UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~September 30, 2022~~March 31, 2023

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

For the transition period from ________ to ________

Commission File Number 001-37875

FB FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)


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

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

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, Par Value $1.00 Per Share

FBK

New York Stock Exchange

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

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

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Small reporting company

☐

Emerging growth company

☐

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

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

The number of shares of registrant’s Common Stock outstanding as of ~~November 3, 2022~~April 28, 2023 was ~~46,929,958.~~46,781,020.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION
	Glossary Of Abbreviations And Acronyms	3
Item 1.	Consolidated Financial Statements	4
	Consolidated Balance Sheets as of ~~September~~Marc ~~30, 2022~~h 31 , 202 3 (Unaudited) and December 31, ~~2021~~202 2	4
	Consolidated Statements of Income (Unaudited) for the three ~~and~~ ~~nine~~ months ended ~~September~~Ma rch ~~30, 2022~~3 1 , 202 3 and ~~2021~~202 2	5
	Consolidated Statements of Comprehensive Income (Unaudited) for the three ~~and~~ ~~nine~~months ended S ~~eptember~~March ~~30, 2022~~31 , 202 3 and ~~2021~~202 2	6
	Consolidated Statements of Changes in Shareholders' Equity (Unaudited) for the three ~~and~~ ~~nine~~months ended ~~September~~ March 31 ~~30, 2022~~, 202 3 and ~~2021~~202 2	7
	Consolidated Statements of Cash Flows (Unaudited) for the ~~nine~~three months ended March ~~Sep~~31 ~~tember~~, 202 3 and 202 ~~30, 2022and 2021~~2	98
	Condensed Notes to Consolidated Financial Statements (Unaudited)	109
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operation	4946
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	8879
Item 4.	Controls and Procedures	8981
~~Part~~PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	9081
Item 1A.	Risk Factors	9081
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	9082
Item 6.	Exhibits	9183
SIGNATURES		9284

PART I

GLOSSARY OF ABBREVIATIONS AND ACRONYMS

As used in this Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2022 (this "Report"),~~March 31, 2023, references to “we,” “our,” “us,” “FB Financial,” or “the Company” refer to FB Financial Corporation, a Tennessee corporation, and our wholly-owned banking subsidiary, FirstBank, a Tennessee state-chartered bank, unless otherwise indicated or the context otherwise requires. References to “Bank” or “FirstBank” refer to FirstBank, our wholly-owned banking subsidiary.

The acronyms and abbreviations identified below are used in the Notes to the Consolidated Financial Statements ~~(Unaudited)~~(unaudited) as well as in the Management’s discussion and analysis of financial condition and results of operations. You may find it helpful to refer to this page as you read this Report.

ACL

Allowance for credit losses

FHLB

Federal Home Loan Bank

AFS

Available-for-sale

FHLMC

Federal Home Loan Mortgage Corporation

ALCO

Asset Liability Management Committee

FNMA

Federal National Mortgage Association

ASC

Accounting Standard Codification

GAAP

U.S. generally accepted accounting principles

~~AFS~~ASU

~~Available-for-sale~~Accounting Standard Update

GNMA

Government National Mortgage Association

~~ALCO~~CD

~~Asset Liability Management Committee~~Certificate of Deposit

IRLC

Interest rate lock commitment

~~ASC~~CECL

~~Accounting Standard Codification~~Current expected credit losses

LIBOR

London Interbank Offered Rate

~~ASU~~CEO

~~Accounting Standard Update~~Chief Executive Officer

MSR

Mortgage servicing rights

~~CARES~~CET1

~~Coronavirus Aid, Relief, and Economic Security Act~~Common Equity Tier 1

NIM

Net interest margin

~~CECL~~COVID-19

~~Current expected credit losses~~Coronavirus pandemic

OREO

Other real estate owned

~~CEO~~CPR

~~Chief Executive Officer~~

~~PPP~~

~~Paycheck Protection Program~~

~~CET1~~

~~Common Equity Tier 1~~Conditional prepayment rate

PSU

Performance-based restricted stock units

~~COVID-19~~

~~Coronavirus pandemic~~

~~ROAA~~

~~Return on average total assets~~

~~CPR~~

~~Conditional prepayment rate~~

~~ROAE~~

~~Return on average shareholders' equity~~

EPS

Earnings per share

~~ROATCE~~Report

~~Return on average tangible common equity~~Form 10-Q for the quarterly period ended March 31, 2023

ESPP

Employee Stock Purchase Plan

~~ROU~~RSU

~~Right-of-use~~Restricted stock units

EVE

Economic value of equity

~~RSU~~SEC

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

FASB

Financial Accounting Standards Board

~~SBA~~SOFR

~~Small Business Administration~~Secured overnight financing rate

FDIC

Federal Deposit Insurance Corporation

~~SEC~~TDFI

~~U.S. Securities and Exchange Commission~~Tennessee Department of Financial Institutions

Federal Reserve

Board of Governors of the Federal Reserve
System

~~SOFR~~

~~Secured overnight financing rate~~

~~FHLB~~

~~Federal Home Loan Bank~~

~~TDFI~~

~~Tennessee Department of Financial Institutions~~

~~FHLMC~~

~~Federal Home Loan Mortgage Corporation~~

TDR

Troubled debt restructuring

~~FNMA~~

~~Federal National Mortgage Association~~

~~PART I - FINANCIAL INFORMATION~~

~~ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS~~

FB Financial Corporation and subsidiaries

Consolidated balance sheets

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


		September 30,		December 31,			March 31,		December 31,
		2022 (Unaudited)		2021			2023 (Unaudited)		2022
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	193,301	$	91,333	Cash and due from banks	$	133,874	$	259,872
Federal funds sold and reverse repurchase agreements	Federal funds sold and reverse repurchase agreements	115,140		128,087		Federal funds sold and reverse repurchase agreements	63,994		210,536
Interest-bearing deposits in financial institutions	Interest-bearing deposits in financial institutions	309,849		1,578,320		Interest-bearing deposits in financial institutions	1,122,083		556,644
Cash and cash equivalents	Cash and cash equivalents	618,290		1,797,740		Cash and cash equivalents	1,319,951		1,027,052
Investments:	Investments:					Investments:
Available-for-sale debt securities, at fair value	Available-for-sale debt securities, at fair value	1,482,171		1,678,525		Available-for-sale debt securities, at fair value	1,471,005		1,471,186
Equity securities, at fair value	Equity securities, at fair value	2,962		3,367		Equity securities, at fair value	3,059		2,990
Federal Home Loan Bank stock, at cost	Federal Home Loan Bank stock, at cost	58,587		32,217		Federal Home Loan Bank stock, at cost	43,369		58,641
Loans held for sale, at fair value		130,733		752,223
Loans		9,105,016		7,604,662
Loans held for sale (includes $61,987 and $113,240 at fair value, respectively)						Loans held for sale (includes $61,987 and $113,240 at fair value, respectively)	82,515		139,451
Loans held for investment						Loans held for investment	9,365,996		9,298,212
Less: allowance for credit losses	Less: allowance for credit losses	134,476		125,559		Less: allowance for credit losses	138,809		134,192
Net loans		8,970,540		7,479,103
Net loans held for investment						Net loans held for investment	9,227,187		9,164,020
Premises and equipment, net	Premises and equipment, net	143,277		143,739		Premises and equipment, net	153,397		146,316
Other real estate owned, net	Other real estate owned, net	5,919		9,777		Other real estate owned, net	4,085		5,794
Operating lease right-of-use assets	Operating lease right-of-use assets	61,444		41,686		Operating lease right-of-use assets	57,054		60,043
Interest receivable	Interest receivable	39,034		38,528		Interest receivable	44,737		45,684
Mortgage servicing rights, at fair value	Mortgage servicing rights, at fair value	171,427		115,512		Mortgage servicing rights, at fair value	164,879		168,365
Goodwill	Goodwill	242,561		242,561		Goodwill	242,561		242,561
Core deposit and other intangibles, net	Core deposit and other intangibles, net	13,407		16,953		Core deposit and other intangibles, net	11,378		12,368
Bank-owned life insurance	Bank-owned life insurance	74,976		73,519		Bank-owned life insurance	74,963		75,329
Other assets	Other assets	242,754		172,236		Other assets	201,007		227,956
Total assets	Total assets	$	12,258,082	$	12,597,686	Total assets	$	13,101,147	$	12,847,756
LIABILITIES	LIABILITIES					LIABILITIES
Deposits	Deposits					Deposits
Noninterest-bearing	Noninterest-bearing	$	2,966,514	$	2,740,214	Noninterest-bearing	$	2,489,149	$	2,676,631
Interest-bearing checking	Interest-bearing checking	2,648,161		3,418,666		Interest-bearing checking	3,292,883		3,059,984
Money market and savings	Money market and savings	3,228,337		3,546,936		Money market and savings	3,904,013		3,697,245
Customer time deposits	Customer time deposits	1,160,726		1,103,594		Customer time deposits	1,496,024		1,420,131
Brokered and internet time deposits	Brokered and internet time deposits	2,344		27,487		Brokered and internet time deposits	846		1,843
Total deposits	Total deposits	10,006,082		10,836,897		Total deposits	11,182,915		10,855,834
Borrowings	Borrowings	722,940		171,778		Borrowings	312,131		415,677
Operating lease liabilities	Operating lease liabilities	70,610		46,367		Operating lease liabilities	67,345		69,754
Accrued expenses and other liabilities	Accrued expenses and other liabilities	177,196		109,949		Accrued expenses and other liabilities	168,967		180,973
Total liabilities	Total liabilities	10,976,828		11,164,991		Total liabilities	11,731,358		11,522,238

