we will transfer mortgage loans originated for sale in the secondary markets into the loan portfolio based on current market conditions, the overall secondary marketability of the loan and the status of the loan. The loans are transferred into the portfolio at fair value at the date of transfer.
Government National Mortgage Association optional repurchase programs allow financial institutions to buy back individual delinquent mortgage loans that meet certain criteria from the securitized loan pool for which the institution provides servicing and was the original transferor. At the servicer’s option and without GNMA’s prior authorization, the servicer may repurchase such a delinquent loan for an amount equal to 100 percent of the remaining principal balance of the loan. These loans are held for investment until certain performance criteria is met and they meet held for sale criteria.
Under FASB ASC Topic 860, “Transfers and Servicing,” this buy-back option is considered a conditional option until the delinquency criteria are met, at which time the option becomes unconditional. When we are deemed to have regained effective control over these loans under the unconditional buy-back option, the loans can no longer be reported as sold and must be brought back onto the balance sheet as loans held for investment, regardless of whether we intend to exercise the buy-back option if the buyback options provides the transferor a more-than-trivial benefit. During the year ended December 31, 2022, the Company identified a more-than-trivial benefit associated with these loans and rebooked them onto the consolidated balance sheets, which also aligns with developing industry best practice. The fair value option election does not apply to the GNMA optional repurchase loans which do not meet the requirements under FASB ASC Topic 825. These loans are reported at current unpaid principal balance in HFS on the consolidated balance sheets with the offsetting liability being reported in borrowings. These are considered nonperforming assets as we do not earn any interest on the unexercised option to repurchase these loans.
We acquired a portfolio of commercial loans, including shared national credits and institutional healthcare loans,risk profile components incorporated by management as part of the Franklin transaction that we account for as held for sale. We elect the fair value option for recording commercial loans held for sale and the fair value is determined using current secondary market prices for loans with similar characteristics. The fair value is determined using an income approach with various assumptions including expected cash flows, market discount rates, credit metrics and collateral value when appropriate. Changes in fair value from the merger date fair value is booked through the mark-to-market using a third party fair value model and included in 'other noninterest income' on the consolidated statement of income.its overall ACL framework.
Mortgage servicing rights We account for our mortgage servicing rights underat fair value at each reporting date with changes in the fair value option as permitted under ASC 860-50-35, "Transfers and Servicing".reported in earnings in the period in which the changes occur. We retain the right to service certain mortgage loans that we sell to secondary market investors. These mortgage servicing rights are recognized as a separate asset on the date the corresponding mortgage is sold. The retained mortgage servicing right is initially recordedmeasured at the fair value of future net cash flows expected to be realized for performing servicing activities. Fair value is determined using an income approach with various assumptions including expected cash flows, prepayment speeds, market discount rates, servicing costs, and other factors. These mortgagetechniques require management to make estimates regarding future servicing rights are recognized as a separate asset on the date the correspondingcash flows, taking into consideration historical and forecasted residential mortgage loan is sold. Derivative financial instruments
We utilize fair value hedge relationships to mitigate the effect of changingprepayment rates, discount rates, escrow balance and servicing costs. Changes in interest rates on the fair values of fixed rate securities and loans. The gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged asset or liability attributable to the hedged risk are recognized in current earnings. The gain or loss on the derivative instrument is presented on the same income statement line item as the earnings effect of the hedged item.
We enter into cash flow hedges to mitigate the exposure to variability in expected future cash flowsprepayments speeds or other types of forecasted transactions. Changes infactors impact the fair value of the cash flow hedges, to the extent that the hedging relationship is effective, are recorded as other comprehensive income and are subsequently recognized in earnings at the same time that the hedged item is recognized inMSR which impacts earnings. The ineffective portions of the changes in fair value of the hedging instruments are immediately recognizedMSR was $164.2 million at December 31, 2023.
Based on a hypothetical sensitivity analysis, we estimate that an increase in earnings. The assessmentdiscount rates of 100 basis points and 200 basis points would reduce the effectiveness of the hedging relationship is evaluated under the hypothetical derivative method. We utilize derivative instruments that are not designated as hedging instruments. We enter into swaps, interest rate cap and/or floor agreements with its customers and then enters into an offsetting derivative contract position with other financial institutions to mitigate the interest rate risk associated with these customer contracts. Because these derivative instruments are not designated as hedging instruments, changes in theDecember 31, 2023 fair value of the derivative instruments are recognized currently in earnings.
We enter into commitments to originateMSR by approximately 4.65% (or $7.6 million) and purchase loans whereby the interest rate8.90% (or $14.6 million), respectively. Separately, a 10% and 20% increase on the loan is determined prior to funding (rate-lock commitments). Rate-lock commitments on mortgage loans that are intended to be sold are considered to be derivatives. Accordingly, such commitments, along with any related fees received from potential borrowers, are recorded atprepayment rates would reduce the December 31, 2023 fair value in other assets or liabilities, withof the MSR by approximately 2.81% (or $4.6 million) and 5.43% (or $8.9 million), respectively.
The above summary demonstrates the sensitivity of fair value to hypothetical changes in fair value recorded in mortgage banking income. Fair value is based on fees currently charged to enter into similar agreements, and for fixed-rate commitments,primary interest rates. This sensitivity analysis does not reflect the difference between current levels of interest rates and the committed rates is also considered. We utilize forward loan sale contracts to mitigate the interest rate risk inherent in our mortgage loan pipeline and held-for-sale portfolio. Forward loan sale contracts are contracts for delayed delivery of mortgage loans. We agree to deliver on a specified future date, a specified instrument, at a specified price or yield. However, the contract may allow for cash settlement. The credit risk inherent to us arises from the potential inability of counterparties to meet the terms of theirexpected outcome.
contracts. In the event of non-acceptance by the counterparty, we would be subject to the credit and inherent (or market) risk of the loans retained. Such contracts are accounted for as derivatives and, along with related fees paid to investor are recorded at fair value in derivative assets or liabilities, with changes in fair value recorded in mortgage banking income. Fair value is based on the estimated amounts that we would receive or pay to terminate the commitment at the reporting date.
We utilize two methods to deliver mortgage loans sold to an investor. Under a “best efforts” sales agreement, we enter into a sales agreement with an investor in the secondary market to sell the loan when an interest rate-lock commitment is entered into with a customer, as described above. Under a “best efforts” sales agreement, we are obligated to sell the mortgage loan to the investor only if the loan is closed and funded. Thus, we will not incur any liability to an investor if the mortgage loan commitment in the pipeline fails to close. We also utilize “mandatory delivery” sales agreements. 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 should we fail to satisfy the contract. Mandatory commitments are recorded at fair value in our Consolidated Balance Sheets. Gains and losses arising from changes in the valuation of these commitments are recognized currently in earnings and are reflected under the line item “Other noninterest income” on the Consolidated Statements of Income.
A hierarchical disclosure framework associated with the level of pricing observability is utilized in measuring financial instruments at fair value. See Note. 18, "Fair Value" in the consolidated financial statements herein for additional disclosures regarding the fair value of our assets and liabilities, including a description of the fair value hierarchy.
Sensitivity of estimates:
Management applies various valuation methodologies to assets and liabilities which often involve a significant degree of judgment, particularly when liquid markets do not exist for those items. Quoted market prices are referred to when estimating fair values for certain assets, including most investment securities, while secondary market pricing is referred to in estimating the fair value of mortgage loans held for sale. For those items which an observable liquid market does not exist, management utilizes significant estimates and assumption to value such items. These valuations require the use of various assumptions, including, among others, estimating prepayment speeds, discount rates, cash flows, default rates, cost of servicing, and liquidation values, which are also subject to economic variables. In addition to valuation, we must assess whether there are any declines in value below the carrying value of assets that require recognition of a loss in the consolidated statement of income. The use of different assumptions could produce significantly different results, which could have a significant impact on the our results of operations, financial condition or disclosures. Due to the number of estimates and judgments management applies, it is not possible to provide meaningful estimates of all those assets and liabilities measured at fair value. A sensitivity analysis on changes to key assumptions in determination of fair value of our mortgage servicing rights is included within Note 10, "Mortgage servicing rights" in the notes to the consolidated financial statements contained herein.
ITEM 7A — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKQuantitative and Qualitative Disclosures About Market Risk Interest rate sensitivity Our market risk arises primarily from interest rate risk inherent in the normal course of lending and deposit-taking activities. Management believes that our ability to successfully respond to changes in interest rates will have a significant impact on our financial results. To that end, management actively monitors and manages our interest rate risk exposure. The Asset Liability Management Committee,ALCO, which is authorized by our boardBoard of directors,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 EquityEVE 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 affecteffect over the life of the current balance sheet. For purposes of calculating EVE, a zero percent floor is assumed on discount factors. The following analysis depicts the estimated impact on net interest income and EVE of immediate changes in interest rates at the specified levels for the periods presented: | | | Percentage change in: | | | | Percentage change in: | | | | Percentage change in: | | | | Net interest income (1) | | | | Net interest income (1) | | | | Net interest income (1) | | | | | Percentage change in: | Change in interest rates | | | Change in interest rates | | | | Net interest income (1) | | | | Year 1 | | Year 2 | Change in interest rates | Change in interest rates | | December 31, | | December 31, | (in basis points) | (in basis points) | | 2022 | | | 2021 | | | 2022 | | | 2021 | | (in basis points) | | (in basis points) | | +400 | | +400 | | +400 | +400 | | 20.6 | % | | 40.9 | % | | 30.7 | % | | 54.8 | % | +300 | +300 | | 15.1 | % | | 30.2 | % | | 22.5 | % | | 40.8 | % | +300 | | +300 | | +200 | | +200 | | +200 | +200 | | 10.8 | % | | 20.9 | % | | 15.7 | % | | 28.3 | % | +100 | +100 | | 5.98 | % | | 10.8 | % | | 8.33 | % | | 14.7 | % | +100 | | +100 | | -100 | | -100 | | -100 | -100 | | (6.32) | % | | (6.32) | % | | (8.87) | % | | (10.2) | % | -200 | -200 | | (13.2) | % | | (8.73) | % | | (18.4) | % | | (13.5) | % | -200 | | -200 | |
| | | | Percentage change in: | | | Percentage change in: | | | Economic value of equity (2) | | | | Economic value of equity (2) | | | Economic value of equity (2) | Change in interest rates | | Change in interest rates | | Change in interest rates | Change in interest rates | | December 31, | | December 31, | (in basis points) | (in basis points) | | 2022 | | | 2021 | | +400 | +400 | | (9.90) | % | | 5.30 | % | +400 | | (16.6) | % | | (9.90) | % | +300 | +300 | | (7.00) | % | | 5.67 | % | +300 | | (13.6) | % | | (7.00) | % | +200 | +200 | | (4.00) | % | | 5.72 | % | +200 | | (8.05) | % | | (4.00) | % | +100 | +100 | | (1.66) | % | | 3.90 | % | +100 | | (3.29) | % | | (1.66) | % | -100 | -100 | | 0.99 | % | | (8.13) | % | -100 | | 1.03 | % | | 0.99 | % | -200 | -200 | | 1.07 | % | | (21.4) | % | -200 | | (0.63) | % | | 1.07 | % |
(1)The percentage change represents the projected net interest income for 12 months and 24 months on a flat balance sheet in a stable interest rate environment versus the projected net interest income in the various rate scenarios. (2)The percentage change in this column represents our EVE in a stable interest rate environment versus EVE in the various rate scenarios. The results for the net interest income simulations as of December 31, 20222023 and 20212022 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 corecustomer deposits. While our variable rateOur variable-rate loan portfolio is indexed to market rates and timing of repricing of loans and deposits typically adjust at a percentagevaries in proportion to market rate fluctuations. We actively monitor and perform stress tests on our deposit betas as part of our overall management of interest rate risk. This requires the overall movementuse of various assumptions based on historical relationships of these variables in reaching any conclusion. Since these correlations are based on competitive pricing in the market, rates.we anticipate that our future results will likely be different from the scenario results presented above and such differences could be material.
The preceding measures assume no change in the size or asset/liability compositions of the balance sheet. Thus, the measures do not reflect the actions the ALCO may undertake in response to such changes in interest rates. The scenarios assume instantaneous movements in interest rates in increments of 100, 200, 300 and 400 basis points. As interest rates are adjusted over a period of time, it is our strategy to proactively change the volume and mix of our balance sheet in order to mitigate our interest rate risk. The computation of the prospective effects of hypothetical interest rate changes requires numerous assumptions regarding characteristics of new business and the behavior of existing positions. These business assumptions are based upon our experience, business plans and published industry experience. Key assumptions employed in the model include asset prepayment speeds, competitive factors, the relative price sensitivity of certain assets and liabilities and the expected life of non-maturity deposits. Because these assumptions are inherently uncertain, actual results may differ from simulated results. We may utilize derivative financial instruments as part of an ongoing effort to mitigate interest rate risk exposure to interest rate fluctuations and facilitate the needs of our customers. For more information about our derivative financial instruments, see Note 17,15, “Derivatives” in the notes to our consolidated financial statements.
ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAFinancial Statements and Supplementary Data
| | | | | | Table of Contents | | | | Page | | | | | | | Consolidated Financial Statements: | | | | | | | | | | | | | |
Report on Management’s Assessment of Internal Control over Financial Reporting The management of FB Financial Corporation (the "Company"“Company”) is responsible for establishing and maintaining adequate internal control over financial reporting. The Company's internal control over financial reporting is a process designed by, or under the supervision of, the Company’s principal executive and principal financial officer and effected by the boardBoard of directors,Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the Company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. The Company's management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2022.2023. In making the assessment, management used the “Internal Control — Integrated Framework” promulgated by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment management has determined that, as of December 31, 2022,2023, the Company's internal control over financial reporting is effective based on the COSO 2013 framework. Additionally, based upon management's assessment, the Company determined that there were no material weaknesses in its internal control over financial reporting as of December 31, 2022.2023. The effectiveness of the Company's internal control over financial reporting as of December 31, 2022,2023, has been audited by Crowe LLP, an independent registered public accounting firm, as stated in their report which appears herein.
Report of Independent Registered Public Accounting Firm Shareholders and the Board of Directors of FB Financial Corporation Nashville, Tennessee Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of FB Financial Corporation (the "Company"“Company”) as of December 31, 20222023 and 2021,2022, the related consolidated statements of income, comprehensive (loss) income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022,2023, and the related notes (collectively referred to as the "financial statements"“financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2022,2023, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 20222023 and 2021,2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 20222023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022,2023, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO. Basis for Opinions The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report on Management’s Assessment of Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Allowance for Credit Losses on Loans – Reasonable and Supportable Forecasts and Qualitative Adjustments As described in Note 1 – Basis of presentation and Note 53 – Loans and allowance for credit losses on loans HFI, the Company estimates expected credit losses for its financial assets carried at amortized cost utilizing the current expected credit loss ("CECL"(“CECL”) methodology. The allowance for credit losses (“ACL”) on loans held for investment on December 31, 20222023 was $134.2$150.3 million. The provision for credit losses on loans held for investment for the year ended December 31, 2022,2023 was $10.4$16.7 million. The Company calculated an expected credit loss using a lifetime loss rate methodology. The Company utilizes probability-weighted forecasts that are developed by a third-party vendor, which consider multiple macroeconomic variables 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. The Company's loss rate models then 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 Company then considers the need to qualitatively adjust its modeled quantitative expected credit loss estimate for information not already captured in the model loss estimation process. The audit procedures over the determination of forecast scenarios involved a high degree of auditor judgment and required significant audit effort, including the use of more experienced audit personnel and our valuation specialists due to its complexity. Additionally, the audit procedures over the qualitative adjustments utilized in management’s methodology involved challenging and subjective auditor judgment. Therefore, we identified the following as a critical audit matter: a) auditing the forecasted macroeconomic scenario and b) auditing the identification and application of qualitative adjustments to the ACL model. The primary audit procedures we performed to address this critical audit matter included the following: •Tested the operating effectiveness of controls specific to: ◦Determining the reasonableness of the forecasted macroeconomic scenario used in the model, ◦The identification and application of qualitative adjustments to the ACL model, ◦The mathematical accuracy of the qualitative adjustments to the ACL model, ◦The relevance and reliability of data used by the Company’s third-party vendor to develop forecast scenarios. ◦The Company’s allowance committee’s oversight and review of the overall ACL. •Evaluated management’s judgments in the selection and application of the forecasted macroeconomic scenarios. •Used the work of specialists to assist in evaluating the relevance and reliability of data used by the Company’s third-party vendor to develop forecast scenarios. •Evaluated management’s judgments in the identification and application of qualitative adjustments to the ACL model. •Tested the completeness and accuracy of the data used in qualitative adjustments to the ACL model.
/s/ Crowe LLP
We have served as the Company's auditor since 2018.
Franklin, Tennessee February 28, 202327, 2024
FB Financial Corporation and subsidiaries Consolidated balance sheets (Amounts are in thousands except share and per share amounts)
| | | December 31, | | | | | December 31, | | | | | December 31, | | | | | | December 31, | | | | | 2022 | | | 2021 | | | ASSETS | ASSETS | | | | | | ASSETS | | ASSETS | | Cash and due from banks | | Cash and due from banks | | Cash and due from banks | Cash and due from banks | | $ | 259,872 | | | $ | 91,333 | | | Federal funds sold and reverse repurchase agreements | Federal funds sold and reverse repurchase agreements | | 210,536 | | | 128,087 | | | Federal funds sold and reverse repurchase agreements | | Federal funds sold and reverse repurchase agreements | | Interest-bearing deposits in financial institutions | | Interest-bearing deposits in financial institutions | | Interest-bearing deposits in financial institutions | Interest-bearing deposits in financial institutions | | 556,644 | | | 1,578,320 | | | Cash and cash equivalents | Cash and cash equivalents | | 1,027,052 | | | 1,797,740 | | | Cash and cash equivalents | | Cash and cash equivalents | | Investments: | | Investments: | | Investments: | Investments: | | | Available-for-sale debt securities, at fair value | Available-for-sale debt securities, at fair value | | 1,471,186 | | | 1,678,525 | | | Available-for-sale debt securities, at fair value | | Available-for-sale debt securities, at fair value | | Equity securities, at fair value | | Equity securities, at fair value | | Equity securities, at fair value | Equity securities, at fair value | | 2,990 | | | 3,367 | | | Federal Home Loan Bank stock, at cost | Federal Home Loan Bank stock, at cost | | 58,641 | | | 32,217 | | | Loans held for sale (includes $113,240 and $752,223 at fair value, respectively) | | 139,451 | | | 752,223 | | | Federal Home Loan Bank stock, at cost | | Federal Home Loan Bank stock, at cost | | Loans held for sale (includes $46,618 and $113,240 at fair value, respectively) | | Loans held for sale (includes $46,618 and $113,240 at fair value, respectively) | | Loans held for sale (includes $46,618 and $113,240 at fair value, respectively) | | Loans held for investment | Loans held for investment | | 9,298,212 | | | 7,604,662 | | | Less: allowance for credit losses | | 134,192 | | | 125,559 | | | Loans held for investment | | Loans held for investment | | Less: allowance for credit losses on loans HFI | | Less: allowance for credit losses on loans HFI | | Less: allowance for credit losses on loans HFI | | Net loans held for investment | | Net loans held for investment | | Net loans held for investment | Net loans held for investment | | 9,164,020 | | | 7,479,103 | | | Premises and equipment, net | Premises and equipment, net | | 146,316 | | | 143,739 | | | Other real estate owned, net | | 5,794 | | | 9,777 | | | Premises and equipment, net | | Premises and equipment, net | | Operating lease right-of-use assets | | Operating lease right-of-use assets | | Operating lease right-of-use assets | Operating lease right-of-use assets | | 60,043 | | | 41,686 | | | Interest receivable | Interest receivable | | 45,684 | | | 38,528 | | | Interest receivable | | Interest receivable | | Mortgage servicing rights, at fair value | Mortgage servicing rights, at fair value | | 168,365 | | | 115,512 | | | Mortgage servicing rights, at fair value | | Mortgage servicing rights, at fair value | | Bank-owned life insurance | | Bank-owned life insurance | | Bank-owned life insurance | | Other real estate owned, net | | Other real estate owned, net | | Other real estate owned, net | | Goodwill | | Goodwill | | Goodwill | Goodwill | | 242,561 | | | 242,561 | | | Core deposit and other intangibles, net | Core deposit and other intangibles, net | | 12,368 | | | 16,953 | | | Bank-owned life insurance | | 75,329 | | | 73,519 | | | Core deposit and other intangibles, net | | Core deposit and other intangibles, net | | Other assets | | Other assets | | Other assets | Other assets | | 227,956 | | | 172,236 | | | Total assets | Total assets | | $ | 12,847,756 | | | $ | 12,597,686 | | | Total assets | | Total assets | | LIABILITIES | | LIABILITIES | | LIABILITIES | LIABILITIES | | | | Deposits | Deposits | | | Deposits | | Deposits | | Noninterest-bearing | | Noninterest-bearing | | Noninterest-bearing | Noninterest-bearing | | $ | 2,676,631 | | | $ | 2,740,214 | | | Interest-bearing checking | Interest-bearing checking | | 3,059,984 | | | 3,418,666 | | | Interest-bearing checking | | Interest-bearing checking | | Money market and savings | | Money market and savings | | Money market and savings | Money market and savings | | 3,697,245 | | | 3,546,936 | | | Customer time deposits | Customer time deposits | | 1,420,131 | | | 1,103,594 | | | Customer time deposits | | Customer time deposits | | Brokered and internet time deposits | | Brokered and internet time deposits | | Brokered and internet time deposits | Brokered and internet time deposits | | 1,843 | | | 27,487 | | | Total deposits | Total deposits | | 10,855,834 | | | 10,836,897 | | | Total deposits | | Total deposits | | Borrowings | | Borrowings | | Borrowings | Borrowings | | 415,677 | | | 171,778 | | | Operating lease liabilities | Operating lease liabilities | | 69,754 | | | 46,367 | | | Operating lease liabilities | | Operating lease liabilities | | Accrued expenses and other liabilities | | Accrued expenses and other liabilities | | Accrued expenses and other liabilities | Accrued expenses and other liabilities | | 180,973 | | | 109,949 | | | Total liabilities | Total liabilities | | 11,522,238 | | | 11,164,991 | | | Commitments and contingencies (Note 16) | | | Total liabilities | | Total liabilities | | SHAREHOLDERS' EQUITY | SHAREHOLDERS' EQUITY | | | Common stock, $1 par value per share; 75,000,000 shares authorized; 46,737,912 and 47,549,241 shares issued and outstanding, respectively | | 46,738 | | | 47,549 | | | SHAREHOLDERS' EQUITY | | SHAREHOLDERS' EQUITY | | Common stock, $1 par value per share; 75,000,000 shares authorized; 46,848,934 and 46,737,912 shares issued and outstanding, respectively | | Common stock, $1 par value per share; 75,000,000 shares authorized; 46,848,934 and 46,737,912 shares issued and outstanding, respectively | | Common stock, $1 par value per share; 75,000,000 shares authorized; 46,848,934 and 46,737,912 shares issued and outstanding, respectively | | Additional paid-in capital | | Additional paid-in capital | | Additional paid-in capital | Additional paid-in capital | | 861,588 | | | 892,529 | | | Retained earnings | Retained earnings | | 586,532 | | | 486,666 | | | Accumulated other comprehensive (loss) income, net | | (169,433) | | | 5,858 | | | Retained earnings | | Retained earnings | | Accumulated other comprehensive loss, net | | Accumulated other comprehensive loss, net | | Accumulated other comprehensive loss, net | | Total FB Financial Corporation common shareholders' equity | | Total FB Financial Corporation common shareholders' equity | | Total FB Financial Corporation common shareholders' equity | Total FB Financial Corporation common shareholders' equity | | 1,325,425 | | | 1,432,602 | | | Noncontrolling interest | Noncontrolling interest | | 93 | | | 93 | | | Noncontrolling interest | | Noncontrolling interest | | Total equity | | Total equity | | Total equity | Total equity | | 1,325,518 | | | 1,432,695 | | | Total liabilities and shareholders' equity | Total liabilities and shareholders' equity | | $ | 12,847,756 | | | $ | 12,597,686 | | | Total liabilities and shareholders' equity | | Total liabilities and shareholders' equity | |
See the accompanying notes to the consolidated financial statements.
FB Financial Corporation and subsidiaries Consolidated statements of income) (Amounts are in thousands, except per share amounts)
5 | | | | | | | | Years Ended December 31, | | | | Years Ended December 31, | | | | | 2022 | | | 2021 | | | 2020 | | Interest income: | Interest income: | | | | | | | | Interest income: | | | | | | | | | | | Interest and fees on loans | Interest and fees on loans | | | $ | 436,363 | | | $ | 359,262 | | | $ | 294,596 | | Interest on securities | | | Interest on investment securities | | Taxable | | Taxable | | Taxable | Taxable | | | 25,469 | | | 15,186 | | | 10,267 | | Tax-exempt | Tax-exempt | | | 7,332 | | | 7,657 | | | 7,076 | | Other | Other | | | 12,258 | | | 2,893 | | | 2,705 | | Total interest income | Total interest income | | | 481,422 | | | 384,998 | | | 314,644 | | | Interest expense: | Interest expense: | | | Interest expense: | | Interest expense: | | Deposits | | Deposits | | Deposits | Deposits | | | 56,642 | | | 30,189 | | | 42,859 | | Borrowings | Borrowings | | | 12,545 | | | 7,439 | | | 6,127 | | Total interest expense | Total interest expense | | | 69,187 | | | 37,628 | | | 48,986 | | Net interest income | Net interest income | | | 412,235 | | | 347,370 | | | 265,658 | | Provision for credit losses | | | 10,393 | | | (38,995) | | | 94,606 | | Provision for credit losses on unfunded commitments | | | 8,589 | | | (1,998) | | | 13,361 | | Net interest income after provisions for credit losses | | | 393,253 | | | 388,363 | | | 157,691 | | Provision for (reversal of) credit losses on loans HFI | | (Reversal of) provision for credit losses on unfunded commitments | | Net interest income after provision for (reversal of) credit losses | | | Noninterest income: | Noninterest income: | | | Noninterest income: | | Noninterest income: | | Mortgage banking income | | Mortgage banking income | | Mortgage banking income | Mortgage banking income | | | 73,580 | | | 167,565 | | | 255,328 | | Service charges on deposit accounts | Service charges on deposit accounts | | | 12,049 | | | 10,034 | | | 9,160 | | Investment services and trust income | | ATM and interchange fees | ATM and interchange fees | | | 15,600 | | | 19,900 | | | 14,915 | | Investment services and trust income | | | 8,866 | | | 8,558 | | | 7,080 | | (Loss) gain from securities, net | | | (376) | | | 324 | | | 1,631 | | (Loss) gain on sales or write-downs of other real estate owned | | | (114) | | | 2,504 | | | (1,491) | | (Loss) gain from other assets | | | (151) | | | 323 | | | (90) | | (Loss) gain from investment securities, net | | (Loss) gain on sales or write-downs of other real estate owned and other assets | | | Other income | | Other income | | Other income | Other income | | | 5,213 | | | 19,047 | | | 15,322 | | Total noninterest income | Total noninterest income | | | 114,667 | | | 228,255 | | | 301,855 | | | Noninterest expenses: | Noninterest expenses: | | | Noninterest expenses: | | Noninterest expenses: | | Salaries, commissions and employee benefits | | Salaries, commissions and employee benefits | | Salaries, commissions and employee benefits | Salaries, commissions and employee benefits | | | 211,491 | | | 248,318 | | | 233,768 | | Occupancy and equipment expense | Occupancy and equipment expense | | | 23,562 | | | 22,733 | | | 18,979 | | Data processing | | Legal and professional fees | Legal and professional fees | | | 15,028 | | | 9,161 | | | 7,654 | | Data processing | | | 9,315 | | | 9,987 | | | 11,390 | | Merger costs | | | — | | | — | | | 34,879 | | | Advertising | | Advertising | | Advertising | | Amortization of core deposit and other intangibles | Amortization of core deposit and other intangibles | | | 4,585 | | | 5,473 | | | 5,323 | | | Advertising | | | 11,208 | | | 13,921 | | | 10,062 | | Mortgage restructuring expense | | | Mortgage restructuring expense | | | Mortgage restructuring expense | Mortgage restructuring expense | | | 12,458 | | | — | | | — | | Other expense | Other expense | | | 60,699 | | | 63,974 | | | 55,030 | | Total noninterest expense | Total noninterest expense | | | 348,346 | | | 373,567 | | | 377,085 | | Income before income taxes | Income before income taxes | | | 159,574 | | | 243,051 | | | 82,461 | | Income tax expense | Income tax expense | | | 35,003 | | | 52,750 | | | 18,832 | | Net income applicable to FB Financial Corporation and noncontrolling interest | Net income applicable to FB Financial Corporation and noncontrolling interest | | | 124,571 | | | 190,301 | | | 63,629 | | Net income applicable to noncontrolling interest | Net income applicable to noncontrolling interest | | | 16 | | | 16 | | | 8 | | Net income applicable to FB Financial Corporation | Net income applicable to FB Financial Corporation | | | $ | 124,555 | | | $ | 190,285 | | | $ | 63,621 | | | Earnings per common share | | | Earnings per common share: | | Earnings per common share: | | Earnings per common share: | | Basic | | Basic | | Basic | Basic | | | $ | 2.64 | | | $ | 4.01 | | | $ | 1.69 | | Diluted | Diluted | | | 2.64 | | | 3.97 | | | 1.67 | |
See the accompanying notes to the consolidated financial statements.
FB Financial Corporation and subsidiaries Consolidated statements of comprehensive (loss) income (loss) (Amounts are in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | | | | | | 2022 | | | 2021 | | | 2020 | | Net income | | | | | | $ | 124,571 | | | $ | 190,301 | | | $ | 63,629 | | Other comprehensive (loss) income, net of tax: | | | | | | | | | | | Net change in unrealized (loss) gain in available-for-sale securities, net of tax (benefits) expenses of $(62,316), $(7,224), and $5,781 | | | | | | (176,798) | | | (22,475) | | | 18,430 | | Reclassification adjustment for gain on sale of securities included in net income, net of tax expenses of $—, $33 and $348 | | | | | | (1) | | | (93) | | | (987) | | Net change in unrealized gain (loss) in hedging activities, net of tax expenses (benefits) of $532, $293 and $(363) | | | | | | 1,508 | | | 831 | | | (1,031) | | Reclassification adjustment for gain on hedging activities, net of tax expenses of $—, $— and $337 | | | | | | — | | | — | | | (955) | | Total other comprehensive (loss) income, net of tax | | | | | | (175,291) | | | (21,737) | | | 15,457 | | Comprehensive (loss) income applicable to FB Financial Corporation and noncontrolling interest | | | | | | (50,720) | | | 168,564 | | | 79,086 | | Comprehensive income applicable to noncontrolling interest | | | | | | 16 | | | 16 | | | 8 | | Comprehensive (loss) income applicable to FB Financial Corporation | | | | | | $ | (50,736) | | | $ | 168,548 | | | $ | 79,078 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | | | | | | 2023 | | | 2022 | | | 2021 | | Net income | | | | | | $ | 120,240 | | | $ | 124,571 | | | $ | 190,301 | | Other comprehensive income (loss), net of tax: | | | | | | | | | | | Net unrealized gain (loss) in available-for-sale securities, net of tax expense (benefit) of $8,706, $(62,316), and $(7,224) | | | | | | 24,802 | | | (176,798) | | | (22,475) | | Reclassification adjustment for loss (gain) on sale of securities included in net income, net of tax benefit (expense) of $3,668, $—, and $(33) | | | | | | 10,406 | | | (1) | | | (93) | | Net unrealized (loss) gain in hedging activities, net of tax (benefit) expense of $(176), $532, and $293 | | | | | | (500) | | | 1,508 | | | 831 | | | | | | | | | | | | | Total other comprehensive income (loss), net of tax | | | | | | 34,708 | | | (175,291) | | | (21,737) | | Comprehensive income (loss) applicable to FB Financial Corporation and noncontrolling interest | | | | | | 154,948 | | | (50,720) | | | 168,564 | | Comprehensive income applicable to noncontrolling interest | | | | | | 16 | | | 16 | | | 16 | | Comprehensive income (loss) applicable to FB Financial Corporation | | | | | | $ | 154,932 | | | $ | (50,736) | | | $ | 168,548 | |
See the accompanying notes to the consolidated financial statements.
FB Financial Corporation and subsidiaries Consolidated statements of changes in shareholders’ equity (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, 2019 | | $ | 31,034 | | | $ | 425,633 | | | $ | 293,524 | | | $ | 12,138 | | | $ | 762,329 | | | $ | — | | | $ | 762,329 | | Cumulative effect of change in accounting principle | | — | | | — | | | (25,018) | | | — | | | (25,018) | | | — | | | (25,018) | | Balance at January 1, 2020 | | $ | 31,034 | | | $ | 425,633 | | | $ | 268,506 | | | $ | 12,138 | | | $ | 737,311 | | | $ | — | | | $ | 737,311 | | Net income attributable to FB Financial Corporation and noncontrolling interest | | — | | | — | | | 63,621 | | | — | | | 63,621 | | | 8 | | | 63,629 | | Other comprehensive income, net of taxes | | — | | | — | | | — | | | 15,457 | | | 15,457 | | | — | | | 15,457 | | Common stock issued in connection with acquisition of FNB Financial Corp., net of registration costs (See Note 2) | | 955 | | | 33,892 | | | — | | | — | | | 34,847 | | | — | | | 34,847 | | Common stock issued in connection with merger with Franklin Financial Network, Inc., net of registration costs (See Note 2) | | 15,058 | | | 429,815 | | | — | | | — | | | 444,873 | | | 93 | | | 444,966 | | Stock based compensation expense | | 22 | | | 10,192 | | | — | | | — | | | 10,214 | | | — | | | 10,214 | | Restricted stock units vested and distributed, net of shares withheld | | 123 | | | (1,633) | | | — | | | — | | | (1,510) | | | — | | | (1,510) | | Shares issued under employee stock purchase program | | 30 | | | 948 | | | — | | | — | | | 978 | | | — | | | 978 | | Dividends declared ($0.36 per share) | | — | | | — | | | (14,502) | | | — | | | (14,502) | | | — | | | (14,502) | | Noncontrolling interest distribution | | — | | | — | | | — | | | — | | | — | | | (8) | | | (8) | | | | Common stock | | | | 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, 2020 | Balance at December 31, 2020 | | $ | 47,222 | | | $ | 898,847 | | | $ | 317,625 | | | $ | 27,595 | | | $ | 1,291,289 | | | $ | 93 | | | $ | 1,291,382 | | Net income attributable to FB Financial Corporation and noncontrolling interest | Net income attributable to FB Financial Corporation and noncontrolling interest | | — | | | — | | | 190,285 | | | — | | | 190,285 | | | 16 | | | 190,301 | | Other comprehensive loss, net of taxes | Other comprehensive loss, net of taxes | | — | | | — | | | — | | | (21,737) | | | (21,737) | | | — | | | (21,737) | | Repurchase of common stock | Repurchase of common stock | | (179) | | | (7,416) | | | — | | | — | | | (7,595) | | | — | | | (7,595) | | Stock based compensation expense | Stock based compensation expense | | 7 | | | 10,275 | | | — | | | — | | | 10,282 | | | — | | | 10,282 | | Restricted stock units vested and distributed, net of shares withheld | Restricted stock units vested and distributed, net of shares withheld | | 462 | | | (10,620) | | | — | | | — | | | (10,158) | | | — | | | (10,158) | | Shares issued under employee stock purchase program | Shares issued under employee stock purchase program | | 37 | | | 1,443 | | | — | | | — | | | 1,480 | | | — | | | 1,480 | | Dividends declared ($0.44 per share) | | — | | | — | | | (21,244) | | | — | | | (21,244) | | | — | | | (21,244) | | Dividends declared and paid ($0.44 per share) | | Noncontrolling interest distribution | Noncontrolling interest distribution | | — | | | — | | | — | | | — | | | — | | | (16) | | | (16) | | Balance at December 31, 2021 | | $ | 47,549 | | | $ | 892,529 | | | $ | 486,666 | | | $ | 5,858 | | | $ | 1,432,602 | | | $ | 93 | | | $ | 1,432,695 | | Balance at December 31, 2021: | | Net income attributable to FB Financial Corporation and noncontrolling interest | Net income attributable to FB Financial Corporation and noncontrolling interest | | — | | | — | | | 124,555 | | | — | | | 124,555 | | | 16 | | | 124,571 | | Other comprehensive loss, net of taxes | Other comprehensive loss, net of taxes | | — | | | — | | | — | | | (175,291) | | | (175,291) | | | — | | | (175,291) | | Repurchase of common stock | Repurchase of common stock | | (997) | | | (38,982) | | | — | | | — | | | (39,979) | | | — | | | (39,979) | | Stock based compensation expense | Stock based compensation expense | | 3 | | | 9,854 | | | — | | | — | | | 9,857 | | | — | | | 9,857 | | Restricted stock units vested and distributed, net of shares withheld | | 156 | | | (2,998) | | | — | | | — | | | (2,842) | | | — | | | (2,842) | | Restricted stock units vested, net of taxes | | Shares issued under employee stock purchase program | Shares issued under employee stock purchase program | | 27 | | | 1,185 | | | — | | | — | | | 1,212 | | | — | | | 1,212 | | Dividends declared ($0.52 per share) | | — | | | — | | | (24,689) | | | — | | | (24,689) | | | — | | | (24,689) | | Dividends declared and paid ($0.52 per share) | | Noncontrolling interest distribution | Noncontrolling interest distribution | | — | | | — | | | — | | | — | | | — | | | (16) | | | (16) | | Balance at December 31, 2022 | 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 | | | Net income attributable to FB Financial Corporation and noncontrolling interest | | | Net income attributable to FB Financial Corporation and noncontrolling interest | | Other comprehensive income, net of taxes | | Repurchase of common stock | | Stock based compensation expense | | Restricted stock units vested, net of taxes | | Performance-based restricted stock units vested, net of taxes | | Shares issued under employee stock purchase program | | Dividends declared and paid ($0.60 per share) | | Noncontrolling interest distribution | | Balance at December 31, 2023 | |
See the accompanying notes to the consolidated financial statements.