Commitments and contingencies (Note 8)						Commitments and contingencies (Note 8)
SHAREHOLDERS' EQUITY	SHAREHOLDERS' EQUITY					SHAREHOLDERS' EQUITY
Common stock, $1 par value per share; 75,000,000 shares authorized; 46,926,377 and 47,549,241 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		46,926		47,549
Common stock, $1 par value per share; 75,000,000 shares authorized; 46,762,626 and 46,737,912 shares issued and outstanding, respectively						Common stock, $1 par value per share; 75,000,000 shares authorized; 46,762,626 and 46,737,912 shares issued and outstanding, respectively	46,763		46,738
Additional paid-in capital	Additional paid-in capital	867,139		892,529		Additional paid-in capital	856,628		861,588
Retained earnings	Retained earnings	554,536		486,666		Retained earnings	615,871		586,532
Accumulated other comprehensive (loss) income, net		(187,440)		5,858
Accumulated other comprehensive loss, net						Accumulated other comprehensive loss, net	(149,566)		(169,433)
Total FB Financial Corporation common shareholders' equity	Total FB Financial Corporation common shareholders' equity	1,281,161		1,432,602		Total FB Financial Corporation common shareholders' equity	1,369,696		1,325,425
Noncontrolling interest	Noncontrolling interest	93		93		Noncontrolling interest	93		93
Total equity	Total equity	1,281,254		1,432,695		Total equity	1,369,789		1,325,518
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	12,258,082	$	12,597,686	Total liabilities and shareholders' equity	$	13,101,147	$	12,847,756

See the accompanying notes to the consolidated financial statements.

FB Financial Corporation and subsidiaries

Consolidated statements of income

(Unaudited)

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Interest income:	Interest income:									Interest income:
Interest and fees on loans	Interest and fees on loans	$	116,664	$	89,993	$	303,183	$	269,266	Interest and fees on loans		$	140,356	$	86,864
Interest on securities	Interest on securities									Interest on securities
Taxable	Taxable	6,843		3,989		18,762		10,652		Taxable		6,570		5,420
Tax-exempt	Tax-exempt	1,818		1,883		5,526		5,772		Tax-exempt		1,804		1,866
Other	Other	3,158		800		6,353		2,089		Other		10,750		977
Total interest income	Total interest income	128,483		96,665		333,824		287,779		Total interest income		159,480		95,127

Interest expense:	Interest expense:									Interest expense:
Deposits	Deposits	13,133		6,596		25,186		24,341		Deposits		52,863		5,462
Borrowings	Borrowings	3,966		1,593		6,901		5,823		Borrowings		2,957		1,483
Total interest expense	Total interest expense	17,099		8,189		32,087		30,164		Total interest expense		55,820		6,945
Net interest income	Net interest income	111,384		88,476		301,737		257,615		Net interest income		103,660		88,182
Provision for credit losses	Provision for credit losses	8,189		(2,832)		10,241		(27,349)		Provision for credit losses		4,997		(6,129)
Provision for credit losses on unfunded commitments	Provision for credit losses on unfunded commitments	3,178		301		9,197		(2,875)		Provision for credit losses on unfunded commitments		(4,506)		1,882
Net interest income after provisions for credit losses	Net interest income after provisions for credit losses	100,017		91,007		282,299		287,839		Net interest income after provisions for credit losses		103,169		92,429

Noninterest income:	Noninterest income:									Noninterest income:
Mortgage banking income	Mortgage banking income	12,384		45,384		64,474		136,215		Mortgage banking income		12,086		29,531
Service charges on deposit accounts	Service charges on deposit accounts	3,208		2,612		9,030		7,217		Service charges on deposit accounts		3,053		2,914
ATM and interchange fees	ATM and interchange fees	2,614		4,868		13,054		14,590		ATM and interchange fees		2,396		5,087
Investment services and trust income	Investment services and trust income	2,227		2,511		6,634		7,518		Investment services and trust income		2,378		2,132
(Loss) gain from securities, net		(140)		51		(401)		278
Gain (loss) on sales or write-downs of other real estate owned		435		2,005		(89)		2,478
(Loss) gain from other assets		(6)		177		76		162
Gain (loss) from securities, net										Gain (loss) from securities, net		69		(152)
Loss on sales or write-downs of other real estate owned and other assets										Loss on sales or write-downs of other real estate owned and other assets		(183)		(434)

Other income	Other income	1,870		1,398		4,420		6,578		Other income		3,550		2,314
Total noninterest income	Total noninterest income	22,592		59,006		97,198		175,036		Total noninterest income		23,349		41,392

Noninterest expenses:	Noninterest expenses:									Noninterest expenses:
Salaries, commissions and employee benefits	Salaries, commissions and employee benefits	51,028		62,818		165,652		189,756		Salaries, commissions and employee benefits		48,788		59,443
Occupancy and equipment expense	Occupancy and equipment expense	6,011		5,979		17,267		17,184		Occupancy and equipment expense		5,909		5,403
Legal and professional fees	Legal and professional fees	4,448		2,177		10,171		6,701		Legal and professional fees		3,108		2,607
Data processing	Data processing	2,334		2,595		7,219		7,456		Data processing		2,113		2,481

Amortization of core deposit and other intangibles	Amortization of core deposit and other intangibles	1,108		1,344		3,546		4,178		Amortization of core deposit and other intangibles		990		1,244

Advertising	Advertising	2,050		4,200		8,114		10,012		Advertising		2,133		4,033
Mortgage restructuring expense		—		—		12,458		—

Other expense	Other expense	14,868		15,894		43,689		47,378		Other expense		17,399		14,061
Total noninterest expense	Total noninterest expense	81,847		95,007		268,116		282,665		Total noninterest expense		80,440		89,272
Income before income taxes	Income before income taxes	40,762		55,006		111,381		180,210		Income before income taxes		46,078		44,549
Income tax expense	Income tax expense	8,931		9,716		24,961		38,744		Income tax expense		9,697		9,313
Net income applicable to FB Financial Corporation and noncontrolling interest	Net income applicable to FB Financial Corporation and noncontrolling interest	31,831		45,290		86,420		141,466		Net income applicable to FB Financial Corporation and noncontrolling interest		36,381		35,236
Net income applicable to noncontrolling interest	Net income applicable to noncontrolling interest	—		—		8		8		Net income applicable to noncontrolling interest		—		—
Net income applicable to FB Financial Corporation	Net income applicable to FB Financial Corporation	$	31,831	$	45,290	$	86,412	$	141,458	Net income applicable to FB Financial Corporation		$	36,381	$	35,236

Earnings per common share	Earnings per common share									Earnings per common share
Basic	Basic	$	0.68	$	0.96	$	1.83	$	2.99	Basic		$	0.78	$	0.74
Diluted	Diluted	0.68		0.94		$	1.83	$	2.95	Diluted		0.78		0.74

See the accompanying notes to the consolidated financial statements.

FB Financial Corporation and subsidiaries

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

(Unaudited)

(Amounts are in thousands)

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


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

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

See the accompanying notes to the consolidated financial statements.

FB Financial Corporation and subsidiaries

Consolidated statements of changes in shareholders’ equity

(Unaudited)

(Amounts are in thousands except per share amounts)

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


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












Balance at December 31, 2021	$	47,549	$	892,529	$	486,666	$	5,858	$	1,432,602	$	93	$	1,432,695
Net income attributable to FB Financial Corporation and noncontrolling interest	—		—		35,236		—		35,236		—		35,236
Other comprehensive loss, net of taxes	—		—		—		(77,402)		(77,402)		—		(77,402)
Repurchase of common stock	(145)		(6,058)		—		—		(6,203)		—		(6,203)
Stock based compensation expense	1		2,581		—		—		2,582		—		2,582
Restricted stock units vested and distributed, net of shares withheld	68		(1,556)		—		—		(1,488)		—		(1,488)
Shares issued under employee stock purchase program	15		672		—		—		687		—		687
Dividends declared ($0.13 per share)	—		—		(6,238)		—		(6,238)		—		(6,238)

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

Balance at December 31, 2022	$	46,738	$	861,588	$	586,532	$	(169,433)	$	1,325,425	$	93	$	1,325,518
Net income attributable to FB Financial Corporation and noncontrolling interest	—		—		36,381		—		36,381		—		36,381
Other comprehensive income, net of taxes	—		—		—		19,867		19,867		—		19,867
Repurchase of common stock	(136)		(4,808)		—		—		(4,944)		—		(4,944)
Stock based compensation expense	1		2,284		—		—		2,285		—		2,285
Restricted stock units vested and distributed, net of shares withheld	92		(1,544)		—		—		(1,452)		—		(1,452)
Performance-based restricted stock units vested and distributed, net of shares withheld	60		(1,205)		—		—		(1,145)		—		(1,145)
Shares issued under employee stock purchase program	8		313		—		—		321		—		321
Dividends declared ($0.15 per share)	—		—		(7,042)		—		(7,042)		—		(7,042)

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

See the accompanying notes to the consolidated financial statements.