FB Financial Corporation and subsidiaries Consolidated statements of cash flows (Amounts are in thousands) | | Years Ended December 31, | | 2022 | | | 2021 | | | 2020 | | | | Years Ended December 31, | | | | Years Ended December 31, | | | 2023 | | Cash flows from operating activities: | Cash flows from operating activities: | | Net income applicable to FB Financial Corporation and noncontrolling interest | Net income applicable to FB Financial Corporation and noncontrolling interest | | $ | 124,571 | | | $ | 190,301 | | | $ | 63,629 | | Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | Net income applicable to FB Financial Corporation and noncontrolling interest | | Net income applicable to FB Financial Corporation and noncontrolling interest | | Adjustments to reconcile net income to net cash provided by operating activities: | | Depreciation and amortization of fixed assets and software | | Depreciation and amortization of fixed assets and software | | Depreciation and amortization of fixed assets and software | Depreciation and amortization of fixed assets and software | | 8,017 | | | 8,416 | | | 7,536 | | Amortization of core deposit and other intangibles | Amortization of core deposit and other intangibles | | 4,585 | | | 5,473 | | | 5,323 | | Amortization of issuance costs on subordinated debt and accretion of subordinated debt fair value premium, net | | Capitalization of mortgage servicing rights | Capitalization of mortgage servicing rights | | (20,809) | | | (39,018) | | | (47,025) | | Net change in fair value of mortgage servicing rights | Net change in fair value of mortgage servicing rights | | (32,044) | | | 3,503 | | | 47,660 | | Stock-based compensation expense | Stock-based compensation expense | | 9,857 | | | 10,282 | | | 10,214 | | Provision for credit losses | | 10,393 | | | (38,995) | | | 94,606 | | Provision for credit losses on unfunded commitments | | 8,589 | | | (1,998) | | | 13,361 | | Provision for (reversal of) credit losses on loans HFI | | (Reversal of) provision for credit losses on unfunded commitments | | Provision for mortgage loan repurchases | Provision for mortgage loan repurchases | | (2,989) | | | (766) | | | 2,607 | | Amortization of premiums and accretion of discounts on acquired loans, net | | 1,020 | | | 853 | | | (3,788) | | Amortization of premiums and accretion of discounts on securities, net | | 6,589 | | | 8,777 | | | 7,382 | | Loss (gain) from securities, net | | 376 | | | (324) | | | (1,631) | | (Accretion) amortization of discounts and premiums on acquired loans, net | | Amortization (accretion) of premiums and discounts on securities, net | | Loss (gain) from investment securities, net | | Originations of loans held for sale | Originations of loans held for sale | | (2,403,476) | | | (6,300,892) | | | (6,650,258) | | Repurchases of loans held for sale | Repurchases of loans held for sale | | (194) | | | (487) | | | — | | Proceeds from sale of loans held for sale | Proceeds from sale of loans held for sale | | 3,067,204 | | | 6,387,110 | | | 6,487,809 | | Gain on sale and change in fair value of loans held for sale | Gain on sale and change in fair value of loans held for sale | | (47,783) | | | (161,964) | | | (270,802) | | | Net loss (gain) or write-downs of other real estate owned | | 114 | | | (2,504) | | | 1,491 | | Loss (gain) on other assets | | 151 | | | (323) | | | 90 | | Net loss (gain) on write-downs of other real estate owned and other assets | | Net loss (gain) on write-downs of other real estate owned and other assets | | Net loss (gain) on write-downs of other real estate owned and other assets | | | Provision for deferred income taxes | | | Provision for deferred income taxes | | | Provision for deferred income taxes | Provision for deferred income taxes | | 12,552 | | | 30,770 | | | (25,530) | | Earnings on bank-owned life insurance | Earnings on bank-owned life insurance | | (1,452) | | | (1,542) | | | (1,556) | | Changes in: | Changes in: | | Operating leases | | 5,030 | | | (969) | | | 2,664 | | Operating lease assets and liabilities, net | | Operating lease assets and liabilities, net | | Operating lease assets and liabilities, net | | Other assets and interest receivable | Other assets and interest receivable | | (17,222) | | | 59,283 | | | (57,316) | | Accrued expenses and other liabilities | Accrued expenses and other liabilities | | 56,247 | | | (100,108) | | | 43,532 | | Net cash provided by (used in) operating activities | | 789,326 | | | 54,878 | | | (270,002) | | Net cash provided by operating activities | | Cash flows from investing activities: | Cash flows from investing activities: | | | Activity in available-for-sale securities: | Activity in available-for-sale securities: | | Activity in available-for-sale securities: | | Activity in available-for-sale securities: | | Sales | | Sales | | Sales | Sales | | 1,218 | | | 8,855 | | | 146,494 | | Maturities, prepayments and calls | Maturities, prepayments and calls | | 204,748 | | | 296,256 | | | 220,549 | | Purchases | Purchases | | (242,889) | | | (847,212) | | | (424,971) | | Proceeds from sales of equity securities | | Net change in loans | Net change in loans | | (1,719,652) | | | (457,042) | | | 4,383 | | Net change in commercial loans held for sale | | 43,676 | | | 147,276 | | | 114,031 | | | Sales of FHLB stock | | Sales of FHLB stock | | Sales of FHLB stock | Sales of FHLB stock | | — | | | 4,294 | | | — | | Purchases of FHLB stock | Purchases of FHLB stock | | (26,424) | | | (5,279) | | | (515) | | | Purchases of premises and equipment | Purchases of premises and equipment | | (10,629) | | | (6,102) | | | (5,934) | | Purchases of premises and equipment | | Purchases of premises and equipment | | Proceeds from the sale of premises and equipment | Proceeds from the sale of premises and equipment | | 875 | | | — | | | — | | Proceeds from the sale of other real estate owned and other assets | | 4,959 | | | 9,396 | | | 6,937 | | Proceeds from the sale of other real estate owned | | Proceeds from the sale of other assets | | Proceeds from bank-owned life insurance | | | Proceeds from bank-owned life insurance | | — | | | — | | | 715 | | Net cash acquired in business combinations | | — | | | — | | | 248,447 | | Net cash (used in) provided by investing activities | | (1,744,118) | | | (849,558) | | | 310,136 | | Net cash used in investing activities | | Net cash used in investing activities | | Net cash used in investing activities | | Cash flows from financing activities: | Cash flows from financing activities: | | | Net (decrease) increase in demand deposits | | (262,109) | | | 1,685,033 | | | 1,519,868 | | Net increase (decrease) in time deposits | | 290,893 | | | (306,173) | | | (328,035) | | Net (decrease) increase in deposits | | Net (decrease) increase in deposits | | Net (decrease) increase in deposits | | Net increase in securities sold under agreements to repurchase and federal funds purchased | Net increase in securities sold under agreements to repurchase and federal funds purchased | | 46,229 | | | 8,517 | | | 5,262 | | Payments on FHLB advances | | — | | | — | | | (250,000) | | Net increase in short-term FHLB advances | | 175,000 | | | — | | | — | | Issuance of subordinated debt, net of issuance costs | | — | | | — | | | 98,189 | | | Net (decrease) increase in short-term FHLB advances and Bank Term Funding Program | | Net (decrease) increase in short-term FHLB advances and Bank Term Funding Program | | Net (decrease) increase in short-term FHLB advances and Bank Term Funding Program | | | Payments on subordinated debt | Payments on subordinated debt | | — | | | (60,000) | | | — | | | Amortization of issuance costs and (accretion) of subordinated debt fair value premium, net | | 387 | | | 17 | | | (397) | | (Payments on) proceeds from other borrowings | | — | | | (15,000) | | | 15,000 | | Payments on subordinated debt | | | Payments on subordinated debt | | | Payments on other borrowings | | Payments on other borrowings | | Payments on other borrowings | | Share based compensation withholding payments | Share based compensation withholding payments | | (2,842) | | | (10,158) | | | (1,510) | | Net proceeds from sale of common stock under employee stock purchase program | Net proceeds from sale of common stock under employee stock purchase program | | 1,212 | | | 1,480 | | | 978 | | Repurchase of common stock | Repurchase of common stock | | (39,979) | | | (7,595) | | | — | | Dividends paid on common stock | Dividends paid on common stock | | (24,503) | | | (20,866) | | | (14,177) | | Dividend equivalent payments made upon vesting of equity compensation | Dividend equivalent payments made upon vesting of equity compensation | | (168) | | | (717) | | | (87) | | Noncontrolling interest distribution | Noncontrolling interest distribution | | (16) | | | (16) | | | (8) | | Net cash provided by financing activities | | 184,104 | | | 1,274,522 | | | 1,045,083 | | Net cash (used in) provided by financing activities | | Net change in cash and cash equivalents | Net change in cash and cash equivalents | | (770,688) | | | 479,842 | | | 1,085,217 | | Cash and cash equivalents at beginning of the period | Cash and cash equivalents at beginning of the period | | 1,797,740 | | | 1,317,898 | | | 232,681 | | Cash and cash equivalents at end of the period | Cash and cash equivalents at end of the period | | $ | 1,027,052 | | | $ | 1,797,740 | | | $ | 1,317,898 | | Supplemental cash flow information: | | | Interest paid | | $ | 63,701 | | | $ | 41,238 | | | $ | 48,679 | | Taxes paid | | 906 | | | 61,693 | | | 20,419 | | Supplemental noncash disclosures: | | Transfers from loans to other real estate owned | | $ | 1,437 | | | $ | 5,262 | | | $ | 2,746 | | | Transfers from other real estate owned to premises and equipment | | 351 | | | — | | | 841 | | | Loans provided for sales of other real estate owned | | — | | | 704 | | | 305 | | Transfers from loans to loans held for sale | | 46,364 | | | 10,408 | | | 11,483 | | Transfers from loans held for sale to loans | | 24,479 | | | 86,315 | | | 55,766 | | Rebooked GNMA loans under optional repurchase program | | 26,211 | | | — | | | — | | | Stock consideration paid in business combination | | — | | | — | | | 480,867 | | | Dividends declared not paid on restricted stock units | | 222 | | | 400 | | | 238 | | | Decrease to retained earnings for adoption of ASU 2016-13 | | — | | | — | | | 25,018 | | Right-of-use assets obtained in exchange for operating lease liabilities | | 25,399 | | | 970 | | | 2,393 | | |
FB Financial Corporation and subsidiaries Consolidated statements of cash flows (continued) (Amounts are in thousands) | | | | | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | | 2023 | | | 2022 | | | 2021 | | Supplemental cash flow information: | | | | | | | Interest paid | | $ | 261,032 | | | $ | 63,701 | | | $ | 41,238 | | Taxes paid, net | | 37,937 | | | 906 | | | 61,693 | | Supplemental noncash disclosures: | | | | | | | Transfers from loans to other real estate owned | | $ | 2,736 | | | $ | 1,437 | | | $ | 5,262 | | Transfers from loans to other assets | | 2,925 | | | — | | | — | | Transfers from other real estate owned to other assets | | 75 | | | — | | | — | | | | | | | | | Transfers from other real estate owned to premises and equipment | | — | | | 351 | | | — | | | | | | | | | Loans provided for sales of other real estate owned | | — | | | — | | | 704 | | Loans provided for sales of other assets | | 911 | | | — | | | — | | Transfers from loans to loans held for sale | | 13,720 | | | 46,364 | | | 10,408 | | Transfers from loans held for sale to loans | | 3,273 | | | 24,479 | | | 86,315 | | (Decrease) increase in rebooked GNMA loans under optional repurchase program | | (4,982) | | | 26,211 | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Dividends declared not paid on restricted stock units | | 287 | | | 222 | | | 400 | | | | | | | | | | | | | | | | Right-of-use assets obtained in exchange for operating lease liabilities | | 7,300 | | | 25,399 | | | 970 | | | | | | | | |
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:presentation (A) Organization and Company overview:overview FB Financial Corporation (the “Company”) is a financial holding company headquartered in Nashville, Tennessee. FirstBank (the “Bank”), a direct subsidiary of the Company, headquartered in Nashville, provides a comprehensive suite of commercial and consumer banking services to clients in select markets. These services are offered through the Bank's 81 full-service branches throughout Tennessee, Kentucky, Alabama and North Georgia, as well as other limited servicing banking, ATM and mortgage loan production locations serving metropolitan and community markets across its footprint. (B) Basis of presentation and use of estimates The accompanying consolidated financial statements include the Company and its wholly-owned subsidiaries, FirstBank (the "Bank")namely the Bank. All significant intercompany accounts and FirstBank Risk Management, Inc. The Bank operates through 82 full-service branches throughout Tennessee, Kentucky, Alabama and North Georgia, and a national mortgage business with office locations across the Southeast, which primarily originates mortgage loans to be soldtransactions have been eliminated in the secondary market.consolidation. The Bank is subject to competition from other financial services companies and financial institutions. Theaccounting policies followed by the Company and its subsidiaries and the Bank are also subject to the regulationsmethods of certain federal and state agencies and undergo periodic examinations by those regulatory authorities. See "Supervision and regulation" in Part I, Item 1, for more details regarding regulatory oversight. (B) Basis of presentation:
The accompanying consolidated financial statements have been prepared in conformityapplying these principles conform with accounting principles generally accepted in the United States of America and general banking industry. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as ofat the date of the balance sheetconsolidated financial statements and the reported resultsamounts of operations forrevenue and expenses during the year then ended. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptiblereporting period, the most significant of which relate to significant change in the near term include the determination of the allowance for credit losses and mortgage servicing rights.
Certain policies that significantly affect the determination of any impairmentfinancial position, results of goodwill or intangible assets. The consolidated financial statements include the accounts of the Company, FBRM, the Bank,operations and its’ wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Certaincash flows are summarized below. Additionally, certain prior period amounts have been reclassified to conform to the current period presentation without anypresentation. These reclassifications did not materially impact on the reported amounts of net income or shareholders’ equity.
Certain accounting policies identified below were modified during the year ended December 31, 2022. Please refer to the Company's auditedconsolidated financial statements on Form 10-K filed on February 25, 2022 for accounting policies in place as of December 31, 2021.statements.
(C) Cash flows: For purposes of reporting consolidated cash flows, cash and cash equivalents include cash on hand, amounts due from banks, federal funds sold and interest earning deposits in other financial institutions with maturities of less than 90 days at the date of purchase. These amounts are reported in the consolidated balance sheets caption “Cash and cash equivalents.” Net cash flows are reported for loans held for investment, deposits and short-term borrowings.
(D) Cash and cash equivalents:
The Company considers all highly liquid unrestricted investments with a maturity of three months or less when purchased to be cash equivalents. This includes cash, federal funds sold, reverse repurchase agreements and interest-bearing deposits in other financial institutions. (E)The Bank maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits. The Bank has not experienced any losses in such correspondent accounts and believes it is not exposed to any significant credit risk from cash and cash equivalents.
(D) Investment securities:securities Available-for-sale debt securities, at fair value Debt securities are classified as held to maturity and carried at amortized cost, excluding accrued interest, when management has the positive intent and ability to hold them to maturity. Debt securities are classified as available-for-sale when theythat might be sold before maturity.maturity are classified as available-for-sale. Available-for-sale debt securities are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of applicable taxes.taxes, unless such unrealized gain or loss results from expected credit losses. Unrealized losses resulting from credit losses for available-for-sale debt securities are recognized in earnings as a provision for credit losses. Unrealized losses that do not result from credit losses are excluded from earnings and reported in equity as accumulated other comprehensive income, net of applicable taxes. Accrued interest receivable for available-for-sale securities is separated from other components of amortized cost and presented separately on the consolidated balance sheets. Equity securities with readily determinable market values are carried at fair value on the balance sheet with any periodic changes in value made through adjustments to the statement of income. Equity securities without readily determinable market values are carried at cost less impairment and included in other assets on the consolidated balance sheets.
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Dollar amounts are in thousands, except share and per share amounts)
Interest income includes the The amortization and accretion of purchase premium and discount. Premiums andpremiums or discounts on securities are amortizedis recognized as interest income on the level-yield method anticipating prepayments based upon the prior three month average monthly prepayments when available. The sale and purchase of investment securities are recognized on a trade date basis with gains and losses on sales being determined using the specific identification method.
The Company evaluates available-for-sale securities for expected credit losses at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation.losses. For securities in an unrealized loss position, consideration is given to the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuer’s financial condition, the Company considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. When credit losses are expected to occur, the amount of the expected credit loss recognized in earnings depends on the Company's intention to sell the security or if it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If the Company intends to sell the security or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis, the expected credit loss recognized in earnings is equal to the entire difference between its amortized cost basis and its fair value at the date it was determined to be impaired due to credit losses or other factors. The previous amortized cost basis less the impairment recognized in earnings becomes the new amortized cost basis of the investment.
However, if the Company does not intend to sell the security and it is not more likely than not to be required to sell the security before recovery of its amortized cost basis, the difference between the amortized cost and the fair value is separated into the amount representing theestimated credit losslosses and the amount related to all other factors. If the Company determines a decline in fair value below the amortized cost basis of an available-for-sale investment security has resulted fromEstimated credit related factors, the Company records a credit loss throughlosses are recorded as an allowance for credit losses. The allowancelosses and
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) recognized in earnings as a provision for credit losses is limited by the amount that the fair value is less than amortized cost. The amount of the allowance for credit losses is determined based on the present value of cash flows expected to be collected and is recognized as a charge to earnings. The amount of the impairmentlosses. Amounts related to other, non-credit related factors isare recognized in other comprehensive income, net of applicable taxes. The Company did not record any provision for credit losses for its available-for-sale debt securities during the years ended December 31, 2023 and 2022 or 2021, as the majority of the investment portfolio is government guaranteed and declines in fair value below amortized cost were determined to be non-credit related. (F) Sales of available-for-sale securities are evaluated based on factors such as changes in interest rates, liquidity needs, asset and liability management strategies and other factors. If the Company intends to sell the security or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis, the expected credit loss recognized in earnings is equal to the difference between its amortized cost basis and its fair value at the date it was determined to be impaired due to credit losses or other factors. The sale and purchase of investment securities are recognized on a trade date basis with gains and losses on sales being determined using the specific identification method.
Held-to-maturity securities Debt securities are classified as held-to-maturity and carried at amortized cost, excluding accrued interest, when management has the positive intent and ability to hold them to maturity. At December 31, 2023 and 2022, the Company did not own held-to-maturity securities. Trading account securities Trading account securities are held for the purpose of buying and selling securities at a profit. Trading account securities are carried at fair value on the balance sheet, with any periodic changes in fair value recorded through income. At December 31, 2023 and 2022, the Company did not own trading account securities. Equity securities, at fair value Equity securities with readily determinable market values are carried at fair value on the balance sheet with any periodic changes in fair value recorded through income. Equity securities without readily determinable market values are carried at cost less impairment and included in “Other assets” on the consolidated balance sheets. Federal Home Loan Bank stock:stock, at cost The BankCompany accounts for its investments in FHLB stock in accordance with FASB ASC Topic 942-325 "Financial“Financial Services-Depository and Lending-Investments-Other."” FHLB stock does not have a readily determinable fair value because its ownership is restricted and lacks a market.market as all transactions are executed at par value with the FHLB as the sole purchaser. FHLB stock is carried at cost and evaluated for impairment.impairment based upon management’s assessment of the recoverability of the par value. Ownership of FHLB stock is required to participate in the FHLB system and varies based upon the amount of FHLB advances. (G)(E) Loans held for sale:sale
Mortgage loans held for sale Mortgage loans originated and intended for sale in the secondary market are carried at fair value under the fair value option as permitted under the guidance in ASC 825, “Financial Instruments” (“ASC 825”).Instruments,” until sold. 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. The change in fair value of both mortgage loans held for sale and the related derivative instruments are recorded in “Mortgage banking income” in the Consolidated Statementsconsolidated statements of Income.income. Gains and losses on sale are recognized at the time the loan is closed. Pass through origination costs and related loan fees are also included in “Mortgage banking income”.income.” Periodically,A portion of loans sold by the Company transfers mortgage loans originated for sale in the secondary markets into the loan HFI portfolio based on current market conditions, the overall secondary marketability and status of the loan. During the years ended December 31, 2022, 2021 and 2020,are sold to GNMA with the Company transferred $24,479, $86,315 and $55,766, respectively, of residential mortgage loans into its loans held for investment portfolio. The loans are transferred intoretaining the portfolio at fair value at the date of transfer. Additionally, occasionally the Company will transfer loans from the held for investment portfolio into loans held for sale. At the time of the transfer, loans are marked to fair value through the allowance for credit losses and reclassified to loans held for sale. During the years ended December 31, 2021 and 2020, the Company transferred $1,188 and $2,116, respectively, from the portfolio to loans held for sale, excluding GNMA repurchases discussed below. There were no such transfers during the year ended December 31, 2022.
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Dollar amounts are in thousands, except share and per share amounts)
The Company sells mortgage loans originated for sale on the secondary market to GNMA and retains servicing rights after the sale. Under the GNMA optional repurchase program,programs allow financial institutions are permitted to buy backrepurchase individual delinquent mortgage loans that meet certain criteria from the securitized loan pool forfrom which the institution provides servicing. At the servicer’sservicer's option and without GNMA’sGNMA's prior authorization, the servicer may repurchase such a delinquent loan for an amount equal to 100 percent100% of the remaining principal balance of the loan. These loans are held for investment until certain performance criteria is met and they meet held for sale criteria. During the years ended December 31, 2022, 2021, and 2020, the Company repurchased GNMA loans of $20,593, $40,417, and $10,586, respectively, into loans held for investment. The Company transferred $46,364, $9,220 and $9,367 during the years ended December 31, 2022, 2021, and 2020, respectively, of these repurchased loans from loans held for investment to loans held for sale.
Under FASB ASC Topic 860, “Transfers and Servicing,” this buy-back option is considered a conditional option until the delinquency criteria are met, at which time the option becomes unconditional. When the Company is deemed to have regained effective control over these loans under the unconditional buy-back option, the loansloan can no longer be reported as sold and must be recorded onbrought onto the balance sheet as loans held for sale, regardless of whether the Company intends to exercise the buy-back option if the buyback options provides the transferor a more-than-trivial benefit. During the year ended December 31, 2022, the Company identified a more-than-trivial benefit associated with these loans and rebooked them onto the consolidated balance sheets, which also aligns with developing industry best practice. As of December 31, 2022, the Company had $26,211 in these optional rights to repurchase delinquent GNMA loans. There were no such loans identified with a more-than-trivial benefit as of December 31, 2021. The fair value option election does not apply to the GNMA optional repurchase loans which do not meet the requirements under FASB ASC Topic 825.option. These loans are reported at the current unpaid principal
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) balance as “Loans held for sale” with an offsetting liability reported in HFS“Borrowings” on the Company's consolidated balance sheets with the offsetting liability being reported in borrowings. Theseand are considered nonperforming assets as the Company does not earn any interest on the unexercised optiondue to repurchase these loans.their delinquent status. Commercial loan held for sale During the year ended December 31, 2020,Historically, the Company acquiredheld and managed a designated portfolio of commercial loans, including shared national credits and institutionalinstitution healthcare loans, as part of the its merger with Franklin Financial Network, Inc. and its wholly-owned subsidiaries (collectively, "Franklin") that the Company accounts for as HFS under the fair value option. As of December 31, 2022 and 2021, the fair value of these loans included in loans held for sale at fair value on the consolidated balances sheets amounted to $30,490 and $79,299, respectively.originally acquired through past acquisitions. During the yearsyear ended December 31, 2022, 2021, and 2020, net (losses) gains of $(5,133), $11,172, and $3,228, respectively, from changes in fair value of2023, the Company exited the final commercial relationship designated as held for sale. Prior to this exit, the Company accounted for these loans was included in other noninterest income on the consolidated statements of income.designated relationships as held for sale.
(H)(F) Loans held for investment (excluding purchased credit deteriorated loans):
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-offpayoff are stated at amortized cost. Amortized cost is equal to the principal amount outstanding less any remaining purchase accounting discount or premium net of any accretion or amortization recognized to date.premium. Interest on loans is recognized as income by using the simple interest method on daily balances of the principal amount outstanding plus any accretion or amortization of purchase accounting premiums or discounts. Loans on which the accrual of interest has been discontinued aremay be designated as nonaccrual loans. Accrual of interest is discontinued on loansif past due 90 days or more or if management determines based on economic conditions and the borrower’s financial condition that collection of principal or interest is doubtful, unless the credit is well secured and in the process of collection. Also, a loan may be placed on nonaccrual status prior to becoming past due 90 days if management believes, after considering economic and business conditions and collection efforts, that the borrower’s financial condition is such that collection of principal or interest is doubtful. The decision to place a loan on nonaccrual status prior to becoming past due 90 days is based on an evaluation of the borrower’s financial condition, collateral liquidation value, economic and business conditions and other factors that affect the borrower’s ability to pay. When a loan is placed on nonaccrual status, the accrued but unpaid interest is charged against current period operations. Thereafter, interest on nonaccrual loans is recognized only as received if future collection of principal is probable. If the collectability of outstanding principal is doubtful, interest received is applied as a reduction of principal. A loan may be restored to accrual status when principal and interest are no longer past due or it otherwise becomes both well secured and collectability is reasonably assured. The Company monitors the level of accrued interest receivable on nonperforming loans, however an allowance (G) Allowance for credit losses was not required as of December 31, 2022 and 2021.
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Dollar amounts are in thousands, except share and per share amounts)
(I) Allowance for credit losses:
The allowance for credit losses represents the portion of the loan's amortized cost basis that the Company does not expect to collect due to credit losses over the loan's life, considering past events, current conditions, and reasonable and supportable forecasts of future economic conditions considering macroeconomic forecasts.conditions. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance for credit losses is based on the loan's amortized cost basis, excluding accrued interest receivable, as the Company promptly charges off uncollectible accrued interest receivable. Management’s determination of the appropriateness of the allowance is based on periodic evaluation of the loan portfolio, lending-related commitments and other relevant factors, including macroeconomic forecasts and historical loss rates. In the future, quarters, the Company may update information and forecasts that may cause significant changes in the estimate in those future quarters. See Note 5, "Loans and allowance for The Company calculates its expected credit losses" for additional details relatedloss using a lifetime loss rate methodology. The Company utilizes probability-weighted forecasts, which consider multiple macroeconomic variables from Moody's that are applicable to each type of loan. Each of the Company's specific calculation methodology. The allowanceloss 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 credit losses isestimated prepayments based on market information and the Company’s best estimate. Actual losses may differ fromprepayment history.
For loss estimation purposes, the December 31, 2022 allowanceCompany disaggregates the loan portfolio into three loan pools: 1) Commercial and industrial; 2) Retail; 3) Commercial real estate. These loan pools are further disaggregated into loan segments for creditapplication of qualitative inputs for loss as the CECL estimate is sensitive to economic forecasts and management judgment. The following portfolioestimation purposes. These loan segments have been identified:include:
Commercial and industrial loans. The Company provides a mix of variable and fixed rate commercial and industrial loans. Commercial and industrial loans are typically made to small- and medium-sized manufacturing, wholesale, retail and service businesses, and farmers for working capital and operating needs and business expansions, including the purchase of capital equipment and loans made to farmers relating to their operations.expansions. This category also includes loans secured by manufactured housing receivables.receivables made primarily to manufactured housing communities. 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. Construction loans.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 the Company's assessment of the value of the property on an as-completed basis. These loans can carry riskbasis and repayment depends upon project completion and sale, refinancing, or operation 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 if the market experiences a deterioration in the value of real estate.
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) 1-4 family mortgage loans. The Company’s 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. The Company's future origination volume could be impacted by any deteriorationRepayment depends primarily upon the cash flow of housing values in the Company's markets and increased unemployment and deteriorating market valuesborrower as well as the value of the real estate.estate collateral. Residential line of credit loans. The Company’s residential line of credit loans are primarily revolving, open-end lines of credit secured by 1-4 residential properties. The Company intends to continue to make residential lineRepayment depends primarily upon the cash flow of credit loans if housing values in the Company's markets do not deteriorate from current prevailing levels and we are able to make such loans consistent withborrower as well as the Company's current credit and underwriting standards. Residential linevalue of credit loans may also be affected by unemployment or underemployment and deteriorating market values ofthe real estate.estate collateral. Multi-family residential loans. The Company’s multi-family residential loans are primarily secured by multi-family properties, such as apartments and condominium buildings. TheRepayment depends primarily upon the cash flow of the borrower as well as the value of these loans and growth in this area of our portfolio may be affected by unemployment or underemployment and deteriorating market values ofthe real estate.estate collateral. Commercial real estate owner-occupied loans. The Company’s 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.borrower. Commercial real estate non-owner occupied loans. The Company’s 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
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Dollar amounts are in thousands, except share and per share amounts)
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 or refinancing of the completed property or rental proceedsincome 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. property. Consumer and other loans. The Company’s consumer and other loans include loans to individuals for personal, family and household purposes, including car, boat and other recreational vehicle loans, manufactured homes (without real estate) and personal lines of credit. Consumer loans are generally secured by vehicles and other household goods. The collateral securing consumer loans may depreciate over time. The company seeks to minimize these risks through its underwriting standards.goods, with repayment depending primarily on the cash flow of the borrower. Other loans also include loans to states and political subdivisions in the U.S. These loansand are generally subject to the risk that the borrowing municipalityrepaid through tax revenues 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. refinancing. None of these categories of loans represent a significant portion of the Company's loan portfolio. The Company's loss rate models estimate the lifetime loss rate for the pools of loan segments 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. (J)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. The quantitative models pool 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 otherwise 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 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; effects of changes in prepayment expectations or other factors affecting assessments of loan contractual terms; industry conditions; and effects of changes in credit concentrations. When a loan no longer shares similar risk characteristics with other loans in any given pool, the loan is individually assessed. A loan may require an individual evaluation when it is collateral-dependent; foreclosure is probable; or it has other unique risk characteristics. A loan is deemed collateral-dependent when the borrower is experiencing financial difficulty and 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
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) 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. 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. Since adoption, 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. The Company 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. Substantially all of its loan modifications involving borrowers experiencing financial difficulty are accounted for as a continuation of the existing loan. Prior to January 1, 2023, loans experiencing financial difficulty for which a concession has not yet been provided may be identified as reasonably expected TDRs. Reasonably expected TDRs and TDRs used the same methodology to estimate credit losses. In cases where the expected credit loss could only be captured through a discounted cash flow analysis (such as an interest rate modification for a TDR loan), the allowance was measured by the amount which the loan’s amortized cost exceeds the discounted cash flow analysis. See Note 3, “Loans and allowance for credit losses” for additional details related to the Company's allowance for credit losses. (H) Business combinations and accounting for acquiredpurchase credit deteriorated loans with credit deterioration and off-balance sheet financial instruments: Business combinations are accounted for by applying the acquisition method in accordance with Accounting Standards CodificationASC 805, “Business Combinations” (“ASC 805”).Combinations.” Under the acquisition method, identifiable assets acquired and liabilities assumed and any non-controlling interest in the acquiree at the acquisition date are measured at their fair values as of that date. Any excess of the purchase price over fair value of net assets acquired is recorded as goodwill. To the extent the fair value of net assets acquired, including any other identifiable intangible assets, exceedexceeds the purchase price, a bargain purchase gain is recognized. Results of operations of acquired entities are included in the consolidated statements of income from the date of acquisition. Loans acquired in business combinations with evidence of more-than-insignificant credit deterioration since origination are considered to be Purchased Credit Deteriorated.PCD. The Company developed multiple criteria to assess the presence of more–than–insignificant credit deterioration in acquired loans, mainly focused on changes in credit quality and payment status. While general criteria have been established, each acquisition will vary in its specific facts and circumstances and the Company will apply judgment around PCD identification for each individual acquisition based on their unique portfolio mix and risks identified. The Company adopted ASC 326 on January 1, 2020 using the prospective transition approach for loans previously classified as purchased credit impaired and accounted for under ASC 310-30. In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption and all PCI loans were transitioned to PCD loans upon adoption. Under PCD accounting, the amount of expected credit losses as of the acquisition date is added to the purchase price of the PCD loan. This establishes the amortized cost basis of the PCD loan. The difference between the unpaid principal balance of the PCD loan and the amortized cost basis of the PCD loan as of the acquisition date is the non-credit discount. Interest income for a PCD loan is recognized by accreting the amortized cost basis of the PCD loan to its contractual cash flows. The discount related to estimated credit losses on acquisition recorded as an allowance for credit losses will not be accreted into interest income. Only the noncredit-related discount will be accreted into interest income and subsequent adjustments to expected credit losses will flow through the provision for credit losses on the income statement.(I) Off-balance sheet financial instruments
Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded, unless considered derivatives. For loan commitments that are not accounted for as derivatives and when the obligation is not unconditionally cancellable by the Company, the Company applies the CECL methodology to estimate the expected credit loss on off-balance-sheetoff-balance sheet commitments. The estimate of expected credit losses for off-balance-sheetoff-balance sheet credit commitments is recognized as a liability. When the loan is funded, an allowance for expected credit losses is estimated for that loan using the CECL methodology, and the liability for off-balance-sheetoff-balance sheet commitments is reduced. When applying the CECL methodology to estimate the expected credit loss, the Company considers the likelihood that funding will occur, the contractual period of exposure to credit loss, the risk of loss, historical loss experience, and current conditions along with expectations of future economic conditions.
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Dollar amounts are in thousands, except share and per share amounts)
(K)(J) Premises and equipment:equipment and other long-lived assets
Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Provisions for depreciation are computed principally on the straight-line method and are charged to occupancy expense over the
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) estimated useful lives of the assets. Maintenance agreements are amortized to expense over the period of time covered by the agreement. Costs of major additions, replacements or improvements are capitalized while expenditures for maintenance and repairs are charged to expense as incurred. For financial statement purposes, the estimated useful life for premises is the lesser of the remaining useful life per thirdthird- party appraisal or forty years, for furniture, fixtures and equipment the estimated useful life is three to ten years, and for leasehold improvements the estimated useful life is the lesser of ten years or the term of the lease. (L)Premises and equipment and other long-lived assets are reviewed for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value. No long-lived assets were deemed to be impaired at December 31, 2023 or 2022.
(K) Other real estate owned:owned Real estate acquired through, or in lieu of, loan foreclosure is initially recorded at fair value less the estimated cost to sell at the date of foreclosure, which may establish a new cost basis. Other real estate owned may also include excess facilities and properties held for sale as described in Note 7, "Other5, “Other real estate owned".owned.” Physical possession of residential real estate property collateralizing a consumer mortgage loan occurs when legal title is obtained upon completion of foreclosure or when the borrower conveys all interest in the property to satisfy the loan. After initial measurement, valuations are periodically performed by management and the asset is carried at the lower of carrying amount or fair value less costs to sell. Revenue and expenses from operations are included in other noninterest income and noninterest expenses. Losses due to the valuation of the property are included in gain (loss) on sales or write-downs of other real estate owned. (M) Leases:(L) Leases
The Company leases certain banking, mortgage and operations locations. The Company records leases on the balance sheet in the form of a lease liability for the present value of future minimum payments under the lease terms and a right-of-use asset equal to the lease liability adjusted for items such as deferred or prepaid rent, incentive liabilities, leasehold intangibles and any impairment of the right-of-use asset. In determining whether a contract contains a lease, management conducts an analysis at lease inception to ensure an asset was specifically identified and the Company has control of use of the asset. The Company considers a lease to be a finance lease if future minimum lease payments amount to greater than 90% of the asset's fair value or if the lease term is equal to or greater than 75% of the asset's estimated economic useful life. The Company does not record leases on the consolidated balance sheets that are classified as short term (less than one year). Additionally, the Company has not recorded equipment leases on the consolidated balance sheets as these are not material to the Company. At lease inception, the Company determines the lease term by adding together the minimum lease term and all optional renewal periods that it is reasonably certain to renew. This determination is at management's full discretion and is made through consideration of the asset, market conditions, competition and entity based economic conditions, among other factors. The lease term is used in the economic life test and also to calculate straight-line rent expense. The depreciable life of leasehold improvements is limited by the estimated lease term, including renewals. Operating leases are expensed on a straight-line basis over the life of the lease beginning when the lease commences. Rent expense and variable lease expense are included in occupancy and equipment expense on the Company's Consolidatedconsolidated statements of income. The Company's variable lease expense includeincludes rent escalators that are based on the Consumer Price Index or market conditions and include items such as common area maintenance, utilities, parking, property taxes, insurance and other costs associated with the lease. The Company recognizes a right-of-use asset and a finance lease liability at the lease commencement dateddate on the estimated present value of lease payments over the lease term for finance leases. The amortization of the right-of-use asset is expensed through occupancy and equipment
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) expense and the interest on the lease liability is expensed through interest expense on borrowings on the Company's consolidated statements of income. There are no residual value guarantees or restrictions or covenants imposed by leases that will impact the Company's ability to pay dividends or cause the Company to incur additional expenses. The discount rate used in determining the lease liability is based upon incremental borrowing rates the Company could obtain for similar loans as of the date of commencement or renewal.