~~FB Financial Corporation and subsidiaries~~

~~Consolidated statements of changes in shareholders’ equity~~

~~(Unaudited)~~

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

Common
stock Additional
paid-in
capital Retained
earnings Accumulated
other
comprehensive
income, net Total common
shareholders' equity Noncontrolling interest Total shareholders' equity
Balance at June 30, 2021 $ 47,361 $ 902,782 $ 403,173 $ 18,405 $ 1,371,721 $ 93 $ 1,371,814
Net income attributable to FB
Financial Corporation and
noncontrolling interest — — 45,290 — 45,290 — 45,290
Other comprehensive loss, net of
     taxes — — — (5,768) (5,768) — (5,768)
Repurchase of common stock (11) (425) — — (436) — (436)
Stock based compensation
expense 1 2,883 — — 2,884 — 2,884
Restricted stock units vested and
distributed net of shares withheld 342 (8,444) — — (8,102) — (8,102)
Shares issued under employee
stock purchase program 15 632 — — 647 — 647
Dividends declared ($0.11 per
     share)
— — (5,323) — (5,323) — (5,323)
Balance at September 30, 2021 $ 47,708 $ 897,428 $ 443,140 $ 12,637 $ 1,400,913 $ 93 $ 1,401,006
Balance at December 31, 2020 $ 47,222 $ 898,847 $ 317,625 $ 27,595 $ 1,291,289 $ 93 $ 1,291,382
Net income attributable to FB
Financial Corporation and
noncontrolling interest — — 141,458 — 141,458 8 141,466
Other comprehensive loss, net of
     taxes — — — (14,958) (14,958) — (14,958)
Repurchase of common stock (11) (425) — — (436) — (436)
Stock based compensation
expense 6 8,059 — — 8,065 — 8,065
Restricted stock units vested and
distributed net of shares withheld 454 (10,496) — — (10,042) — (10,042)
Shares issued under employee
stock purchase program 37 1,443 — — 1,480 — 1,480
Dividends declared ($0.33 per
     share)
— — (15,943) — (15,943) — (15,943)
Noncontrolling interest distribution — — — — — (8) (8)
Balance at September 30, 2021 $ 47,708 $ 897,428 $ 443,140 $ 12,637 $ 1,400,913 $ 93 $ 1,401,006

FB Financial Corporation and subsidiaries

Consolidated statements of cash flows

(Unaudited)

(Amounts are in thousands)


		Nine Months Ended September 30,				Three Months Ended March 31,
		2022		2021				2023		2022
Cash flows from operating activities:	Cash flows from operating activities:						Cash flows from operating activities:
Net income applicable to FB Financial Corporation and noncontrolling interest	Net income applicable to FB Financial Corporation and noncontrolling interest	$	86,420	$	141,466		Net income applicable to FB Financial Corporation and noncontrolling interest	$	36,381	$	35,236
Adjustments to reconcile net income to net cash provided by (used in) operating activities:	Adjustments to reconcile net income to net cash provided by (used in) operating activities:						Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization of fixed assets and software	Depreciation and amortization of fixed assets and software	6,105		6,288			Depreciation and amortization of fixed assets and software	2,228		2,036
Amortization of core deposit and other intangibles	Amortization of core deposit and other intangibles	3,546		4,178			Amortization of core deposit and other intangibles	990		1,244
Amortization of issuance costs on subordinated debt							Amortization of issuance costs on subordinated debt	97		97
Capitalization of mortgage servicing rights	Capitalization of mortgage servicing rights	(19,523)		(31,382)			Capitalization of mortgage servicing rights	(1,788)		(9,812)
Net change in fair value of mortgage servicing rights	Net change in fair value of mortgage servicing rights	(36,392)		788			Net change in fair value of mortgage servicing rights	5,274		(19,351)
Stock-based compensation expense	Stock-based compensation expense	8,153		8,065			Stock-based compensation expense	2,285		2,582
Provision for credit losses	Provision for credit losses	10,241		(27,349)			Provision for credit losses	4,997		(6,129)
Provision for credit losses on unfunded commitments	Provision for credit losses on unfunded commitments	9,197		(2,875)			Provision for credit losses on unfunded commitments	(4,506)		1,882
Provision for mortgage loan repurchases	Provision for mortgage loan repurchases	(1,989)		(266)			Provision for mortgage loan repurchases	(250)		(389)
Amortization of premiums and accretion of discounts on acquired loans, net		1,339		127
(Accretion) amortization of discounts and premiums on acquired loans, net							(Accretion) amortization of discounts and premiums on acquired loans, net	(319)		2,352
Amortization of premiums and accretion of discounts on securities, net	Amortization of premiums and accretion of discounts on securities, net	5,178		6,521			Amortization of premiums and accretion of discounts on securities, net	1,382		1,992
Loss (gain) from securities, net		401		(278)
(Gain) loss from securities, net							(Gain) loss from securities, net	(69)		152
Originations of loans held for sale	Originations of loans held for sale	(2,129,129)		(4,926,390)			Originations of loans held for sale	(295,760)		(993,733)
Repurchases of loans held for sale		(194)		(384)

Proceeds from sale of loans held for sale	Proceeds from sale of loans held for sale	2,796,313		4,939,323			Proceeds from sale of loans held for sale	340,108		1,330,701
Gain on sale and change in fair value of loans held for sale	Gain on sale and change in fair value of loans held for sale	(43,648)		(126,983)			Gain on sale and change in fair value of loans held for sale	(8,635)		(21,675)

Net loss (gain) or write-downs of other real estate owned		89		(2,478)
Gain on other assets		(76)		(162)
Net loss on write-downs of other real estate owned and other assets							Net loss on write-downs of other real estate owned and other assets	183		434

Provision for deferred income taxes	Provision for deferred income taxes	15,879		20,904			Provision for deferred income taxes	1,396		9,313
Earnings on bank-owned life insurance	Earnings on bank-owned life insurance	(1,099)		(1,156)			Earnings on bank-owned life insurance	(605)		(354)
Changes in:	Changes in:						Changes in:
Operating leases		4,485		(781)
Operating lease assets and liabilities, net							Operating lease assets and liabilities, net	580		(190)
Other assets and interest receivable	Other assets and interest receivable	(23,220)		(1,352)			Other assets and interest receivable	62,512		(62,043)
Accrued expenses and other liabilities	Accrued expenses and other liabilities	51,583		(46,867)			Accrued expenses and other liabilities	(48,099)		13,900
Net cash provided by (used in) operating activities		743,659		(41,043)
Net cash provided by operating activities							Net cash provided by operating activities	98,382		288,245
Cash flows from investing activities:	Cash flows from investing activities:						Cash flows from investing activities:
Activity in available-for-sale securities:	Activity in available-for-sale securities:						Activity in available-for-sale securities:
Sales		1,218		8,855

Maturities, prepayments and calls	Maturities, prepayments and calls	170,701		216,032			Maturities, prepayments and calls	26,827		57,443
Purchases	Purchases	(242,639)		(645,658)			Purchases	(660)		(170,093)
Net change in loans	Net change in loans	(1,523,815)		(177,953)			Net change in loans	(52,540)		(362,408)
Net change in commercial loans held for sale		43,006		116,158

Sales of FHLB stock	Sales of FHLB stock	—		4,294			Sales of FHLB stock	21,637		—
Purchases of FHLB stock	Purchases of FHLB stock	(26,370)		(663)			Purchases of FHLB stock	(6,365)		(2,216)

Purchases of premises and equipment	Purchases of premises and equipment	(6,060)		(5,193)			Purchases of premises and equipment	(9,450)		(601)
Proceeds from the sale of premises and equipment		875		—
Proceeds from the sale of other real estate owned		4,753		8,834
Proceeds from the sale of other assets		4		—

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

Proceeds from bank-owned life insurance							Proceeds from bank-owned life insurance	236		—

Net cash used in investing activities	Net cash used in investing activities	(1,578,327)		(475,294)			Net cash used in investing activities	(18,284)		(477,754)
Cash flows from financing activities:	Cash flows from financing activities:						Cash flows from financing activities:
Net (decrease) increase in demand deposits		(852,629)		863,646
Net increase in demand deposits							Net increase in demand deposits	251,069		238,893
Net increase (decrease) in time deposits	Net increase (decrease) in time deposits	31,989		(249,765)			Net increase (decrease) in time deposits	74,896		(75,765)
Net (decrease) increase in securities sold under agreements to repurchase		(11,708)		9,531
Net decrease in securities sold under agreements to repurchase and federal funds purchased							Net decrease in securities sold under agreements to repurchase and federal funds purchased	(48,815)		(14,779)

Net increase in short-term FHLB advances		540,000		—
Net decrease in short-term FHLB advances							Net decrease in short-term FHLB advances	(50,000)		—

Payments on subordinated debt		—		(60,000)

Amortization of issuance costs and (accretion) of subordinated debt fair value premium, net		291		(79)
Payments on other borrowings		—		(15,000)

Share based compensation withholding payments	Share based compensation withholding payments	(2,635)		(10,042)			Share based compensation withholding payments	(2,597)		(1,488)
Net proceeds from sale of common stock under employee stock purchase program	Net proceeds from sale of common stock under employee stock purchase program	1,212		1,480			Net proceeds from sale of common stock under employee stock purchase program	321		687
Repurchase of common stock	Repurchase of common stock	(32,743)		(436)			Repurchase of common stock	(4,944)		(6,203)
Dividends paid on common stock	Dividends paid on common stock	(18,401)		(15,617)			Dividends paid on common stock	(6,994)		(6,194)
Dividend equivalent payments made upon vesting of equity compensation	Dividend equivalent payments made upon vesting of equity compensation	(150)		(707)			Dividend equivalent payments made upon vesting of equity compensation	(135)		(71)
Noncontrolling interest distribution		(8)		(8)
Net cash (used in) provided by financing activities		(344,782)		523,003

Net cash provided by financing activities							Net cash provided by financing activities	212,801		135,080
Net change in cash and cash equivalents	Net change in cash and cash equivalents	(1,179,450)		6,666			Net change in cash and cash equivalents	292,899		(54,429)
Cash and cash equivalents at beginning of the period	Cash and cash equivalents at beginning of the period	1,797,740		1,317,898			Cash and cash equivalents at beginning of the period	1,027,052		1,797,740
Cash and cash equivalents at end of the period	Cash and cash equivalents at end of the period	$	618,290	$	1,324,564		Cash and cash equivalents at end of the period	$	1,319,951	$	1,743,311
Supplemental cash flow information:	Supplemental cash flow information:						Supplemental cash flow information:
Interest paid	Interest paid	$	31,322	$	34,542		Interest paid	$	52,634	$	8,631
Taxes paid		808		55,609
Taxes (refunded) paid, net							Taxes (refunded) paid, net	(904)		72
Supplemental noncash disclosures:	Supplemental noncash disclosures:						Supplemental noncash disclosures:
Transfers from loans to other real estate owned	Transfers from loans to other real estate owned	$	984	$	4,945		Transfers from loans to other real estate owned	$	235	$	563

Loans provided for sales of other real estate owned		—		685

Transfers from loans to loans held for sale	Transfers from loans to loans held for sale	42,997		10,408			Transfers from loans to loans held for sale	7,126		8,700
Transfers from loans held for sale to loans	Transfers from loans held for sale to loans	23,183		52,151			Transfers from loans held for sale to loans	776		47,956
Rebooked GNMA loans under optional repurchase program		26,485		—
Decrease in rebooked GNMA loans under optional repurchase program							Decrease in rebooked GNMA loans under optional repurchase program	(5,683)		—

Trade date payable - securities	Trade date payable - securities	—		5,996			Trade date payable - securities	245		—

Dividends declared not paid on restricted stock units	Dividends declared not paid on restricted stock units	173		340			Dividends declared not paid on restricted stock units	48		60

Right-of-use assets obtained in exchange for operating lease liabilities	Right-of-use assets obtained in exchange for operating lease liabilities	24,605		839			Right-of-use assets obtained in exchange for operating lease liabilities	3,375		283

See the accompanying notes to the consolidated financial statements.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

Note (1)—Basis of presentation:

Overview and presentation

FB Financial Corporation (the “Company”) is a financial holding company headquartered in Nashville, Tennessee. The Company operates primarily through its wholly-owned ~~subsidiaries,~~subsidiary, FirstBank (the "Bank") ~~and FirstBank Risk Management, Inc.~~. As of ~~September 30, 2022,~~March 31, 2023, the Bank had 82 full-service branches throughout Tennessee, Alabama, southern Kentucky and north Georgia, and a ~~national~~ mortgage business with office locations across the Southeast, which primarily originates loans to be sold in the secondary market.

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

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

In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported results of operations for the reporting periods and the related disclosures. Although management's estimates contemplate current conditions and how they are expected to change in the future, it is reasonably possible that actual conditions could vary from those anticipated, which could affect the Company's financial condition and results of operations. Actual results could differ significantly from those estimates.

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

Earnings per share

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

Unvested share-based payment awards, which include the right to receive non-forfeitable dividends or dividend equivalents, are considered to participate with common shareholders in undistributed earnings for purposes of computing EPS. Companies that have such participating securities are required to calculate basic and diluted EPS using the two-class method. Certain restricted stock awards granted by the Company include non-forfeitable dividend equivalents and are considered participating securities. Calculations of EPS under the two-class method (i) exclude from the numerator any dividends paid or owed on participating securities and any undistributed earnings considered to be attributable to participating securities and (ii) exclude from the denominator the dilutive impact of the participating securities.

109

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

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


		Three Months Ended September 30,			Nine Months Ended September 30,							Three Months Ended March 31,
			2022		2021		2022		2021				2023		2022
Basic earnings per common share calculation:
Basic earnings per common share:											Basic earnings per common share:
Net income applicable to FB Financial Corporation	Net income applicable to FB Financial Corporation		$	31,831	$	45,290	$	86,412	$	141,458	Net income applicable to FB Financial Corporation		$	36,381	$	35,236
Dividends paid on and undistributed earnings allocated to participating securities	Dividends paid on and undistributed earnings allocated to participating securities		—		—		—		—		Dividends paid on and undistributed earnings allocated to participating securities		—		—
Earnings available to common shareholders	Earnings available to common shareholders		$	31,831	$	45,290	$	86,412	$	141,458	Earnings available to common shareholders		$	36,381	$	35,236
Weighted average basic shares outstanding	Weighted average basic shares outstanding		46,908,520		47,412,214		47,181,853		47,345,984		Weighted average basic shares outstanding		46,679,618		47,530,520
Basic earnings per common share	Basic earnings per common share		$	0.68	$	0.96	$	1.83	$	2.99	Basic earnings per common share		$	0.78	$	0.74
Diluted earnings per common share:	Diluted earnings per common share:										Diluted earnings per common share:
Earnings available to common shareholders	Earnings available to common shareholders		$	31,831	$	45,290	$	86,412	$	141,458	Earnings available to common shareholders		$	36,381	$	35,236
Weighted average basic shares outstanding	Weighted average basic shares outstanding		46,908,520		47,412,214		47,181,853		47,345,984		Weighted average basic shares outstanding		46,679,618		47,530,520
Weighted average diluted shares contingently issuable(1)	Weighted average diluted shares contingently issuable(1)		116,091		594,933		133,247		637,510		Weighted average diluted shares contingently issuable(1)		85,536		193,382
Weighted average diluted shares outstanding	Weighted average diluted shares outstanding		47,024,611		48,007,147		47,315,100		47,983,494		Weighted average diluted shares outstanding		46,765,154		47,723,902
Diluted earnings per common share	Diluted earnings per common share		$	0.68	$	0.94	$	1.83	$	2.95	Diluted earnings per common share		$	0.78	$	0.74

(1)Excludes ~~15,408~~159,946 and ~~11,888~~123,709 restricted stock units outstanding considered to be antidilutive for the three ~~and nine months ended September 30, 2022 and 15,974 and 20,448 restricted stock units outstanding considered to be antidilutive for three and nine months ended September 30, 2021.~~

~~Recently modified accounting policies:~~

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

~~During the three~~ months ended March 31, 2023 and 2022, the Company appended the following language to the below referenced existing accounting policy related to derivative financial instruments and hedging activities described in Note 1 of the Company's 2021 Annual Report on Form 10-K as a result of entering into designated fair value hedges during the period.

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

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

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

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

~~Mortgage loans held for sale~~

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

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

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

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

The Company sells mortgage loans originated for sale on the secondary market to GNMA and retains servicing rights after sale. Under the GNMA optional repurchase program, financial institutions are permitted to buy back individual delinquent mortgage loans that meet certain criteria from the securitized loan pool for which the institution provides servicing. At the servicer’s option and without GNMA’s prior authorization, the servicer may repurchase such a delinquent loan for an amount equal to 100 percent of the remaining principal balance of the loan. Under FASB ASC Topic 860, “Transfers and Servicing,” this buy-back option is considered a conditional option until the delinquency criteria are met, at which time the option becomes unconditional. When the Company is deemed to have regained effective control over these loans under the unconditional buy-back option, the loans can no longer be reported as sold and must be recorded on the balance sheet, regardless of whether the Company intends to exercise the buy-back option if the buyback options provides the transferor a more-than-trivial benefit. Prior to September 30, 2022, the Company deemed there was not a more than trivial benefit associated with repurchasing these loans based on quarterly analyses and as such, these were not rebooked to the balance sheet. During the quarter ended September 30, 2022, the Company revised its accounting estimate by applying the removal of accounts provision regardless of whether the transferor is provided a more-than-trivial benefit to align with developing industry best practice and regulatory expectations. Upon application of the change, as of September 30, 2022 the Company recorded $26,485 of optional rights to repurchase delinquent GNMA loans. The fair value option election does not apply to the GNMA optional repurchase loans which do not meet the requirements under FASB ASC Topic 825. These loans are reported at current unpaid principal balance in LHFS on the consolidated balance sheets with the offsetting liability being reported in borrowings. These are considered nonperforming assets as the Company does not earn any interest on the unexercised option to repurchase these loans. This change in accounting estimate was applied prospectively without modification to prior periods.respectively.

Recently adopted accounting standards:

~~The Company did not adopt any new accounting standards that were not disclosed in the Company's 2021 audited consolidated financial statements included on Form 10-K.~~

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

Additionally, in March 2022, the FASB issued ASU 2022-02, ~~"'Financial~~"Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures" related to troubled debt restructurings and vintage disclosures for financing receivables. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan modifications and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require disclosure of current-period gross write-offs for financing receivables ~~and net investment in leases~~ by year of origination in the vintage disclosures. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The Company prospectively adopted the amendment effective January 1, 2023 and updated its disclosures for the first quarter of 2023. Refer to Note 3 for further information. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

Newly issued not yet effective accounting standards:

In March 2023, the FASB issued ASU 2023-01, “Leases (Topic 842): Common Control Arrangements” as part of the Post-Implementation Review process of Topic 842 around related party arrangements between entities under common control. Under previous guidance, a lessee is ~~currently evaluating~~generally required to amortize leasehold improvements that it owns over the ~~effect~~shorter of the useful life of those improvements or the lease term. However, due to the nature of leasehold improvements made under leases between entities under common control, ASU 2023-01 requires a lessee in a common-control arrangement to amortize such leasehold improvements that it owns over the improvements' useful life to the common control group, regardless of the lease term. The ASU ~~2022-02 will~~becomes effective January 1, 2024 and is not expected to have a material impact on ~~its~~the Company's consolidated financial statements and related disclosures.

Additionally, in March 2023, the FASB issued ASU 2023-02, "Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method". The amendments in this update permit reporting entities to elect to account for tax equity investments, regardless of the tax credit program from

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

~~In March 2022,~~which the ~~SEC released SAB 121 to add interpretive guidance for entities to consider when they have obligations to safeguard crypto-assets held for clients.~~income tax credits are received, using the proportional amortization method if certain conditions are met. The ~~new guidance requires reporting entities who allow clients to transact in crypto-assets~~ASU becomes effective January 1, 2024 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 three months ended March 31, 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. While the Company does not currently hold or facilitate transactions with crypto-assets, the Company is evaluating the potential ~~future~~impact of this standard on its consolidated financial ~~statement~~statements and related disclosures.