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Dollar amounts are in thousands, except share and per share amounts)
(N)(M) Mortgage servicing rights:rights
The Company accounts for its mortgage servicing rights underat fair value at each reporting date with changes in the fair value option as permitted under ASC 860-50-35, "Transfers and Servicing".reported in earnings in the period in which changes occur. The Company retains the right to service certain mortgage loans that it sells to secondary market investors. These mortgage servicing rights are recognized as a separate asset on the date the corresponding mortgage loan is sold. The retained mortgage servicing right is initially recorded at the fair value of future net cash flows expected to be realized for performing servicing activities. Fair value is determined using an income approach with various assumptions including expected cash flows, prepayment speeds, market discount rates, servicing costs, and other factors. These mortgage servicing rights are recognized as a separate asset on the date the corresponding mortgage loan is sold. Subsequent changes in fair value, including the write downswrite-downs due to pay offspayoffs and paydowns, are recorded in earnings in Mortgage banking income. (O)(N) Transfers of financial assets:assets
Transfers of financial assets are accounted for as sales when control over the assets has been relinquished. Control over transferred assets is deemedsurrendered. Control is generally considered to behave been surrendered when 1) the transferred assets have beenare legally isolated from the Company or its consolidated affiliates, even in bankruptcy or other receivership, 2) the transferee obtainshas the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets with no conditions that constrain the transferee and provide more than a trivial benefit to the Company, and 3) the Company does not maintain effective control overthe obligation or unilateral ability to reclaim or repurchase the assets. If these sale criteria are met, the transferred assets through an agreement to repurchase them before their maturity.are removed from the Company’s balance sheet and a gain or loss on sale is recognized on the consolidated statements of income. If not met, the transfer is recorded as a secured borrowing, and the assets remain on the Company’s consolidated balance sheets, the proceeds from the transaction are recognized as a liability, and gain or loss on sale is deferred until the sale criterion are achieved. (P)(O) Goodwill and other intangibles:intangibles
Goodwill represents the excess of the cost of an acquisitionpurchase price over the estimated fair value of theidentifiable net assets acquired. Goodwill impairment testing is performed annually or more frequently if events or circumstances indicate possible impairment.associated with acquisition transactions. Goodwill is assigned to the Company’s reporting units, Banking or Mortgage, as applicable. Goodwill is evaluatedand tested for impairment byannually, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. As part of its testing, the Company may elect to first performing aassess qualitative evaluation to determine whether it is necessary to perform the quantitative goodwill impairment test. The qualitative evaluation is an assessment of factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill.amount. If an entity does athe results of the qualitative assessment and determinesindicate that it is not more likely than not thea reporting unit’s fair value of a reporting unit is less than its carrying amount, then goodwill of the reporting unit is not considered impaired, and it is not necessary to continue toCompany determines the quantitative goodwill impairment test. If the estimated implied fair value of goodwill is less than the carrying amount, an impairment loss would be recognized in noninterest expenserespective reporting unit (through the application of various quantitative valuation methodologies) relative to reduce theits carrying amount to the estimated implied fair value, which could be material to the Company's operating results for any particular reporting period.determine whether quantitative indicators of potential impairment are present. The Company performed amay also elect to bypass the qualitative assessment duringand begin with the years ended December 31, 2022 and 2021 and determined it was more likely than notquantitative assessment. If the results of the quantitative assessment indicate that the fair value of the reporting units exceededunit is below its carrying amount, the Company will recognize an impairment loss in noninterest expense for the amount that the reporting unit’s carrying amount exceeds its fair value including goodwill.(up to the amount of goodwill recorded). No impairment was identified through the annual assessments for impairment performedcharges were recognized in either reporting units during the yearsyear ended December 31, 2022 and 2021.2023. Other intangible assets consist of core deposit intangible assets arising from whole bank and branch acquisitions in addition to both a customer trust intangible and manufactured housing loan servicing intangible. All intangible assets are initially measured at fair value and then amortized over their estimated useful lives. See Note 8,"Goodwill6, “Goodwill and intangible assets"assets” for additional information on goodwill and other intangibles. (Q)(P) Income taxes:taxes
Income tax expense is the total of the current year income tax due and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed,
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) reduces deferred tax assets to the amount expected to be realized. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company’s policy is to recognize interest and penalties on uncertain tax positions in “Income tax expense” in the Consolidated Statementsconsolidated statements of Income.income. There were no amounts related to uncertain tax positions recognized for the years ended December 31, 2023, 2022 2021 or 2020.2021. (Q) Derivative financial instruments and hedging activities A derivative is a financial instrument that derives its cash flows, and therefore its value, by reference to an underlying instrument, index or referenced interest rate. These instruments include interest rates swaps, caps, floors, financial forwards and futures contracts. The Company mainly uses derivatives to manage economic risk related to mortgage loans, long-term debt, and other funding sources. The Company also uses derivatives to facilitate transactions on behalf of its customers. All derivative instruments are recognized on the Company’s consolidated balance sheets at their fair value. The Company does not offset fair value amounts under master netting agreements. Fair values are estimated using pricing models and current market data. On the date the derivative instrument is entered into, the Company designates the derivative as (1) a fair value hedge, (2) a cash flow hedge, or (3) a derivative with no hedge accounting designation. Changes in the fair value of a derivative instrument that is highly effective and that is designated and qualifies as a fair value hedge, along with the gain or loss on the hedged asset or liability that is attributable to the hedged risk (including losses or gains on firm commitments), are recorded in earnings. Changes in the fair value of a derivative instrument that is highly effective and that is designated and qualifies as a cash flow hedge are recorded in accumulated other comprehensive income, until earnings are affected by the variability of cash flows (e.g., when period settlements on a variable-rate asset or liability are recorded in earnings). Changes in the fair value of a derivative with no hedge accounting designation and settlements on the instrument are reported in earnings. The Company formally documents all relationships between hedging instruments and hedge items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivative instruments that are designated as fair value or cash flow hedges to specific assets or liabilities on the Company’s consolidated balance sheets, or to specific firm commitments or forecasted transactions. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative instruments that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. The Company discontinues hedge accounting prospectively when: (1) it is determined that the derivative instrument is no longer highly effective in offsetting changes in the fair value or cash flows of a hedged item (including firm commitments or forecasted transactions); (2) the derivative instrument expires or is sold, terminated or exercised; (3) the derivative instrument is de-designated as a hedging instrument because it is unlikely that a forecasted transaction will occur; (4) a hedged firm commitment no longer meets the definition of a firm commitment; or (5) management determines that designation of the derivative instrument as a hedging instrument is no longer appropriate. When hedge accounting is discontinued because it is determined that the derivative instrument no longer qualifies as an effective fair value or cash flow hedge, the derivative instrument continues to be carried on the Company’s consolidated balance sheets at its fair value, with changes in the fair value included in earnings. Additionally, for fair value hedges, the hedged asset or liability is no longer adjusted for changes in fair value and the existing basis adjustment is amortized or accreted as an adjustment to the hedged item’s yield over the hedged item’s remaining life as established at original designation of the hedging relationship. For cash flow hedges, when hedge accounting is discontinued, but the hedged cash flows or forecasted transaction(s) are still expected to occur, the unrealized gains and losses that were accumulated in other comprehensive income are recognized in earnings in the same period when the earnings are affected by the original hedged cash flows or forecasted transaction. When a cash flow hedge is discontinued because the hedged cash flows or forecasted transactions are not expected to occur, unrealized gains and losses that were accumulated in other comprehensive income are recognized in earnings immediately.
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) (R) Long-lived assets: Premises and equipment, core deposit intangible assets, and other long-lived assets are reviewed for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value. No long-lived assets were deemed to be impaired at December 31, 2022 or 2021.
(S) Derivative financial instruments and hedging activities:
All derivative financial instruments are recorded at their fair values in other assets or other liabilities in the consolidated balance sheets in accordance with ASC 815, “Derivatives and Hedging.” If derivative financial instruments are designated as hedges of fair values, both the change in the fair value of the hedge and the hedged item are included in current earnings. If derivative financial instruments are not designated as hedges, only the change in the fair value of the derivative instrument is included in current earnings.
The Company enters into fair value hedge relationships to mitigate the effect of changing interest rates on the fair values of fixed rate securities and loans. The gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged asset or liability attributable to the hedged risk are recognized in current earnings. The gain or loss on the derivative instrument is presented on the sameComprehensive income statement line item as the earnings effect of the hedged item.
Cash flow hedges are utilized to mitigate the exposure to variability in expected future cash flows or other types of forecasted transactions. For the Company’s derivatives designated as cash flow hedges, changes in the fair value of cash flow hedges are, to the extent that the hedging relationship is effective, recorded as other comprehensive income and are subsequently recognized in earnings at the same time that the hedged item is recognized in earnings. The ineffective portions of the changes in fair value of the hedging instruments are immediately recognized in earnings. The assessment of the effectiveness of the hedging relationship is evaluated under the hypothetical derivative method.
The Company also utilizes derivative instruments that are not designated as hedging instruments. The Company enters into interest rate cap and/or floor and fixed/floating interest rate swap agreements with its customers and then enters into offsetting derivative contracts with other financial institutions to mitigate the interest rate risk associated with these customer contracts. Because these derivative instruments are not designated as hedging instruments, changes in the fair value of the derivative instruments are recognized in earnings.
The Company also enters into commitments to originate loans whereby the interest rate on the loan is determined prior to funding (rate-lock commitments). Rate-lock commitments on mortgage loans that are intended to be sold are considered to be derivatives. Accordingly, such commitments, along with any related fees received from potential borrowers, are recorded at fair value in other assets or liabilities, with changes in fair value recorded in the line item “Mortgage banking income” on the Consolidated Statements of Income. Fair value 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 Company utilizes forward loan sale contracts and forward sales of residential mortgage-backed securities to mitigate the interest rate risk inherent in the Company’s mortgage loan pipeline and held-for-sale portfolio. Forward sale contracts are contracts for delayed delivery of mortgage loans or a group of loans pooled as mortgage-backed securities. The Company agrees to deliver on a specified future date, a specified instrument, at a specified price or yield. However, the contract may allow for cash settlement. The credit risk inherent to the Company arises from the potential inability of counterparties to meet the terms of their contracts. In the event of non-acceptance by the counterparty, the Company would be subject to the credit and inherent (or market) risk of the loans retained. Such contracts are accounted for as derivatives and, along with related fees paid to investor are recorded at fair value in derivative assets or liabilities, with changes in fair value recorded in the line item “Mortgage banking income” on the Consolidated Statements of Income. Fair value is based on the estimated amounts that the Company would receive or pay to terminate the commitment at the reporting date.
The Company utilizes two methods to deliver mortgage loans sold to an investor. Under a “best efforts” sales agreement, the Company enters into a sales agreement with an investor in the secondary market to sell the loan when an interest rate-lock commitment is entered into with a customer, as described above. Under a “best efforts” sales agreement, the Company is obligated to sell the mortgage loan to the investor only if the loan is closed and funded. Thus, the Company will not incur any liability to an investor if the mortgage loan commitment in the pipeline fails to close. The Company also utilizes “mandatory delivery” sales agreements. Under a mandatory delivery sales agreement, the Company commits 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 should the Company fail to satisfy the contract. Mandatory commitments are recorded at fair value in
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Dollar amounts are in thousands, except share and per share amounts)
the Company’s Consolidated Balance Sheets. Gains and losses arising from changes in the valuation of these commitments are recognized currently in earnings and are reflected under the line item “Mortgage banking income” on the Consolidated Statements of Income.
(T) Lender risk account:
The Company sells qualified mortgage loans to FHLB-Cincinnati via the Mortgage Purchase Program. All mortgage loans purchased from members through the MPP are held on the FHLB’s balance sheet. FHLB does not securitize MPP loans for sale to other investors. They mitigate their credit risk exposure through their underwriting and pool composition requirements and through the establishment of the Lender Risk Account credit enhancement. The LRA protects the FHLB against possible credit losses by setting aside a portion of the initial purchase price into a performance based escrow account that can be used to offset possible loan losses. The LRA amount is established as a percentage applied to the sum of the initial unpaid principal balance of each mortgage in the aggregated pool at the time of the purchase of the mortgage as determined by the FHLB-Cincinnati and is funded by the deduction from the proceeds of sale of each mortgage in the aggregated pool to the FHLB-Cincinnati. As of December 31, 2022 and 2021, the Company had on deposit with the FHLB-Cincinnati $19,737 and $17,130, respectively, in these LRA’s. Additionally, as of December 31, 2022 and 2021, the Company estimated the guaranty account to be $9,558 and $8,372, respectively. The Company bears the risk of receiving less than 100% of its LRA contribution in the event of losses, either by the Company or other members selling mortgages in the aggregated pool. Any losses will be deducted first from the individual LRA contribution of the institution that sold the mortgage of which the loss was incurred. If losses incurred in the aggregated pool are greater than the member’s LRA contribution, such losses will be deducted from the LRA contribution of other members selling mortgages in that aggregated pool. Any portion of the LRA not used to pay losses will be released over a thirty year period and will not start until the end of five years after the initial fill-up period.
(U) Comprehensive income:
Comprehensive income consists of net income and other comprehensive income. Other comprehensive income includes unrealized gains and losses on available-for-sale securities and derivatives designated as cash flow hedges, net of taxes. (V)(S) Loss contingencies:contingencies
Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there are such matters that will have a material effect on the consolidated financial statements. (W) Securities sold under agreements to repurchase:
The Company routinely sells securities to certain customers and then repurchases the securities the next business day. Securities sold under agreements to repurchase are recorded on the consolidated balance sheets at the amount of cash received in connection with each transaction in the line item "Borrowings". These are secured liabilities and are not covered by the FDIC. See Note 13, "Borrowings" in the Notes to the consolidated financial statements for additional details regarding securities sold under agreements to repurchase.
(X) Advertising expense:
Advertising costs, including costs related to internet mortgage marketing, lead generation, and related costs, are expensed as incurred.
(Y)(T) Earnings per common share:share
Basic EPS excludes dilution and is computed by dividing earnings attributable 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 attributable to common shareholders by the weighted average number of common shares outstanding for the year, 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, including the Company, are required to calculate basic and diluted EPS using the two-class method. Certain restricted stock awards granted by the Company include non-forfeitable
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Dollar amounts are in thousands, except share and per share amounts)
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. The following is a summary of the basic and diluted earnings per common share calculation for each of the periods presented: | | | Years Ended December 31, | | | | Years Ended December 31, | | | Years Ended December 31, | | | 2023 | | 2022 | | 2021 | | | 2022 | | 2021 | | 2020 | Basic earnings per common share calculation: | | Basic earnings per common share: | | Net income applicable to FB Financial Corporation | | Net income applicable to FB Financial Corporation | | Net income applicable to FB Financial Corporation | Net income applicable to FB Financial Corporation | | $ | 124,555 | | | $ | 190,285 | | | $ | 63,621 | | Dividends paid on and undistributed earnings allocated to participating securities | Dividends paid on and undistributed earnings allocated to participating securities | | — | | | — | | | — | | Earnings available to common shareholders | Earnings available to common shareholders | | $ | 124,555 | | | $ | 190,285 | | | $ | 63,621 | | Weighted average basic shares outstanding | Weighted average basic shares outstanding | | 47,113,470 | | | 47,431,102 | | | 37,621,720 | | Basic earnings per common share | Basic earnings per common share | | $ | 2.64 | | | $ | 4.01 | | | $ | 1.69 | | Diluted earnings per common share: | Diluted earnings per common share: | | Earnings available to common shareholders | Earnings available to common shareholders | | $ | 124,555 | | | $ | 190,285 | | | $ | 63,621 | | Earnings available to common shareholders | | Earnings available to common shareholders | | Weighted average basic shares outstanding | Weighted average basic shares outstanding | | 47,113,470 | | | 47,431,102 | | | 37,621,720 | | Weighted average diluted shares contingently issuable(1) | Weighted average diluted shares contingently issuable(1) | | 126,321 | | | 524,778 | | | 478,024 | | Weighted average diluted shares outstanding | Weighted average diluted shares outstanding | | 47,239,791 | | | 47,955,880 | | | 38,099,744 | | Diluted earnings per common share | Diluted earnings per common share | | $ | 2.64 | | | $ | 3.97 | | | $ | 1.67 | |
(1) Excludes 172,677, 11,888, 4,400, and 239,8134,400 restricted stock units outstanding considered to be antidilutive as of December 31, 2023, 2022, 2021, and 20202021 respectively.(Z)(U) Segment reporting:reporting
The Company’s Mortgage division representsASC 820, “Segment Reporting,” requires information be reported about a distinct reportable segment that differs fromcompany's reporting segments using a “management approach.” Identifiable reporting segments are defined as those revenue-producing components for which discrete financial information is utilized internally and which are subject to evaluation by the Company’s primary business of Banking. During the year ended December 31, 2022,chief operating decision maker in making resource allocation decisions. Based on this guidance, the Company exitedhas identified two reporting segments - Banking and Mortgage. The Banking segment, the direct-to-consumer delivery channel (referredCompany's primary segment, provides a full range of deposit and lending services to herein as "Mortgage restructuring"), which is one of two delivery channels in the Mortgage segment. As a result of exiting this channel, thecorporate, commercial and consumer customers. The Company incurred $12,458 of restructuring expenses during the year ended December 31, 2022. The repositioning ofalso originates conforming residential mortgage loans through the Mortgage segment does not qualify to be reported as discontinued operations. The Company plans to continue originatingwhich engages in servicing and selling residentialsale of mortgage loans within its Mortgage segment through its traditional mortgage retail channel, retain mortgage servicing rights and continue holding residential 1-4 family mortgage loans in the loan portfolio. A reconciliation of reportable segment revenues, expenses and profit to the Company’s consolidated totalsecondary markets. Certain financial information has been presented in Note 20, "Segment reporting".18, “Segment reporting.”
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) (V) Stock-based compensation:compensation The Company grants restricted stock unitsRSUs under compensation arrangements for the benefit of certain employees, executive officers, and directors. Restricted stock unit grants are subject to time-based vesting. The total number of restricted stock unitsRSUs granted represents the maximum number of restricted stock units eligible to vest based upon the service conditions set forth in the grant agreements. The Company awards annual grants of performance-based restricted stock unitsPSUs to executivescertain employees and other employees.executive officers. Under the terms of thea PSU award, the number of units that will vest and convert to shares of common stock will be based on the extent to which the Company achieves specified performance criteria relative to a predefined peer group during a fixed three-year performance period. Stock-based compensation expense is recognized in accordance with ASC 718-20, “Compensation“Compensation – Stock Compensation Awards Classified as Equity”.Equity.” Expense is recognized based on the fair value of the portion of stock-based payment awards that are ultimately expected to vest, reduced for forfeitures based on grant-date fair value. The restricted stock unit awardsRSUs and related expense are amortized over the required service period, if any. Compensation expense for PSUs is estimated each period based on the fair value of the stock at the grant date and the most probable outcome of the performance condition, adjusted for the passage of time within the vesting period of the awards. The summary of RSUs, PSUs, and Stock-based compensation expense is presented in Note 23, "Stock-based Compensation".21, “Stock-based compensation.”
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Dollar amounts are in thousands, except share and per share amounts)
(BB)(W) Subsequent Events:events
In accordance with ASC Topic 855, "Subsequent Events",“Subsequent Events,” the Company has evaluated events and transactions that occurred after December 31, 20222023 through the date of the issued consolidated financial statements for potential recognition and disclosure. Recently adopted accounting standards: In March 2022, the SEC released SAB 121 to add interpretive guidance for entities to consider when they have obligations to safeguard crypto-assets held for clients. The new guidance requires reporting entities who allow clients to transact in crypto-assets and act as a custodian to record a liability with a corresponding asset regardless of whether they control the crypto-asset. The crypto-asset will need to be marked at fair value for each reporting period. The new guidance requires disclosures in the footnotes to address the amount of crypto-assets reported, and the safeguarding and recordkeeping of the assets. The guidance in this update requires that reporting companies implement SAB 121 no later than the financial statements covering the first interim or annual period ending after June 15, 2022, with retrospective application back to the beginning of the fiscal year. During the first quarter of 2022, the Company became a founding member of the USDF Consortium (the "Consortium"), which plans to utilize blockchain and technology to streamline peer-to-peer financial transactions. The USDF Consortium is a membership-based association of insured depository institutions with a mission to build a network of banks to further the adoption and interoperability of a bank-minted tokenized deposit. The Company does not currently hold or facilitate transactions with crypto-assets, however the Company now evaluates any crypto-asset activities and the applicable financial statement and disclosure requirements in accordance with the guidance.
Newly issued not yet effective accounting standards:
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 is issuing 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 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 and net investment in leases by year of origination in the vintage disclosures. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The Company adopted the amendment effective January 1, 2023 and will update its disclosures for the first quarter of 2023. The update did not have a material impact to the Company's results of operation, financial position or liquidity.standards
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 is intended to provide relief for companies preparing for discontinuation of interest rates based on LIBOR. The 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 onetimeone-time sale and/or transfer to AFS or trading to be made for HTMheld-to-maturity debt securities that both reference an eligible reference rate and were classified as HTMheld-to-maturity 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
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Dollar amounts are in thousands, except share and per share amounts)
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 HTMheld-to-maturity may be made any time after March 12, 2020. In December 2022, the FASB issued ASU 2022-06, "Reference“Reference rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848"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 toCompany has implemented its transition plan away from LIBOR to alternative rates and has continued its efforts consistent with industry timelines. As partfollowing the benchmark's discontinuation effective June 30, 2023. The application of these efforts, during the fourth quarter of 2021, we ceased utilization of LIBOR as an index in newly originated loans or loans that are refinanced. Additionally, we identified existing products that utilize LIBOR and are reviewing contractual language to facilitate the transition to alternative reference rates. ASU 2020-04 and ASU 2021-01 arethis guidance did not expected to have a material impact to the consolidated financial statements or related disclosures. In March 2022, the FASB issued ASU 2022-01, “Derivatives and Hedging (Topic 815): Fair Value Hedging – Portfolio Layer Method,” to expand the current single-layer method of electing hedge accounting to allow multiple hedged layers of a single closed portfolio under the method. To reflect that expansion, the last-of-layer method is renamed the portfolio layer method. The amendments in this update are effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early adoption is permitted on any date on or after the issuance of ASU 2022-01 for any entity that has adopted the amendments in ASU 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 Company's consolidated financial statements. Note (2)—Mergers and acquisitions:
The following mergers and acquisitions were accounted for pursuant to Accounting Standards Codification 805, "Business Combinations". Accordingly, the purchase price of each acquisition was allocated to the acquired assets and liabilities assumed based on estimated fair values as of the respective acquisition dates. The excess of the purchase price over the net assets acquired was recorded as goodwill.
Franklin Financial Network, Inc. merger
Effective August 15, 2020, the Company completed its merger with Franklin Financial Network, Inc. and its wholly-owned subsidiaries, with FB Financial Corporation continuing as the surviving entity. After consolidating duplicative locations the merger added 10 branches and expanded the Company's footprint in middle Tennessee and the Nashville metropolitan statistical area. Under the terms of the agreement, the Company acquired total assets of $3.63 billion, loans of $2.79 billion and assumed total deposits of $3.12 billion. Total loans acquired includes a non-strategic institutional portfolio with a fair value of $326,206 the Company classified as held for sale. Franklin common shareholders received 15,058,181 shares of the Company's common stock, net of the equivalent value of 44,311 shares withheld on certain Franklin employee equity awards that vested upon change in control, as consideration in connection with the merger, in addition to $31,330 in cash consideration. Also included in the purchase price, the Company issued replacement restricted stock units for awards initially granted by Franklin during 2020 that did not vest upon change in control, with a total fair value of $674 attributed to pre-combination service. Based on the closing price of the Company's common stock on the New York Stock Exchange of $29.52 on August 15, 2020, the merger consideration represented approximately $477,830 in aggregate consideration.
Goodwill of $67,191 was recorded in connection with the transaction resulted from the ongoing business contribution, reputation, operating model and expertise of Franklin. The goodwill is not deductible for income tax purposes. Goodwill is included in the Banking segment as substantially all of the operations resulting from the merger with Franklin are in alignment with the Company's banking business.statements or disclosures.
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) 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 following table presentsamendments 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 beginning with 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 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 ASC 820, “Fair Value Measurement,” when measuring the fair value of an allocationequity 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 Company adopted this update effective January 1, 2024. The adoption did not have an impact on the Company's consolidated financial statements or related disclosures. In March 2023, the FASB issued ASU 2023-01, “Leases (Topic 842): Common Control Arrangements” as part of the Post-Implementation Review process of ASC 842, “Leases,” 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 Company adopted this standard on January 1, 2024 on a prospective basis. The adoption of this standard did not have a material impact on the Company's consolidated financial statements or related disclosures. Additionally, in March 2023, the FASB issued ASU 2023-02, “Investments – Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method.” The amendments in this update permit reporting entities to elect to account for tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. The Company adopted this standard effective January 1, 2024. The adoption of this accounting pronouncement did not have an impact on the Company's historical consolidated financial statements but could influence the Company's decisions with respect to investments in certain tax credits prospectively. In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The amendments in this update are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. The ASU requires disclosures to include significant segment expenses that are regularly provided to the chief operating decision maker, a description of other segment items by reportable segment, and any additional measures of a segment's profit or loss used by the chief operating decision maker when deciding how to allocate resources. The ASU also requires all annual disclosures currently required by Topic 280, “Segment Reporting,” to be included in interim periods. This update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted and retrospective application is required for all periods presented. The Company is evaluating the impact this will have on the Company's consolidated financial statements and related disclosures. In December 2023, the FASB issued ASU 2023-08, “Intangibles – Goodwill and Other-Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets.” This update requires entities to present crypto assets measured at fair value separately from other intangible assets on the balance sheet and reflect changes from remeasurement in the net income. Additionally, an entity that receives crypto assets as noncash consideration in the ordinary course of business and converts them nearly immediately into cash is required to netclassify those cash receipts as cash flows from operating activities. Lastly, the update requires entities to provide interim and annual disclosures about the types of crypto assets acquired: | | | | | | | | | | | | | | | | | Purchase Price: | | | | | | | Equity consideration | | | | | | | Franklin shares outstanding(1)
| | 15,588,337 | | | | | | Franklin options converted to net shares | | 62,906 | | | | | | | | 15,651,243 | | | | | | Exchange ratio to FB Financial shares | | 0.965 | | | | | | FB Financial shares to be issued as merger consideration(2)
| | 15,102,492 | | | | | | Issuance price as of August 15, 2020 | | $ | 29.52 | | | | | | Value of FB Financial stock to be issued as merger consideration | | $ | 445,826 | | | | | | Less: tax withholding on vested restricted stock awards, units and options(3)
| | (1,308) | | | | | | Value of FB Financial stock issued | | $ | 444,518 | | | | | | FB Financial shares issued | | 15,058,181 | | | | | | | | | | | | | Franklin restricted stock units that do not vest on change in control | | 114,915 | | | | | | Replacement awards issued to Franklin employees | | 118,776 | | | | | | Fair value of replacement awards | | $ | 3,506 | | | | | | Fair value of replacement awards attributable to pre-combination service | | $ | 674 | | | | | | | | | | | | | Cash consideration | | | | | | | Total Franklin shares and net shares outstanding | | 15,651,243 | | | | | | Cash consideration per share | | $ | 2.00 | | | | | | Total cash to be paid to Franklin(4)
| | $ | 31,330 | | | | | | Total purchase price | | | | $ | 477,830 | | | | Fair value of net assets acquired | | | | 410,639 | | | | Goodwill resulting from merger | | | | $ | 67,191 | | | | | | | | | | |
(1)Franklin shares outstanding includes restricted stock awardsthey hold and restricted stock units that vested upon changeany changes in control.
(2)Only factors in whole share issuance. Cash was paid in lieutheir holdings of fractional shares.
(3)Represents the equivalent value of approximately 44,311 shares of FB Financial Corporation stock on August 15, 2020.
(4)Includes $28 of cash paid in lieu of fractional shares.
FNB Financial Corp. merger
Effective February 14, 2020,crypto assets. While the Company completed its acquisition of FNB Financial Corp. and its wholly-owned subsidiary, Farmers National Bank of Scottsville (collectively, "Farmers National"). Following the acquisition, Farmers National was merged intodoes not currently hold or facilitate transactions with crypto assets, the Company with FB Financial Corporation continuing asis evaluating the surviving entity. The transaction added four branchespotential future financial statement and expandeddisclosure impact from adopting this guidance when it becomes applicable based on the Company's footprint into Kentucky. Under the terms of the agreement, the Company acquired total assets of $258,218, loans of $182,171 and assumed total deposits of $209,535. Farmers National shareholders received 954,797 shares of the Company's common stock as consideration in connection with the merger, in addition to $15,001 in cash consideration. Based on the closing price of the Company's common stock on the New York Stock Exchange of $36.70 on February 14, 2020, the merger consideration represented approximately $50,042 in aggregate consideration.
Goodwill of $6,319 was recorded in connection with the transaction resulted from the ongoing business contribution of Farmers National and anticipated synergies arising from the combination of certain operational areas of the Company. Goodwill resulting from this transaction is not deductible for income tax purposes and is included in the Banking segment as substantially all of the operations resulting from the acquisition of Farmers National are in alignment with the Company's core banking business.
crypto asset activities.
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) Additionally, in December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The following table presentsamendments in this update enhance the total purchase price, fair valuetransparency and decision usefulness of net assets acquired,income tax disclosures. This ASU requires disclosures of specific categories and disaggregation of information in the rate reconciliation table. The ASU also requires disclosure of disaggregated information related to income taxes paid, income or loss from continuing operations before income tax expense or benefit, and income tax expense or benefit from continuing operations. The requirements of the ASU are effective for annual periods beginning after December 15, 2024. Early adoption is permitted and the goodwill as of the acquisition date. | | | | | | | | | | | | | | | Consideration: | | | | | Net shares issued | | 954,797 | | | | Purchase price per share on February 14, 2020 | | $ | 36.70 | | | | Value of stock consideration | | | | $ | 35,041 | | Cash consideration paid | | | | 15,001 | | Total purchase price | | | | $ | 50,042 | | Fair value of net assets acquired | | | | 43,723 | | Goodwill resulting from merger | | | | $ | 6,319 | |
Net assets acquired
amendments should be applied on a prospective basis. Retrospective application is permitted. The following table summarizes the estimated fair values of assets acquired and liabilities assumed as of the respective acquisition dates: | | | | | | | | | | | | | | | | | As of August 15, 2020 | | As of February 14, 2020 | | | Franklin Financial Network, Inc. | | FNB Financial Corp. | ASSETS | | | | | Cash and cash equivalents | | $ | 284,004 | | | $ | 10,774 | | Investments | | 373,462 | | | 50,594 | | Mortgage loans held for sale, at fair value | | 38,740 | | | — | | Commercial loans held for sale, at fair value | | 326,206 | | | — | | Loans held for investment, net of fair value adjustments | | 2,427,527 | | | 182,171 | | Allowance for credit losses on purchased credit deteriorated loans | | (24,831) | | | (669) | | Premises and equipment | | 45,471 | | | 8,049 | | Operating lease right-of-use assets | | 23,958 | | | 14 | | Mortgage servicing rights | | 5,111 | | | — | | Core deposit intangible | | 7,670 | | | 2,490 | | Other assets | | 124,571 | | | 4,795 | | Total assets | | $ | 3,631,889 | | | $ | 258,218 | | LIABILITIES | | | | | Deposits: | | | | | Noninterest-bearing | | $ | 505,374 | | | $ | 63,531 | | Interest-bearing checking | | 1,783,379 | | | 26,451 | | Money market and savings | | 342,093 | | | 37,002 | | Customer time deposits | | 383,433 | | | 82,551 | | Brokered and internet time deposits | | 107,452 | | | — | | Total deposits | | 3,121,731 | | | 209,535 | | | | | | | Borrowings | | 62,435 | | | 3,192 | | Operating lease liabilities | | 24,330 | | | 14 | | Accrued expenses and other liabilities | | 12,661 | | | 1,754 | | Total liabilities assumed | | 3,221,157 | | | 214,495 | | Noncontrolling interests acquired | | 93 | | | — | | Net assets acquired | | $ | 410,639 | | | $ | 43,723 | |
Purchased credit-deteriorated loans
Under the CECL methodology, the Company is required to determine whether purchased loans held for investment have experienced more-than-insignificant deterioration in credit quality since origination. Loans that have experienced this level of deterioration in credit quality are subject to special accounting at initial recognition and measurement. The Company initially measures the amortized cost of a PCD loan by adding the acquisition date estimate of expected credit losses to the loan's purchase price (i.e. the "gross up" approach). There is no provision for credit loss recognized upon acquisition of a PCD loan because the initial allowance is established through gross-up of the loans' amortized cost.
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Dollar amounts are in thousands, except share and per share amounts)
The Company determined that 27.9% of the Franklin loan portfolio had more-than-insignificant deterioration in credit quality since origination as of the merger date. This included deterioration in credit metrics, such as delinquency, nonaccrual status or risk ratings as well as certain loans within designated industries of concern that have been negatively impacted by COVID-19. It was determined that 10.1% of the Farmers National loan portfolio had more-than-insignificant deterioration in credit quality since origination as of the February acquisition date. These were primarily delinquent loans or loans that Farmers National had classified as nonaccrual or troubled debt restructuring prior to the Company's acquisition.
| | | | | | | | | | | | | | | | | As of August 15, 2020 | | As of February 14, 2020 | | | Franklin Financial Network, Inc. | | FNB Financial Corp. | Purchased credit-deteriorated loans | | | | | Principal balance | | $ | 693,999 | | | $ | 18,964 | | Allowance for credit losses at acquisition | | (24,831) | | | (669) | | Net premium attributable to other factors | | 8,810 | | | 63 | | Loans purchased credit-deteriorated fair value | | $ | 677,978 | | | $ | 18,358 | |
Loans recognized through acquisition that have not experienced more-than-insignificant credit deterioration since origination are initially recognized at the purchase price. Expected credit losses are measured under CECL through the provision for credit losses. The Company recorded provisions for credit losses in the amounts of $52,822 and $2,885 as of August 15, 2020 and February 14, 2020, respectively, in the statement of income related to estimated credit losses on non-PCD loans from Franklin and Farmers National, respectively. Additionally, the Company estimates expected credit losses on off-balance sheet loan commitments that are not accounted for as derivatives. The Company recorded an increase in provision for credit losses from unfunded commitments of $10,499 as of August 15, 2020 related to the Franklin merger.
Pro forma financial information (unaudited)
The results of operations of the acquisitions have been included in the Company's consolidated financial statements prospectively beginning on the date of each transaction. The acquired entities have been fully integrated with the Company's existing operations. Accordingly, post-acquisition net interest income, total revenues, and net income are not discernible. The following unaudited pro forma condensed consolidated financial information presents the results of operations for the year ended December 31, 2020, as though the Franklin merger and Farmers National acquisition had been completed as of January 1, 2019. The unaudited estimated pro forma information combines the historical results of the mergers with the Company’s historical consolidated results and includes certain adjustments reflecting the estimated impact of certain fair value adjustments for the periods presented. Merger expenses are reflected in the period they were incurred. The pro forma information is not indicative of what would have occurred had the transactions taken place on January 1, 2019 and does not includecurrently evaluating the effect of cost-saving or revenue-enhancing strategies.
| | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | | | | | | | | | | 2020 | | | Net interest income | | | | | | | | | $ | 338,092 | | | | Total revenues | | | | | | | | | $ | 654,374 | | | | Net income applicable to FB Financial Corporation | | | | | | | | | $ | 65,135 | | | | | | | | | | | | | | | | that ASU 2023-09 will have on its disclosures.Note (3)—Cash and cash equivalents concentrations: The Bank maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits. The Bank has not experienced any losses in such correspondent accounts and believes it is not exposed to any significant credit risk from cash and cash equivalents.
Included in cash and cash equivalents, the Bank had cash in the form of Federal funds sold of $135,128 and $53,919 as of December 31, 2022 and 2021, respectively; and the Bank had reverse repurchase agreements of $75,408 and $74,168 as of December 31, 2022 and 2021, respectively.
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Dollar amounts are in thousands, except share and per share amounts)
Note (4)(2)—Investment securities: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) incomeloss at December 31, 20222023 and 2021:2022: | | December 31, 2022 | | | December 31, 2023 | | | | December 31, 2023 | | | | Amortized cost | | Gross unrealized gains | | Gross unrealized losses | | Allowance for credit losses for investments | | Fair Value | | | Amortized cost | | Gross unrealized gains | | Gross unrealized losses | | Allowance for credit losses for investments | | Fair Value | Investment Securities | Investment Securities | | | | | | | | | Investment Securities | | | | | | | Available-for-sale debt securities | Available-for-sale debt securities | | | | | | U.S. government agency securities | | U.S. government agency securities | | U.S. government agency securities | U.S. government agency securities | | $ | 45,167 | | | $ | — | | | $ | (5,105) | | | $ | — | | | $ | 40,062 | | Mortgage-backed securities - residential | Mortgage-backed securities - residential | | 1,224,522 | | | — | | | (190,329) | | | — | | | 1,034,193 | | Mortgage-backed securities - commercial | Mortgage-backed securities - commercial | | 19,209 | | | — | | | (1,565) | | | — | | | 17,644 | | Municipal securities | Municipal securities | | 295,375 | | | 458 | | | (31,413) | | | — | | | 264,420 | | U.S. Treasury securities | U.S. Treasury securities | | 113,301 | | | — | | | (5,621) | | | — | | | 107,680 | | Corporate securities | Corporate securities | | 8,000 | | | — | | | (813) | | | — | | | 7,187 | | Total | Total | | $ | 1,705,574 | | | $ | 458 | | | $ | (234,846) | | | $ | — | | | $ | 1,471,186 | |
| | | December 31, 2022 | | | | December 31, 2022 | | | | December 31, 2022 | | | | | December 31, 2021 | | | | | Amortized cost | | Gross unrealized gains | | Gross unrealized losses | | Allowance for credit losses for investments | | Fair Value | | Investment Securities | Investment Securities | | | | | | | | | | Investment Securities | | Investment Securities | | Available-for-sale debt securities | | Available-for-sale debt securities | | Available-for-sale debt securities | Available-for-sale debt securities | | | | | | | | | | U.S. government agency securities | U.S. government agency securities | | $ | 34,023 | | | $ | 18 | | | $ | (171) | | | $ | — | | | $ | 33,870 | | | U.S. government agency securities | | U.S. government agency securities | | Mortgage-backed securities - residential | | Mortgage-backed securities - residential | | Mortgage-backed securities - residential | Mortgage-backed securities - residential | | 1,281,285 | | | 6,072 | | | (17,985) | | | — | | | 1,269,372 | | | Mortgage-backed securities - commercial | Mortgage-backed securities - commercial | | 15,024 | | | 272 | | | (46) | | | — | | | 15,250 | | | Mortgage-backed securities - commercial | | Mortgage-backed securities - commercial | | Municipal securities | | Municipal securities | | Municipal securities | Municipal securities | | 322,052 | | | 16,718 | | | (160) | | | — | | | 338,610 | | | U.S. Treasury securities | U.S. Treasury securities | | 14,914 | | | — | | | (6) | | | — | | | 14,908 | | | U.S. Treasury securities | | U.S. Treasury securities | | Corporate securities | Corporate securities | | 6,500 | | | 40 | | | (25) | | | — | | | 6,515 | | | Corporate securities | | Corporate securities | | Total | | Total | | Total | Total | | $ | 1,673,798 | | | $ | 23,120 | | | $ | (18,393) | | | $ | — | | | $ | 1,678,525 | | | |
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 December 31, 20222023 and 2021,2022, total accrued interest receivable on debt securities was $5,470$7,212 and $5,051, respectively. As of December 31, 2022 and 2021, the Company had $2,990 and $3,367, in marketable equity securities recorded at fair value, respectively. Additionally, the Company had equity securities without readily determinable market value included in other assets on the consolidated balance sheets with carrying amounts of $22,496 and $8,868 at December 31, 2022 and 2021,$5,470, respectively.