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”. The FASB issued this update to clarify the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, to amend a related illustrative example, and to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The ASU becomes effective January 1, 2024 and the Company is evaluating the potential impact ~~from adopting~~of this ~~guidance when it becomes applicable based~~standard on ~~the Company's crypto-asset activities.~~its consolidated financial statements and related disclosures.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 is intended to provide relief for companies preparing for discontinuation of interest rates based on LIBOR. The ASU provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or other reference rates expected to be discontinued. ASU 2020-04 also provides for a ~~onetime~~one-time sale and/or transfer to AFS or trading to be made for HTM debt securities that both reference an eligible reference rate and were classified as HTM before January 1, 2020. ASU 2020-04 was effective for all entities as of March 12, 2020 and through December 31, 2022. Companies can apply the ASU as of the beginning of the interim period that includes March 12, 2020 or any date thereafter. The guidance requires companies to apply the guidance prospectively to contract modifications and hedging relationships while the one-time election to sell and/or transfer debt securities classified as HTM may be made any time after March 12, 2020. In December 2022, the FASB issued ASU 2022-06, "Reference rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848" to extend the date to December 31, 2024 for companies to apply the relief in Topic 848.

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

Subsequent events

The Company has evaluated, for consideration of recognition or disclosure, subsequent events that occurred through the date of issuance of these financial statements. The Company has determined that there were no subsequent events that occurred after ~~September 30, 2022,~~March 31, 2023, but prior to the issuance of these financial statements that would have a material impact on the Company’s consolidated financial statements.

1311

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

Note (2)—Investment securities:

The following tables summarize the amortized cost, allowance for credit losses and fair value of the available-for-sale debt securities and the corresponding amounts of unrealized gains and losses recognized in accumulated other comprehensive ~~income~~loss at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


		September 30, 2022											March 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											Available-for-sale debt securities
U.S. government agency securities	U.S. government agency securities	$	45,161	$	—	$	(5,330)	$	—	$	39,831	U.S. government agency securities	$	45,176	$	—	$	(4,248)	$	—	$	40,928
Mortgage-backed securities - residential	Mortgage-backed securities - residential	1,257,521		—		(199,758)		—		1,057,763		Mortgage-backed securities - residential	1,197,702		—		(172,314)		—		1,025,388
Mortgage-backed securities - commercial	Mortgage-backed securities - commercial	19,453		—		(1,606)		—		17,847		Mortgage-backed securities - commercial	18,979		—		(1,256)		—		17,723
Municipal securities	Municipal securities	297,451		100		(45,408)		—		252,143		Municipal securities	295,010		967		(24,983)		—		270,994
U.S. Treasury securities	U.S. Treasury securities	113,198		—		(5,901)		—		107,297		U.S. Treasury securities	113,403		—		(4,580)		—		108,823
Corporate securities	Corporate securities	8,001		—		(711)		—		7,290		Corporate securities	8,000		—		(851)		—		7,149
Total	Total	$	1,740,785	$	100	$	(258,714)	$	—	$	1,482,171	Total	$	1,678,270	$	967	$	(208,232)	$	—	$	1,471,005


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

The components of amortized cost for debt securities on the consolidated balance sheets excludes accrued interest receivable since the Company elected to present accrued interest receivable separately on the consolidated balance sheets. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, total accrued interest receivable on debt securities was ~~$5,535~~$5,399 and ~~$5,051, respectively.~~

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

Securities pledged at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 had carrying amounts of ~~$1,213,747~~$1,184,836 and ~~$1,226,646,~~$1,191,021, respectively, and were pledged to secure a Federal Reserve Bank line of credit, public deposits and repurchase agreements.

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

Investment securities transactions are recorded as of the trade date. ~~At September 30, 2022 and December~~As of March 31, ~~2021,~~2023, there were no$245 in trade date ~~receivables nor~~ payables that related to ~~sales or~~ purchases settled after period end. There were no such trade date payables as of December 31, 2022.

1412

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

The amortized cost and fair value of debt securities by contractual maturity ~~at September 30, 2022~~as of March 31, 2023 and December 31, ~~2021~~2022 are shown below. Maturities may differ from contractual maturities in mortgage-backed securities because the mortgage underlying the security may be called or repaid without any penalties. Therefore, mortgage-backed securities are not included in the maturity categories in the following summary.


		September 30,				December 31,					March 31,				December 31,
		2022				2021					2023				2022
		Available-for-sale				Available-for-sale					Available-for-sale				Available-for-sale
		Amortized cost		Fair value		Amortized cost		Fair value			Amortized cost		Fair value		Amortized cost		Fair value
Due in one year or less	Due in one year or less	$	4,011	$	3,962	$	21,851	$	21,884	Due in one year or less	$	34,965	$	34,270	$	4,277	$	4,225
Due in one to five years	Due in one to five years	155,637		146,428		54,847		55,307		Due in one to five years	138,189		130,585		161,556		152,181
Due in five to ten years	Due in five to ten years	62,157		56,759		45,714		46,975		Due in five to ten years	58,876		56,982		61,290		57,859
Due in over ten years	Due in over ten years	242,006		199,412		255,077		269,737		Due in over ten years	229,559		206,057		234,720		205,084
		463,811		406,561		377,489		393,903			461,589		427,894		461,843		419,349
Mortgage-backed securities - residential	Mortgage-backed securities - residential	1,257,521		1,057,763		1,281,285		1,269,372		Mortgage-backed securities - residential	1,197,702		1,025,388		1,224,522		1,034,193
Mortgage-backed securities - commercial	Mortgage-backed securities - commercial	19,453		17,847		15,024		15,250		Mortgage-backed securities - commercial	18,979		17,723		19,209		17,644
Total debt securities	Total debt securities	$	1,740,785	$	1,482,171	$	1,673,798	$	1,678,525	Total debt securities	$	1,678,270	$	1,471,005	$	1,705,574	$	1,471,186

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

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

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


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

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


		September 30, 2022													March 31, 2023
		Less than 12 months				12 months or more				Total					Less than 12 months				12 months or more				Total
		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
U.S. government agency securities	U.S. government agency securities	$	33,269	$	(4,207)	$	6,562	$	(1,123)	$	39,831	$	(5,330)	U.S. government agency securities	$	4,014	$	(94)	$	36,913	$	(4,154)	$	40,927	$	(4,248)
Mortgage-backed securities - residential	Mortgage-backed securities - residential	570,554		(84,615)		487,209		(115,143)		1,057,763		(199,758)		Mortgage-backed securities - residential	101,194		(4,425)		924,189		(167,889)		1,025,383		(172,314)
Mortgage-backed securities - commercial	Mortgage-backed securities - commercial	16,709		(1,354)		1,138		(252)		17,847		(1,606)		Mortgage-backed securities - commercial	11,311		(740)		6,415		(516)		17,726		(1,256)
Municipal securities	Municipal securities	238,067		(42,452)		8,533		(2,956)		246,600		(45,408)		Municipal securities	43,100		(1,872)		161,743		(23,111)		204,843		(24,983)
U.S. Treasury securities	U.S. Treasury securities	107,297		(5,901)		—		—		107,297		(5,901)		U.S. Treasury securities	60,669		(1,276)		48,154		(3,304)		108,823		(4,580)
Corporate securities	Corporate securities	7,290		(711)		—		—		7,290		(711)		Corporate securities	946		(55)		6,281		(796)		7,227		(851)
Total	Total	$	973,186	$	(139,240)	$	503,442	$	(119,474)	$	1,476,628	$	(258,714)	Total	$	221,234	$	(8,462)	$	1,183,695	$	(199,770)	$	1,404,929	$	(208,232)

1513

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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


		December 31, 2021													December 31, 2022
		Less than 12 months				12 months or more				Total					Less than 12 months				12 months or more				Total
		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized loss
U.S. government agency securities	U.S. government agency securities	$	18,360	$	(171)	$	—	$	—	$	18,360	$	(171)	U.S. government agency securities	$	23,791	$	(2,802)	$	16,271	$	(2,303)	$	40,062	$	(5,105)
Mortgage-backed securities - residential	Mortgage-backed securities - residential	$	871,368	$	(14,295)	$	102,799	$	(3,690)	$	974,167	$	(17,985)	Mortgage-backed securities - residential	316,656		(32,470)		717,533		(157,859)		1,034,189		(190,329)
Mortgage-backed securities - commercial	Mortgage-backed securities - commercial	7,946		(46)		—		—		7,946		(46)		Mortgage-backed securities - commercial	11,104		(968)		6,541		(597)		17,645		(1,565)
Municipal securities	Municipal securities	11,414		(160)		—		—		11,414		(160)		Municipal securities	196,419		(26,811)		36,726		(4,602)		233,145		(31,413)
U.S. Treasury securities	U.S. Treasury securities	14,908		(6)		—		—		14,908		(6)		U.S. Treasury securities	94,248		(4,122)		13,434		(1,499)		107,682		(5,621)
Corporate securities	Corporate securities	4,119		(25)		—		—		4,119		(25)		Corporate securities	4,008		(492)		3,270		(321)		7,278		(813)
Total	Total	$	928,115	$	(14,703)	$	102,799	$	(3,690)	$	1,030,914	$	(18,393)	Total	$	646,226	$	(67,665)	$	793,775	$	(167,181)	$	1,440,001	$	(234,846)

As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company’s debt securities portfolio consisted of ~~504~~506 and ~~511~~503 securities, ~~487~~409 and 80454 of which were in an unrealized loss position, respectively.