Securities pledged at December 31, 20222023 and 20212022 had carrying amounts of $1,191,021$929,546 and $1,226,646,$1,191,021, respectively, and were pledged to secure a Federal Reserve Bank line of credit, Bank Term Funding Program borrowings, public deposits and repurchase agreements. There were no holdings of debt securities of any one issuer, other than U.S. Government sponsored enterprises, in an amount greater than 10% of shareholders' equity during any period presented. Investment securities transactions are recorded as of the trade date. At December 31, 20222023 and 2021,2022, there were no trade date receivables nor payables that related to sales or purchases settled after period end.
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) The amortized cost and fair value of debt securities by contractual maturity at December 31, 2022 and 2021 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. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, | | | 2022 | | | 2021 | | | | Available-for-sale | | Available-for-sale | | | Amortized cost | | Fair value | | Amortized cost | | Fair value | Due in one year or less | | $ | 4,277 | | | $ | 4,225 | | | $ | 21,851 | | | $ | 21,884 | | Due in one to five years | | 161,556 | | | 152,181 | | | 54,847 | | | 55,307 | | Due in five to ten years | | 61,290 | | | 57,859 | | | 45,714 | | | 46,975 | | Due in over ten years | | 234,720 | | | 205,084 | | | 255,077 | | | 269,737 | | | | 461,843 | | | 419,349 | | | 377,489 | | | 393,903 | | Mortgage-backed securities - residential | | 1,224,522 | | | 1,034,193 | | | 1,281,285 | | | 1,269,372 | | Mortgage-backed securities - commercial | | 19,209 | | | 17,644 | | | 15,024 | | | 15,250 | | Total debt securities | | $ | 1,705,574 | | | $ | 1,471,186 | | | $ | 1,673,798 | | | $ | 1,678,525 | |
Sales and other dispositions of available-for-sale securities were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | | | | | 2022 | | | 2021 | | | 2020 | Proceeds from sales | | | | | $ | 1,218 | | | $ | 8,855 | | | $ | 146,494 | | Proceeds from maturities, prepayments and calls | | | | | 204,748 | | | 296,256 | | | 220,549 | | Gross realized gains | | | | | 4 | | | 127 | | | 1,606 | | Gross realized losses | | | | | 3 | | | 1 | | | 271 | | | | | | | | | | | |
Additionally, changes in fair value and the sale of equity securities with readily determinable fair values resulted in a net loss of $377 for the year ended December 31, 2022, and a net gain of $198 and $296 for the years ended December 31, 2021 and 2020, respectively.
The following tables show gross unrealized losses for which an allowance for credit losses has not been recorded at December 31, 20222023 and 2021,2022, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2023 | | | Less than 12 months | | 12 months or more | | Total | | | Fair Value | | Gross Unrealized Loss | | Fair Value | | Gross Unrealized Loss | | Fair Value | | Gross Unrealized Loss | U.S. government agency securities | | $ | 25,923 | | | $ | (21) | | | $ | 14,040 | | | $ | (1,156) | | | $ | 39,963 | | | $ | (1,177) | | Mortgage-backed securities - residential | | — | | | — | | | 896,971 | | | (160,418) | | | 896,971 | | | (160,418) | | Mortgage-backed securities - commercial | | — | | | — | | | 16,961 | | | (1,225) | | | 16,961 | | | (1,225) | | Municipal securities | | 14,480 | | | (148) | | | 188,669 | | | (21,271) | | | 203,149 | | | (21,419) | | U.S. Treasury securities | | — | | | — | | | 108,496 | | | (3,233) | | | 108,496 | | | (3,233) | | Corporate securities | | — | | | — | | | 3,326 | | | (174) | | | 3,326 | | | (174) | | Total | | $ | 40,403 | | | $ | (169) | | | $ | 1,228,463 | | | $ | (187,477) | | | $ | 1,268,866 | | | $ | (187,646) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 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) | |
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Dollar amounts are in thousands, except share and per share amounts)
| | | | December 31, 2021 | | | December 31, 2022 | | | | Less than 12 months | | 12 months or more | | Total | | | Less than 12 months | | 12 months or more | | Total | | | | Fair Value | | Unrealized Loss | | Fair Value | | Unrealized Loss | | Fair Value | | Unrealized loss | | | Fair Value | | Gross Unrealized Loss | | Fair Value | | Gross Unrealized Loss | | Fair Value | | Gross Unrealized Loss | U.S. government agency securities | U.S. government agency securities | | $ | 18,360 | | | $ | (171) | | | $ | — | | | $ | — | | | $ | 18,360 | | | $ | (171) | | Mortgage-backed securities - residential | Mortgage-backed securities - residential | | 871,368 | | | (14,295) | | | 102,799 | | | (3,690) | | | 974,167 | | | (17,985) | | Mortgage-backed securities - commercial | Mortgage-backed securities - commercial | | 7,946 | | | (46) | | | — | | | — | | | 7,946 | | | (46) | | Municipal securities | Municipal securities | | 11,414 | | | (160) | | | — | | | — | | | 11,414 | | | (160) | | U.S. Treasury securities | U.S. Treasury securities | | 14,908 | | | (6) | | | — | | | — | | | 14,908 | | | (6) | | Corporate securities | Corporate securities | | 4,119 | | | (25) | | | — | | | — | | | 4,119 | | | (25) | | Total | Total | | $ | 928,115 | | | $ | (14,703) | | | $ | 102,799 | | | $ | (3,690) | | | $ | 1,030,914 | | | $ | (18,393) | | |
As of December 31, 20222023 and 2021,2022, the Company’s debt securities portfolio consisted of 439 and 503 securities, 370 and 511 securities, 454 and 80 of which were in an unrealized loss position, respectively. During the year ended December 31, 2022, the Company's available-for-sale debt securities portfolio unrealized value declined $239,115 to an unrealized loss position of $234,388 from an unrealized gain position of $4,727 as of December 31, 2021. During the year ended December 31, 2021, the Company's available-for-sale debt securities portfolio unrealized value declined $29,825 to an unrealized gain position of $4,727 from an unrealized gain position of $34,552 as of December 31, 2020.
The majority of the investment portfolio was either government guaranteed, or an issuance of a government sponsored entity or highly rated by major credit rating agencies, and the Company has historically not recorded any credit losses associated with these investments. Municipal securities with market values below amortized cost at December 31, 20222023 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 December 31, 20222023 and 2021,2022, it was determined that all available-for-saleAFS 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 December 31, 2022, 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 provisionallowance for credit losses recognized on available-for-saleAFS debt securities during the year ended December 31, 2022 or 2021. Note (5)—Loans and allowance for credit losses:
Loans outstanding as of December 31, 2022 and 2021, by class of financing receivable are as follows:
| | | | | | | | | | | | | | | | | December 31, | | | 2022 | | | 2021 | | Commercial and industrial (1) | | $ | 1,645,783 | | | $ | 1,290,565 | | Construction | | 1,657,488 | | | 1,327,659 | | Residential real estate: | | | | | 1-to-4 family mortgage | | 1,573,121 | | | 1,270,467 | | Residential line of credit | | 496,660 | | | 383,039 | | Multi-family mortgage | | 479,572 | | | 326,551 | | Commercial real estate: | | | | | Owner-occupied | | 1,114,580 | | | 951,582 | | Non-owner occupied | | 1,964,010 | | | 1,730,165 | | Consumer and other | | 366,998 | | | 324,634 | | Gross loans | | 9,298,212 | | | 7,604,662 | | Less: Allowance for credit losses | | (134,192) | | | (125,559) | | Net loans | | $ | 9,164,020 | | | $ | 7,479,103 | |
(1)Includes $767 and $3,990 of loans originated as part2023 or 2022. Periodically, AFS debt securities may be sold or the composition of the Paycheck Protection Program as of December 31, 2022portfolio realigned to improve yields, quality or marketability, or to implement changes in investment or asset/liability strategy, including maintaining collateral requirements and 2021, respectively. PPP loans are federally guaranteed as part of the CARES Act, provided PPP loan recipients receive loan forgiveness under the SBA regulations. As such, there is minimal credit risk associated with these loans.raising funds for liquidity purposes or preparing for anticipated changes in market interest rates.
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Dollar amounts are in thousands, except share and per share amounts)
As of December 31, 2022 and 2021, $909,734 and $1,136,294, respectively, of qualifying residential mortgage loans (including loans held for sale) and $1,763,730 and $1,581,673, 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 December 31, 2022 and 2021, qualifying loans of $3,118,172 and $2,440,097, 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 December 31, 2022 and 2021, accrued interest receivable on loans held for investment amounted to $38,507 and $31,676, 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; 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, 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 year ended December 31, 2022 was a result of increased loan growth and a tightening monetary policy environment both of which were incorporated into the Company's reasonable and supportable forecasts. 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 construction loans incurred the largest increase due to increased economic uncertainty going into 2023. Loss rates on residential loans were qualitatively adjusted downwards, addressing the relative strength of asset values in the Company's predominant markets.
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (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 December 31, 2023 and 2022 are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, | | | 2023 | | | 2022 | | | | Available-for-sale | | Available-for-sale | | | Amortized cost | | Fair value | | Amortized cost | | Fair value | Due in one year or less | | $ | 64,776 | | | $ | 64,279 | | | $ | 4,277 | | | $ | 4,225 | | Due in one to five years | | 75,996 | | | 71,801 | | | 161,556 | | | 152,181 | | Due in five to ten years | | 51,162 | | | 49,630 | | | 61,290 | | | 57,859 | | Due in over ten years | | 391,270 | | | 372,331 | | | 234,720 | | | 205,084 | | | | 583,204 | | | 558,041 | | | 461,843 | | | 419,349 | | Mortgage-backed securities - residential | | 1,057,389 | | | 896,971 | | | 1,224,522 | | | 1,034,193 | | Mortgage-backed securities - commercial | | 18,186 | | | 16,961 | | | 19,209 | | | 17,644 | | Total debt securities | | $ | 1,658,779 | | | $ | 1,471,973 | | | $ | 1,705,574 | | | $ | 1,471,186 | |
Sales and other dispositions of AFS debt securities were as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | | | | | 2023 | | | 2022 | | | 2021 | Proceeds from sales | | | | | $ | 100,463 | | | $ | 1,218 | | | $ | 8,855 | | Proceeds from maturities, prepayments and calls | | | | | 128,206 | | | 204,748 | | | 296,256 | | Gross realized gains | | | | | 45 | | | 4 | | | 127 | | Gross realized losses | | | | | 14,119 | | | 3 | | | 1 | | | | | | | | | | | |
Equity Securities As of December 31, 2022, the Company calculates its expected credit loss using a lifetime loss rate methodology using the following pools: | | | | | | | | | | 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 leveraging a reverse-compounding formula. Loss rates incorporate a peer scaling factor.
Qualitative: An uncertain economic outlook including the effects of inflation and the interest rate environment as well as changes in asset quality are driving a qualitative increase in the ACL.
|
When a loanhad $2,990 in marketable equity securities recorded at fair value. There were no longer shares similar risk characteristics with other loans in any given pool, the loan is individually assessed.such securities outstanding as of December 31, 2023. The Company has determinedhad equity securities without readily determinable market value included in “Other assets” on the following circumstances in which a loan may require an individual evaluation: collateral dependent loans; loans for which foreclosure is probable;consolidated balance sheets with carrying amounts of $25,191 and loans with other unique risk characteristics. A loan is deemed collateral dependent when 1) the borrower is experiencing financial difficulty$22,496 at December 31, 2023 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,2022, respectively. Additionally, the Company reduceshad $34,190 and $58,641 of FHLB stock carried at cost at December 31, 2023 and 2022, respectively, included separately from the other equity securities discussed above.
The change in the fair value by the estimated costs to sell. Loans experiencing financial difficulty for whichof equity securities and sale of equity securities with readily determinable fair values resulted in a concession has not yet been provided may be identified as reasonably expected TDRs. Reasonably expected TDRsnet gain (loss) of $101, $(377), and TDRs use the same methodology. In cases where the expected credit loss can only be captured through a discounted cash flow analysis (such as an interest rate modification for a TDR loan), the allowance is measured by the amount which the loan’s amortized cost exceeds the discounted cash flow analysis.
The following tables provide the changes in the allowance for credit losses by class of financing receivable$198 for the years ended December 31, 2023, 2022, and 2021, and 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Commercial and industrial | | Construction | | 1-to-4 family residential mortgage | | Residential line of credit | | Multi-family residential mortgage | | Commercial real estate owner occupied | | Commercial real estate non-owner occupied | | Consumer and other | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 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 | | (4,563) | | | 11,221 | | | 7,060 | | | 1,574 | | | (486) | | | (4,883) | | | (3,584) | | | 4,054 | | | 10,393 | | Recoveries of loans previously charged-off | | 2,005 | | | 11 | | | 54 | | | 17 | | | — | | | 88 | | | — | | | 766 | | | 2,941 | | Loans charged off | | (2,087) | | | — | | | (77) | | | — | | | — | | | (15) | | | (268) | | | (2,254) | | | (4,701) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Ending balance - December 31, 2022 | | $ | 11,106 | | | $ | 39,808 | | | $ | 26,141 | | | $ | 7,494 | | | $ | 6,490 | | | $ | 7,783 | | | $ | 21,916 | | | $ | 13,454 | | | $ | 134,192 | |
respectively.
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Commercial and industrial | | Construction | | 1-to-4 family residential mortgage | | Residential line of credit | | Multi-family residential mortgage | | Commercial real estate owner occupied | | Commercial real estate non-owner occupied | | Consumer and other | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2021 | | | Beginning balance - December 31, 2020 | | $ | 14,748 | | | $ | 58,477 | | | $ | 19,220 | | | $ | 10,534 | | | $ | 7,174 | | | $ | 4,849 | | | $ | 44,147 | | | $ | 11,240 | | | $ | 170,389 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Provision for credit losses | | 4,178 | | | (29,874) | | | (87) | | | (4,728) | | | (197) | | | 7,588 | | | (16,813) | | | 938 | | | (38,995) | | | Recoveries of loans previously charged-off | | 861 | | | 3 | | | 125 | | | 115 | | | — | | | 156 | | | — | | | 773 | | | 2,033 | | | Loans charged off | | (4,036) | | | (30) | | | (154) | | | (18) | | | (1) | | | — | | | (1,566) | | | (2,063) | | | (7,868) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Ending balance - December 31, 2021 | | $ | 15,751 | | | $ | 28,576 | | | $ | 19,104 | | | $ | 5,903 | | | $ | 6,976 | | | $ | 12,593 | | | $ | 25,768 | | | $ | 10,888 | | | $ | 125,559 | | |
Note (3)—Loans and allowance for credit losses on loans HFI | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 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 | Year Ended December 31, 2020 | | Beginning balance - December 31, 2019 | | $ | 4,805 | | | $ | 10,194 | | | $ | 3,112 | | | $ | 752 | | | $ | 544 | | | $ | 4,109 | | | $ | 4,621 | | | $ | 3,002 | | | $ | 31,139 | | Impact of adopting ASC 326 on non-purchased credit deteriorated loans | | 5,300 | | | 1,533 | | | 7,920 | | | 3,461 | | | 340 | | | 1,879 | | | 6,822 | | | 3,633 | | | 30,888 | | Impact of adopting ASC 326 on purchased credit deteriorated loans | | 82 | | | 150 | | | 421 | | | (3) | | | — | | | 162 | | | 184 | | | (438) | | | 558 | | Provision for credit losses | | 13,830 | | | 40,807 | | | 6,408 | | | 5,649 | | | 5,506 | | | (1,739) | | | 17,789 | | | 6,356 | | | 94,606 | | Recoveries of loans previously charged-off | | 1,712 | | | 205 | | | 122 | | | 125 | | | — | | | 83 | | | — | | | 756 | | | 3,003 | | Loans charged off | | (11,735) | | | (18) | | | (403) | | | (22) | | | — | | | (304) | | | (711) | | | (2,112) | | | (15,305) | | Initial allowance on loans purchased with deteriorated credit quality | | 754 | | | 5,606 | | | 1,640 | | | 572 | | | 784 | | | 659 | | | 15,442 | | | 43 | | | 25,500 | | Ending balance - December 31, 2020 | | $ | 14,748 | | | $ | 58,477 | | | $ | 19,220 | | | $ | 10,534 | | | $ | 7,174 | | | $ | 4,849 | | | $ | 44,147 | | | $ | 11,240 | | | $ | 170,389 | |
Loans outstanding as of December 31, 2023 and 2022, by class of financing receivable are as follows: | | | | | | | | | | | | | | | | | | | | | | December 31, | | | 2023 | | | 2022 | | Commercial and industrial | | $ | 1,720,733 | | | $ | 1,645,783 | | Construction | | 1,397,313 | | | 1,657,488 | | Residential real estate: | | | | | 1-to-4 family mortgage | | 1,568,552 | | | 1,573,121 | | Residential line of credit | | 530,912 | | | 496,660 | | Multi-family mortgage | | 603,804 | | | 479,572 | | Commercial real estate: | | | | | Owner-occupied | | 1,232,071 | | | 1,114,580 | | Non-owner occupied | | 1,943,525 | | | 1,964,010 | | Consumer and other | | 411,873 | | | 366,998 | | Gross loans | | 9,408,783 | | | 9,298,212 | | Less: Allowance for credit losses on loans HFI | | (150,326) | | | (134,192) | | Net loans | | $ | 9,258,457 | | | $ | 9,164,020 | |
As of December 31, 2023 and 2022, $1,030,016 and $909,734, respectively, of qualifying residential mortgage loans (including loans held for sale) and $1,984,007 and $1,763,730, respectively, of qualifying commercial mortgage loans were pledged to the FHLB system securing advances against the Bank’s line of credit. Additionally, as of December 31, 2023 and 2022, qualifying commercial and industrial, construction and consumer loans, of $3,107,495 and $3,118,172, respectively, were pledged to the Federal Reserve under the Borrower-in-Custody program. The amortized cost of loans HFI on the consolidated balance sheets exclude accrued interest receivable as the Company presents accrued interest receivable separately on the balance sheet. As of December 31, 2023 and 2022, accrued interest receivable on loans HFI amounted to $43,776 and $38,507, respectively. 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 weaknessweaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the institution’s credit position at some future date. Management does not believe there will be a loss of principal or interest. These loans require intensive servicing and may possess more than normal credit risk. | | | | | | | | | | Classified. | Loans included in the Classified category include loans rated as Substandard and Doubtful. Loans rated as Substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Also included in this category are loans classified as Doubtful, which have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weakness or weaknesses make collection or liquidation in full, based on currently existing facts, conditions, and values, highly questionable and improbable. | | | | | | | | | | |
Risk ratings are updated on an ongoing basis and are subject to change by continuous loan monitoring processes.
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) Risk ratings are updated on an ongoing basis and are subject to change by continuous loan monitoring processes.
During the year ended December 31, 2022, the Company revised the presentation of the below credit quality vintage tables without change to accounting or credit policies. The updated presentation disaggregates between commercial and consumer loan types with consumer loan types reported as either performing or nonperforming based on their delinquency and accrual status. As such, the tables presented below as of December 31, 2021 have been revised to align with current period presentation.
The following tables present the credit quality of the Company's commercial type loan portfolio by year of origination as of December 31, 2023 and 2022 and 2021.the gross charge-offs for the year ended December 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. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 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 | | | |
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 year ended December 31, 2023 | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | Revolving Loans Amortized Cost Basis | | Total | | | Commercial and industrial | | | | | | | | | | | | | | | | | | | Pass | | $ | 225,734 | | | $ | 255,921 | | | $ | 151,492 | | | $ | 39,897 | | | $ | 70,302 | | | $ | 73,415 | | | $ | 839,918 | | | $ | 1,656,679 | | | | Special Mention | | — | | | 17,947 | | | 3,083 | | | — | | | 151 | | | 108 | | | 7,549 | | | 28,838 | | | | Classified | | 457 | | | 4,253 | | | 3,075 | | | 3,027 | | | 254 | | | 6,129 | | | 18,021 | | | 35,216 | | | | | | | | | | | | | | | | | | | | | | | Total | | 226,191 | | | 278,121 | | | 157,650 | | | 42,924 | | | 70,707 | | | 79,652 | | | 865,488 | | | 1,720,733 | | | | | | | | | | | | | | | | | | | | | | | Current-period gross charge-offs | | 14 | | | 7 | | | 201 | | | 22 | | | — | | | 87 | | | 131 | | | 462 | | | | Construction | | | | | | | | | | | | | | | | | | | Pass | | 179,929 | | | 677,387 | | | 148,312 | | | 46,697 | | | 39,140 | | | 49,954 | | | 208,491 | | | 1,349,910 | | | | Special Mention | | 1 | | | 4,659 | | | 2,943 | | | 1,202 | | | — | | | 690 | | | 12,000 | | | 21,495 | | | | Classified | | — | | | 2,349 | | | 1,484 | | | 6,620 | | | — | | | — | | | 15,455 | | | 25,908 | | | | | | | | | | | | | | | | | | | | | | | Total | | 179,930 | | | 684,395 | | | 152,739 | | | 54,519 | | | 39,140 | | | 50,644 | | | 235,946 | | | 1,397,313 | | | | | | | | | | | | | | | | | | | | | | | Current-period gross charge-offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | Residential real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Multi-family mortgage | | | | | | | | | | | | | | | | | | | Pass | | 29,982 | | | 151,495 | | | 223,889 | | | 92,745 | | | 29,933 | | | 43,479 | | | 31,209 | | | 602,732 | | | | Special Mention | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | Classified | | — | | | — | | | — | | | — | | | — | | | 1,072 | | | — | | | 1,072 | | | | | | | | | | | | | | | | | | | | | | | Total | | 29,982 | | | 151,495 | | | 223,889 | | | 92,745 | | | 29,933 | | | 44,551 | | | 31,209 | | | 603,804 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Current-period gross charge-offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | Commercial real estate: | | | | | | | | | | | | | | | | | | | Owner occupied | | | | | | | | | | | | | | | | | | | Pass | | 118,030 | | | 261,196 | | | 231,241 | | | 115,397 | | | 151,146 | | | 281,253 | | | 53,970 | | | 1,212,233 | | | | Special Mention | | — | | | 1,297 | | | 1,827 | | | — | | | 154 | | | 2,617 | | | — | | | 5,895 | | | | Classified | | — | | | 6,305 | | | 16 | | | — | | | 760 | | | 5,789 | | | 1,073 | | | 13,943 | | | | | | | | | | | | | | | | | | | | | | | Total | | 118,030 | | | 268,798 | | | 233,084 | | | 115,397 | | | 152,060 | | | 289,659 | | | 55,043 | | | 1,232,071 | | | | | | | | | | | | | | | | | | | | | | | Current-period gross charge-offs | | — | | | — | | | 144 | | | — | | | — | | | — | | | — | | | 144 | | | | Non-owner occupied | | | | | | | | | | | | | | | | | | | Pass | | 47,026 | | | 474,560 | | | 478,878 | | | 117,429 | | | 178,448 | | | 580,168 | | | 43,577 | | | 1,920,086 | | | | Special Mention | | — | | | — | | | 3,975 | | | — | | | — | | | 10,435 | | | — | | | 14,410 | | | | Classified | | — | | | — | | | 1,001 | | | — | | | 381 | | | 7,647 | | | — | | | 9,029 | | | | | | | | | | | | | | | | | | | | | | | Total | | 47,026 | | | 474,560 | | | 483,854 | | | 117,429 | | | 178,829 | | | 598,250 | | | 43,577 | | | 1,943,525 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Current-period gross charge-offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | Total commercial loan types | | | | | | | | | | | | | | | | | | | Pass | | 600,701 | | | 1,820,559 | | | 1,233,812 | | | 412,165 | | | 468,969 | | | 1,028,269 | | | 1,177,165 | | | 6,741,640 | | | | Special Mention | | 1 | | | 23,903 | | | 11,828 | | | 1,202 | | | 305 | | | 13,850 | | | 19,549 | | | 70,638 | | | | Classified | | 457 | | | 12,907 | | | 5,576 | | | 9,647 | | | 1,395 | | | 20,637 | | | 34,549 | | | 85,168 | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 601,159 | | | $ | 1,857,369 | | | $ | 1,251,216 | | | $ | 423,014 | | | $ | 470,669 | | | $ | 1,062,756 | | | $ | 1,231,263 | | | $ | 6,897,446 | | | | Current-period gross charge-offs | | $ | 14 | | | $ | 7 | | | $ | 345 | | | $ | 22 | | | $ | — | | | $ | 87 | | | $ | 131 | | | $ | 606 | | | |
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) | | | As of December 31, 2021 | | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Revolving Loans Amortized Cost Basis | | Total | | As of December 31, 2022 | | | As of December 31, 2022 | | | As of December 31, 2022 | | Commercial and industrial | | Commercial and industrial | | Commercial and industrial | Commercial and industrial | | | Pass | Pass | | $ | 273,232 | | | $ | 95,279 | | | $ | 140,938 | | | $ | 52,162 | | | $ | 33,997 | | | $ | 57,020 | | | $ | 596,667 | | | $ | 1,249,295 | | | Pass | | Pass | | Special Mention | Special Mention | | 79 | | | 9 | | | 949 | | | 632 | | | 3 | | | 1,519 | | | 12,367 | | | 15,558 | | | Special Mention | | Special Mention | | Classified | | Classified | | Classified | Classified | | 918 | | | 2,391 | | | 2,376 | | | 3,089 | | | 3,370 | | | 6,425 | | | 7,143 | | | 25,712 | | | | Total | Total | | 274,229 | | | 97,679 | | | 144,263 | | | 55,883 | | | 37,370 | | | 64,964 | | | 616,177 | | | 1,290,565 | | | | Total | | | Total | | | Construction | | | Construction | | | Construction | Construction | | | Pass | Pass | | 677,258 | | | 280,828 | | | 135,768 | | | 23,916 | | | 15,313 | | | 67,818 | | | 117,176 | | | 1,318,077 | | | Pass | | Pass | | Special Mention | Special Mention | | 62 | | | 184 | | | — | | | — | | | 1,208 | | | 1,384 | | | — | | | 2,838 | | | Special Mention | | Special Mention | | Classified | | Classified | | Classified | Classified | | — | | | — | | | 2,922 | | | 2,882 | | | 3 | | | 737 | | | 200 | | | 6,744 | | | | Total | Total | | 677,320 | | | 281,012 | | | 138,690 | | | 26,798 | | | 16,524 | | | 69,939 | | | 117,376 | | | 1,327,659 | | | | Total | | | Total | | | Residential real estate: | | | Residential real estate: | | | Residential real estate: | Residential real estate: | | | | Multi-family mortgage | Multi-family mortgage | | | | Multi-family mortgage | | | Multi-family mortgage | | Pass | | Pass | | Pass | Pass | | 166,576 | | | 32,242 | | | 64,345 | | | 7,124 | | | 5,602 | | | 38,526 | | | 10,891 | | | 325,306 | | | Special Mention | Special Mention | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | Special Mention | | Special Mention | | Classified | | Classified | | Classified | Classified | | — | | | — | | | — | | | — | | | — | | | 1,245 | | | — | | | 1,245 | | | | Total | Total | | 166,576 | | | 32,242 | | | 64,345 | | | 7,124 | | | 5,602 | | | 39,771 | | | 10,891 | | | 326,551 | | | | Total | | | Total | | | Commercial real estate: | | | Commercial real estate: | | | | Commercial real estate: | Commercial real estate: | | | Owner occupied | Owner occupied | | | Owner occupied | | Owner occupied | | Pass | | Pass | | Pass | Pass | | 170,773 | | | 131,471 | | | 174,257 | | | 83,698 | | | 69,939 | | | 236,998 | | | 57,123 | | | 924,259 | | | Special Mention | Special Mention | | — | | | — | | | 1,502 | | | 3,541 | | | 885 | | | 2,555 | | | 213 | | | 8,696 | | | Special Mention | | Special Mention | | Classified | | Classified | | Classified | Classified | | — | | | — | | | 3,102 | | | 768 | | | 3,295 | | | 9,616 | | | 1,846 | | | 18,627 | | | | Total | Total | | 170,773 | | | 131,471 | | | 178,861 | | | 88,007 | | | 74,119 | | | 249,169 | | | 59,182 | | | 951,582 | | | | Total | | | Total | | | Non-owner occupied | | | Non-owner occupied | | | Non-owner occupied | Non-owner occupied | | | Pass | Pass | | 462,478 | | | 154,048 | | | 165,917 | | | 264,855 | | | 170,602 | | | 414,859 | | 46,541 | | | 1,679,300 | | | Pass | | Pass | | Special Mention | Special Mention | | — | | | — | | | 3,747 | | | 3,388 | | | — | | | 969 | | — | | | 8,104 | | | Special Mention | | Special Mention | | Classified | | Classified | | Classified | Classified | | — | | | — | | | 1,898 | | | 23,849 | | | 1,506 | | | 15,508 | | — | | | 42,761 | | | | Total | Total | | 462,478 | | | 154,048 | | | 171,562 | | | 292,092 | | | 172,108 | | | 431,336 | | | 46,541 | | | 1,730,165 | | | | Total | | | Total | | | Total commercial loan types | | | Total commercial loan types | | | Total commercial loan types | Total commercial loan types | | | Pass | Pass | | 1,750,317 | | | 693,868 | | | 681,225 | | | 431,755 | | | 295,453 | | | 815,221 | | | 828,398 | | | 5,496,237 | | | Pass | | Pass | | Special Mention | | Special Mention | | Special Mention | Special Mention | | 141 | | | 193 | | | 6,198 | | | 7,561 | | | 2,096 | | | 6,427 | | | 12,580 | | | 35,196 | | | Classified | Classified | | 918 | | | 2,391 | | | 10,298 | | | 30,588 | | | 8,174 | | | 33,531 | | | 9,189 | | | 95,089 | | | Classified | | Classified | | Total | Total | | $ | 1,751,376 | | | $ | 696,452 | | | $ | 697,721 | | | $ | 469,904 | | | $ | 305,723 | | | $ | 855,179 | | | $ | 850,167 | | | $ | 5,626,522 | | | Total | | Total | |
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) Credit Quality - Consumer Type Loans For consumer and residential loan classes, the companyCompany 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 by year of origination as of December 31, 2023 and 2022 and 2021.the gross charge-offs for the year ended December 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. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 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 | |
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 in the below tables. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of and for the year ended December 31, 2023 | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | Revolving Loans Amortized Cost Basis | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Residential real estate: | | | | | | | | | | | | | | | | | 1-to-4 family mortgage | | | | | | | | | | | | | | | | | Performing | | $ | 198,537 | | | $ | 500,628 | | | $ | 399,338 | | | $ | 145,484 | | | $ | 81,905 | | | $ | 226,587 | | | $ | — | | | $ | 1,552,479 | | Nonperforming | | 76 | | | 2,565 | | | 4,026 | | | 3,846 | | | 690 | | | 4,870 | | | — | | | 16,073 | | Total | | 198,613 | | | 503,193 | | | 403,364 | | | 149,330 | | | 82,595 | | | 231,457 | | | — | | | 1,568,552 | | Current-period gross charge-offs | | — | | | 18 | | | — | | | 4 | | | — | | | 24 | | | — | | | 46 | | Residential line of credit | | | | | | | | | | | | | | | | | Performing | | — | | | — | | | — | | | — | | | — | | | — | | | 528,439 | | | 528,439 | | Nonperforming | | — | | | — | | | — | | | — | | | — | | | — | | | 2,473 | | | 2,473 | | Total | | — | | | — | | | — | | | — | | | — | | | — | | | 530,912 | | | 530,912 | | Current-period gross charge-offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | Consumer and other | | | | | | | | | | | | | | | | | Performing | | 104,399 | | | 91,557 | | | 45,187 | | | 34,928 | | | 24,040 | | | 93,833 | | | 6,890 | | | 400,834 | | Nonperforming | | 528 | | | 1,025 | | | 2,562 | | | 1,819 | | | 1,264 | | | 3,841 | | | — | | | 11,039 | | Total | | 104,927 | | | 92,582 | | | 47,749 | | | 36,747 | | | 25,304 | | | 97,674 | | | 6,890 | | | 411,873 | | Current-period gross charge-offs | | 1,463 | | | 564 | | | 139 | | | 201 | | | 110 | | | 372 | | | 2 | | | 2,851 | | Total consumer type loans | | | | | | | | | | | | | | | | | Performing | | 302,936 | | | 592,185 | | | 444,525 | | | 180,412 | | | 105,945 | | | 320,420 | | | 535,329 | | | 2,481,752 | | Nonperforming | | 604 | | | 3,590 | | | 6,588 | | | 5,665 | | | 1,954 | | | 8,711 | | | 2,473 | | | 29,585 | | Total | | $ | 303,540 | | | $ | 595,775 | | | $ | 451,113 | | | $ | 186,077 | | | $ | 107,899 | | | $ | 329,131 | | | $ | 537,802 | | | $ | 2,511,337 | | Current-period gross charge-offs | | $ | 1,463 | | | $ | 582 | | | $ | 139 | | | $ | 205 | | | $ | 110 | | | $ | 396 | | | $ | 2 | | | $ | 2,897 | |
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) | | | As of December 31, 2021 | | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Revolving Loans Amortized Cost Basis | | Total | As of December 31, 2022 | | | As of December 31, 2022 | | | As of December 31, 2022 | | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | Revolving Loans Amortized Cost Basis | | Total | | Residential real estate: | Residential real estate: | | | Residential real estate: | | | Residential real estate: | | 1-to-4 family mortgage | 1-to-4 family mortgage | | 1-to-4 family mortgage | | 1-to-4 family mortgage | | Performing | | Performing | | Performing | Performing | | $ | 521,533 | | | $ | 204,690 | | | $ | 121,775 | | | $ | 100,164 | | | $ | 109,087 | | | $ | 199,262 | | | $ | — | | | $ | 1,256,511 | | Nonperforming | Nonperforming | | 1,232 | | | 3,734 | | | 977 | | | 2,429 | | | 1,765 | | | 3,819 | | | — | | | 13,956 | | Total | Total | | 522,765 | | | 208,424 | | | 122,752 | | | 102,593 | | | 110,852 | | | 203,081 | | | — | | | 1,270,467 | | | Residential line of credit | Residential line of credit | | Performing | | Performing | | Performing | Performing | | — | | | — | | | — | | | — | | | — | | | — | | | 381,303 | | | 381,303 | | Nonperforming | Nonperforming | | — | | | — | | | — | | | — | | | — | | | — | | | 1,736 | | | 1,736 | | Total | Total | | — | | | — | | | — | | | — | | | — | | | — | | | 383,039 | | | 383,039 | | | Consumer and other | Consumer and other | | Performing | | Performing | | Performing | Performing | | 82,910 | | | 55,123 | | | 38,281 | | | 32,893 | | | 21,856 | | | 74,248 | | | 14,478 | | | 319,789 | | Nonperforming | Nonperforming | | 199 | | | 345 | | | 545 | | | 1,352 | | | 861 | | | 1,496 | | | 47 | | | 4,845 | | Total | Total | | 83,109 | | | 55,468 | | | 38,826 | | | 34,245 | | | 22,717 | | | 75,744 | | | 14,525 | | | 324,634 | | | Total consumer type loans | Total consumer type loans | | Performing | | Performing | | Performing | Performing | | 604,443 | | | 259,813 | | | 160,056 | | | 133,057 | | | 130,943 | | | 273,510 | | | 395,781 | | | 1,957,603 | | Nonperforming | Nonperforming | | 1,431 | | | 4,079 | | | 1,522 | | | 3,781 | | | 2,626 | | | 5,315 | | | 1,783 | | | 20,537 | | Total | Total | | $ | 605,874 | | | $ | 263,892 | | | $ | 161,578 | | | $ | 136,838 | | | $ | 133,569 | | | $ | 278,825 | | | $ | 397,564 | | | $ | 1,978,140 | |
Nonaccrual and Past Due Loans Nonperforming loans include loans that are no longer accruing interest (nonaccrual loans) and loans past due ninety or more days and still accruing interest. The following tables represent an analysis of the aging by class of financing receivable as of December 31, 20222023 and 2021:2022: | 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 | December 31, 2023 | | December 31, 2023 | | December 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 | Commercial and industrial | | $ | 1,650 | | | $ | 136 | | | $ | 1,307 | | | | $ | 1,642,690 | | | $ | 1,645,783 | | Construction | Construction | | 1,246 | | | — | | | 389 | | | | 1,655,853 | | | 1,657,488 | | Residential real estate: | Residential real estate: | | | | 1-to-4 family mortgage | | 1-to-4 family mortgage | | 1-to-4 family mortgage | 1-to-4 family mortgage | | 15,470 | | | 16,639 | | | 6,476 | | | | 1,534,536 | | | 1,573,121 | | Residential line of credit | Residential line of credit | | 772 | | | 131 | | | 1,400 | | | | 494,357 | | | 496,660 | | Multi-family mortgage | Multi-family mortgage | | — | | | — | | | 42 | | | | 479,530 | | | 479,572 | | Commercial real estate: | Commercial real estate: | | | | Owner occupied | Owner occupied | | 1,948 | | | — | | | 5,410 | | | | 1,107,222 | | | 1,114,580 | | Owner occupied | | Owner occupied | | Non-owner occupied | Non-owner occupied | | 102 | | | — | | | 5,956 | | | | 1,957,952 | | | 1,964,010 | | Consumer and other | Consumer and other | | 10,108 | | | 1,509 | | | 6,451 | | | | 348,930 | | | 366,998 | | Total | Total | | $ | 31,296 | | | $ | 18,415 | | | $ | 27,431 | | | | $ | 9,221,070 | | | $ | 9,298,212 | |
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2021 | | 30-89 days past due and accruing interest | | 90 days or more and accruing interest | | Nonaccrual loans | | | | Loans current on payments and accruing interest | | Total | Commercial and industrial | | $ | 1,030 | | | $ | 63 | | | $ | 1,520 | | | | | $ | 1,287,952 | | | $ | 1,290,565 | | Construction | | 4,852 | | | 718 | | | 3,622 | | | | | 1,318,467 | | | 1,327,659 | | Residential real estate: | | | | | | | | | | | | | 1-to-4 family mortgage | | 11,007 | | | 9,363 | | | 4,593 | | | | | 1,245,504 | | | 1,270,467 | | Residential line of credit | | 319 | | | — | | | 1,736 | | | | | 380,984 | | | 383,039 | | Multi-family mortgage | | — | | | — | | | 49 | | | | | 326,502 | | | 326,551 | | Commercial real estate: | | | | | | | | | | | | | Owner occupied | | 1,417 | | | — | | | 6,710 | | | | | 943,455 | | | 951,582 | | Non-owner occupied | | 427 | | | — | | | 14,084 | | | | | 1,715,654 | | | 1,730,165 | | Consumer and other | | 7,398 | | | 1,591 | | | 3,254 | | | | | 312,391 | | | 324,634 | | Total | | $ | 26,450 | | | $ | 11,735 | | | $ | 35,568 | | | | | $ | 7,530,909 | | | $ | 7,604,662 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2022 | | 30-89 days past due and accruing interest | | 90 days or more and accruing interest | | Nonaccrual loans | | | | Loans current on payments and accruing interest | | Total | Commercial and industrial | | $ | 1,650 | | | $ | 136 | | | $ | 1,307 | | | | | $ | 1,642,690 | | | $ | 1,645,783 | | Construction | | 1,246 | | | — | | | 389 | | | | | 1,655,853 | | | 1,657,488 | | Residential real estate: | | | | | | | | | | | | | 1-to-4 family mortgage | | 15,470 | | | 16,639 | | | 6,476 | | | | | 1,534,536 | | | 1,573,121 | | Residential line of credit | | 772 | | | 131 | | | 1,400 | | | | | 494,357 | | | 496,660 | | Multi-family mortgage | | — | | | — | | | 42 | | | | | 479,530 | | | 479,572 | | Commercial real estate: | | | | | | | | | | | | | Owner occupied | | 1,948 | | | — | | | 5,410 | | | | | 1,107,222 | | | 1,114,580 | | Non-owner occupied | | 102 | | | — | | | 5,956 | | | | | 1,957,952 | | | 1,964,010 | | Consumer and other | | 10,108 | | | 1,509 | | | 6,451 | | | | | 348,930 | | | 366,998 | | Total | | $ | 31,296 | | | $ | 18,415 | | | $ | 27,431 | | | | | $ | 9,221,070 | | | $ | 9,298,212 | |
The following tables provide the amortized cost basis of loans on nonaccrual status, as well as any related allowance and interest income as of and for the years ended December 31, 20222023 and 20212022 by class of financing receivable. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2023 | | Nonaccrual with no related allowance | | Nonaccrual with related allowance | | Related allowance | | Year to date Interest Income | | | Commercial and industrial | | $ | 3,678 | | | $ | 18,052 | | | $ | 5,011 | | | $ | 2,451 | | | | Construction | | 2,267 | | | 605 | | | 59 | | | 335 | | | | Residential real estate: | | | | | | | | | | | 1-to-4 family mortgage | | 1,444 | | | 5,274 | | | 103 | | | 410 | | | | Residential line of credit | | 685 | | | 451 | | | 8 | | | 141 | | | | Multi-family mortgage | | — | | | 32 | | | 1 | | | 3 | | | | Commercial real estate: | | | | | | | | | | | Owner occupied | | 2,920 | | | 268 | | | 15 | | | 514 | | | | Non-owner occupied | | 3,316 | | | 35 | | | 1 | | | 1,221 | | | | Consumer and other | | — | | | 9,203 | | | 498 | | | 1,053 | | | | Total | | $ | 14,310 | | | $ | 33,920 | | | $ | 5,696 | | | $ | 6,128 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2022 | | Nonaccrual with no related allowance | | Nonaccrual with related allowance | | Related allowance | | Year to date Interest Income | | | | | | | | | | | | | | Commercial and industrial | | $ | 790 | | | $ | 517 | | | $ | 10 | | | $ | 181 | | | | Construction | | — | | | 389 | | | 7 | | | 28 | | | | Residential real estate: | | | | | | | | | | | 1-to-4 family mortgage | | 2,834 | | | 3,642 | | | 78 | | | 274 | | | | Residential line of credit | | 1,134 | | | 266 | | | 4 | | | 136 | | | | Multi-family mortgage | | 1 | | | 41 | | | 1 | | | 3 | | | | Commercial real estate: | | | | | | | | | | | Owner occupied | | 5,200 | | | 210 | | | 1 | | | 232 | | | | Non-owner occupied | | 5,755 | | | 201 | | | 5 | | | 332 | | | | Consumer and other | | — | | | 6,451 | | | 327 | | | 358 | | | | Total | | $ | 15,714 | | | $ | 11,717 | | | $ | 433 | | | $ | 1,544 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2021 | | Nonaccrual with no related allowance | | Nonaccrual with related allowance | | Related allowance | | Year to date Interest Income | | | | | | | | | | | | | | Commercial and industrial | | $ | 1,085 | | | $ | 435 | | | $ | 6 | | | $ | 1,371 | | | | Construction | | 2,882 | | | 740 | | | 99 | | | 156 | | | | Residential real estate: | | | | | | | | | | | 1-to-4 family mortgage | | 378 | | | 4,215 | | | 60 | | | 314 | | | | Residential line of credit | | 797 | | | 939 | | | 11 | | | 289 | | | | Multi-family mortgage | | — | | | 49 | | | 2 | | | 3 | | | | Commercial real estate: | | | | | | | | | | | Owner occupied | | 5,346 | | | 1,364 | | | 206 | | | 536 | | | | Non-owner occupied | | 13,898 | | | 186 | | | 7 | | | 486 | | | | Consumer and other | | — | | | 3,254 | | | 164 | | | 245 | | | | Total | | $ | 24,386 | | | $ | 11,182 | | | $ | 555 | | | $ | 3,400 | | | |
Accrued interest receivable written off as an adjustment to interest income amounted to $1,089, $804, and $627 for the years ended December 31, 2022, 2021, and 2020, respectively.
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) Troubled debt restructurings
As ofAccrued interest receivable written off as an adjustment to interest income amounted to $1,094, $1,089, and $804 for the years ended December 31, 2023, 2022, and 2021, respectively.
Loan Modifications to Borrowers Experiencing Financial Difficulty Occasionally, the Company had a recorded investment in TDRsmay make certain modifications of $13,854 and $32,435, respectively. The modifications included extensions of the maturity date and/or a stated rate of interest to one lower than the current market rateloans to borrowers experiencing financial difficulty. Of theseThese modifications may be in the form of an interest rate reduction, a term extension or a combination thereof. Upon the Company's determination that a modified loan has subsequently been deemed uncollectible, the portion of the loan deemed uncollectible is charged off against the allowance for credit losses on loans $7,321HFI. The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. During the year ended December 31, 2023, the Company modified three residential mortgage loans with balances totaling $160 and $11,084 were classified as nonaccrual loansone commercial and industrial loan with a balance of $181 in the form of term extensions for borrowers experiencing financial difficulties. 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 and 2021, respectively. The Company has calculated $253 and $1,245 in allowancesor for credit losses on TDRs as ofthe years ended December 31, 2022 and 2021, respectively. As2021. Prior to the Company's adoption, the Company accounted for a modification to the contractual terms of December 31, 2022 and 2021, unfundeda loan commitmentsthat resulted in granting a concession to extend additional fundsa borrower experiencing financial difficulties as a TDR. The standard eliminated TDR accounting prospectively for all restructurings occurring on troubled debt restructuringsor after January 1, 2023. Loans that were not meaningful.restructured in a TDR prior to the Company's adoption 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. The following tables presenttable presents the financial effect of TDRs recorded during the periods indicated: | Year Ended December 31, 2022 | Year Ended December 31, 2022 | | Number of loans | | Pre-modification outstanding recorded investment | | Post-modification outstanding recorded investment | | Charge offs and specific reserves | Year Ended December 31, 2022 | | Number of loans | | Pre-modification outstanding recorded investment | | Post-modification outstanding recorded investment | | Charge offs and specific reserves | Commercial and industrial | Commercial and industrial | | 3 | | | $ | 612 | | | $ | 522 | | | $ | — | | | Commercial real estate: | | Commercial real estate: | | Commercial real estate: | | | | Residential real estate: | | | Residential real estate: | | | Residential real estate: | Residential real estate: | | 1-to-4 family mortgage | 1-to-4 family mortgage | | 3 | | | 391 | | | 707 | | | — | | 1-to-4 family mortgage | | 1-to-4 family mortgage | | Residential line of credit | Residential line of credit | | 1 | | | 49 | | | 49 | | | — | | | Consumer and other | Consumer and other | | 2 | | | 23 | | | 23 | | | — | | Consumer and other | | Consumer and other | | Total | Total | | 9 | | | $ | 1,075 | | | $ | 1,301 | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2021 | | Number of loans | | Pre-modification outstanding recorded investment | | Post-modification outstanding recorded investment | | Charge offs and specific reserves | Commercial and industrial | | 8 | | | $ | 15,430 | | | $ | 15,430 | | | $ | 446 | | | | | | | | | | | Commercial real estate: | | | | | | | | | Owner occupied | | 7 | | 5,209 | | | 5,209 | | | — | | Non-owner occupied | | 1 | | 11,997 | | | 11,997 | | | — | | Residential real estate: | | | | | | | | | 1-4 family mortgage | | 3 | | 945 | | | 945 | | | — | | Residential line of credit | | 3 | | 485 | | | 485 | | | — | | Multi-family Mortgage | | 1 | | 49 | | | 49 | | | — | | Total | | 23 | | $ | 34,115 | | | $ | 34,115 | | | $ | 446 | |
| Year Ended December 31, 2020 | | Number of loans | | Pre-modification outstanding recorded investment | | Post-modification outstanding recorded investment | | Charge offs and specific reserves | Year Ended December 31, 2021 | | Year Ended December 31, 2021 | | Number of loans | | Pre-modification outstanding recorded investment | | Post-modification outstanding recorded investment | | Charge offs and specific reserves | Commercial and industrial | Commercial and industrial | | 5 | | | $ | 2,257 | | | $ | 2,257 | | | $ | — | | | Construction | | Commercial real estate: | Commercial real estate: | | Owner occupied | | Owner occupied | | Owner occupied | Owner occupied | | 7 | | 2,794 | | | 2,794 | | | — | | Non-owner occupied | Non-owner occupied | | 2 | | 3,752 | | | 3,752 | | | — | | Residential real estate: | Residential real estate: | | 1-4 family mortgage | | 3 | | 618 | | | 618 | | | — | | 1-to-4 family mortgage | | 1-to-4 family mortgage | | 1-to-4 family mortgage | | Residential line of credit | Residential line of credit | | 1 | | 95 | | | 95 | | | — | | Multi-family mortgage | | | Total | Total | | 18 | | $ | 9,516 | | | $ | 9,516 | | | $ | — | | Total | | Total | |
Troubled debt restructurings for which there was a payment default within twelve months following the modification totaled $304 and $304 during both the years ended December 31, 2022 and 2021, respectively. There were no loans modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the year ended December 31, 2020.2021. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy. The terms of certain other loans were modified during the years ended December 31, 2022, 2021, and 2020 that did not meet the definition of a TDR. The modification of these loans usually involve either a modification of the terms of a loan to borrowers who are not experiencing financial difficulties or an insignificant delay in payments.
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) 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. | | December 31, 2022 | | Type of Collateral | | | | Real Estate | | | | Financial Assets and Equipment | | Total | | | Individually assessed allowance for credit loss | | | December 31, 2023 | | | | December 31, 2023 | | | | December 31, 2023 | | | | Type of Collateral | | | | Real Estate | | | | Real Estate | | | | Real Estate | | | Farmland | | | | Business Assets | | Total | | | | Individually assessed allowance for credit loss | Commercial and industrial | Commercial and industrial | | $ | 2,596 | | | | | $ | — | | | $ | 2,596 | | | | $ | — | | | Construction | | Residential real estate: | Residential real estate: | | | | | | | | 1-to-4 family mortgage | | 1-to-4 family mortgage | | 1-to-4 family mortgage | 1-to-4 family mortgage | | 4,467 | | | | | — | | | 4,467 | | | | 194 | | Residential line of credit | Residential line of credit | | 1,135 | | | | | — | | | 1,135 | | | | — | | | Commercial real estate: | Commercial real estate: | | | | | | | | Commercial real estate: | | Commercial real estate: | | Owner occupied | | Owner occupied | | Owner occupied | Owner occupied | | 5,424 | | | | | — | | | 5,424 | | | | — | | Non-owner occupied | Non-owner occupied | | 5,755 | | | | | — | | | 5,755 | | | | — | | Consumer and other | Consumer and other | | 134 | | | | | — | | | 134 | | | | — | | Total | Total | | $ | 19,511 | | | | | $ | — | | | $ | 19,511 | | | | $ | 194 | |
| | | December 31, 2022 | | | | December 31, 2022 | | | | December 31, 2022 | | | | Type of Collateral | | | | Real Estate | | | | Real Estate | | | | Real Estate | | | | | | | Business Assets | | Total | | | | Individually assessed allowance for credit loss | Commercial and industrial | | | | December 31, 2021 | | Type of Collateral | | | | Real Estate | | | | Financial Assets and Equipment | | Total | | | Individually assessed allowance for credit loss | Commercial and industrial | | $ | 799 | | | | | $ | 1,090 | | | $ | 1,889 | | | | $ | — | | Construction | | 3,580 | | | | | — | | | 3,580 | | | | 92 | | Residential real estate: | Residential real estate: | | | | | | | | Residential real estate: | | Residential real estate: | | 1-to-4 family mortgage | | 1-to-4 family mortgage | | 1-to-4 family mortgage | 1-to-4 family mortgage | | 338 | | | | | — | | | 338 | | | | — | | Residential line of credit | Residential line of credit | | 1,400 | | | | | — | | | 1,400 | | | | 10 | | | Commercial real estate: | Commercial real estate: | | | | | | | | Commercial real estate: | | Commercial real estate: | | Owner occupied | | Owner occupied | | Owner occupied | Owner occupied | | 8,117 | | | | | 71 | | | 8,188 | | | | 200 | | Non-owner occupied | Non-owner occupied | | 13,899 | | | | | — | | | 13,899 | | | | — | | Consumer and other | Consumer and other | | 25 | | | | | — | | | 25 | | | | 1 | | Total | Total | | $ | 28,158 | | | | | $ | 1,161 | | | $ | 29,319 | | | | $ | 303 | |
Allowance for Credit Losses on Loans HFI
The Company performed evaluations within its established qualitative framework, assessing the impact of the current economic outlook, including: continued actions taken by the Federal Reserve with regard to monetary policy, interest rates and the potential impact of those actions, potential impact of persistent high inflation on economic growth, potential negative economic forecasts, and other considerations. The increase in the allowance for credit losses on loans HFI as of December 31, 2023 compared with December 31, 2022 is primarily the result of deterioration in economic forecasts between periods. These forecasts included weighted projections that the economy may be nearing a recession, reflected through deterioration in asset quality projected over life of the loan portfolio. As of December 31, 2023, the macroeconomic forecast was based solely using the Moody’s baseline scenario, which showed a slightly more negative outlook than the comparative baseline as of December 31, 2022, which used a weighting of two economic forecasts from Moody’s in order to align with management’s best estimate over the reasonable and supportable forecast period. At December 31, 2022, the Moody’s baseline scenario was more heavily weighted while the downside scenario received a smaller weighting. While the primary driver of the increase in allowance for credit losses on loans HFI was the deterioration in economic forecasts between periods, a portion of the increase was attributable to reserves on individually
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) evaluated loans. Most notably, the Company had three commercial and industrial relationships that were moved to nonaccrual during the year ended December 31, 2023 with total specific reserves of $4,908. The following tables provide the changes in the allowance for credit losses on loans HFI by class of financing receivable for the years ended December 31, 2023, 2022, and 2021: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Commercial and industrial | | Construction | | 1-to-4 family residential mortgage | | Residential line of credit | | Multi-family residential mortgage | | Commercial real estate owner occupied | | Commercial real estate non-owner occupied | | Consumer and other | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 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 (reversal of) credit losses on loans HFI | | 8,682 | | | (4,446) | | | 310 | | | 1,973 | | | 2,352 | | | 2,905 | | | (784) | | | 5,746 | | | 16,738 | | | Recoveries of loans previously charged-off | | 273 | | | 10 | | | 100 | | | 1 | | | — | | | 109 | | | 1,833 | | | 573 | | | 2,899 | | | Loans charged off | | (462) | | | — | | | (46) | | | — | | | — | | | (144) | | | — | | | (2,851) | | | (3,503) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Ending balance - December 31, 2023 | | $ | 19,599 | | | $ | 35,372 | | | $ | 26,505 | | | $ | 9,468 | | | $ | 8,842 | | | $ | 10,653 | | | $ | 22,965 | | | $ | 16,922 | | | $ | 150,326 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 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 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 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 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (Reversal of) provision for credit losses on loans HFI | | (4,563) | | | 11,221 | | | 7,060 | | | 1,574 | | | (486) | | | (4,883) | | | (3,584) | | | 4,054 | | | 10,393 | | | Recoveries of loans previously charged-off | | 2,005 | | | 11 | | | 54 | | | 17 | | | — | | | 88 | | | — | | | 766 | | | 2,941 | | | Loans charged off | | (2,087) | | | — | | | (77) | | | — | | | — | | | (15) | | | (268) | | | (2,254) | | | (4,701) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Ending balance - December 31, 2022 | | $ | 11,106 | | | $ | 39,808 | | | $ | 26,141 | | | $ | 7,494 | | | $ | 6,490 | | | $ | 7,783 | | | $ | 21,916 | | | $ | 13,454 | | | $ | 134,192 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 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 | Year Ended December 31, 2021 | | Beginning balance - December 31, 2020 | | $ | 14,748 | | | $ | 58,477 | | | $ | 19,220 | | | $ | 10,534 | | | $ | 7,174 | | | $ | 4,849 | | | $ | 44,147 | | | $ | 11,240 | | | $ | 170,389 | | Provision for (reversal of) credit losses on loans HFI | | 4,178 | | | (29,874) | | | (87) | | | (4,728) | | | (197) | | | 7,588 | | | (16,813) | | | 938 | | | (38,995) | | Recoveries of loans previously charged-off | | 861 | | | 3 | | | 125 | | | 115 | | | — | | | 156 | | | — | | | 773 | | | 2,033 | | Loans charged off | | (4,036) | | | (30) | | | (154) | | | (18) | | | (1) | | | — | | | (1,566) | | | (2,063) | | | (7,868) | | Ending balance - December 31, 2021 | | $ | 15,751 | | | $ | 28,576 | | | $ | 19,104 | | | $ | 5,903 | | | $ | 6,976 | | | $ | 12,593 | | | $ | 25,768 | | | $ | 10,888 | | | $ | 125,559 | |
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) Note (6)(4)—Premises and equipment:equipment Premises and equipment and related accumulated depreciation as of December 31, 20222023 and 2021,2022, are as follows: | | | | 2022 | | 2021 | | | 2023 | | 2022 | Land | Land | | $ | 32,985 | | | $ | 33,151 | | Premises | Premises | | 109,277 | | | 109,357 | | Furniture, fixtures and equipment | Furniture, fixtures and equipment | | 49,203 | | | 48,392 | | Leasehold improvements | Leasehold improvements | | 19,001 | | | 18,531 | | Construction in process | Construction in process | | 10,230 | | | 1,705 | | Finance lease | Finance lease | | 1,367 | | | 1,487 | | | 222,063 | | | 212,623 | | | | 207,388 | | Less: accumulated depreciation and amortization | Less: accumulated depreciation and amortization | | (75,747) | | | (68,884) | | Total Premises and Equipment | | $ | 146,316 | | | $ | 143,739 | | Total premises and equipment | |
Depreciation and amortization expense was $9,797, $7,554, $7,411, and $7,009$7,411 for the years ended December 31, 2023, 2022, 2021, and 2020,2021, respectively. Note (7)(5)—Other real estate owned The amount reported as other real estate owned includes property acquired through foreclosure in addition to excess facilities held for sale and is carried at the lower of the carrying amount of the underlying loan or the fair value of the real estate less estimated costcosts to sell the property.sell. The following table summarizes the other real estate owned for the years ended December 31, 2023, 2022, 2021, and 2020:2021: | | | | Years Ended December 31, | | | | | Years Ended December 31, | | | | | | Years Ended December 31, | | | | | | Years Ended December 31, | | | | | | 2022 | | 2021 | | 2020 | | | | | | | 2023 | | 2022 | | 2021 | Balance at beginning of period | Balance at beginning of period | | | $ | 9,777 | | | $ | 12,111 | | | $ | 18,939 | | Transfers from loans | Transfers from loans | | | 1,437 | | | 5,262 | | | 2,746 | | Transfers to other assets | | Transfers to premises and equipment | Transfers to premises and equipment | | | (351) | | | — | | | (841) | | | Proceeds from sale of other real estate owned | | Proceeds from sale of other real estate owned | | Proceeds from sale of other real estate owned | Proceeds from sale of other real estate owned | | | (4,955) | | | (9,396) | | | (6,937) | | Gain on sale of other real estate owned | Gain on sale of other real estate owned | | | 328 | | | 3,248 | | | 354 | | Loans provided for sales of other real estate owned | Loans provided for sales of other real estate owned | | | — | | | (704) | | | (305) | | Write-downs and partial liquidations | Write-downs and partial liquidations | | | (442) | | | (744) | | | (1,845) | | | Balance at end of period | Balance at end of period | | | $ | 5,794 | | | $ | 9,777 | | | $ | 12,111 | | Balance at end of period | | Balance at end of period | |
Foreclosed residential real estate properties totaled $840$2,414 and $775$840 as of December 31, 20222023 and 2021,2022, respectively. The recorded investment in residential mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process totaled $2,653 at December 31, 2022. As of December 31, 2021, there were no such residential foreclosure proceedings in process. Excess land$3,377 and facilities held for sale resulting from branch consolidations totaled $2,116 and $3,348$2,653 as of December 31, 20222023 and 2021,2022, respectively.
Note (8)(6)—Goodwill and intangible assets:assets Goodwill represents the excess of the cost of a business combination over the fair value of the net assets acquired. The carrying amount of goodwill was $242,561 at both December 31, 20222023 and 2021.2022. GoodwillThe Company’s policy is tested annually,to assess goodwill for impairment at the reporting unit level on an annual basis or more oftenfrequently, if an event occurs or circumstances warrant, for impairment. Impairment exists when a reporting unit's carrying value exceeds its fair value. During the years ended December 31, 2022 and 2021, the Company performed a qualitative assessment and determined it was more likely than notchange which indicate that the fair value of a reporting unit is below its carrying amount. Impairment is the condition that exists when the carrying amount of the reporting units exceeded its carryingunit exceeds the fair value including goodwill. As such,of that reporting unit. In accordance with GAAP and due to the passage of time since the last quantitative analysis, the Company elected to perform a quantitative assessment for the year ended December 31, 2023. The assessment indicated no impairment was recorded as of December 31, 2022 or 2021.
Core deposit and other intangibles include core deposit intangibles, customer base trust intangible and manufactured housing servicing intangible. The compositiongoodwill for either of core deposit and other intangibles as of December 31, 2022 and 2021 is as follows:the reporting units.
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) | | | | | | | | | | | | | | | | | | | | | | | | | Core deposit and other intangibles | | | | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | | December 31, 2022 | | | | | | | | | Core deposit intangible | | $ | 59,835 | | | $ | (48,200) | | | $ | 11,635 | | | | Customer base trust intangible | | 1,600 | | | (867) | | | 733 | | | | Manufactured housing servicing intangible | | 1,088 | | | (1,088) | | | — | | | | Total core deposit and other intangibles | | $ | 62,523 | | | $ | (50,155) | | | $ | 12,368 | | | | | | | | | | | | | December 31, 2021 | | | | | | | | | Core deposit intangible | | $ | 59,835 | | | $ | (43,902) | | | $ | 15,933 | | | | Customer base trust intangible | | 1,600 | | | (707) | | | 893 | | | | Manufactured housing servicing intangible | | 1,088 | | | (961) | | | 127 | | | | Total core deposit and other intangibles | | $ | 62,523 | | | $ | (45,570) | | | $ | 16,953 | | | |
Core deposit and other intangibles include core deposit intangibles and a customer base trust intangible. The composition of core deposit and other intangibles, which excludes fully amortized intangibles, as of December 31, 2023 and 2022 is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | Core deposit and other intangibles | | | | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | | December 31, 2023 | | | | | | | | | Core deposit intangible | | $ | 59,835 | | | $ | (51,699) | | | $ | 8,136 | | | | Customer base trust intangible | | 1,600 | | | (1,027) | | | 573 | | | | | | | | | | | | | Total core deposit and other intangibles | | $ | 61,435 | | | $ | (52,726) | | | $ | 8,709 | | | | | | | | | | | | | December 31, 2022 | | | | | | | | | Core deposit intangible | | $ | 59,835 | | | $ | (48,200) | | | $ | 11,635 | | | | Customer base trust intangible | | 1,600 | | | (867) | | | 733 | | | | | | | | | | | | | Total core deposit and other intangibles | | $ | 61,435 | | | $ | (49,067) | | | $ | 12,368 | | | |
Amortization of core deposit and other intangibles totaled $3,659, $4,585, and $5,473 for the years ended December 31, 2023, 2022, and 2021, respectively. The estimated aggregate future amortization expense of core deposit and other intangibles is as follows: | 2023 | | $ | 3,658 | | | 2024 | | 2024 | | 2024 | 2024 | | 2,946 | | | 2025 | 2025 | | 2,306 | | | 2025 | | 2025 | | 2026 | | 2026 | | 2026 | 2026 | | 1,563 | | | 2027 | 2027 | | 1,080 | | | 2027 | | 2027 | | 2028 | | 2028 | | 2028 | | Thereafter | | Thereafter | | Thereafter | Thereafter | | 815 | | | | | | $ | 12,368 | | | | | | |
Note (9)(7)—Leases:Leases As of December 31, 2022,2023, the Company was the lessee in 5854 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 as these are insignificant. 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. During the year ended December 31, 2020, the Company entered into an operating lease for a new corporate headquarters office located in downtown Nashville. During the year ended December 31, 2022, construction of the exterior of the building was completed and the Company took possession of the leased space and began the build-out of the interior space. On August 1, 2022, the Company recorded an ROU asset and operating lease liability of $16,095 and $20,037, respectively, in connection with the initial term of this lease.
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) Information related to the Company's leases is presented below as of December 31, 20222023 and 2021:2022: | | | December 31, | | Classification | | 2022 | | 2021 | | | | December 31, | | | | | December 31, | | | | | December 31, | | | Classification | | | Classification | | 2023 | | 2022 | Right-of-use assets: | Right-of-use assets: | | Operating leases | | Operating leases | | Operating leases | Operating leases | Operating lease right-of-use assets | | $ | 60,043 | | $ | 41,686 | Operating lease right-of-use assets | | $ | 54,295 | | $ | 60,043 | Finance leases | Finance leases | Premises and equipment, net | | 1,367 | | 1,487 | Finance leases | Premises and equipment, net | | 1,256 | | 1,367 | Total right-of-use assets | Total right-of-use assets | | $ | 61,410 | | $ | 43,173 | Total right-of-use assets | | | $ | 55,551 | | $ | 61,410 | Lease liabilities: | Lease liabilities: | | | | | Operating leases | | Operating leases | | Operating leases | Operating leases | Operating lease liabilities | | $ | 69,754 | | $ | 46,367 | Operating lease liabilities | | $ | 67,643 | | $ | 69,754 | Finance leases | Finance leases | Borrowings | | 1,420 | | 1,518 | Finance leases | Borrowings | | 1,326 | | 1,420 | Total lease liabilities | Total lease liabilities | | $ | 71,174 | | $ | 47,885 | Total lease liabilities | | | $ | 68,969 | | $ | 71,174 | Weighted average remaining lease term (in years) - operating | Weighted average remaining lease term (in years) - operating | | 12.1 | | 12.4 | Weighted average remaining lease term (in years) - operating | | | 11.6 | | 12.1 | Weighted average remaining lease term (in years) - finance | Weighted average remaining lease term (in years) - finance | | 12.4 | | 13.4 | Weighted average remaining lease term (in years) - finance | | | 11.4 | | 12.4 | Weighted average discount rate - operating | Weighted average discount rate - operating | | 3.08 | % | | 2.73 | % | Weighted average discount rate - operating | | | 3.39 | % | | 3.08 | % | Weighted average discount rate - finance | Weighted average discount rate - finance | | 1.76 | % | | 1.76 | % | Weighted average discount rate - finance | | | 1.76 | % | | 1.76 | % |
The components of total lease expense included in the consolidated statements of income were as follows: | | | | | | Years Ended December 31, | | | | | | | Years Ended December 31, | | | | | | | Years Ended December 31, | | | | | | Years Ended December 31, | | | Classification | | 2022 | | | | 2021 | | | 2020 | | Classification | | | Classification | | | Classification | | | | | | | 2023 | | | | 2022 | | | 2021 | Operating lease costs: | Operating lease costs: | | | | | | Amortization of right-of-use asset | | Amortization of right-of-use asset | | Amortization of right-of-use asset | Amortization of right-of-use asset | Occupancy and equipment | | $ | 8,441 | | | | $ | 7,636 | | | $ | 6,228 | | Short-term lease cost | Short-term lease cost | Occupancy and equipment | | 526 | | | | 427 | | | 456 | | Variable lease cost | Variable lease cost | Occupancy and equipment | | 1,078 | | | | 1,003 | | | 602 | | Lease impairment | (1) | | 364 | | | | — | | | 2,142 | | Gain on lease modifications and terminations | Occupancy and equipment | | (18) | | | | (805) | | | — | | | Loss (gain) on lease modifications and terminations
| | Loss (gain) on lease modifications and terminations
| | Loss (gain) on lease modifications and terminations
| | Finance lease costs: | Finance lease costs: | | | | | | Interest on lease liabilities | | Interest on lease liabilities | | Interest on lease liabilities | Interest on lease liabilities | Interest expense on borrowings | | 28 | | | | 25 | | | 11 | | Amortization of right-of-use asset | Amortization of right-of-use asset | Occupancy and equipment | | 120 | | | | 101 | | | 43 | | | Sub-lease income | Occupancy and equipment | | (993) | | | | (573) | | | (346) | | Sublease income | | Sublease income | | Sublease income | | Total lease cost | Total lease cost | | | $ | 9,546 | | | | $ | 7,814 | | | $ | 9,136 | |
(1) OperatingLoss (gain) on lease impairmentmodifications and terminations is included in "Mortgage restructuring expense"“Occupancy and "Merger costs"equipment” within the Company's consolidated statements of income for the years ended December 31, 2023 and 2021. For the year ended December 31, 2022, loss (gain) on lease modifications and 2020, respectively.terminations of $364 and $(18) is included in “Mortgage restructuring expense” and “Occupancy and equipment,” respectively, within the Company's consolidated statements of income.
During the year ended December 31, 2023, the Company recorded $1,770 of loss on lease modifications and terminations primarily related to the closure of two branch locations. During the year ended December 31, 2022, the Company recorded $364 of loss on lease impairmentmodifications and terminations related to vacating two locations associated with restructuring the Company's Mortgage segment and recorded gains of $18 related to early lease terminations and modifications on other vacated locations. During the year ended December 31, 2021, the Company recorded $805 in gains on lease modifications and terminations on certain vacated locations that were consolidated as a result of previous business combinations. During the year ended December 31, 2020, the Company recorded $2,142 of lease impairment related
FB Financial Corporation and subsidiaries Notes to vacating certain locations as a result of its business combination activityconsolidated financial statements (Dollar amounts are in thousands, except share and location consolidation. See Note 2, "Mergers and Acquisitions" for additional information on the Company's business combination activity.per share amounts) 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
(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 liabilityliabilities as of December 31, 20222023 is as follows: | | Operating | | Finance | | Leases | | Lease | | Operating | | | Operating | | Finance | | Leases | | | Leases | | Lease | Lease payments due: | Lease payments due: | | | | December 31, 2023 | $ | 8,085 | | | $ | 118 | | December 31, 2024 | | December 31, 2024 | | December 31, 2024 | December 31, 2024 | 8,210 | | | 120 | | December 31, 2025 | December 31, 2025 | 7,909 | | | 121 | | December 31, 2026 | December 31, 2026 | 7,724 | | | 123 | | December 31, 2027 | December 31, 2027 | 7,340 | | | 125 | | December 31, 2028 | | Thereafter | Thereafter | 46,503 | | | 977 | | Total undiscounted future minimum lease payments | Total undiscounted future minimum lease payments | 85,771 | | | 1,584 | | Less: imputed interest | Less: imputed interest | (16,017) | | | (164) | | Lease liability | $ | 69,754 | | | $ | 1,420 | | Lease liabilities | |
Note (10)(8)—Mortgage servicing rights:rights Changes in the Company’s mortgage servicing rights were as follows for the years ended December 31, 2023, 2022, 2021, and 2020:2021: | | | | | | | | Years Ended December 31, | | | | Years Ended December 31, | | | | | 2022 | | 2021 | | 2020 | | | Carrying value at beginning of period | Carrying value at beginning of period | | | $ | 115,512 | | $ | 79,997 | | $ | 75,521 | | | Carrying value at beginning of period | | | Carrying value at beginning of period | | Capitalization | Capitalization | | | 20,809 | | 39,018 | | 47,025 | | | Mortgage servicing rights acquired from Franklin, at fair value | | | — | | — | | 5,111 | | | | Change in fair value: | Change in fair value: | | | Due to pay-offs/pay-downs | | | (16,012) | | (30,583) | | (27,834) | | | Change in fair value: | | | Change in fair value: | | Due to payoffs/paydowns | | Due to payoffs/paydowns | | Due to payoffs/paydowns | | Due to change in valuation inputs or assumptions | Due to change in valuation inputs or assumptions | | | 48,056 | | 27,080 | | (19,826) | | Carrying value at end of period | Carrying value at end of period | | | $ | 168,365 | | $ | 115,512 | | $ | 79,997 | |
The following table summarizes servicing income and expense, which are included in 'Mortgage“Mortgage banking income'income” and 'Other“Other noninterest expense',expense,” respectively, withinin the Mortgage segment operating resultsconsolidated statements of income for the years ended December 31, 2023, 2022, 2021, and 2020:2021: | | | | | | | | Years Ended December 31, | | | | Years Ended December 31, | | | | | 2022 | | 2021 | | 2020 | | Servicing income: | Servicing income: | | | | Servicing income | Servicing income | | | $ | 30,763 | | $ | 28,890 | | $ | 22,128 | | Servicing income | | Servicing income | | Change in fair value of mortgage servicing rights | Change in fair value of mortgage servicing rights | | | 32,044 | | (3,503) | | (47,660) | | Change in fair value of derivative hedging instruments | Change in fair value of derivative hedging instruments | | | (42,143) | | (8,614) | | 13,286 | | Servicing income | Servicing income | | | 20,664 | | 16,773 | | (12,246) | | Servicing expenses | Servicing expenses | | | 10,259 | | 9,862 | | 7,890 | | Net servicing income (loss)(1) | | | $ | 10,405 | | $ | 6,911 | | $ | (20,136) | | Net servicing income | |
(1) Excludes benefit of custodial servicing related noninterest-bearing deposits held by the Bank.