During the three months ended ~~September 30,~~March 31, 2023, the Company's available-for-sale debt securities portfolio unrealized value increased $27,123 to an unrealized loss position of $207,265 from an unrealized loss position of $234,388 as of December 31, 2022. During the three months ended March 31, 2022, the Company's available-for-sale debt securities portfolio unrealized value declined ~~$91,104~~$105,660 to an unrealized loss position of $258,614 as of September 30, 2022 from an unrealized loss position of $167,510 as of June 30, 2022. During the nine months ended September 30, 2022, the Company's available-for-sale debt securities portfolio unrealized value declined $263,341$100,933 from an unrealized gain position of $4,727 as of December 31, 2021.

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

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

Equity Securities

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

~~Loans outstanding as~~As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021, by class~~2022, the Company had $3,059 and $2,990, in marketable equity securities recorded at fair value, respectively. The Company had equity securities without readily determinable market value included in other assets on the consolidated balance sheets with carrying amounts of ~~financing receivable are as follows:~~

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

~~(1)Includes $851~~$22,483 and ~~$3,990 of loans originated as part of the Paycheck Protection Program as of September 30, 2022~~$22,496 at March 31, 2023 and December 31, ~~2021,~~2022, respectively. ~~PPP loans are federally guaranteed as part~~Additionally, the Company had $43,369 and $58,641 of Federal Home Loan Bank stock carried at cost at March 31, 2023 and December 31, 2022, respectively, included separately from the ~~CARES Act, provided PPP loan recipients receive loan forgiveness under~~other equity securities discussed above.

The change in the ~~SBA regulations. As such, there is minimal credit risk associated~~fair value of equity securities and sale of equity securities with ~~these loans.~~readily determinable fair values resulted in a net gain of $69 and a net loss of $154 for the three months ended March 31, 2023 and 2022, respectively.

1614

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

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

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


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

As of March 31, 2023 and ~~$1,136,294,~~December 31, 2022, $849,349 and $909,734, respectively, of qualifying residential mortgage loans (including loans held for sale) and ~~$1,665,345~~$1,709,763 and ~~$1,581,673,~~$1,763,730, respectively, of qualifying commercial mortgage loans were pledged to the Federal Home Loan Bank of Cincinnati securing advances against the Bank’s line of credit. Additionally, as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, qualifying loans of ~~$3,012,814~~$3,164,317 and ~~$2,440,097,~~$3,118,172, respectively, were pledged to the Federal Reserve Bank under the Borrower-in-Custody program.

The components of amortized cost for loans on the consolidated balance sheets exclude accrued interest receivable as the Company presents accrued interest receivable separately on the balance sheet. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, accrued interest receivable on loans held for investment ~~was $32,247~~amounted to $37,005 and ~~$31,676,~~$38,507, respectively.

Allowance for Credit Losses

The Company calculates its expected credit loss using a lifetime loss rate methodology. The Company utilizes probability-weighted forecasts, which consider multiple macroeconomic variables from a third-party vendor that are applicable to the type of loan. Each of the Company's loss rate models incorporate forward-looking macroeconomic projections throughout the reasonable and supportable forecast period and the subsequent historical reversion at the macroeconomic variable input level. In order to estimate the life of a loan, the contractual term of the loan is adjusted for estimated prepayments based on market information and the Company’s prepayment history.

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

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

The Company considers the need to qualitatively adjust its modeled quantitative expected credit loss estimate for information not already captured in the model loss estimation process. These qualitative factor adjustments may increase or decrease the Company’s estimate of expected credit losses. The Company reviews the qualitative adjustments so as to validate that information that has already been considered and included in the modeled quantitative loss estimation process is not also included in the qualitative adjustment. The Company considers the qualitative factors that are relevant to the institution as of the reporting date, which may include, but are not limited to: levels of and trends in delinquencies and performance of loans; levels of and trends in write-offs and recoveries collected; trends in volume and terms of loans; effects of any changes in reasonable and supportable economic forecasts; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and expertise; available relevant information sources that contradict the Company’s own forecast;

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

effects of changes in prepayment expectations or other factors affecting assessments of loan contractual terms; industry conditions; and effects of changes in credit concentrations.

The ~~quantitative models require loan data and macroeconomic variables based on~~Company performed qualitative evaluations within the ~~inherent credit risks in each portfolio to more accurately measure~~Company's established qualitative framework, assessing the ~~credit risks associated with each. Each~~impact of the ~~quantitative models pools~~current economic outlook (including uncertainty due to inflation, recent bank failures, negative economic forecasts, predicted Federal Reserve rate increases, status of federal government stimulus programs, and other considerations). The increase in estimated required reserve during the three months ended March 31, 2023 was a result of increased loan growth and a tightening monetary policy environment both of which were incorporated into the Company's reasonable and supportable forecasts. These forecasts included weighted projections that the economy may be nearing a recession, reflected through deterioration in asset quality projected over life of the loan portfolio. Loss rates on residential loans ~~with similar risk characteristics~~ and ~~collectively assesses~~HELOC were qualitatively adjusted downwards, addressing the relative strength of asset values in the Company's predominant markets.

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


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

When a loan no longer shares similar risk characteristics with other loans in any given pool, the loan is individually assessed. The Company has determined the following circumstances in which a loan may require an individual evaluation: collateral dependent loans; loans for which foreclosure is probable; and loans with other unique risk characteristics. A loan is deemed collateral dependent when 1) the borrower is experiencing financial difficulty and 2) the repayment is expected to be primarily through sale or operation of the collateral. The allowance for credit losses for collateral dependent loans as well as loans where foreclosure is probable is calculated as the amount for which the loan’s amortized cost basis exceeds fair value. Fair value is determined based on appraisals performed by qualified appraisers and reviewed by qualified personnel. In cases where repayment is to be provided substantially through the sale of collateral, the Company reduces the fair value by the estimated costs to sell. ~~Loans~~

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

Effective January 1, 2023, the Company prospectively adopted the accounting guidance in ASU 2022-02, "Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures", which eliminates the recognition and measurement of TDRs. Upon adoption of this guidance, the Company no longer measures an allowance for credit losses for TDRs it reasonably expects will occur, and it evaluates all loan modifications according to the accounting guidance for loan refinancing and modifications to determine whether the modification should be accounted for as a new loan or a continuation of the existing loan. After adoption, the Company now derecognizes the existing loan and accounts for the modified loan as a new loan if the effective yield on the modified loan is at least equal to the effective yield for comparable loans with similar collection risks and the modifications to the original loan are more than minor. If a loan modification does not meet these conditions, it extends the existing loan’s amortized cost basis and accounts for the modified loan as a continuation of the existing loan.

Prior to January 1, 2023, loans experiencing financial difficulty for which a concession has not yet been provided may be identified as reasonably expected TDRs.

Reasonably expected TDRs and TDRs ~~use~~used the same methodology. In cases where the expected credit loss can only be captured through a discounted cash flow analysis (such as an interest rate modification for a TDR loan), the allowance iswas measured by the amount which the loan’s amortized cost exceeds the discounted cash flow analysis.

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

The following tables provide the changes in the allowance for credit losses by class of financing receivable for the three months ended March 31, 2023 and 2022:


	Commercial and industrial		Construction		1-to-4 family residential mortgage		Residential line of credit		Multi-family residential mortgage		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Consumer and other		Total








Three Months Ended March 31, 2023
Beginning balance - December 31, 2022	$	11,106	$	39,808	$	26,141	$	7,494	$	6,490	$	7,783	$	21,916	$	13,454	$	134,192


Provision for credit losses	(10)		1,217		1,073		1,540		129		103		(48)		993		4,997
Recoveries of loans previously charged-off	67		—		15		—		—		66		—		239		387
Loans charged off	(46)		—		(16)		—		—		—		—		(705)		(767)


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


	Commercial and industrial		Construction		1-to-4 family residential mortgage		Residential line of credit		Multi-family residential mortgage		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Consumer and other		Total







Three Months Ended March 31, 2022
Beginning balance - December 31, 2021	$	15,751	$	28,576	$	19,104	$	5,903	$	6,976	$	12,593	$	25,768	$	10,888	$	125,559


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


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

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

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 three and nine months ended September 30, 2022 was a result of increased loan growth and a tightening monetary policy environment both of which were incorporated into the Company's reasonable and supportable forecasts. Qualitative adjustments increased the reserve on loans with commercial exposure to address elevated risk in these assets not covered by the model. Loss rates on residential backed loans were qualitatively adjusted downwards, addressing the relative strength of asset values in the Company's predominant markets. Qualitative factors also included weighted projections that the economy may be nearing a recession.

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

Commercial
and industrial Construction 1-to-4
family
residential
mortgage Residential
line of credit Multi-family
residential
mortgage Commercial
real estate
owner
occupied Commercial
real estate
non-owner
occupied Consumer
and other Total
Three Months Ended September 30, 2021
Beginning balance -
June 30, 2021
$ 13,791 $ 32,838 $ 19,672 $ 6,716 $ 13,475 $ 4,707 $ 42,856 $ 10,608 $ 144,663
Provision for loan losses 3,203 (3,080) (2,677) (952) (1,462) 7,665 (6,450) 921 (2,832)
Recoveries of loans
previously charged-off
19 3 33 1 — 4 — 169 229
Loans charged off (2,175) (1) — — — — — (438) (2,614)
Ending balance -
September 30, 2021
$ 14,838 $ 29,760 $ 17,028 $ 5,765 $ 12,013 $ 12,376 $ 36,406 $ 11,260 $ 139,446
Nine Months Ended September 30, 2021
Beginning balance -
December 31, 2020
$ 14,748 $ 58,477 $ 19,220 $ 10,534 $ 7,174 $ 4,849 $ 44,147 $ 11,240 $ 170,389
Provision for credit losses 2,667 (28,690) (2,141) (4,767) 4,839 7,384 (7,741) 1,100 (27,349)
Recoveries of loans
previously charged-off
235 3 98 16 — 143 — 554 1,049
Loans charged off (2,812) (30) (149) (18) — — — (1,634) (4,643)
Ending balance -
September 30, 2021 $ 14,838 $ 29,760 $ 17,028 $ 5,765 $ 12,013 $ 12,376 $ 36,406 $ 11,260 $ 139,446

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

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

Credit Quality - Commercial Type Loans

The Company categorizes commercial loan types into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans that share similar risk characteristics collectively. Loans that do not share similar risk characteristics are evaluated individually.