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (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 December 31, 20222023 and 20212022 are as follows: | | | | December 31, | | | December 31, | | | | December 31, | | | | December 31, | | | | | 2022 | | 2021 | | | 2023 | | 2022 | Unpaid principal balance | | $ | 11,086,582 | | | $ | 10,759,286 | | Unpaid principal balance of mortgage loans sold and serviced for others | | Weighted-average prepayment speed (CPR) | Weighted-average prepayment speed (CPR) | | 5.55 | % | | 9.31 | % | Weighted-average prepayment speed (CPR) | | 6.19 | % | | 5.55 | % | Estimated impact on fair value of a 10% increase | Estimated impact on fair value of a 10% increase | | $ | (4,886) | | | $ | (4,905) | | Estimated impact on fair value of a 20% increase | Estimated impact on fair value of a 20% increase | | $ | (9,447) | | | $ | (9,429) | | | Discount rate | | | Discount rate | | | Discount rate | Discount rate | | 9.10 | % | | 9.81 | % | | 9.62 | % | | 9.10 | % | Estimated impact on fair value of a 100 bp increase | Estimated impact on fair value of a 100 bp increase | | $ | (8,087) | | | $ | (4,785) | | Estimated impact on fair value of a 200 bp increase | Estimated impact on fair value of a 200 bp increase | | $ | (15,475) | | | $ | (9,198) | | | Weighted-average coupon interest rate | | | Weighted-average coupon interest rate | | | Weighted-average coupon interest rate | Weighted-average coupon interest rate | | 3.31 | % | | 3.23 | % | | 3.47 | % | | 3.31 | % | Weighted-average servicing fee (basis points) | Weighted-average servicing fee (basis points) | | 27 | | 27 | Weighted-average servicing fee (basis points) | | 27 | Weighted-average remaining maturity (in months) | Weighted-average remaining maturity (in months) | | 332 | | 330 | Weighted-average remaining maturity (in months) | | 334 | | 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 17, "Derivatives"15, “Derivatives” for additional information on these hedging instruments. As of December 31, 20222023 and 2021,2022, mortgage escrow deposits totaled to$63,591 and $75,612, and $127,617, respectively. Note (11)(9)—Other assets and other liabilities:liabilities Included in other assets are: | | | | As of December 31, | | | As of December 31, | Other assets | Other assets | | 2022 | | 2021 | Other assets | | 2023 | | 2022 | Derivatives (See Note 15) | | Deferred tax asset (See Note 12) | | Equity securities without readily determinable market value | | FHLB lender risk account receivable | | Mortgage lending receivable | | Pledged collateral on derivative instruments | | Prepaid expenses | Prepaid expenses | | $ | 9,280 | | | $ | 12,371 | | Current income tax receivable | | Software | Software | | 108 | | | 578 | | Mortgage lending receivable | | 14,425 | | | 16,087 | | Derivatives (See Note 17) | | 48,769 | | | 27,384 | | Deferred tax asset (See Note 14) | | 42,412 | | | — | | FHLB lender risk account receivable (See Note 1) | | 19,737 | | | 17,130 | | Pledged collateral on derivative instruments | | 23,325 | | | 57,868 | | Equity securities without readily determinable market value | | 22,496 | | | 8,868 | | Current income tax receivable | | 7,373 | | | 26,698 | | Other assets | Other assets | | 40,031 | | | 5,252 | | Total other assets | Total other assets | | $ | 227,956 | | | $ | 172,236 | |
Included in other liabilities are: | | | | | | | | | | | | | | | | | | As of December 31, | | Other liabilities | | 2022 | | 2021 | | Deferred compensation | | $ | 2,424 | | | $ | 2,487 | | | Accrued payroll | | 13,592 | | | 22,138 | | | | | | | | | Mortgage buyback reserve (See Note 16) | | 1,621 | | | 4,802 | | | Accrued interest payable | | 8,648 | | | 3,162 | | | Derivatives (See Note 17) | | 63,229 | | | 21,000 | | | Deferred tax liability (See Note 14) | | — | | | 6,820 | | | | | | | | | FHLB lender risk account guaranty | | 9,558 | | | 8,372 | | | Allowance for credit losses on unfunded commitments (See Note 16) | | 22,969 | | | 14,380 | | | Other liabilities | | 58,932 | | | 26,788 | | | Total other liabilities | | $ | 180,973 | | | $ | 109,949 | | |
| | | | | | | | | | | | | | | | | | As of December 31, | | Other liabilities | | 2023 | | 2022 | | | | | | | | Derivatives (See Note 15) | | 38,215 | | | 63,229 | | | | | | | | | | | | | | | Accrued interest payable | | 18,809 | | | 8,648 | | | Accrued payroll | | 18,406 | | | 13,592 | | | FHLB lender risk account guaranty | | 9,746 | | | 9,558 | | | Allowance for credit losses on unfunded commitments (See Note 14) | | 8,770 | | | 22,969 | | | Deferred compensation | | 2,152 | | | 2,424 | | | Mortgage buyback reserve (See Note 14) | | 899 | | | 1,621 | | | Other liabilities | | 45,625 | | | 58,932 | | | Total other liabilities | | $ | 142,622 | | | $ | 180,973 | | |
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) Note (12)(10)—Deposits:Deposits As of December 31, 20222023 and 2021,2022, the aggregate amount of time deposits with a minimum denomination greater than $250 was $556,537$644,588 and $303,289,$556,537, respectively. At December 31, 2022,2023, the scheduled maturities of time deposits are as follows: | | | | | | | | | Scheduled maturities of time deposits | | | Due on or before: | | | December 31, 20232024 | | $ | 873,3271,279,052 | | December 31, 2024 | | 480,005 | | December 31, 2025 | | 34,766309,929 | | December 31, 2026 | | 19,07314,902 | | December 31, 2027 | | 14,68710,239 | | December 31, 2028 | | 6,504 | | Thereafter | | 1167 | | Total | | $ | 1,421,9741,620,633 | |
As of December 31, 20222023 and 2021,2022, the Company had $5,725$3,475 and $2,574,$5,725, respectively, of deposit accounts in overdraft status and thus have been reclassified to loans on the accompanying consolidated balance sheets. Note (13)(11)—Borrowings:Borrowings The Company has access to various sources of funds that allow for management of interest rate exposure and liquidity. The following table summarizes the Company's outstanding borrowings and weighted average interest rates as of December 31, 20222023 and 2021:2022: | | Outstanding Balance | | Weighted Average Interest Rate | | | December 31, | | December 31, | | 2022 | | | 2021 | | | 2022 | | | 2021 | | | | Outstanding Balance | | | | Outstanding Balance | | Weighted Average Interest Rate | | | December 31, | | | | December 31, | | December 31, | | | 2023 | | Securities sold under agreements to repurchase and federal funds purchased | Securities sold under agreements to repurchase and federal funds purchased | | $ | 86,945 | | | $ | 40,716 | | | 3.78 | % | | 0.21 | % | Securities sold under agreements to repurchase and federal funds purchased | | $ | 108,764 | | | $ | | $ | 86,945 | | | 5.05 | | 5.05 | % | | 3.78 | % | FHLB advances | FHLB advances | | 175,000 | | | — | | | 4.44 | % | | — | % | FHLB advances | | — | | | 175,000 | | 175,000 | | | — | | — | % | | 4.44 | % | Bank Term Funding Program | | Bank Term Funding Program | | 130,000 | | | — | | | 4.85 | % | | — | % | Subordinated debt, net | Subordinated debt, net | | 126,101 | | | 129,544 | | | 5.31 | % | | 4.24 | % | Subordinated debt, net | | 129,645 | | | 126,101 | | 126,101 | | | 5.52 | | 5.52 | % | | 5.31 | % | Other borrowings | Other borrowings | | 27,631 | | | 1,518 | | | 0.09 | % | | 1.76 | % | Other borrowings | | 22,555 | | | 27,631 | | 27,631 | | | 0.10 | | 0.10 | % | | 0.09 | % | Total | Total | | $ | 415,677 | | | $ | 171,778 | | | |
Securities sold under agreements to repurchase and federal funds purchased Securities sold under agreements to repurchase are financing arrangements that mature daily. Securities sold under agreements to repurchase totaled $21,945$19,328 and $40,716$21,945 as of December 31, 20222023 and 2021,2022, respectively. The weighted average interest rate of the Company's securities sold under agreements to repurchase was 0.18%1.60% and 0.21%0.18% as of December 31, 20222023 and 2021,2022, respectively. The fair value of securities pledged to secure repurchase agreements may decline. The Company manages this risk by having a policy to pledge securities valued at 100% of the outstanding balance of repurchase agreements. The Bank maintains 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. As of December 31, 20222023 and 2021,2022, the aggregate total borrowing capacity under these lines amounted to $350,000$370,000 and $325,000,$350,000, respectively. As of December 31, 2023 and 2022, borrowings against these lines (i.e., federal funds purchased) totaled $89,436 and $65,000 with a weighted average rate of 5.79% and 5.00%. There were no such borrowings as of December 31, 2021., respectively.
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) Information concerning securities sold under agreement to repurchase and federal funds purchased is summarized as follows: | | December 31, 2022 | | December 31, 2021 | | December 31, 2023 | | | December 31, 2023 | | December 31, 2022 | Balance at year end | Balance at year end | $ | 86,945 | | | $ | 40,716 | | Average daily balance during the year | Average daily balance during the year | 28,497 | | | 36,453 | | Average interest rate during the year | Average interest rate during the year | 0.23 | % | | 0.27 | % | Average interest rate during the year | 2.24 | % | | 0.23 | % | Maximum month-end balance during the year | Maximum month-end balance during the year | $ | 86,945 | | | $ | 41,730 | | Weighted average interest rate at year-end | Weighted average interest rate at year-end | 3.78 | % | | 0.21 | % | Weighted average interest rate at year-end | 5.05 | % | | 3.78 | % |
Federal Home Loan Bank Advances As a member of the FHLB, Cincinnati, the BankCompany may utilize advances from the FHLB in order to provide additional liquidity and funding. Under these short-term agreements, the Company maintains a line of credit that as of December 31, 20222023 and 20212022 had total borrowing capacity of $1,270,240$1,757,702 and $1,233,254,$1,270,240, respectively. As of December 31, 20222023 and 2021,2022, the Company had qualifying loans pledged as collateral securing these lines amounting to $2,673,464$3,014,023 and $2,717,967,$2,673,464, respectively. Overnight cash advances against this line totaled $175,000 as of December 31, 2022. There were no FHLB advances outstanding as of December 31, 2021.2023. Information concerning FHLB advances as of or for the yearyears ended December 31, 2023 and 2022 is summarized within the table below. There were | | | | | | | | | | | | | December 31, 2023 | | December 31, 2022 | Balance at year end | $ | — | | | $ | 175,000 | | Average daily balance during the year | 28,973 | | | 171,142 | | Average interest rate during the year | 5.13 | % | | 3.26 | % | Maximum month-end balance during the year | $ | 125,000 | | | $ | 540,000 | | Weighted average interest rate at year-end | — | % | | 4.44 | % |
Bank Term Funding Program In March 2023, the Federal Reserve established the Bank Term Funding Program to make available funding to eligible depository institutions in order to help ensure they have the ability to meet the needs of their depositors following the March 2023 high-profile bank failures. The program allows for advances for up to one year secured by eligible high-quality securities at par value extended at the one-year overnight index swap rate, plus 10 basis points, as of the day the advance is made. The interest rate is fixed for the term of the advance and there are no FHLB advancesprepayment penalties. At December 31, 2023, the Company had outstanding duringborrowings of $130,000 under the BTFP at a borrowing rate of 4.85% and a maturity date of December 26, 2024. Information concerning the Bank Term Funding Program as of or for the year ended December 31, 2021.2023 is summarized within the table below. | | | | | | | | | December 31, 20222023 | | | Balance at year end | $ | 175,000130,000 | | | | Average daily balance during the year | 171,1421,781 | | | | Average interest rate during the year | 3.264.85 | % | | | Maximum month-end balance during the year | $ | 540,000130,000 | | | | Weighted average interest rate at year-end | 4.444.85 | % | | |
Subordinated Debt During the year-endedyear ended December 31, 2003, two separate trusts were formed by the Company, which issued $9,000 (“Trust I”) and $21,000 ("Trust II") of floating rate trust preferred securities as part of a pooled offering of such securities. The Company issued junior subordinated debentures of $9,280, which included proceeds of common securities purchased by the Company of $280, and junior subordinated debentures of $21,650, which included proceeds of common securities of $650. The Truststrusts were created for the sole purpose of issuing 30-year capital trust preferred securities to fund the purchase of junior subordinated debentures issued by the Company. 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, the Company placed $100,000 of ten year fixed-to-floating rate subordinated notes, maturing September 1, 2030. During the year ended December 31, 2022, the Company began mitigating interest rate exposure associated with these notes through the use of fair value hedging instruments. See Note 17, "Derivatives" for additional details related to these instruments.
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) mitigating interest rate exposure associated with these notes through the use of fair value hedging instruments. See Note 15, "Derivatives" for additional details related to these instruments. Further information related to the Company's subordinated debt as of December 31, 20222023 is detailed below: | Name | Name | Year Established | Maturity | Call Date | Total Debt Outstanding | Interest Rate | Coupon Structure | Name | Year Established | Maturity | Call Date | Total Debt Outstanding | Interest Rate | Coupon Structure | Subordinated Debt issued by Trust Preferred Securities | | Subordinated Debt issued by Trust Preferred Securities: | | FBK Trust I (1) | | FBK Trust I (1) | | FBK Trust I (1) | FBK Trust I (1) | 2003 | 06/09/2033 | 6/09/2008(2) | $ | 9,280 | | 8.00% | 3-month LIBOR plus 3.25% | 2003 | 06/09/2033 | 6/09/2008 | $ | 9,280 | | 8.84% | 8.84% | 3-month SOFR plus 3.51% | FBK Trust II (1) | FBK Trust II (1) | 2003 | 06/26/2033 | 6/26/2008(3) | 21,650 | | 7.87% | 3-month LIBOR plus 3.15% | FBK Trust II (1) | 2003 | 06/26/2033 | 6/26/2008 | 21,650 | | 8.77% | 8.77% | 3-month SOFR plus 3.41% | Additional Subordinated Debt | | FBK Subordinated Debt I(4) | 2020 | 09/01/2030 | 9/1/2025 (5) | 100,000 | | 4.50% | Semi-annual Fixed (6) | Additional Subordinated Debt: | | FBK Subordinated Debt I(2) | | FBK Subordinated Debt I(2) | | FBK Subordinated Debt I(2) | | 2020 | 09/01/2030 | 9/1/2025 | 100,000 | | 4.50% | Semi-annual Fixed (3) | Unamortized debt issuance costs | Unamortized debt issuance costs | | (999) | | | Fair Value Hedge (See Note 17, "Derivatives" ) | (3,830) | | | Fair Value Hedge (See Note 15, “Derivatives”) | | Fair Value Hedge (See Note 15, “Derivatives”) | | Fair Value Hedge (See Note 15, “Derivatives”) | | Total Subordinated Debt, net | Total Subordinated Debt, net | | $ | 126,101 | | | (1)The Company classifies $30,000 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. | Total Subordinated Debt, net | | Total Subordinated Debt, net | | (1)The Company classifies $30,000 of the trusts' subordinated debt as Tier 1 capital. (2)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. (3)Beginning on September 1, 2025 the coupon structure migrates to the 3-month SOFR plus a spread of 439 basis points through the end of the term of the debenture. | | (1)The Company classifies $30,000 of the trusts' subordinated debt as Tier 1 capital. (2)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. (3)Beginning on September 1, 2025 the coupon structure migrates to the 3-month SOFR plus a spread of 439 basis points through the end of the term of the debenture. | | (1)The Company classifies $30,000 of the trusts' subordinated debt as Tier 1 capital. (2)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. (3)Beginning on September 1, 2025 the coupon structure migrates to the 3-month SOFR plus a spread of 439 basis points through the end of the term of the debenture. | |
Other BorrowingsAs of December 31, 20222023 and 2021,2022, other borrowings included a finance lease liability amounting to $1,420$1,326 and $1,518,$1,420, respectively. Additionally, as of December 31, 2023 and 2022, the Company had $21,229 and $26,211, respectively, of government guaranteed GNMA loans that were greater than 90 days delinquent under their contractual terms that were eligible for optional repurchase and recorded in both loans HFS and other borrowings. See Note 9, "Leases"7, “Leases” and Note 18, "Fair16, “Fair Value of financial instruments"instruments” for additional information regarding the Company's finance lease and guaranteed GNMA loans eligible for repurchase, respectively. Note (14)—Income taxes:
An allocation of federal and state income taxes between current and deferred portions is presented below: | | | | | | | | | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | | | | | | 2022 | | | 2021 | | | 2020 | | Current | | | | | | $ | 22,451 | | | $ | 21,980 | | | $ | 44,362 | | Deferred | | | | | | 12,552 | | | 30,770 | | | (25,530) | | Total | | | | | | $ | 35,003 | | | $ | 52,750 | | | $ | 18,832 | |
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) Note (12)—Income taxes An allocation of federal and state income taxes between current and deferred portions is presented below: | | | | | | | | | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | | | | | | 2023 | | | 2022 | | | 2021 | | Current | | | | | | $ | 31,467 | | | $ | 22,451 | | | $ | 21,980 | | Deferred | | | | | | (1,415) | | | 12,552 | | | 30,770 | | Total | | | | | | $ | 30,052 | | | $ | 35,003 | | | $ | 52,750 | |
The following table presents a reconciliation of federal income taxes at the statutory federal rate of 21% to the Company's effective tax rates for the years ended December 31, 2023, 2022, 2021, and 2020:2021: | | | | | | | Years Ended December 31, | | | Years Ended December 31, | | | | 2022 | | | 2021 | | | 2020 | | Federal taxes calculated at statutory rate | Federal taxes calculated at statutory rate | | $ | 33,510 | | 21.0 | % | | $ | 51,041 | | 21.0 | % | | $ | 17,317 | | 21.0 | % | Federal taxes calculated at statutory rate | | | | | | | $ | 31,561 | | 21.0 | 21.0 | % | | $ | 33,510 | | 21.0 | 21.0 | % | | $ | 51,041 | | 21.0 | 21.0 | % | Increase (decrease) resulting from: | | | (Decrease) increase resulting from: | | State taxes, net of federal benefit | | State taxes, net of federal benefit | | State taxes, net of federal benefit | State taxes, net of federal benefit | | 3,845 | | 2.4 | % | | 8,788 | | 3.5 | % | | 3,197 | | 3.8 | % | | | | | | | (158) | | (0.1) | (0.1) | % | | 3,845 | | 2.4 | 2.4 | % | | 8,788 | | 3.5 | 3.5 | % | | (Benefit) expense from equity based compensation | | (392) | | (0.2) | % | | (2,719) | | (1.1) | % | | 153 | | 0.2 | % | Expense (benefit) from equity based compensation | | | Expense (benefit) from equity based compensation | | | Expense (benefit) from equity based compensation | | | | | | | | 219 | | 0.1 | % | | (392) | | (0.2) | % | | (2,719) | | (1.1) | % | Municipal interest income, net of interest disallowance | Municipal interest income, net of interest disallowance | | (1,774) | | (1.1) | % | | (1,818) | | (0.8) | % | | (1,507) | | (1.8) | % | Municipal interest income, net of interest disallowance | | | | | | | (1,804) | | (1.2) | (1.2) | % | | (1,774) | | (1.1) | (1.1) | % | | (1,818) | | (0.8) | (0.8) | % | Bank-owned life insurance | Bank-owned life insurance | | (305) | | (0.2) | % | | (324) | | (0.1) | % | | (327) | | (0.4) | % | Bank-owned life insurance | | | | | | | (393) | | (0.3) | (0.3) | % | | (305) | | (0.2) | (0.2) | % | | (324) | | (0.1) | (0.1) | % | NOL Carryback provision under CARES Act | NOL Carryback provision under CARES Act | | — | | — | % | | (3,424) | | (1.4) | % | | — | | — | % | NOL Carryback provision under CARES Act | | | | | | | — | | — | — | % | | — | | — | — | % | | (3,424) | | (1.4) | (1.4) | % | Offering costs | Offering costs | | — | | — | % | | 123 | | 0.1 | % | | 289 | | 0.4 | % | Offering costs | | | | | | | — | | — | — | % | | — | | — | — | % | | 123 | | 0.1 | 0.1 | % | Section 162(m) limitation | Section 162(m) limitation | | 241 | | 0.1 | % | | 1,381 | | 0.6 | % | | — | | — | % | Section 162(m) limitation | | | | | | | 244 | | 0.2 | 0.2 | % | | 241 | | 0.1 | 0.1 | % | | 1,381 | | 0.6 | 0.6 | % | Other | Other | | (122) | | (0.1) | % | | (298) | | (0.1) | % | | (290) | | (0.4) | % | Other | | | | | | | 383 | | 0.3 | 0.3 | % | | (122) | | (0.1) | (0.1) | % | | (298) | | (0.1) | (0.1) | % | Income tax expense, as reported | Income tax expense, as reported | | $ | 35,003 | | 21.9 | % | | $ | 52,750 | | 21.7 | % | | $ | 18,832 | | 22.8 | % | Income tax expense, as reported | | | | | | | $ | 30,052 | | 20.0 | 20.0 | % | | $ | 35,003 | | 21.9 | 21.9 | % | | $ | 52,750 | | 21.7 | 21.7 | % |
The Company is subject to Internal Revenue Code Section 162(m), which limits the deductibility of compensation paid to certain individuals. It is the Company’s policy to apply the Section 162(m) limitations to stock-based compensation first and then followed by cash compensation. As a result of the vesting of these unitsthis stock-based compensation and cash compensation paid to date, the Company has disallowed a portion of its compensation paid to the applicable individuals. The components of the net deferred tax assets (liabilities)and liabilities at December 31, 20222023 and 2021,2022, are as follows: | | December 31, | | | December 31, | | | | December 31, | | | | 2022 | | | 2021 | | Deferred tax assets: | Deferred tax assets: | | | | | Allowance for credit losses | | Allowance for credit losses | | Allowance for credit losses | Allowance for credit losses | | $ | 38,646 | | | $ | 35,233 | | Operating lease liabilities | Operating lease liabilities | | 25,882 | | | 12,478 | | Net operating loss | Net operating loss | | 1,088 | | | 1,370 | | Amortization of core deposit intangibles | Amortization of core deposit intangibles | | 653 | | | — | | Deferred compensation | Deferred compensation | | 5,245 | | | 5,484 | | Unrealized loss on debt securities | Unrealized loss on debt securities | | 61,004 | | | — | | | Unrealized loss on cash flow hedges | | — | | | 205 | | Other assets | Other assets | | 6,691 | | | 8,301 | | Subtotal | Subtotal | | 139,209 | | | 63,071 | | Deferred tax liabilities: | Deferred tax liabilities: | | | | | FHLB stock dividends | FHLB stock dividends | | $ | (484) | | | $ | (484) | | FHLB stock dividends | | FHLB stock dividends | | Operating leases - right of use assets | Operating leases - right of use assets | | (24,478) | | | (11,287) | | Depreciation | Depreciation | | (7,274) | | | (7,938) | | Amortization of core deposit intangibles | | — | | | (116) | | | Unrealized gain on equity securities | | Unrealized gain on equity securities | | Unrealized gain on equity securities | Unrealized gain on equity securities | | (2,287) | | | (2,407) | | Unrealized gain on cash flow hedges | Unrealized gain on cash flow hedges | | (327) | | | — | | Unrealized gain on debt securities | | — | | | (1,324) | | | Mortgage servicing rights | | Mortgage servicing rights | | Mortgage servicing rights | Mortgage servicing rights | | (43,869) | | | (30,098) | | Goodwill | Goodwill | | (15,869) | | | (13,743) | | Other liabilities | Other liabilities | | (2,209) | | | (2,494) | | Subtotal | Subtotal | | (96,797) | | | (69,891) | | Net deferred tax assets (liabilities) | | $ | 42,412 | | | $ | (6,820) | | Net deferred tax assets | |
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) The Company had a net operating loss carryforward generated as a result of a previous merger amounting to $5,179$3,835 and $6,523$5,179 as of December 31, 20222023 and 2021,2022, respectively. The net operating loss carryforward can be used to offset taxable income in future periods and reduce income tax liabilities in those future periods. While net operating losses are subject to certain annual utilization limits under Section 382, the Company believes the net operating loss carryforwards will be realized based on the projected annual limitation and the length of the net operating loss carryover period. The Company's determination of the realization of the net deferred tax asset is based on its assessment of all available positive and negative evidence. The net operating loss carryforward will begin to expire in 2029. Note (15)(13)—Dividend restrictions:restrictions Due to regulations of the Tennessee Department of Financial Institutions, the Bank may not declare dividends in any calendar year that exceeds the total of its net income of that year combined with its retained net income of the preceding two years without the prior approval of the TDFI Commissioner. Based upon this regulation, $161,251$218,415 and $170,769$161,251 was available for payment of dividends without such prior approval as of December 31, 20222023 and 2021,2022, respectively. 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 both the years ended December 31, 2022, 2021,2023 and 2020,2022, there were $49,000 $122,500 and $48,750, respectively, in cash dividends declared and paid from the Bank to the Company. Additionally, duringDuring the year ended December 31, 2020, the Bank2021, there were $122,500 in cash dividends declared a noncash dividend to the Company comprising investment securities amounting to $956. There were no such noncash dividendsand paid from the Bank to the Company during the years ended December 31, 2022 or 2021.Company. Note (16)(14)—Commitments and contingencies:contingencies Commitments to extend credit &and letters of credit Some financial instruments, such as loan commitments, credit lines and letters of credit, are issued to meet customer financing needs. These areunfunded loan commitment 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 the Company uses to evaluate and underwrite loans are also used to make suchoriginate unfunded loan commitments, as are used for loans, including obtaining collateral at exercise of the commitment. ManyThese unfunded loan commitments expire without being used and are only recorded in the consolidated financial statements when drawn upon.upon and many expire without being used. The Company's maximum off-balance sheet exposure to credit loss from these unfunded loan commitments is represented by the contractual amount of these instruments. | | | December 31, | | | December 31, | | | | December 31, | | | | December 31, | | | | | 2022 | | | 2021 | | Commitments to extend credit, excluding interest rate lock commitments | Commitments to extend credit, excluding interest rate lock commitments | | $ | 3,563,982 | | | $ | 3,106,594 | | Letters of credit | Letters of credit | | 71,250 | | | 77,427 | | Balance at end of period | Balance at end of period | | $ | 3,635,232 | | | $ | 3,184,021 | |
As of December 31, 2023 and 2022, and 2021,unfunded loan commitments included above with floating interest rates totaled $2.96 billion$2,459,669 and $2.26 billion,$2,961,683, respectively. TheAs part of its credit loss process, the Company estimates expected credit losses on off-balance sheetits unfunded loan commitments that are not accounted for as derivatives under the CECL methodology. When applying this methodology, the Company considers the likelihood that funding will occur, the contractual period of exposure to credit loss, the risk of loss, historical loss experience, and current conditions along with expectations of future economic conditions.
The table below presents activity within the allowance for credit losses on unfunded loan commitments included in accrued expenses and other liabilities on the Company's consolidated balance sheets: | | | | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | | | | | 2023 | | 2022 | | 2021 | | Balance at beginning of period | | | | | $ | 22,969 | | $ | 14,380 | | $ | 16,378 | | | | | | | | | | | | | | | | | | (Reversal of) provision for credit losses on unfunded commitments | | | | | (14,199) | | 8,589 | | (1,998) | | Balance at end of period | | | | | $ | 8,770 | | $ | 22,969 | | $ | 14,380 | |
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) The table below presents activity within the allowance for credit losses on unfunded commitments included in accrued expenses and other liabilities on the Company's consolidated balance sheets for the years ended December 31, 2022, 2021, and 2020:
| | | | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | | | | | 2022 | | 2021 | | 2020 | | Balance at beginning of period | | | | | $ | 14,380 | | $ | 16,378 | | $ | — | | Impact of CECL adoption on provision for credit losses on unfunded commitments | | | | | — | | — | | 2,947 | | Increase in provision for credit losses from unfunded commitments acquired in business combination | | | | | — | | — | | 10,499 | | Provision for credit losses on unfunded commitments | | | | | 8,589 | | (1,998) | | 2,932 | | Balance at end of period | | | | | $ | 22,969 | | $ | 14,380 | | $ | 16,378 | |
Loan repurchases or indemnifications In connection with the sale of mortgage loans to third partythird-party private investors or government sponsored agencies, the Company makes usual and customary representations and warranties as to the propriety of its origination activities.activities, which are typical and customary to these types of transactions. 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 valuation reserve.in loans held for investment. The total principal amount of loans repurchased (or indemnified for) was $8,552, $7,834 and $7,364 and $9,171 for the years ended December 31, 2023, 2022, 2021, and 2020,2021, respectively. The Company has established a reserve associated with potential loan repurchases. The following table summarizes the activity in the repurchase reserve included in accrued“Accrued expenses and other liabilitiesliabilities” on the Company's consolidated balance sheets: | | | Years Ended December 31, | | | | | Years Ended December 31, | | | | | | Years Ended December 31, | | | | | | Years Ended December 31, | | | | | | 2022 | | 2021 | | 2020 | | Balance at beginning of period | Balance at beginning of period | | | $ | 4,802 | | $ | 5,928 | | $ | 3,529 | | Provision for loan repurchases or indemnifications | Provision for loan repurchases or indemnifications | | | (2,989) | | (766) | | 2,607 | | | Losses on loans repurchased or indemnified | Losses on loans repurchased or indemnified | | | (192) | | (360) | | (208) | | Losses on loans repurchased or indemnified | | Losses on loans repurchased or indemnified | | Balance at end of period | Balance at end of period | | | $ | 1,621 | | $ | 4,802 | | $ | 5,928 | | |
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 (17)(15)—Derivatives:Derivatives The Company utilizes derivative financial instruments as part of its ongoing efforts to manage its interest rate risk exposure as well as theinterest rate 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.” See Note 1, “Basis of presentation,” for additional information on the Company’s accounting policies related to derivative instruments and hedging activities. Derivatives designated as fair value hedges The Company enters into fair value hedging relationships using interest rates swaps to mitigate the Company’s exposure to losses in market value as interest rates change. Derivative instruments that are used as part of the Company’s interest rate risk management strategy include interest rate swaps that relate to pricing of specific balance sheet assets and liabilities. Interest rate swaps generally involve the exchange of fixed and variable rate interest payments between two parties, based on a common notional principal amount and maturity date. The critical terms of the interest rate swaps match the terms of the corresponding hedged items. All components of each derivative instrument’s gain or loss are included in the assessment of hedge effectiveness. Any initial and ongoing assessment of expected hedge effectiveness is based on regression analysis. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 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- fixed rate money market deposits | | 0.64 | | 1.50% | | SOFR | | 75,000 | | | (1,686) | | | 75,000 | | | (3,693) | | Interest rate swap agreement- fixed rate money market deposits | | 0.64 | | 1.50% | | SOFR | | 125,000 | | | (2,811) | | | 125,000 | | | (6,154) | | Interest rate swap agreement- subordinated debt | | 0.17 | | 1.46% | | SOFR | | 100,000 | | | (673) | | | 100,000 | | | (3,830) | | Total | | 0.49 | | 1.48% | | | | $ | 300,000 | | | $ | (5,170) | | | $ | 300,000 | | | $ | (13,677) | |
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) The following discloses the amount of expense included in interest expense on borrowings and deposits, related to these fair value hedging instruments: | | | | | | | | | | | | | | Years Ended December 31, | | | 2023 | 2022 | Designated fair value hedge: | | | | Interest expense on deposits | | $ | (7,176) | | $ | (717) | | Interest expense on borrowings | | (3,630) | | (395) | | Total | | $ | (10,806) | | $ | (1,112) | |
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 | | December 31, 2023 | | December 31, 2022 | | December 31, 2023 | | December 31, 2022 | Money market and savings deposits | | $ | 198,143 | | | $ | 196,520 | | (1) | $ | (4,497) | | | $ | (9,847) | | Borrowings | | 98,715 | | | 95,171 | | (2) | (673) | | | (3,830) | | Total | | $ | 296,858 | | | $ | 291,691 | | | $ | (5,170) | | | $ | (13,677) | |
(1) The carrying value also includes an unaccreted purchase accounting fair value premium of $2,640 and $6,367 as of December 31, 2023 and 2022, respectively. (2) The carrying value also includes unamortized subordinated debt issuance costs of $612 and $999 as of December 31, 2023 and 2022, respectively. Derivatives designated as cash flow hedges The Company enters into cash flow hedging relationships using interest rate swaps to mitigate the exposure to the variability in future cash flows or other forecast transactions associated with its floating rate assets and liabilities. The Company uses interest rate swap agreements to hedge the repricing characteristics of its floating rate subordinated debt. All components of each derivative instrument’s gain or loss are included in the assessment of hedge effectiveness. Any initial and ongoing assessment of expected hedge effectiveness is based on regression analysis. The ongoing periodic measures of hedge ineffectiveness are based on the expected change in cash flows of the hedged item caused by changes in the benchmark interest rate. The following presents a summary of the Company's designated cash flow hedges as of the dates presented: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 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 | | | $ | 579 | | | Other assets | | $ | 1,255 | | | Other assets |
The Company's consolidated statements of income included income of $985 for the year ended December 31, 2023 and expense of $93 and $577 for the years ended December 31, 2022 and 2021, respectively, in interest expense on borrowings related to these cash flow hedges. The cash flow hedges were highly 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 as a result of hedge ineffectiveness during any period presented. The following discloses the amount included in other comprehensive (loss) income, net of tax, for derivative instruments designated as cash flow hedges for the periods presented: | | | | | | | | | | | | | | | | | Years Ended December 31, | | | 2023 | 2022 | 2021 | Amount of (loss) gain recognized in other comprehensive (loss) income, net of tax (benefit) expense of $(176), $532 and $293 | | $ | (500) | | $ | 1,508 | | $ | 831 | |
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) Derivatives not designated as hedging instruments The Company entersDerivatives not designated under hedge accounting rules include those that are entered into commitmentsas either economic hedges as part of the Company’s overall risk management strategy or to originate loans wherebyfacilitate client needs. Economic hedges are those that are not designated as a fair value or cash flow hedge for accounting purposes but are necessary to economically manage the interest rate on the loan is determined prior to funding (rate-lock commitments). Under such commitments, interest rates for mortgage loans are typically locked in for between 45 to 90 daysrisk exposure associated 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. Gainsassets and losses arising from changes in the valuationliabilities of the rate-lock commitments and forward commitments are recognized currently in earnings and are reflected under the line item “Mortgage banking income” on the consolidated statements of income.Company.
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 Company enters into interest rate-lock commitments on residential loan commitments that will be held for resale. These are considered derivative instruments with no hedge accounting designation, and the interest rate exposure on these commitments is economically hedged primarily with forward contracts. 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” in the consolidated statements of income. The Company also enters into forwards, futures and option contracts to economically hedge the change 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” in the consolidated statements of income. The following tables provide details on the Company’s non-designated derivative financial instruments as of the dates presented: | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2023 | | | | Notional Amount | | Asset | | Liability | | | | | | | | | | Interest rate contracts | | $ | 569,865 | | | $ | 32,179 | | | $ | 32,184 | | | Forward commitments | | 159,000 | | | — | | | 861 | | | Interest rate-lock commitments | | 69,217 | | | 1,203 | | | — | | | Futures contracts | | 254,000 | | | 777 | | | — | | | | | | | | | | | Total | | $ | 1,052,082 | | | $ | 34,159 | | | $ | 33,045 | | |
| | | | | | | | | | | | | | | | | | | | | | | December 31, 2022 | | | Notional Amount | | Asset | | Liability | | | | | | | | Interest rate contracts | | $ | 560,310 | | | $ | 45,775 | | | $ | 45,762 | | Forward commitments | | 207,000 | | | 306 | | | — | | Interest rate-lock commitments | | 118,313 | | | 1,433 | | | — | | Futures contracts | | 494,300 | | | — | | | 3,790 | | | | | | | | | Total | | $ | 1,379,923 | | | $ | 47,514 | | | $ | 49,552 | |
(Losses) gains included in the consolidated statements of income related to the Company’s non-designated derivative financial instruments were as follows: | | | | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | | | | | 2023 | | 2022 | | 2021 | | Included in mortgage banking income: | | | | | | | | Interest rate lock commitments | | | | | $ | (230) | | $ | (5,764) | | $ | (27,194) | | Forward commitments | | | | | 953 | | 55,804 | | 25,661 | | Futures contracts | | | | | (3,366) | | (36,381) | | (7,949) | | Option contracts | | | | | (1,125) | | 36 | | — | | Total | | | | | $ | (3,768) | | $ | 13,695 | | $ | (9,482) | |
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) offsetting derivative contract. The Company manages its credit risk, or potential riskNetting 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: | | | | | | | | | | | | | | | | | | | | | | | | 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 | | 87,700 | | | — | | | 3,790 | | | | | | | | | | | Total | | $ | 973,323 | | | $ | 47,514 | | | $ | 49,552 | | |
| | | | | | | | | | | | | | | | | | | | | | | December 31, 2021 | | | Notional Amount | | Asset | | Liability | | | | | | | | Interest rate contracts | | $ | 600,048 | | | $ | 19,265 | | | $ | 19,138 | | Forward commitments | | 1,180,000 | | | — | | | 1,077 | | Interest rate-lock commitments | | 487,396 | | | 7,197 | | | — | | Futures contracts | | 429,000 | | | 922 | | | — | | | | | | | | | Total | | $ | 2,696,444 | | | $ | 27,384 | | | $ | 20,215 | |
Gains (losses) included in the consolidated statements of income related to the Company’s non-designated derivative financial instruments were as follows:
| | | | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | | | | | 2022 | | 2021 | | 2020 | | Included in mortgage banking income: | | | | | | | | Interest rate lock commitments | | | | | $ | (5,764) | | $ | (27,194) | | $ | 27,339 | | Forward commitments | | | | | 55,804 | | 25,661 | | (73,033) | | Futures contracts | | | | | (36,381) | | (7,949) | | 8,151 | | Option contracts | | | | | 36 | | — | | — | | Total | | | | | $ | 13,695 | | $ | (9,482) | | $ | (37,543) | |
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:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2022 | | December 31, 2021 | | | | Notional Amount | | Estimated fair value | | Balance sheet location | | Estimated fair value | | Balance sheet location | | Interest rate swap agreements- subordinated debt | | $ | 30,000 | | | $ | 1,255 | | | Other assets | | $ | (785) | | | Accrued expenses and other liabilities | | | | | | | | | | | | | |
The Company's consolidated statements of income included losses of $93, $577, and $353 for the years ended December 31, 2022, 2021, and 2020, respectively, in interest expense on borrowings related to these cash flow hedges. Additionally, during the year ended December 31, 2020, the Company reclassified an unamortized gain related to the previous cancellation of interest rate swap contracts amounting to $955, net of tax expense of $337, from accumulated other comprehensive income into earnings upon maturity of the underlying FHLB advances. There were no reclassifications from accumulated other comprehensive loss into earnings during the years ended December 31, 2022 or 2021.
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Dollar amounts are in thousands, except share and per share amounts)
The following discloses the amount included in other comprehensive loss (income), net of tax, for derivative instruments designated as cash flow hedges for the periods presented:
| | | | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | | | | | 2022 | | 2021 | | 2020 | | | | | | | | | | Amount of gain (loss) recognized in other comprehensive (loss) income, net of tax expense (benefit) of $532, $293 and $(363) | | | | | $ | 1,508 | | $ | 831 | | $ | (1,031) | |
Derivatives designated as fair value hedges
During the year ended December 31, 2022, the Company entered into three 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 December 31, 2022, the fair value hedges were deemed effective.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2022 | | | Notional Amount | | Remaining Maturity (In Years) | | Receive Fixed Rate | | Pay Floating Rate | | Estimated fair value | Derivatives included in other liabilities: | | | | | | | | | | | Interest rate swap agreement- subordinated debt | | $ | 100,000 | | | 1.17 | | 1.46% | | SOFR | | $ | (3,830) | | Interest rate swap agreement- fixed rate money market deposits | | 75,000 | | | 1.64 | | 1.50% | | SOFR | | (3,693) | | Interest rate swap agreement- fixed rate money market deposits | | 125,000 | | | 1.64 | | 1.50% | | SOFR | | (6,154) | | Total | | $ | 300,000 | | | 1.48 | | 1.48% | | | | $ | (13,677) | |
The following discloses the amount of expense included in interest expense on borrowings and deposits, related to these fair value hedging instruments:
| | | | | | | | | | | | | | | | | Year Ended December 31, | | | | | | 2022 | | | Designated fair value hedge: | | | | | | | Interest expense on deposits | | | | | $ | (717) | | | Interest expense on borrowings | | | | | (395) | | | Total | | | | | $ | (1,112) | | |
The following amounts were recorded on the balance sheet related to cumulative adjustments of fair value hedges as of December 31, 2022:
| | | | | | | | | | | | | | | | | | | | | Line item on the balance sheet | | Carrying Amount of the Hedged Item | | Cumulative Decrease in Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Item | | | | | | | | | | | | Borrowings | | $ | 95,171 | | | | (1) | $ | (3,830) | | | | | Money market and savings deposits | | 196,520 | | | | (2) | (9,847) | | | | | | | | | | | | | |
(1) The carrying value also includes unamortized subordinated debt issuance costs of $999.
(2) The carrying value also includes an unaccreted purchase accounting fair value premium of $6,367.
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Dollar amounts are in thousands, except share and per share amounts) Derivative InstrumentsCertain financial instruments, including derivatives, may be eligible for offset inon 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 inon the consolidated balance sheets. The following table presents the Company's gross derivative positions as recognized inon the consolidated balance sheets as well as the net derivative positions, including collateral pledged to the extent the application of such collateral did not reduce the net derivative liability position below zero, had the Company elected to offset those instruments subject to an enforceable master netting agreement: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Offsetting Derivative Assets | | Offsetting Derivative Liabilities | | | December 31, 2022 | | December 31, 2021 | | December 31, 2022 | | December 31, 2021 | Gross amounts recognized | | $ | 44,273 | | | $ | 4,990 | | | $ | 20,251 | | | $ | 15,733 | | Gross amounts offset in the consolidated balance sheets | | — | | | — | | | — | | | — | | Net amounts presented in the consolidated balance sheets | | 44,273 | | | 4,990 | | | 20,251 | | | 15,733 | | | | | | | | | | | Gross amounts not offset in the consolidated balance sheets | | | | | | | | | Less: financial instruments | | 14,229 | | | 4,297 | | | 14,229 | | | 4,297 | | Less: financial collateral pledged | | — | | | — | | | 6,022 | | | 11,436 | | Net amounts | | $ | 30,044 | | | $ | 693 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Gross amounts not offset on the consolidated balance sheets | | | | | Gross amounts recognized | | Gross amounts offset on the consolidated balance sheets | | Net amounts presented on the consolidated balance sheets | | Financial instruments | | Financial collateral pledged | | Net Amount | December 31, 2023 | | | | | | | | | | | | | Derivative financial assets | | $ | 31,468 | | | $ | — | | | $ | 31,468 | | | $ | 6,502 | | | $ | — | | | $ | 24,966 | | Derivative financial liabilities | | $ | 11,330 | | | $ | — | | | $ | 11,330 | | | $ | 6,502 | | | $ | 4,828 | | | $ | — | | | | | | | | | | | | | | | December 31, 2022 | | | | | | | | | | | | | Derivative financial assets | | $ | 44,273 | | | $ | — | | | $ | 44,273 | | | $ | 14,229 | | | $ | — | | | $ | 30,044 | | Derivative financial liabilities | | $ | 20,251 | | | $ | — | | | $ | 20,251 | | | $ | 14,229 | | | $ | 6,022 | | | $ | — | |
Collateral Requirements Most derivative contracts with clientscustomers are secured by collateral. Additionally, in accordance with the interest rate agreements with derivatives dealers,derivative counterparties, the Company may be required to post margin tocollateral with these derivative counterparties. As of December 31, 20222023 and 2021,2022, the Company had minimum collateral posting thresholds with certain derivative counterparties and had collateral posted of $23,325$14,042 and $57,868,$23,325, respectively, against its obligations under these agreements. Cash pledged as collateral on derivative contracts is recorded in "Other assets"“Other assets” on the consolidated balance sheets. Note (18)(16)—Fair value of financial instruments: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.
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) 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
(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-recurringnonrecurring basis using the following methods and assumptions: | | | | | | | Investment Securitiessecurities | | 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 debt 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 | | LoansMortgage 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 ofGNMA optional repurchase loans recorded as held for sale loans are carried at their principal balance. For commercial loans held for sale, fair value is determined using an income approach with various assumptions including expected cash flows, market discount rates, credit metrics and collateral value when appropriate. As such, these are considered Level 3. 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. | | | | CollateralCollateral- dependent loans | | Collateral dependentCollateral-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 dependentCollateral-dependent loans are classified as Level 3. |
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(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 | 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 agreement 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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair Value | December 31, 2021 | | Carrying amount | | Level 1 | | Level 2 | | Level 3 | | Total | Financial assets: | | | | | | | | | | | Cash and cash equivalents | | $ | 1,797,740 | | | $ | 1,797,740 | | | $ | — | | | $ | — | | | $ | 1,797,740 | | Investment securities | | 1,681,892 | | | — | | | 1,681,892 | | | — | | | 1,681,892 | | | | | | | | | | | | | Net loans held for investment | | 7,479,103 | | | — | | | — | | | 7,566,717 | | | 7,566,717 | | Loans held for sale, at fair value | | 752,223 | | | — | | | 672,924 | | | 79,299 | | | 752,223 | | Interest receivable | | 38,528 | | | 36 | | | 6,461 | | | 32,031 | | | 38,528 | | Mortgage servicing rights | | 115,512 | | | — | | | — | | | 115,512 | | | 115,512 | | Derivatives | | 27,384 | | | — | | | 27,384 | | | — | | | 27,384 | | Financial liabilities: | | | | | | | | | | | Deposits: | | | | | | | | | | | Without stated maturities | | $ | 9,705,816 | | | $ | 9,705,816 | | | $ | — | | | $ | — | | | $ | 9,705,816 | | With stated maturities | | 1,131,081 | | | — | | | 1,137,647 | | | — | | | 1,137,647 | | Securities sold under agreement to repurchase and federal funds purchased | | 40,716 | | | 40,716 | | | — | | | — | | | 40,716 | | | | | | | | | | | | | Subordinated debt, net | | 129,544 | | | — | | | — | | | 133,021 | | | 133,021 | | | | | | | | | | | | | Interest payable | | 3,162 | | | 140 | | | 1,510 | | | 1,512 | | | 3,162 | | Derivatives | | 21,000 | | | — | | | 21,000 | | | — | | | 21,000 | |
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) The balances and levels of the assets and liabilities measured at fair value on a recurring basis atas of December 31, 2023 and 2022 are presented in the following table:tables: | 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 | At December 31, 2023 | | At December 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: | Recurring valuations: | | | | | | | | | Recurring valuations: | | | Financial assets: | Financial assets: | | | | | | | | | Financial assets: | | | Available-for-sale securities: | Available-for-sale securities: | | | | | | | | | Available-for-sale securities: | | | U.S. government agency securities | U.S. government agency securities | | $ | — | | | $ | 40,062 | | | $ | — | | | $ | 40,062 | | Mortgage-backed securities - residential | Mortgage-backed securities - residential | | — | | | 1,034,193 | | | — | | | 1,034,193 | | Mortgage-backed securities - commercial | Mortgage-backed securities - commercial | | — | | | 17,644 | | | — | | | 17,644 | | Municipal securities | Municipal securities | | — | | | 264,420 | | | — | | | 264,420 | | U.S. Treasury securities | U.S. Treasury securities | | — | | | 107,680 | | | — | | | 107,680 | | Corporate securities | Corporate securities | | — | | | 7,187 | | | — | | | 7,187 | | Equity securities, at fair value | | — | | | 2,990 | | | — | | | 2,990 | | | Total securities | | Total securities | | Total securities | Total securities | | $ | — | | | $ | 1,474,176 | | | $ | — | | | $ | 1,474,176 | | Loans held for sale, at fair value | Loans held for sale, at fair value | | $ | — | | | $ | 56,539 | | | $ | 30,490 | | | $ | 87,029 | | Mortgage servicing rights | Mortgage servicing rights | | — | | | — | | | 168,365 | | | 168,365 | | Derivatives | Derivatives | | — | | | 48,769 | | | — | | | 48,769 | | Financial Liabilities: | Financial Liabilities: | | Derivatives | Derivatives | | — | | | 63,229 | | | — | | | 63,229 | | Derivatives | | Derivatives | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | 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 | | | | | | Collateral dependent net loans held for investment: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 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 | | | | | |
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) The balances and levels of the assets measured at fair value on a recurringnonrecurring basis atas of December 31, 20212023 and 2022 are presented in the following table:tables: | | | | | | | | | | | | | | | | | | | | | | | | | | | At December 31, 2021 | | Quoted prices in active markets for identical assets (liabilities) (level 1) | | Significant other observable inputs (level 2) | | Significant unobservable inputs (level 3) | | Total | Recurring valuations: | | | | | | | | | Financial assets: | | | | | | | | | Available-for-sale securities: | | | | | | | | | U.S. government agency securities | | $ | — | | | $ | 33,870 | | | $ | — | | | $ | 33,870 | | Mortgage-backed securities - residential | | — | | | 1,269,372 | | | — | | | 1,269,372 | | Mortgage-backed securities - commercial | | — | | | 15,250 | | | — | | | 15,250 | | Municipal securities | | — | | | 338,610 | | | — | | | 338,610 | | U.S. Treasury securities | | — | | | 14,908 | | | — | | | 14,908 | | Corporate securities | | — | | | 6,515 | | | — | | | 6,515 | | Equity securities, at fair value | | — | | | 3,367 | | | — | | | 3,367 | | Total securities | | $ | — | | | $ | 1,681,892 | | | $ | — | | | $ | 1,681,892 | | Loans held for sale, at fair value | | $ | — | | | $ | 672,924 | | | $ | 79,299 | | | $ | 752,223 | | Mortgage servicing rights | | — | | | — | | | 115,512 | | | 115,512 | | Derivatives | | — | | | 27,384 | | | — | | | 27,384 | | Financial Liabilities: | | | | | | | | | Derivatives | | — | | | 21,000 | | | — | | | 21,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | At December 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 | | | | | Nonrecurring valuations: | | | | | | | | | | | | | Financial assets: | | | | | | | | | | | | | Other real estate owned | | $ | — | | | $ | — | | | $ | 2,400 | | | $ | 2,400 | | | | | | Collateral-dependent net loans held for investment: | | | | | | | | | | | | | Commercial and industrial | | — | | | — | | | 12,338 | | | 12,338 | | | | | | Construction | | — | | | — | | | 203 | | | 203 | | | | | | Residential real estate: | | | | | | | | | | | | | 1-4 family mortgage | | $ | — | | | $ | — | | | $ | 429 | | | $ | 429 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Consumer and other | | — | | | — | | | 71 | | | 71 | | | | | | Total collateral-dependent loans | | $ | — | | | $ | — | | | $ | 13,041 | | | $ | 13,041 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | 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 | Nonrecurring valuations: | | | | | | | | | Financial assets: | | | | | | | | | Other real estate owned | | $ | — | | | $ | — | | | $ | 2,497 | | | $ | 2,497 | | Collateral-dependent net loans held for investment: | | | | | | | | | | | | | | | | | | | | | | | | | | | 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 balances
FB Financial Corporation and levelssubsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) Commercial loans held for sale As of December 31, 2022, the assetsCompany had a portfolio of acquired commercial loans. There were no such loans outstanding as of December 31, 2023. These commercial loans were measured at fair value. As such, these loans were excluded from the ACL. The following tables set forth the changes in fair value associated with this portfolio for the years ended December 31, 2023, 2022, and 2021: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 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: | | | | | | | | Paydowns and payoffs | | (28,376) | | | — | | | (28,376) | | | Write-offs to discount | | (5,981) | | | 5,981 | | | — | | | Changes in valuation included in other noninterest income | | — | | | (2,114) | | | (2,114) | | | Carrying value at end of period | | $ | — | | | $ | — | | | $ | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 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: | | | | | | | Paydowns and payoffs | | (43,676) | | | — | | | (43,676) | | Write-offs to discount | | (8,729) | | | 8,729 | | | — | | Changes in valuation included in other noninterest income | | — | | | (5,133) | | | (5,133) | | Carrying value at end of period | | $ | 34,357 | | | $ | (3,867) | | | $ | 30,490 | |
| | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2021 | | | Principal balance | | Fair Value discount | | Fair Value | Carrying value at beginning of period | | $ | 239,063 | | | $ | (23,660) | | | $ | 215,403 | | | | | | | | | Change in fair value: | | | | | | | Paydowns and payoffs | | (141,002) | | | — | | | (141,002) | | Write-offs to discount | | (8,563) | | | 8,563 | | | — | | Changes in valuation included in other noninterest income | | (2,736) | | | 7,634 | | | 4,898 | | Carrying value at end of period | | $ | 86,762 | | | $ | (7,463) | | | $ | 79,299 | |
In addition to the gain of $4,898 recognized on a non-recurring basis atthe change in fair value of the portfolio during the year ended December 31, 2021, are presentedthe Company recognized an additional gain of $6,274 related to the payoff of a loan that had been partially charged off prior to acquisition of the portfolio. The significant unobservable inputs (Level 3) used in the following table: | | | | | | | | | | | | | | | | | | | | | | | | | | | At December 31, 2021 | | Quoted prices in active markets for identical assets (liabilities) (level 1) | | Significant other observable inputs (level 2) | | Significant unobservable inputs (level 3) | | Total | Non-recurring valuations: | | | | | | | | | Financial assets: | | | | | | | | | Other real estate owned | | $ | — | | | $ | — | | | $ | 6,308 | | | $ | 6,308 | | Collateral dependent net loans held for investment: | | | | | | | | | | | | | | | | | | Construction | | $ | — | | | $ | — | | | $ | 606 | | | $ | 606 | | Residential real estate: | | | | | | | | | | | | | | | | | | Residential line of credit | | — | | | — | | | 592 | | | 592 | | Commercial real estate: | | | | | | | | | Owner occupied | | — | | | — | | | 729 | | | 729 | | Non-owner occupied | | — | | | — | | | 3,526 | | | 3,526 | | Consumer and other | | — | | | — | | | 24 | | | 24 | | Total collateral dependent loans | | $ | — | | | $ | — | | | $ | 5,477 | | | $ | 5,477 | |
valuation and changes in fair value associated with the Company's mortgage servicing rights for the years ended December 31, 2023, 2022, and 2021 are detailed at Note 8, “Mortgage servicing rights.”The following tables present information as of December 31, 20222023 and 20212022 about significant unobservable inputs (Level 3) used in the valuation of assets measured at fair value on a nonrecurring basis: | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, 20222023 | | | | | | | | | | Financial instrument | | Fair Value | | Valuation technique | | Significant unobservable inputs | | Range of inputs | | Collateral dependentCollateral-dependent net loans held for investment | | $ | 2,86013,041 | | | Valuation of collateral | | Discount for comparable sales | | 10%-61% | | 10%-35% | Other real estate owned | | $ | 2,4972,400 | | | 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 (Dollar amounts are in thousands, except share and per share amounts) | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, 20212022 | | | | | | | | | | Financial instrument | | Fair Value | | Valuation technique | | Significant unobservable inputs | | Range of inputs | | Collateral dependentCollateral-dependent net loans held for investment | | $ | 5,4772,860 | | | Valuation of collateral | | Discount for comparable sales | | 10%-35% | | Other real estate owned | | $ | 6,3082,497 | | | Appraised value of property less costs to sell | | Discount for costs to sell | | 0%-15% | |
For collateral dependentFair value for collateral-dependent loans the ACL is measureddetermined based on the difference between the fair value of the collateralappraisals performed by qualified appraisers and the amortized cost basis of the loan as of the measurement date.reviewed by qualified personnel. 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 dependentCollateral-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 December 31, 20222023 and 2021,2022, total amortized cost of collateral dependentcollateral-dependent loans measured on a non-recurringnonrecurring basis amounted to $18,166 and $3,054, and $5,781, respectively. The allowance for credit losses is calculated as the amount for which the loan’s amortized cost basis exceeds fair value.
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 dependentcollateral-dependent loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the lending administrative department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry wide statistics. Collateral dependentCollateral-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: | | | December 31, | | 2022 | | 2021 | | | December 31, | | | | December 31, | | | | December 31, | | | | 2023 | | | | 2023 | | 2022 | Loans held for sale under a fair value option: | Loans held for sale under a fair value option: | | | Commercial loans held for sale | Commercial loans held for sale | | $ | 30,490 | | | $ | 79,299 | | Commercial loans held for sale | | Commercial loans held for sale | | | Mortgage loans held for sale | | Mortgage loans held for sale | | Mortgage loans held for sale | Mortgage loans held for sale | | 82,750 | | | 672,924 | | Total loans held for sale, at fair value | Total loans held for sale, at fair value | | 113,240 | | | 752,223 | | Loans held for sale not accounted for under a fair value option: | Loans held for sale not accounted for under a fair value option: | | Mortgage loans held for sale - guaranteed GNMA repurchase option | Mortgage loans held for sale - guaranteed GNMA repurchase option | | 26,211 | | | — | | Mortgage loans held for sale - guaranteed GNMA repurchase option | | Mortgage loans held for sale - guaranteed GNMA repurchase option | | Total loans held for sale | Total loans held for sale | | $ | 139,451 | | | $ | 752,223 | |
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 $121, $13,677, and $16,976 and a net gain of $24,233 resulting from fair value changes of mortgage loans were recorded in income during the years ended December 31, 2023, 2022, 2021, and 2020,2021, 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 HFSheld for sale and derivatives resulted in net losses of $1,815, $17,633, and $33,284 and a net gain of $31,192 for the years ended December 31, 2023, 2022, 2021, and 2020,2021, respectively. The change in fair value of both loans held for sale and the related derivative instruments are recorded in Mortgage Banking Income“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
(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. During the year ended December 31, 2022, the Company identified a more-than-trivial benefit associated with serviced GNMA loans previously sold that are contractually delinquent greater than 90 days and began recording this guaranteed repurchase option on the balance sheet on a prospective basis without impact to prior periods. See Note 1, "Basis of presentation" within this Report for additional information. Rebooked GNMA optional repurchase loans do not meet the requirements under FASB ASC Topic 825 to be accounted for under the fair value option. As such, these loans are excluded from the below disclosures. As of December 31, 2021, there were $91,924 of delinquent GNMA loans previously sold that the Company did not record on its consolidated balance sheets as the Company determined there not to be a more-than-trivial benefit based on an analysis of interest rates and an assessment of potential reputational risk associated with these loans.
Commercial loans held for sale
The Company also has a portfolio of shared national credits and institutional healthcare loans that were acquired during 2020 in the merger with Franklin. These commercial loans are also being measured under the fair value option. As such, these loans are excluded from the allowance for credit losses. The following tables sets forth the changes in fair value associated with this portfolio for the years ended December 31, 2022, 2021, and 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 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 | | (43,676) | | | — | | | (43,676) | | | Write-offs to discount | | (8,729) | | | 8,729 | | | — | | | Changes in valuation included in other noninterest income | | — | | | (5,133) | | | (5,133) | | | Carrying value at end of period | | $ | 34,357 | | | $ | (3,867) | | | $ | 30,490 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2021 | | | Principal balance | | Fair Value discount | | Fair Value | Carrying value at beginning of period | | $ | 239,063 | | | $ | (23,660) | | | $ | 215,403 | | | | | | | | | Change in fair value: | | | | | | | Pay-downs and pay-offs | | (141,002) | | | — | | | (141,002) | | Write-offs to discount | | (8,563) | | | 8,563 | | | — | | Changes in valuation included in other noninterest income | | (2,736) | | | 7,634 | | | 4,898 | | Carrying value at end of period | | $ | 86,762 | | | $ | (7,463) | | | $ | 79,299 | |
In addition to the gain of $4,898 recognized on the change in fair value of the portfolio during the year ended December 31, 2021, the Company recognized an additional gain of $6,274 related to the pay-off of a loan that had been partially charged off prior to acquisition of the portfolio.
| | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2020 | | | Principal balance | | Fair Value discount | | Fair Value | Carrying value at beginning of period | | $ | — | | | $ | — | | | $ | — | | Commercial loans held for sale acquired from Franklin | | 350,269 | | | (24,063) | | | 326,206 | | Change in fair value: | | | | | | | Pay-downs and pay-offs | | (111,206) | | | — | | | (111,206) | | Write-offs to discount | | — | | | (2,825) | | | (2,825) | | Changes in valuation included in other noninterest income | | — | | | 3,228 | | | 3,228 | | Carrying value at end of period | | $ | 239,063 | | | $ | (23,660) | | | $ | 215,403 | |
Interest income on loans held for sale measured at fair value is accrued as it is earned based on contractual rates and is reflected in interest income in the consolidated statements of income.
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) The following table summarizes the differences between the fair value and the principal balance for loans held for sale and nonaccrual loans HFS measured at fair value as of December 31, 20222023 and 2021:2022: | | | | | | | | | | | | | | | | | | | | | 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) | | | | | | | | | December 31, 2021 | | Aggregate fair value | | Aggregate Unpaid Principal Balance | | Difference | Mortgage loans held for sale measured at fair value | | $ | 672,924 | | | $ | 658,017 | | | $ | 14,907 | | Commercial loans held for sale measured at fair value | | 74,082 | | | 76,863 | | | (2,781) | | | | | | | | | Nonaccrual commercial loans held for sale | | 5,217 | | | 9,899 | | | (4,682) | |
Note (19)—Parent company financial statements: | | | | | | | | | | | | | | | | | | | | | December 31, 2023 | | Aggregate fair value | | Aggregate Unpaid Principal Balance | | Difference | Mortgage loans held for sale measured at fair value | | $ | 46,618 | | | $ | 45,509 | | | $ | 1,109 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 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) | |
The following information presentstable contains the condensed balance sheets, statements of income,estimated fair values and cash flows of FB Financial Corporation as of December 31, 2022 and 2021 and for eachthe related carrying values of the years in the three-year period ended December 31, 2022.Company's financial instruments. Items that are not financial instruments are not included. | | | | | | | | | | | | | | | | | As of December 31, | Balance sheets | | 2022 | | 2021 | Assets | | | | | Cash and cash equivalents(1) | | $ | 3,052 | | | $ | 21,515 | | | | | | | | | | | | Investment in subsidiaries(1) | | 1,337,657 | | | 1,427,784 | | Other assets | | 16,654 | | | 14,487 | | Goodwill | | 29 | | | 29 | | Total assets | | $ | 1,357,392 | | | $ | 1,463,815 | | Liabilities and shareholders' equity | | | | | Liabilities | | | | | Borrowings | | $ | 30,930 | | | $ | 30,930 | | Accrued expenses and other liabilities | | 1,037 | | | 283 | | Total liabilities | | 31,967 | | | 31,213 | | Shareholders' equity | | | | | Common stock | | 46,738 | | | 47,549 | | Additional paid-in capital | | 861,588 | | | 892,529 | | Retained earnings | | 586,532 | | | 486,666 | | Accumulated other comprehensive income | | (169,433) | | | 5,858 | | Total shareholders' equity | | 1,325,425 | | | 1,432,602 | | Total liabilities and shareholders' equity | | $ | 1,357,392 | | | $ | 1,463,815 | |
(1) Eliminates in Consolidation | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair Value | December 31, 2023 | | Carrying amount | | Level 1 | | Level 2 | | Level 3 | | Total | Financial assets: | | | | | | | | | | | Cash and cash equivalents | | $ | 810,932 | | | $ | 810,932 | | | $ | — | | | $ | — | | | $ | 810,932 | | Investment securities | | 1,471,973 | | | — | | | 1,471,973 | | | — | | | 1,471,973 | | Net loans held for investment | | 9,258,457 | | | — | | | — | | | 9,068,518 | | | 9,068,518 | | Loans held for sale, at fair value | | 46,618 | | | — | | | 46,618 | | | — | | | 46,618 | | Interest receivable | | 52,715 | | | 388 | | | 8,551 | | | 43,776 | | | 52,715 | | Mortgage servicing rights | | 164,249 | | | — | | | — | | | 164,249 | | | 164,249 | | Derivatives | | 34,738 | | | — | | | 34,738 | | | — | | | 34,738 | | Financial liabilities: | | | | | | | | | | | Deposits: | | | | | | | | | | | Without stated maturities | | $ | 8,927,654 | | | $ | 8,927,654 | | | $ | — | | | $ | — | | | $ | 8,927,654 | | With stated maturities | | 1,620,633 | | | — | | | 1,614,400 | | | — | | | 1,614,400 | | Securities sold under agreements to repurchase and federal funds purchased | | 108,764 | | | 108,764 | | | — | | | — | | | 108,764 | | | | | | | | | | | | | Bank Term Funding Program | | 130,000 | | | — | | | 130,000 | | | — | | | 130,000 | | Subordinated debt, net | | 129,645 | | | — | | | — | | | 122,671 | | | 122,671 | | | | | | | | | | | | | Interest payable | | 18,809 | | | 4,104 | | | 13,205 | | | 1,500 | | | 18,809 | | Derivatives | | 38,215 | | | — | | | 38,215 | | | — | | | 38,215 | |
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) | | | | | | | | | | | | | | | | | | | | | | | Years Ended December 31, | Statements of income | | 2022 | | 2021 | | 2020 | Income | | | | | | | | | | | | | | | | | | | | | Dividend income from bank subsidiary(1) | | $ | 49,000 | | | $ | 122,500 | | | $ | 49,706 | | | | | | | | | Dividend income from nonbank subsidiary(1) | | — | | | 2,525 | | | — | | Gain on investments | | — | | | 249 | | | 217 | | | | | | | | | Other income | | 89 | | | 15 | | | 1,732 | | Total income | | 49,089 | | | 125,289 | | | 51,655 | | Expenses | | | | | | | Interest expense | | 1,587 | | | 2,455 | | | 3,122 | | Salaries, legal and professional fees | | 1,590 | | | 1,445 | | | 1,458 | | Other noninterest expense | | 771 | | | 1,812 | | | 283 | | Total expenses | | 3,948 | | | 5,712 | | | 4,863 | | Income before income tax benefit and equity in undistributed earnings of subsidiaries | | 45,141 | | | 119,577 | | | 46,792 | | Federal and state income tax benefit | | (1,002) | | | (2,992) | | | (1,155) | | Income before equity in undistributed earnings of subsidiaries | | 46,143 | | | 122,569 | | | 47,947 | | Equity in undistributed earnings from bank subsidiary(1) | | 76,232 | | | 68,351 | | | 15,168 | | Equity in undistributed earnings from nonbank subsidiary(1) | | 2,180 | | | (635) | | | 506 | | Net income | | $ | 124,555 | | | $ | 190,285 | | | $ | 63,621 | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 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 | |
Note (17)—Parent company financial statements The following information presents the condensed balance sheets, statements of income, and cash flows of FB Financial Corporation as of December 31, 2023 and 2022 and for each of the years in the three-year period ended December 31, 2023. | | | | | | | | | | | | | | | | | As of December 31, | Balance sheets | | 2023 | | 2022 | Assets | | | | | Cash and cash equivalents(1) | | $ | 21,448 | | | $ | 3,052 | | | | | | | | | | | | Investment in subsidiaries(1) | | 1,449,439 | | | 1,337,657 | | Other assets | | 15,291 | | | 16,654 | | Goodwill | | 29 | | | 29 | | Total assets | | $ | 1,486,207 | | | $ | 1,357,392 | | Liabilities and shareholders' equity | | | | | Liabilities | | | | | Borrowings | | $ | 30,930 | | | $ | 30,930 | | Accrued expenses and other liabilities | | 483 | | | 1,037 | | Total liabilities | | 31,413 | | | 31,967 | | Shareholders' equity | | | | | Common stock | | 46,849 | | | 46,738 | | Additional paid-in capital | | 864,258 | | | 861,588 | | Retained earnings | | 678,412 | | | 586,532 | | Accumulated other comprehensive loss | | (134,725) | | | (169,433) | | Total shareholders' equity | | 1,454,794 | | | 1,325,425 | | Total liabilities and shareholders' equity | | $ | 1,486,207 | | | $ | 1,357,392 | |
(1) Eliminates in Consolidation | | | | | | | | | | | | | | | | | | | | | | | Years Ended December 31, | Statements of cash flows | | 2022 | | 2021 | | 2020 | Operating Activities | | | | | | | Net income | | $ | 124,555 | | | $ | 190,285 | | | $ | 63,621 | | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | Equity in undistributed income of bank subsidiary | | (76,232) | | | (68,351) | | | (15,168) | | Equity in undistributed income of nonbank subsidiary | | (2,180) | | | 635 | | | (506) | | Gain on investments | | — | | | (249) | | | (217) | | | | | | | | | Stock-based compensation expense | | 9,857 | | | 10,282 | | | 10,214 | | Increase in other assets | | (802) | | | (3,916) | | | (9,717) | | Decrease in other liabilities | | (7,381) | | | (678) | | | (11,853) | | | | | | | | | Net cash provided by operating activities | | 47,817 | | | 128,008 | | | 36,374 | | Investing Activities | | | | | | | | | | | | | | | | | | | | | Net cash paid in business combinations (See Note 2) | | — | | | — | | | (35,505) | | Proceeds from sale of equity securities | | — | | | 1,422 | | | — | | Net cash provided by (used in) investing activities | | — | | | 1,422 | | | (35,505) | | Financing Activities | | | | | | | | | | | | | | Payments on subordinated debt | | — | | | (60,000) | | | — | | Accretion of subordinated debt fair value premium | | — | | | (369) | | | (436) | | Payments on other borrowings | | — | | | (15,000) | | | — | | Proceeds from other borrowings | | — | | | — | | | 15,000 | | Share based compensation withholding payments | | (2,842) | | | (10,158) | | | (1,510) | | Net proceeds from sale of common stock under employee stock purchase program | | 1,212 | | | 1,480 | | | 978 | | Repurchase of common stock | | (39,979) | | | (7,595) | | | — | | Dividends paid on common stock | | (24,503) | | | (20,866) | | | (14,177) | | Dividend equivalent payments made upon vesting of equity compensation | | (168) | | | (717) | | | (87) | | Net cash used in financing activities | | (66,280) | | | (113,225) | | | (232) | | Net (decrease) increase in cash and cash equivalents | | (18,463) | | | 16,205 | | | 637 | | Cash and cash equivalents at beginning of year | | 21,515 | | | 5,310 | | | 4,673 | | Cash and cash equivalents at end of year | | $ | 3,052 | | | $ | 21,515 | | | $ | 5,310 | | Supplemental noncash disclosures: | | | | | | | Dividends declared not paid on restricted stock units | | $ | 222 | | | $ | 400 | | | $ | 238 | | Noncash dividend from bank subsidiary | | — | | | — | | | 956 | | Noncash security distribution to bank subsidiary | | — | | | 2,646 | | | — | | | | | | | | | | | | | | | |
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) | | | | | | | | | | | | | | | | | | | | | | | Years Ended December 31, | Statements of income | | 2023 | | 2022 | | 2021 | Income | | | | | | | | | | | | | | | | | | | | | Dividend income from bank subsidiary(1) | | $ | 49,000 | | | $ | 49,000 | | | $ | 122,500 | | | | | | | | | Dividend income from nonbank subsidiary(1) | | 530 | | | — | | | 2,525 | | Loss on investments | | — | | | — | | | 249 | | | | | | | | | Other income | | 57 | | | 89 | | | 15 | | Total income | | 49,587 | | | 49,089 | | | 125,289 | | Expenses | | | | | | | Interest expense | | 1,590 | | | 1,587 | | | 2,455 | | Salaries, legal and professional fees | | 1,461 | | | 1,590 | | | 1,445 | | Other noninterest expense | | 478 | | | 771 | | | 1,812 | | Total expenses | | 3,529 | | | 3,948 | | | 5,712 | | Income before income tax benefit and equity in undistributed earnings of subsidiaries | | 46,058 | | | 45,141 | | | 119,577 | | Federal and state income tax benefit | | (887) | | | (1,002) | | | (2,992) | | Income before equity in undistributed earnings of subsidiaries | | 46,945 | | | 46,143 | | | 122,569 | | Equity in undistributed earnings from bank subsidiary(1) | | 73,832 | | | 76,232 | | | 68,351 | | Equity in undistributed earnings from nonbank subsidiary(1) | | (553) | | | 2,180 | | | (635) | | Net income | | $ | 120,224 | | | $ | 124,555 | | | $ | 190,285 | | | | | | | | |
(1) Eliminates in Consolidation | | | | | | | | | | | | | | | | | | | | | | | Years Ended December 31, | Statements of cash flows | | 2023 | | 2022 | | 2021 | Operating Activities | | | | | | | Net income | | $ | 120,224 | | | $ | 124,555 | | | $ | 190,285 | | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | Equity in undistributed income of bank subsidiary | | (73,832) | | | (76,232) | | | (68,351) | | Equity in undistributed income of nonbank subsidiary | | 553 | | | (2,180) | | | 635 | | Accretion of subordinated debt fair value premium | | — | | | — | | | (369) | | Gain on investments | | — | | | — | | | (249) | | | | | | | | | Stock-based compensation expense | | 10,381 | | | 9,857 | | | 10,282 | | Decrease (increase) in other assets | | 1,017 | | | (802) | | | (3,916) | | Decrease in other liabilities | | (4,064) | | | (7,381) | | | (678) | | | | | | | | | Net cash provided by operating activities | | 54,279 | | | 47,817 | | | 127,639 | | Investing Activities | | | | | | | | | | | | | | | | | | | | | | | | | | | | Proceeds from sale of equity securities | | — | | | — | | | 1,422 | | Net cash provided by investing activities | | — | | | — | | | 1,422 | | Financing Activities | | | | | | | | | | | | | | Payments on subordinated debt | | — | | | — | | | (60,000) | | Payments on other borrowings | | — | | | — | | | (15,000) | | | | | | | | | Share based compensation withholding payments | | (3,379) | | | (2,842) | | | (10,158) | | Net proceeds from sale of common stock under employee stock purchase program | | 723 | | | 1,212 | | | 1,480 | | Repurchase of common stock | | (4,944) | | | (39,979) | | | (7,595) | | Dividends paid on common stock | | (28,057) | | | (24,503) | | | (20,866) | | Dividend equivalent payments made upon vesting of equity compensation | | (226) | | | (168) | | | (717) | | Net cash used in financing activities | | (35,883) | | | (66,280) | | | (112,856) | | Net increase (decrease) in cash and cash equivalents | | 18,396 | | | (18,463) | | | 16,205 | | Cash and cash equivalents at beginning of year | | 3,052 | | | 21,515 | | | 5,310 | | Cash and cash equivalents at end of year | | $ | 21,448 | | | $ | 3,052 | | | $ | 21,515 | | Supplemental noncash disclosures: | | | | | | | Dividends declared not paid on restricted stock units | | $ | 287 | | | $ | 222 | | | $ | 400 | | | | | | | | | Noncash security distribution to bank subsidiary | | — | | | — | | | 2,646 | | | | | | | | | | | | | | | |
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) Note (20)(18)—Segment reporting:reporting The Companyfollowing tables present selected financial information with respect to the Company's reportable segments for the years ended December 31, 2023, 2022, and the Bank are engaged2021. | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2023 | | Banking(2) | | Mortgage | | Consolidated | Net interest income | | $ | 407,217 | | | $ | — | | | $ | 407,217 | | Provisions for credit losses | | 2,539 | | | — | | | 2,539 | | Mortgage banking income | | — | | | 60,918 | | | 60,918 | | Change in fair value of mortgage servicing rights, net of hedging(1) | | — | | | (16,226) | | | (16,226) | | Other noninterest income | | 25,831 | | | 20 | | | 25,851 | | Depreciation and amortization | | 10,444 | | | 736 | | | 11,180 | | Amortization of intangibles | | 3,659 | | | — | | | 3,659 | | | | | | | | | Other noninterest expense | | 262,433 | | | 47,657 | | | 310,090 | | Income (loss) before income taxes | | $ | 153,973 | | | $ | (3,681) | | | $ | 150,292 | | Income tax expense | | | | | | 30,052 | | Net income applicable to FB Financial Corporation and noncontrolling interest | | | | | | 120,240 | | Net income applicable to noncontrolling interest(2) | | | | | | 16 | | Net income applicable to FB Financial Corporation | | | | | | $ | 120,224 | | Total assets | | $ | 12,046,190 | | | $ | 558,213 | | | $ | 12,604,403 | | Goodwill | | 242,561 | | | — | | | 242,561 | |
(1) Change in fair value of mortgage servicing rights, net of hedging is included in Mortgage banking income in the businessCompany's consolidated statements of income. (2) Banking segment includes noncontrolling interest.
| | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2022 | | Banking(3) | | Mortgage | | Consolidated | Net interest income | | $ | 412,237 | | | $ | (2) | | | $ | 412,235 | | Provisions for credit losses | | 18,982 | | | — | | | 18,982 | | Mortgage banking income | | — | | | 83,679 | | | 83,679 | | Change in fair value of mortgage servicing rights, net of hedging(1) | | — | | | (10,099) | | | (10,099) | | Other noninterest income | | 41,320 | | | (233) | | | 41,087 | | Depreciation and amortization | | 7,035 | | | 982 | | | 8,017 | | Amortization of intangibles | | 4,585 | | | — | | | 4,585 | | | | | | | | | Other noninterest expense(2) | | 240,096 | | | 95,648 | | | 335,744 | | Income (loss) before income taxes | | $ | 182,859 | | | $ | (23,285) | | | $ | 159,574 | | Income tax expense | | | | | | 35,003 | | | | | | | | | | | | | | | | Net income applicable to FB Financial Corporation and noncontrolling interest | | | | | | 124,571 | | Net income applicable to noncontrolling interest(3) | | | | | | 16 | | Net income applicable to FB Financial Corporation | | | | | | $ | 124,555 | | Total assets | | $ | 12,228,451 | | | $ | 619,305 | | | $ | 12,847,756 | | Goodwill | | 242,561 | | | — | | | 242,561 | |
(1)Change in fair value of mortgage servicing rights, net of hedging is included in mortgage banking and provide a full rangeincome in the Company's consolidated statements 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 throughincome. (2)Includes $12,458 in Mortgage restructuring expenses in the Mortgage segment which activities also include the servicing of residential mortgage loans and the packaging and securitization of loans to governmental agencies. The Company’s mortgage division represents a distinct reportable segment which differs from the Company’s primary business of commercial and retail banking. The financial performance of the Mortgage segment is assessed based on results of operations reflecting direct revenues and expenses and allocated expenses. This approach gives management a better indication of the operating performance of the segment. When assessing the Banking segment’s financial performance, the CEO utilizes reports with indirect revenues and expenses including but not limitedrelated 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 sourcesexit 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 year ended December 31, 2022, the Company exited the direct-to-consumer internet delivery channel, which is one of two delivery channels in the Mortgage segment. As a result of exiting this channel, the Company incurred $12,458 of restructuring expenses during the year ended December 31, 2022. The repositioning of the Mortgagechannel.