The Company uses the following definitions for risk ratings:


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




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




			Classified.			Loans included in the Classified category include loans rated as Substandard and Doubtful. Loans rated as Substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Also included in this category are loans classified as Doubtful, which have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weakness or weaknesses make collection or liquidation in full, based on currently existing facts, conditions, and values, highly questionable and improbable.

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

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

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

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

The following tables present the credit quality of ~~our~~the Company's commercial type loan portfolio as of March 31, 2023 and December 31, 2022 and the gross charge-offs for the three months ended March 31, 2023 by year of ~~origination as of September 30, 2022 and December 31, 2021.~~origination. Revolving loans are presented separately. Management considers the guidance in ASC 310-20 when determining whether a modification, extension, or renewal constitutes a current period origination. Generally, current period renewals of credit are reunderwritten at the point of renewal and considered current period originations for the purposes of the tables below.

As of September 30, 2022
Commercial Term Loans
Amortized Cost Basis by Origination Year
2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Total
Commercial and industrial
Pass $ 284,399 $ 220,172 $ 83,831 $ 96,337 $ 40,939 $ 63,998 $ 718,260 $ 1,507,936
Special Mention 26 355 — 375 151 — 2,732 3,639
Classified 65 1,220 2,106 1,593 451 9,015 8,134 22,584
Total 284,490 221,747 85,937 98,305 41,541 73,013 729,126 1,534,159
Construction
Pass 570,166 569,425 215,636 71,706 18,027 46,794 183,738 1,675,492
Special Mention 428 — 18 — 7 2,530 — 2,983
Classified — 822 — — — — 200 1,022
Total 570,594 570,247 215,654 71,706 18,034 49,324 183,938 1,679,497
Residential real estate:
Multi-family mortgage
Pass 117,654 163,283 33,326 30,470 4,201 35,279 8,966 393,179
Special Mention — — — — — — — —
Classified — — — — — 1,187 — 1,187
Total 117,654 163,283 33,326 30,470 4,201 36,466 8,966 394,366
Commercial real estate:
Owner occupied
Pass 215,250 231,038 117,751 159,546 78,881 266,021 66,718 1,135,205
Special Mention 103 1,293 — 1,470 2,294 390 — 5,550
Classified — — 241 5,992 1,282 9,418 655 17,588
Total 215,353 232,331 117,992 167,008 82,457 275,829 67,373 1,158,343
Non-owner occupied
Pass 411,612 428,087 138,590 171,747 225,519 505,370 56,718 1,937,643
Special Mention — 1,015 — — 82 — — 1,097
Classified — — — 150 3,329 12,000 — 15,479
Total 411,612 429,102 138,590 171,897 228,930 517,370 56,718 1,954,219
Total commercial loans
Pass 1,599,081 1,612,005 589,134 529,806 367,567 917,462 1,034,400 6,649,455
Special Mention 557 2,663 18 1,845 2,534 2,920 2,732 13,269
Classified 65 2,042 2,347 7,735 5,062 31,620 8,989 57,860
Total commercial loans $ 1,599,703 $ 1,616,710 $ 591,499 $ 539,386 $ 375,163 $ 952,002 $ 1,046,121 $ 6,720,584

2018

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

As of December 31, 2021
Commercial Term Loans
Amortized Cost Basis by Origination Year
2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Total
Commercial and industrial
Pass $ 273,232 $ 95,279 $ 140,938 $ 52,162 $ 33,997 $ 57,020 $ 596,667 $ 1,249,295
Special Mention 79 9 949 632 3 1,519 12,367 15,558
Classified 918 2,391 2,376 3,089 3,370 6,425 7,143 25,712
Total 274,229 97,679 144,263 55,883 37,370 64,964 616,177 1,290,565
Construction
Pass 677,258 280,828 135,768 23,916 15,313 67,818 117,176 1,318,077
Special Mention 62 184 — — 1,208 1,384 — 2,838
Classified — — 2,922 2,882 3 737 200 6,744
Total 677,320 281,012 138,690 26,798 16,524 69,939 117,376 1,327,659
Residential real estate:
Multi-family mortgage
Pass 166,576 32,242 64,345 7,124 5,602 38,526 10,891 325,306
Special Mention — — — — — — — —
Classified — — — — — 1,245 — 1,245
Total 166,576 32,242 64,345 7,124 5,602 39,771 10,891 326,551
Commercial real estate:
Owner occupied
Pass 170,773 131,471 174,257 83,698 69,939 236,998 57,123 924,259
Special Mention — — 1,502 3,541 885 2,555 213 8,696
Classified — — 3,102 768 3,295 9,616 1,846 18,627
Total 170,773 131,471 178,861 88,007 74,119 249,169 59,182 951,582
Non-owner occupied
Pass 462,478 154,048 165,917 264,855 170,602 414,859 46,541 1,679,300
Special Mention — — 3,747 3,388 — 969 — 8,104
Classified — — 1,898 23,849 1,506 15,508 — 42,761
Total 462,478 154,048 171,562 292,092 172,108 431,336 46,541 1,730,165
Total commercial loans
Pass 1,750,317 693,868 681,225 431,755 295,453 815,221 828,398 5,496,237
Special Mention 141 193 6,198 7,561 2,096 6,427 12,580 35,196
Classified 918 2,391 10,298 30,588 8,174 33,531 9,189 95,089
Total commercial loans $ 1,751,376 $ 696,452 $ 697,721 $ 469,904 $ 305,723 $ 855,179 $ 850,167 $ 5,626,522
Effective January 1, 2023, the Company adopted the accounting guidance in ASU 2022-02 which requires the presentation of gross charge-offs by year of origination. The Company prospectively adopted ASU 2022-02; therefore, prior period activity of gross charge-offs by year of origination are not included in the below tables.





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

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

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

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

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

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

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


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

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

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

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




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

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

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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





As of December 31, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Commercial and industrial
Pass	$	396,643	$	204,000	$	67,231	$	90,894	$	39,780	$	62,816	$	762,717	$	1,624,081
Special Mention	125		7		—		160		143		771		2,520		3,726
Classified	65		823		1,916		1,651		273		6,913		6,335		17,976

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

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

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

Residential real estate:

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

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


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

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

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

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

Total commercial loan types
Pass	1,927,662		1,511,093		548,528		516,650		340,964		864,548		1,083,355		6,792,800
Special Mention	226		690		15		328		2,450		5,195		7,520		16,424
Classified	145		4,683		2,140		6,386		4,819		27,589		6,447		52,209
Total	$	1,928,033	$	1,516,466	$	550,683	$	523,364	$	348,233	$	897,332	$	1,097,322	$	6,861,433

2120

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

Credit Quality - Consumer Type Loans

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

The following tables present the credit quality by classification (performing or nonperforming) of ~~our~~the Company's consumer type loan portfolio as of March 31, 2023 and December 31, 2022 and the gross charge-offs for the three months ended March 31, 2023 by year of ~~origination as of September 30, 2022 and December 31, 2021.~~origination. Revolving loans are presented separately. Management considers the guidance in ASC 310-20 when determining whether a modification, extension, or renewal constitutes a current period origination. Generally, current period renewals of credit are reunderwritten at the point of renewal and considered current period originations for the purposes of the tables below.

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





As of and for the three months ended March 31, 2023	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Total





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

2221

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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


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

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

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

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

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

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

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

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

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


September 30, 2022		30-89 days past due and accruing interest		90 days or more and accruing interest		Non-accrual loans		Loans current on payments and accruing interest		Total
March 31, 2023												March 31, 2023	30-89 days past due and accruing interest		90 days or more and accruing interest		Nonaccrual loans		Loans current on payments and accruing interest		Total
Commercial and industrial	Commercial and industrial	$	1,812	$	38	$	1,730	$	1,530,579	$	1,534,159	Commercial and industrial	$	574	$	42	$	2,413	$	1,668,369	$	1,671,398
Construction	Construction	1,916		—		—		1,677,581		1,679,497		Construction	2,708		—		382		1,694,423		1,697,513
Residential real estate:	Residential real estate:											Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	16,994		13,767		5,580		1,508,911		1,545,252		1-to-4 family mortgage	13,348		11,505		9,088		1,528,562		1,562,503
Residential line of credit	Residential line of credit	542		209		1,671		458,352		460,774		Residential line of credit	678		158		924		495,631		497,391
Multi-family mortgage	Multi-family mortgage	—		—		44		394,322		394,366		Multi-family mortgage	—		—		39		489,340		489,379
Commercial real estate:	Commercial real estate:											Commercial real estate:
Owner occupied	Owner occupied	982		—		4,873		1,152,488		1,158,343		Owner occupied	851		—		7,211		1,128,916		1,136,978
Non-owner occupied	Non-owner occupied	293		—		6,960		1,946,966		1,954,219		Non-owner occupied	—		—		5,802		1,933,715		1,939,517
Consumer and other	Consumer and other	8,057		1,988		5,767		362,594		378,406		Consumer and other	6,918		875		7,041		356,483		371,317
Total	Total	$	30,596	$	16,002	$	26,625	$	9,031,793	$	9,105,016	Total	$	25,077	$	12,580	$	32,900	$	9,295,439	$	9,365,996

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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


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

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



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


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

Commercial and industrial	$	790	$	517	$	10
Construction	—		389		7
Residential real estate:
1-to-4 family mortgage	2,834		3,642		78
Residential line of credit	1,134		266		4
Multi-family mortgage	1		41		1
Commercial real estate:
Owner occupied	5,200		210		1
Non-owner occupied	5,755		201		5
Consumer and other	—		6,451		327
Total	$	15,714	$	11,717	$	433

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

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

The following ~~tables provide~~presents interest income recognized on nonaccrual loans for the three months ended March 31, 2023 and 2022:


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

Accrued interest receivable written off as an adjustment to interest income amounted to $181 and $184 for the three months ended March 31, 2023 and 2022, respectively.