(3)Banking segment does not qualify to be reported as discontinued operations. The Company plans to continue originating and selling residential mortgage loans within its Mortgage segment through its traditional mortgage retail channel, retain mortgage servicing rights and continue holding residential mortgage loans in the loan HFI portfolio. Interest rate lock commitment volume and sales volume by delivery channel included in the Mortgage segment is as follows for the periods indicated:
| | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | | | | | 2022 | 2021 | 2020 | Interest rate lock commitment volume by delivery channel: | | | | | | | | Direct-to-consumer | | | | | $ | 663,848 | | $ | 3,745,430 | | $ | 5,539,862 | | Retail | | | | | 2,036,658 | | 3,414,638 | | 3,399,174 | | Total | | | | | $ | 2,700,506 | | $ | 7,160,068 | | $ | 8,939,036 | | Interest rate lock commitment volume % by delivery channel: | | | | | | | | Direct-to-consumer | | | | | 24.6 | % | 52.3 | % | 62.0 | % | Retail | | | | | 75.4 | % | 47.7 | % | 38.0 | % | Mortgage sales by delivery channel: | | | | | | | | Direct-to-consumer | | | | | $ | 1,031,810 | | $ | 3,328,216 | | $ | 3,751,813 | | Retail | | | | | 1,958,849 | | 2,873,861 | | 2,483,336 | | Total | | | | | $ | 2,990,659 | | $ | 6,202,077 | | $ | 6,235,149 | | Mortgage sales % by delivery channel: | | | | | | | | Direct-to-consumer | | | | | 34.5 | % | 53.7 | % | 60.2 | % | Retail | | | | | 65.5 | % | 46.3 | % | 39.8 | % |
includes noncontrolling interest.
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) The following tables provide segment financial information for the periods indicated:
| Year Ended December 31, 2022 | | Banking(4) | | Mortgage | | Consolidated | Year Ended December 31, 2021 | | Year Ended December 31, 2021 | | Banking(2) | | Mortgage | | Consolidated | Net interest income | Net interest income | | $ | 412,237 | | | $ | (2) | | | $ | 412,235 | | Provisions for credit losses(1) | | 18,982 | | | — | | | 18,982 | | Mortgage banking income(2) | | — | | | 83,679 | | | 83,679 | | Change in fair value of mortgage servicing rights, net of hedging(2) | | — | | | (10,099) | | | (10,099) | | Provisions for credit losses | | Mortgage banking income | | Change in fair value of mortgage servicing rights, net of hedging(1) | | Other noninterest income | Other noninterest income | | 41,320 | | | (233) | | | 41,087 | | Depreciation and amortization | Depreciation and amortization | | 7,035 | | | 982 | | | 8,017 | | Amortization of intangibles | Amortization of intangibles | | 4,585 | | | — | | | 4,585 | | | Other noninterest expense(3) | | 240,096 | | | 95,648 | | | 335,744 | | Income (loss) before income taxes | | $ | 182,859 | | | $ | (23,285) | | | $ | 159,574 | | Other noninterest expense | | Other noninterest expense | | Other noninterest expense | | Income before income taxes | | Income tax expense | Income tax expense | | 35,003 | | | Net income applicable to FB Financial Corporation and noncontrolling interest | Net income applicable to FB Financial Corporation and noncontrolling interest | | 124,571 | | Net income applicable to noncontrolling interest(4) | | 16 | | | Net income applicable to FB Financial Corporation and noncontrolling interest | | | Net income applicable to FB Financial Corporation and noncontrolling interest | | Net income applicable to noncontrolling interest(2) | | Net income applicable to FB Financial Corporation | Net income applicable to FB Financial Corporation | | $ | 124,555 | | Total assets | Total assets | | $ | 12,228,451 | | | $ | 619,305 | | | $ | 12,847,756 | | Goodwill | Goodwill | | 242,561 | | | — | | | 242,561 | |
(1) Includes $8,589 in provision for credit losses on unfunded commitments. (2) Change in fair value of mortgage servicing rights, net of hedging is included in mortgage banking income in the Company's consolidated statements of income.
(3) Includes $12,458 in Mortgage restructuring expenses in the Mortgage segment related to the exit from the direct-to-consumer delivery channel.
(4)(2) Banking segment includes noncontrolling interest.
| | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2021 | | Banking(3) | | Mortgage | | Consolidated | Net interest income | | $ | 347,342 | | | $ | 28 | | | $ | 347,370 | | Provisions for credit losses(1) | | (40,993) | | | — | | | (40,993) | | Mortgage banking income(2) | | — | | | 179,682 | | | 179,682 | | Change in fair value of mortgage servicing rights, net of hedging(2) | | — | | | (12,117) | | | (12,117) | | Other noninterest income | | 61,073 | | | (383) | | | 60,690 | | Depreciation and amortization | | 7,054 | | | 1,362 | | | 8,416 | | Amortization of intangibles | | 5,473 | | | — | | | 5,473 | | | | | | | | | Other noninterest expense | | 220,283 | | | 139,395 | | | 359,678 | | Income before income taxes | | $ | 216,598 | | | $ | 26,453 | | | $ | 243,051 | | Income tax expense | | | | | | 52,750 | | | | | | | | | | | | | | | | Net income applicable to FB Financial Corporation and noncontrolling interest | | | | | | 190,301 | | Net income applicable to noncontrolling interest(3) | | | | | | 16 | | Net income applicable to FB Financial Corporation | | | | | | $ | 190,285 | | Total assets | | $ | 11,540,560 | | | $ | 1,057,126 | | | $ | 12,597,686 | | Goodwill | | 242,561 | | | — | | | 242,561 | |
(1)Includes $(1,998) 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
(Dollar amounts are in thousands, except share and per share amounts)
| | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2020 | | Banking(1)(5) | | Mortgage(1) | | Consolidated | Net interest income | | $ | 265,581 | | | $ | 77 | | | $ | 265,658 | | Provisions for credit losses(2) | | 107,967 | | | — | | | 107,967 | | Mortgage banking income(3) | | — | | | 289,702 | | | 289,702 | | Change in fair value of mortgage servicing rights, net of hedging(3) | | — | | | (34,374) | | | (34,374) | | Other noninterest income | | 46,527 | | | — | | | 46,527 | | Depreciation and amortization | | 6,425 | | | 1,111 | | | 7,536 | | Amortization of intangibles | | 5,323 | | | — | | | 5,323 | | | | | | | | | Other noninterest expense(4) | | 212,890 | | | 151,336 | | | 364,226 | | (Loss) income before income taxes | | $ | (20,497) | | | $ | 102,958 | | | $ | 82,461 | | Income tax expense | | | | | | 18,832 | | | | | | | | | | | | | | | | Net income applicable to FB Financial Corporation and noncontrolling interest | | | | | | 63,629 | | Net income applicable to noncontrolling interest(5) | | | | | | 8 | | Net income applicable to FB Financial Corporation | | | | | | $ | 63,621 | | Total assets | | $ | 10,254,324 | | | $ | 953,006 | | | $ | 11,207,330 | | Goodwill | | 242,561 | | | — | | | 242,561 | |
(1)As previously reported on Form 10-K filed with the SEC on February 25, 2022, results have been revised from originally reported to reflect a $26,416 reclassification of mortgage retail footprint total net contribution from the Banking segment to the Mortgage segment.
(2)Includes $13,361 in provision for credit losses on unfunded commitments.
(3)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.
(4)Includes $33,824 of merger costs in the Banking segment related to the Farmers National acquisition and the Franklin merger and $1,055 of merger costs in the Mortgage segment related to the Franklin merger.
(5)Banking segment includes noncontrolling interest.
The Banking segment provides the Mortgage segment with a warehouse line of credit that is used to fundoriginate mortgage loans held for sale.until those mortgage loans can be sold at which time the warehouse line of credit is repaid. 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 $16,170, $18,906 $23,910, and $14,810$23,910 for the years ended December 31, 2023, 2022, 2021, and 2020,2021, respectively. Additionally during the year ended December 31, 2022, the Company exited the direct-to-consumer delivery channel of the Mortgage segment. This restructure resulted in the recognition of $12,458 of expenses during the year ended December 31, 2022 within the Mortgage segment. After this restructuring, the Mortgage segment continues to originate and sell residential mortgage loans and retain servicing rights through its traditional retail channel.
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts) Note (21)(19)—Minimum capital requirements: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 approachesapproach institutions, the Bank and Company are required to maintain minimum capital ratios as outlined in the table below. Additionally, under U.S. Basel III Capital Rules, the decision was made to opt outMinimum risk-based capital adequacy ratios below include a capital conservation buffer of including accumulated other comprehensive income in regulatory capital.2.50%. As of December 31, 20222023 and 2021,2022, the Bank and Company met all capital adequacy requirements to which they are subject. Additionally, under U.S. Basel III Capital Rules, the Bank and Company opted out of including accumulated other comprehensive income in regulatory capital. In March 2020, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC announced a final rule to delay the estimated impact on regulatory capital stemming from the implementation of CECL. The final rule maintained the three-year transition option in the previous rule and provides banks the option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period (five-year transition option). The Company adoptedelected to phase-in the capital transition reliefimpact related to adopting ASU 2016-13 over the permissible five-year transition relief period and delayed the initial impact of CECL adoption plus 25% of the quarterly increases in ACL through December 31, 2021.in the first two years after adoption. As of January 1, 2022, the cumulative amount of the transition adjustments became fixed and are being phased out of regulatory capital calculations evenly over a three yearthree-year period, with 75% of the transition provision’s impact being recognized in 2022, 50% recognized in 2023, and 25% recognized in 2024.
Actual and required capital amounts and ratios are included below as of the dates indicated.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2023 | | Actual | | | | Minimum Requirement for Capital Adequacy with Capital Buffer | | To Qualify as Well-Capitalized Under Prompt Corrective Action Provisions | | | Amount | | Ratio | | | | | | Amount | | Ratio | | Amount | | Ratio | | | | | | | | | | | | | | | | | | Total Capital (to risk-weighted assets) | | | | | | | | | | | | | | | | | FB Financial Corporation | | $ | 1,635,848 | | | 14.5 | % | | | | | | $ | 1,182,028 | | | 10.5 | % | | N/A | | N/A | FirstBank | | 1,600,950 | | | 14.2 | % | | | | | | 1,179,886 | | | 10.5 | % | | $ | 1,123,701 | | | 10.0 | % | Tier 1 Capital (to risk-weighted assets) | | | | | | | | | | | | | | | | | FB Financial Corporation | | $ | 1,405,890 | | | 12.5 | % | | | | | | $ | 956,880 | | | 8.5 | % | | N/A | | N/A | FirstBank | | 1,370,991 | | | 12.2 | % | | | | | | 955,145 | | | 8.5 | % | | $ | 898,960 | | | 8.0 | % | Tier 1 Capital (to average assets) | | | | | | | | | | | | | | | | | FB Financial Corporation | | $ | 1,405,890 | | | 11.3 | % | | | | | | $ | 496,485 | | | 4.0 | % | | N/A | | N/A | FirstBank | | 1,370,991 | | | 11.1 | % | | | | | | 495,761 | | | 4.0 | % | | $ | 619,701 | | | 5.0 | % | Common Equity Tier 1 Capital (to risk-weighted assets) | | | | | | | | | | | | | | | | | FB Financial Corporation | | $ | 1,375,890 | | | 12.2 | % | | | | | | $ | 788,018 | | | 7.0 | % | | N/A | | N/A | FirstBank | | 1,370,991 | | | 12.2 | % | | | | | | 786,590 | | | 7.0 | % | | $ | 730,405 | | | 6.5 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2022 | | Actual | | | | Minimum Requirement for Capital Adequacy with Capital Buffer | | To Qualify as 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 | % |
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (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 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 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, 2021 | | Actual | | | | Minimum Capital adequacy with capital buffer | | To be well capitalized under prompt corrective action provisions | | | Amount | | Ratio | | | | | | Amount | | Ratio | | Amount | | Ratio | | | | | | | | | | | | | | | | | | Total Capital (to risk-weighted assets) | | | | | | | | | | | | | | | | | FB Financial Corporation | | $ | 1,434,581 | | | 14.5 | % | | | | | | $ | 1,039,984 | | | 10.5 | % | | N/A | | N/A | FirstBank | | 1,396,407 | | | 14.1 | % | | | | | | 1,038,760 | | | 10.5 | % | | $ | 989,295 | | | 10.0 | % | Tier 1 Capital (to risk-weighted assets) | | | | | | | | | | | | | | | | | FB Financial Corporation | | $ | 1,251,874 | | | 12.6 | % | | | | | | $ | 841,892 | | | 8.5 | % | | N/A | | N/A | FirstBank | | 1,213,700 | | | 12.3 | % | | | | | | 840,901 | | | 8.5 | % | | $ | 791,436 | | | 8.0 | % | Tier 1 Capital (to average assets) | | | | | | | | | | | | | | | | | FB Financial Corporation | | $ | 1,251,874 | | | 10.5 | % | | | | | | $ | 474,831 | | | 4.0 | % | | N/A | | N/A | FirstBank | | 1,213,700 | | | 10.2 | % | | | | | | 474,044 | | | 4.0 | % | | $ | 592,555 | | | 5.0 | % | Common Equity Tier 1 Capital (to risk-weighted assets) | | | | | | | | | | | | | | | | | FB Financial Corporation | | $ | 1,221,874 | | | 12.3 | % | | | | | | $ | 693,322 | | | 7.0 | % | | N/A | | N/A | FirstBank | | 1,213,700 | | | 12.3 | % | | | | | | 692,507 | | | 7.0 | % | | $ | 643,042 | | | 6.5 | % |
Note (22)(20)—Employee benefit plans:plans (A)—401(k) plan:plan
The Bank hasCompany sponsors a 401(k) Plan (the “Plan”) wherebydefined contribution plan which covers substantially all employees participate in the Plan. Employees mayand allows participating employees to contribute the maximum amount of their eligible compensationsalary subject to certain limits based on the federal tax laws. The BankCompany has an employer match of 50% of participant contributions not to exceedthe first 6% of an employee’s total compensation and thesalary with any such contributions vesting term of profit sharing contributions isratably over a three-year ratable period. For the years ended December 31, 2023, 2022 and 2021, matching employer contributions totaled $3,450, $3,686 and 2020, the matching portions provided by the Bank to this Plan were $3,686, $3,923 and $3,198 respectively.
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Dollar amounts are in thousands, except share and per share amounts)
(B)—Acquired supplemental retirement plans:plans
The Company has nonqualified supplemental retirement plans for certain former employees that were assumed through previous acquisitions. As of December 31, 20222023 and 2021,2022, other liabilities on the consolidated balance sheets included post-retirement benefits payable of $2,424$2,152 and $2,487,$2,424, respectively, related to these plans. For the years ended December 31, 2023, 2022 and 2021, and 2020, the Company recorded expense of $119, $94 and $29, respectively, related to these plans and payments to the participants were $181, $172 and $131 in 2022, 2021 and 2020, respectively.not meaningful. The Company also acquired single premium life insurance policies on these individuals. At December 31, 20222023 and 2021,2022, cash surrender value of bank-owned life insurance was $75,329$76,143 and $73,519,$75,329, respectively. Income related to these policies (net of related insurance premium expense) amounted to $1,871, $1,452 and $1,542 in 2023, 2022 and $1,556 in 2022, 2021, and 2020, respectively. Note (23)(21)—Stock-Based Compensation:Stock-based compensation Restricted Stock Units The Company grants RSUs under compensation arrangements for the benefit of certain employees, executive officers, and directors. RSU grants are subject to time-based vesting.vesting with associated compensation recognized on a straight-line basis based on the grant date fair value of the awards. The total number of restricted stock unitsRSUs granted represents the maximum number of restricted stock unitsawards eligible to vest based upon the service conditions set forth in the grant agreements. The following table summarizes changes in restricted stock unitsRSUs for the year ended December 31, 2022.2023: | | | | | | | | | | Restricted Stock Units Outstanding | | Weighted Average Grant Date Fair Value | | Balance at beginning of period (unvested) | Balance at beginning of period (unvested) | | 492,320 | | | $ | 36.06 | | | Balance at beginning of period (unvested) | | Balance at beginning of period (unvested) | | Granted | | Granted | | Granted | Granted | | 145,000 | | | 43.67 | | | Vested | Vested | | (221,074) | | | 36.27 | | | Vested | | Vested | | Forfeited | | Forfeited | | Forfeited | Forfeited | | (51,091) | | | 34.99 | | | Balance at end of period (unvested) | Balance at end of period (unvested) | | 365,155 | | | $ | 39.02 | | | Balance at end of period (unvested) | | Balance at end of period (unvested) | |
The total fair value of restricted stock unitsRSUs vested was $8,089, $8,018, and released was $8,018, $16,340 and $5,619 for the years ended December 31, 2023, 2022, 2021, and 2020,2021, respectively. The compensation cost related to stockthe grants and vesting of restricted stock unitsRSUs was$7,372, $7,438, $7,372, and $8,907 and $9,213 for the years ended December 31, 2023, 2022, 2021, and 2020,2021, respectively. This includedincludes amounts paid related to director grants and compensation for directors elected to be settled in stock amounting to$663, $834, $663, and $635 and $898 duringfor the years ended December 31, 2023, 2022, and 2021, and 2020, respectively. As of December 31, 2022,2023, there was $8,891$7,736 of total unrecognized compensation cost related to unvested restricted stock unitsRSUs which is expected to be recognized over a weighted-average period of 2.31.94 years. Additionally, as of December 31, 2022,2023, there were 1,723,8601,497,096 shares available for issuance under the Company's stock compensation plans. As of December 31, 2023 and 2022, there was $353 and 2021, there were $292, and $274, respectively, accrued in other liabilities related to dividend equivalent units declared to be paid upon vesting and distribution of the underlying restricted stock units.RSUs.
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts)
Performance BasedPerformance-Based Restricted Stock Units
The Company awards performance-based restricted stock unitsPSUs 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 thea predefined peer group will be measured based on calculated non-GAAP adjustedcore return on average tangible common equity ratio, which is adjusted for unusual gains/losses, merger expenses, and other items as approved by the compensation committeeCompensation Committee of the Company's boardBoard of directors.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 awardsawards. The following table summarizes information about the changes in PSUs as of and for the year ended December 31, 2022.2023: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Performance Stock Units Outstanding | | Weighted Average Grant Date Fair Value | | | | | Balance at beginning of period (unvested) | | 115,750 | | | $ | 40.13 | | | | | | Granted | | 69,291 | | | 44.44 | | | | | | Vested | | — | | | — | | | | | | Forfeited or expired | | (23,374) | | | 42.65 | | | | | | Balance at end of period (unvested) | | 161,667 | | | $ | 41.73 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Performance Stock Units Outstanding | | Weighted Average Grant Date Fair Value | | | | | Balance at beginning of period (unvested) | | 161,667 | | | $ | 41.73 | | | | | | Granted | | 86,010 | | | 37.17 | | | | | | Performance adjustment (1) | | 51,444 | | | 36.93 | | | | | | Vested | | (104,833) | | | 36.93 | | | | | | Forfeited or expired | | (18,125) | | | 43.58 | | | | | | Balance at end of period (unvested) | | 176,163 | | | $ | 40.86 | | | | | | (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 December 31, 2022:2023: | | | | | | | | | | | | | | | | | | | | | Grant Year | | Grant Price | | Vest Year | | PSUs Outstanding | 2020 (1) | | $ | 36.21 | | | 2023 | | 44,319 | 2021 (1) | | $ | 43.20 | | | 2024 | | 56,406 | 2022 (2) | | $ | 44.44 | | | 2025 | | 60,942 | (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. |
| | | | | | | | | | | | | | | | | | | | | Grant Year | | Grant Price | | Performance Period | | PSUs Outstanding | 2021 (1) | | $ | 43.20 | | | 2021 to 2023 | | 47,387 | 2022 (1) | | $ | 44.44 | | | 2022 to 2024 | | 50,117 | 2023 (1) | | $ | 37.17 | | | 2023 to 2025 | | 78,659 | (1)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 associated with PSUs of $2,943, $2,485, $1,375, and $1,001$1,375 for the years ended December 31, 2023, 2022, 2021, and 2020,2021, respectively. As of December 31, 2022,2023, maximum unrecognized compensation cost at 200% payout related to the unvested PSUs was $8,638,$10,864, and the weighted average remaining performance period over which the cost could be recognized was 1.841.82 years.Employee Stock Purchase Plan: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 thanlimited to 725 shares during any offering period (and, in any event, no more than $25 worth of common stock in any calendar year).for each participating employee. There were 20,520, 26,950, 37,310, and 30,17937,310 shares of common stock issued under the ESPP with proceeds from employee payroll withholdings of $686, $1,087, $1,190, and $919$1,190 during the years ended December 31, 2023, 2022, 2021, and 2020,2021, respectively. As of December 31, 2022,2023, there were 2,314,7462,294,226 shares available for issuance under the ESPP.
FB Financial Corporation and subsidiaries Notes to consolidated financial statements (Dollar amounts are in thousands, except share and per share amounts)
Note (24)(22)—Related party transactions:transactions (A) Loans: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, significant shareholders and directors of the Bank and their related interests is presented below: | | | | | | | | | Loans outstanding at January 1, 20222023 | | $ | 29,01082,559 | | New loans and advances | | 67,02410,047 | | Change in related party status | | (9,939)(37,897) | | Repayments | | (3,536)(5,636) | | Loans outstanding at December 31, 20222023 | | $ | 82,55949,073 | |
Unfunded commitments to certain executive officers, certain management and directors and their related interests totaled $31,564$44,206 and $10,994$31,564 at December 31, 20222023 and 2021,2022, respectively. (B) Deposits:Deposits
The Bank held deposits from related parties totaling $347,660$316,141 and $312,956$347,660 as of December 31, 20222023 and 2021,2022, respectively. (C) Leases:Leases
The Bank leases various office spaces from entities owned by certain directors of the Company under varying terms. Lease expense for these properties totaled $385, $396, $497, and $510$497 for the years ended December 31, 2023, 2022, and 2021, and 2020.respectively. (D) Aviation lease and time sharing agreement:
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 years ended December 31, 2022 and 2021, theThe Company recognized income amounting toof $28, $52, and $21 respectively, under this agreement. Additionally, the Company is a participant to an aviation time sharing agreement for an aircraft owned by an entity that is owned by one of the Company's directors and one of the Company's former directors. During the years ended December 31, 2021 and 2020, the Company made payments of $32 and $161 under this agreement, respectively. No such payments were made during the year ended December 31, 2022. (E) Registration rights agreement:
The Company is party to a registration rights agreement with its former majority shareholder entered into in connection with the 2016 IPO, under which the Company is responsible for payment of expenses (other than underwriting discounts and commissions) relating to sales to the public by the shareholder of shares of the Company’s common stock beneficially owned by him. Such expenses include registration fees, legal and accounting fees, and printing costs payable by the Company and expensed when incurred. During the year ended December 31, 2021, the Company paid $605 under this agreement related to the secondary offering completed during the second quarter of 2021. There were no such expenses during the years ended December 31, 2023, 2022, or 2020.and 2021, respectively, under this agreement.
(F) Equity investment in preferred stock:stock and master loan purchase agreement
During the year ended December 31, 2022, the Company invested in preferred stock of a privately held entity of which an executive officer of the Company is on the Board of directors of the investee. This investment is included in other assets on the consolidated balance sheets with a carrying amount of $10,000 as of both December 31, 2023 and 2022, and is being accounted for as an equity security without readily determinable market value. No gains or losses have been recognized to date associated with this investment. Concurrently, the Company also entered a separate master loan purchase agreement with the entity to purchase up to $250,000 in manufactured loan housing production over an initial five-year term. During the year ended December 31, 2023, the Company purchased $33,164 of loans HFI under this agreement. No such loans were purchased during the year ended December 31, 2022. As of December 31, 2023, the amortized cost of these loans HFI amounted to $32,154. There were no loans recorded under the master loan purchase agreement as of December 31, 2022.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREChanges In and Disagreements with Accountants on Accounting and Financial Disclosure None. ITEM 9A. 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) under the Exchange Act as of December 31, 20222023 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 December 31, 2022,2023, the Company’s disclosure controls and procedures were effective for ensuring that information the Company is required to disclose in reports that it files or submits under the Act, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to the Company’s senior management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Annual Reports on Internal Control over Financial Reporting The report of the Company’s management on the Company’s internal control over financial reporting is included under subheading "“Report on Management’s Assessment of Internal Control over Financial Reporting"Reporting” within Item 8, “Financial Statements and Supplementary Data".Data.” The report of the Company’s independent registered public accounting firm on the Company’s internal control over financial reporting is included under subheading "“Report of Independent Registered Public Accounting Firm"Firm” within Item 8, “Financial Statements and Supplementary Data,” within this Annual Report. Changes in Internal Controls There were no changes in our internal control over financial reporting that occurred during the year ended December 31, 20222023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Limitations on the Effectiveness of Controls The Company’s management recognizes that a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, errors and instances of fraud, if any, within the Company have been detected. ITEM 9B. Other Information None.Rule 10b5-1 Trading Plans
During the quarter ended December 31, 2023, none of the Company’s directors or executive officers adopted, modified, or terminated any contract, instruction, or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.” Other Events Amended and Restated Employment Agreements On February 23, 2024, FB Financial Corporation (the “Company”) and FirstBank (“FirstBank”), the Company’s wholly owned subsidiary, entered into amended and restated employment agreements (the “new agreements”) with the following named executive officers: Christopher T. Holmes, President and Chief Executive Officer, Michael M. Mettee, Chief Financial Officer, Travis K. Edmondson, Chief Banking Officer, Aimee T. Hamilton, Chief Risk Officer, and R. Wade Peery, Chief Innovations Officer (collectively, the “named executive officers”). The agreements replace and supersede each of the named executive officer’s respective prior employment agreements (the “prior agreements”). Term. The initial terms of the new agreements are for three years from the effective date, February 23, 2024, of the respective agreement. The terms automatically renew on each anniversary thereafter for additional one-year periods. Compensation. The base salaries under the new agreements are set at a minimum and are subject to annual review and increases. Mr. Holmes’ new agreement provides that he is entitled to an annual base salary of $725,000, an annual bonus target of $725,000, and a potential long-term incentive plan award of $1,250,000. Mr. Mettee’s new agreement provides that he is entitled to an annual base salary of $405,000, an annual bonus target of $250,000, and a potential long-term incentive plan award of $250,000. Mr. Edmondson’s new agreement provides that he is entitled to an annual base salary of $400,000, an annual bonus target of $250,000, and a potential long-term incentive plan award of $250,000. Ms. Hamilton’s new agreement provides that she is entitled to an annual base salary of $362,000, an annual bonus target of
$175,000, and a potential long-term incentive plan award of $176,000. Mr. Peery’s new agreement provides that he is entitled to an annual base salary of $326,000, an annual bonus target of $272,000, and a potential long-term incentive plan award of $408,000. The annual bonus and long-term incentive awards will be subject to performance and other vesting conditions as established by the Compensation Committee of the board of directors of the Company. Additionally, annual short-term incentive compensation and annual long-term incentive compensation awards are set at a minimum for each executive, and in each case are subject to annual review and adjustment. The named executive officers are entitled to participate in all incentive, savings, retirement, welfare and fringe benefit plans generally made available to the Company’s senior executive officers. Mr. Holmes also receives automobile expenses, country club dues, and a term life insurance policy of $2,500,000. Obligation of the Company in Event of Termination and Non-Renewal.The named executive officers’ employment may be terminated any time by either party, and the new agreements automatically terminate on the respective officer’s death or disability. Resignation for Good Reason, Termination Other Than for Cause, Death or Disability. If employment is terminated by the Company other than for cause, death or disability, or the named executive officer resigns for “good reason” (as defined in the employment agreements) then the named executive officer will receive a severance payment equal to two times the sum of (i) the named executive officer’s current base salary and (ii) the greater of (x) the average annual bonus paid to the officer for the three immediately preceding fiscal years, or (y) the target annual bonus for the fiscal year in which the termination occurs. The named executive officers are also entitled to participate in the Company's health plan for 18 months at the active employee rate. Termination for Cause, Resignation by Executive other than Resignation for Good Reason; Death; Retirement. If the named executive officer’s employment is terminated by the Company for cause, by the officer other than for good reason, retirement, or in the event of the officer’s death, then the Company shall have no further obligations under the employment agreement, other than for payment of any accrued salary, which shall be paid to the officer or the officer’s estate or beneficiary, and payments of other benefits, as applicable. Termination for Disability.If the Company terminates a named executive officer’s employment for disability, then the Company shall pay a lump sum amount equal to six months of his or her respective base salary, plus a prorated portion of the officer’s target annual bonus opportunity for the fiscal year in which the disability occurred. Termination following a Change in Control. If, within 12 months following a change in control, the Company terminates the named executive officer’s employment other than for cause, or the named executive officer terminates employment for good reason then the named executive officer will receive (A) his or her accrued salary and (B) an amount equal to two and one-half times (three times in the case of Mr. Holmes) the sum of his or her current base salary plus a bonus equal to the greater of (x) the average annual bonus paid to the officer for the three immediately preceding fiscal years, or (y) the target annual bonus for the fiscal year in which the termination occurs. Obligation of the Company in Event of Non-Renewal.If the Company elects not to renew the term of the named executive officer’s employment agreement, and within 12 months following the expiration of such term, the Company terminates the officer’s employment other than for cause, death, or disability, then the officer will receive a severance payment equal to two times the sum of his or her current base salary and the greater of (x) the average annual bonus for the three immediately preceding fiscal years, or (y) the target annual bonus for the fiscal year in which the termination occurs. Treatment of Outstanding Equity Awards. In the event of a termination following a change of control, death, retirement, resignation for good reason, or termination other than for cause, death or disability, the officer’s outstanding time-based equity awards shall become fully vested (to the extent not previously vested), and each of the respective officer’s then outstanding performance-based equity awards shall remain outstanding and shall vest, in whole, in part, or not at all, on a pro rata basis based on the level of achievement of applicable performance metrics at the end of the performance period. Restrictive Covenants. The employment agreements contain confidentiality, non-competition, and employee and customer non-solicitation covenants that apply during employment and for one year after the named executive officer’s termination of employment. The foregoing description of the named executive officers’ employment agreements is qualified in its entirety by the full text of the employment agreement, which will be filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the period ending March 31, 2024. ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not Applicable.
PART III Item 10. Directors, Executive Officers and Corporate Governance The information required by this Item will be presented in, and is incorporated herein by reference to, the Company’s definitive proxy statement for the 20232024 annual meeting of shareholders which will be filed with the SEC within 120 days of December 31, 2022.2023. Item 11. Executive Compensation The information required by this Item will be presented in, and is incorporated herein by reference to, the Company’s definitive proxy statement for the 20232024 annual meeting of shareholders which will be filed with the SEC within 120 days of December 31, 2022.2023. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this Item will be presented in, and is incorporated herein by reference to, the Company’s definitive proxy statement for the 20232024 annual meeting of shareholders which will be filed with the SEC within 120 days of December 31, 2022.2023. Item 13. Certain Relationships, Related Transactions and Director Independence The information required by this Item will be presented in, and is incorporated herein by reference to, the Company’s definitive proxy statement for the 20232024 annual meeting of shareholders which will be filed with the SEC within 120 days of December 31, 2022.2023. Item 14. Principal Accountant Fees and Services The information required by this Item will be presented in, and is incorporated herein by reference to, the Company’s definitive proxy statement for the 20232024 annual meeting of shareholders which will be filed with the SEC within 120 days of December 31, 2022.
2023.
PART IV Item 15. Exhibits and Financial Statement Schedules (a) Documents filed as a part of this report. 1. Financial Statements The following consolidated financial statements of FB Financial Corporation and our subsidiaries and related reports of our independent registered public accounting firm are incorporated in this Item 15. by reference from Part II - Item 8. Financial Statements and Supplementary Data of this Annual Report.
•Consolidated balance sheets as of December 31, 20222023 and 20212022 •Consolidated statements of income for the years ended December 31, 2023, 2022, 2021, and 20202021 •Consolidated statements of comprehensive income for the years ended December 31, 2023, 2022, 2021, and 20202021 •Consolidated statements of changes in shareholders' equity for the years ended December 31, 2023, 2022, 2021, and 20202021 •Consolidated statements of cash flows for the years ended December 31, 2023, 2022, 2021, and 20202021 •Notes to Consolidated Financial Statementsconsolidated financial statements •Report of Independent Registered Public Accounting Firm 2. Financial Statement Schedules None are applicable because the required information has been incorporated in the consolidated financial statements and notes thereto of FB Financial Corporation and our subsidiaries which are incorporated in this Annual Report by reference. 3. Exhibits The following exhibits are filed or furnished herewith or are incorporated herein by reference to other documents previously filed with the SEC.
EXHIBIT INDEX | | | | | | Exhibit Number | Description | 3.1 | | 3.2 | | 4.1 | | 4.2 | | 4.8 | In accordance with Item 601(b)(4)(iii)(A) of Regulation S-K, certain instruments with respect to long-term debt of the Company have been omitted but will be furnished to the Securities and Exchange Commission upon request. | 10.1 | | 10.2 | | 10.3 | | 10.4 | | 10.610.4 | | 10.710.5 |
| 10.810.6 | | 10.7 | | 10.8 | | 10.9 | | 10.10 | | 10.11 | | 10.12 | | 10.1310.12 | Employment Agreement, dated April 28, 2021,July 31, 2023, by and among FB Financial Corporation, FirstBank, and Wilburn J. EvansMark E. Hickman (incorporated by reference to Exhibit 10.1310.1 to the Company’s AnnualQuarterly Report on Form 10-k10-Q for the quarter ended December 31, 2021September 30, 2023 (File No. 001-37875) filed on February 25, 2022)November 3, 2023)† | 10.1410.13 | | 10.1510.14 | | 10.15 | | 21 | |
| | | | | | 24.1 | | 31.1 | | 31.2 | | 32.1 | | 97 | | 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. | *** | As directed by Item 601(a)(5) of Regulation S-K, certain schedules and exhibits to this exhibit are omitted from this filing. The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request. | † | Represents a management contract or a compensatory plan or arrangement. |
ITEM 16. FORMForm 10-K SUMMARYSummary None.
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/ Christopher T. Holmes | February 28, 202327, 2024 | | Christopher T. Holmes President and Chief Executive Officer (Principal Executive Officer) | | | | | | | | | | | | | | | | | | | | | |
POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Christopher T. Holmes and Michael M. Mettee and each of them, his or her true and lawful attorney(s)-in-fact and agent(s), with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments to this report and to file the same, with all exhibits and schedules thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney(s)-in-fact and agent(s) full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney(s)-in-fact and agent(s), or their substitute(s), may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. | | | | | | | | | | | | | | | Signature | | Title | | Date | | | | | | /s/ Christopher T. Holmes | | | | | Christopher T. Holmes | | Director, President and Chief Executive Officer | | February 28, 202327, 2024 | | | (Principal Executive Officer) | | | | | | | | /s/ Michael M. Mettee | | | | | Michael M. Mettee | | Chief Financial Officer | | February 28, 202327, 2024 | | | (Principal Financial Officer) | | | | | | | | /s/ Keith RainwaterJonathan Pennington | | | | | Keith RainwaterJonathan Pennington | | Chief Accounting Officer | | February 28, 202327, 2024 | | | (Principal Accounting Officer) | | | | | | | | /s/ Jimmy E. Allen | | | | | Jimmy Allen | | Director | | February 28, 2023 | | | | | | /s/ J. Jonathan Ayers | | | | | J. Jonathan Ayers | | Director | | February 28, 202327, 2024 | | | | | | /s/ William F. Carpenter III | | | | | William F. Carpenter III | | Chairman of the Board | | February 28, 202327, 2024 | | | | | | /s/ Agenia W. Clark | | | | | Agenia W. Clark | | Director | | February 28, 202327, 2024 | | | | | | /s/ James W. Cross IV | | | | | James W. Cross IV | | Director | | February 28, 202327, 2024 | | | | | | /s/ James L. Exum | | | | | James L. Exum | | Director | | February 28, 202327, 2024 | | | | | | /s/ Orrin H. Ingram | | | | | Orrin H. Ingram | | Director | | February 28, 202327, 2024 | | | | | | /s/ Raja J. Jubran | | | | | Raja J. Jubran | | Director | | February 28, 202327, 2024 | | | | | | /s/ C. Wright Pinson | | | | | C. Wright Pinson | | Director | | February 28, 202327, 2024 | | | | | | /s/ Emily J. Reynolds | | | | | Emily J. Reynolds | | Director | | February 28, 202327, 2024 | | | | | | /s/ Melody J. Sullivan | | | | | Melody J. Sullivan | | Director | | February 28, 202327, 2024 |
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