Loan Modifications to Borrowers Experiencing Financial Difficulty

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

Upon the Company's determination that a modified loan has subsequently been deemed uncollectible, the portion of the loan deemed uncollectible is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.

The Company closely monitors the performance of the loans ~~on non-accrual status, as well as any related allowance~~that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.

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

Troubled debt restructurings

The following disclosure is presented in accordance with GAAP in effect prior to the adoption of ASU 2022-02. The Company has included this disclosure as of ~~September 30, 2022 and~~ December 31, ~~2021 by class~~2022 or for the three months ended March 31, 2022.

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

September 30, 2022 Non-accrual
with no
related
allowance Non-accrual
with
related
allowance Related
allowance
Commercial and industrial $ 1,228 $ 502 $ 3
Residential real estate:
1-to-4 family mortgage 1,537 4,043 73
Residential line of credit 1,070 601 9
Multi-family mortgage — 44 1
Commercial real estate:
Owner occupied 4,710 163 1
Non-owner occupied 6,751 209 4
Consumer and other — 5,767 291
Total $ 15,296 $ 11,329 $ 382

December 31, 2021 Non-accrual
with no
related
allowance Non-accrual
with
related
allowance Related
allowance
Commercial and industrial $ 1,085 $ 435 $ 6
Construction 2,882 740 99
Residential real estate:
1-to-4 family mortgage 378 4,215 60
Residential line of credit 797 939 11
Multi-family mortgage — 49 2
Commercial real estate:
Owner occupied 5,346 1,364 206
Non-owner occupied 13,898 186 7
Consumer and other — 3,254 164
Total $ 24,386 $ 11,182 $ 555
As of December 31, 2022, the Company had a recorded investment in TDRs of $13,854. The modifications included extensions of the maturity date and/or a stated rate of interest to one lower than the current market rate to borrowers experiencing financial difficulty. Of these loans, $7,321 were classified as nonaccrual loans as of December 31, 2022. The Company has calculated $253 in allowances for credit losses on TDRs as of December 31, 2022. As of December 31, 2022, unfunded loan commitments to extend additional funds on troubled debt restructurings were not meaningful.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

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

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Commercial and industrial $ 26 $ 190 $ 163 $ 523
Construction 5 75 31 105
Residential real estate:
1-to-4 family mortgage 78 114 185 199
Residential line of credit 37 197 98 242
Multi-family mortgage — — 2 2
Commercial real estate:
Owner occupied 61 187 149 419
Non-owner occupied 89 123 235 353
Consumer and other 113 75 182 130
Total $ 409 $ 961 $ 1,045 $ 1,973

Accrued interest receivable written off as an adjustment to interest income amounted to $151 and $63 for the three months ended September 30, 2022 and 2021, respectively, and $458 and $660 for the nine months ended September 30, 2022 and 2021, respectively.

~~Troubled debt restructurings~~

As of September 30, 2022 and December 31, 2021, the Company had a recorded investment in TDRs of $14,959 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 rate to borrowers experiencing financial difficulty. Of these loans, $7,592 and $11,084 were classified as non-accrual loans as of September 30, 2022 and December 31, 2021, respectively. The Company has calculated $258 and $1,245 in allowances for credit losses on TDRs as of September 30, 2022 and December 31, 2021, respectively. There were no significant unfunded loan commitments to extend additional funds on troubled debt restructurings as of September 30, 2022 or December 31, 2021.

~~The following tables present~~ the financial effect of TDRs recorded during the ~~periods indicated:~~three months ended March 31, 2022:

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

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

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

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

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

Nine Months Ended September 30, 2021 Number of loans Pre-modification outstanding recorded investment Post-modification outstanding recorded investment Charge offs and specific reserves
Commercial and industrial 5 $ 13,162 $ 13,162 $ —
Commercial real estate:
Owner occupied 4 3,550 3,550 —
Non-owner occupied 1 11,997 11,997 —
Residential real estate:
1-4 family mortgage 3 945 945 —
Residential line of credit 1 11 11 —
Total 14 $ 29,665 $ 29,665 $ —


	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Charge offs and specific reserves





Residential real estate:
1-to-4 family mortgage	1	80		80		—


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

Troubled debt restructurings for which there was a payment default within twelve months following the modification totaled $304 during the ~~nine~~three months ended ~~September 30,~~March 31, 2022. Troubled debt restructurings for which there was a payment default within twelve months following the modification totaled $304 during the three and nine months ended September 30, 2022. Troubled debt restructurings for which there was a payment default within twelve months following the modification totaled $305 during the three and nine months ended September 30, 2021. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy. The terms of certain other loans were modified during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 ~~and 2021~~ that did not meet the definition of a TDR. The modification of these loans usually ~~involve~~involves either a modification of the terms of a loan to borrowers who are not experiencing financial difficulties or an insignificant delay in payments.

~~Collateral Dependent~~Collateral-Dependent Loans

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


		September 30, 2022						March 31, 2023
		Type of Collateral							Type of Collateral
		Real Estate		Financial Assets and Equipment		Total				Individually assessed allowance for credit loss			Real Estate		Financial Assets and Equipment		Total		Individually assessed allowance for credit loss
Commercial and industrial	Commercial and industrial	$	1,228	$	787	$	2,015			$	—	Commercial and industrial	$	2,597	$	800	$	3,397	$	—

Residential real estate:	Residential real estate:											Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	1,192		—		1,192				205		1-to-4 family mortgage	5,332		—		5,332		169
Residential line of credit	Residential line of credit	1,069		—		1,069				—		Residential line of credit	1,109		—		1,109		5

Commercial real estate:	Commercial real estate:											Commercial real estate:
Owner occupied	Owner occupied	5,823		—		5,823				—		Owner occupied	7,651		—		7,651		4
Non-owner occupied	Non-owner occupied	6,751		—		6,751				—		Non-owner occupied	5,610		—		5,610		—
Consumer and other	Consumer and other	139		—		139				—		Consumer and other	132		—		132		—
Total	Total	$	16,202	$	787	$	16,989			$	205	Total	$	22,431	$	800	$	23,231	$	178

2625

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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


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

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

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

Note (4)—Other real estate owned

The amount reported as other real estate owned includes property acquired through foreclosure in addition to excess facilities held for sale and is carried at the lower of the carrying amount of the underlying loan or the fair value of the real estate less ~~estimated cost~~costs to ~~sell the property.~~sell. The following table summarizes the other real estate owned for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,				September 30,						March 31,
		2022		2021		2022		2021					2023		2022
Balance at beginning of period	Balance at beginning of period	$	9,398	$	11,986	$	9,777	$	12,111	Balance at beginning of period			$	5,794	$	9,777
Transfers from loans	Transfers from loans	421		349		984		4,945		Transfers from loans			235		563

Proceeds from sale of other real estate owned	Proceeds from sale of other real estate owned	(4,335)		(4,173)		(4,753)		(8,834)		Proceeds from sale of other real estate owned			(2,031)		(121)
Gain (loss) on sale of other real estate owned	Gain (loss) on sale of other real estate owned	483		2,090		353		3,190		Gain (loss) on sale of other real estate owned			87		(104)
Loans provided for sales of other real estate owned		—		(152)		—		(685)

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

Balance at end of period	Balance at end of period	$	5,919	$	10,015	$	5,919	$	10,015	Balance at end of period			$	4,085	$	9,721

Foreclosed residential real estate properties totaled ~~$614~~$798 and ~~$775~~$840 as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. The recorded investment in residential mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process totaled ~~$755 at September 30, 2022. As of December 31, 2021, there were no such residential foreclosure proceedings in process.~~

~~Excess land~~$4,769 and ~~facilities held for sale resulting from branch consolidations totaled $2,467 and $3,348~~$2,653 as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Note (5)—Leases:

As of ~~September 30, 2022,~~March 31, 2023, the Company was the lessee in 5960 operating leases and 1 finance lease of certain branch, mortgage and operations locations ~~of which 45 operating leases and 1 finance lease currently have remaining~~with original terms ~~varying from~~ greater than one ~~year to 33 years.~~year. Leases with initial terms of less than one year and equipment leases are not included on the consolidated balance sheets ~~as these are insignificant.~~in accordance with U.S. GAAP.

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

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

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

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


			September 30,			December 31,					March 31,			December 31,
		Classification	2022			2021				Classification	2023			2022
Right-of-use assets:	Right-of-use assets:								Right-of-use assets:
Operating leases	Operating leases	Operating lease right-of-use assets	$	61,444		$	41,686		Operating leases	Operating lease right-of-use assets	$	57,054		$	60,043
Finance leases	Finance leases	Premises and equipment, net	1,394			1,487			Finance leases	Premises and equipment, net	1,339			1,367
Total right-of-use assets	Total right-of-use assets		$	62,838		$	43,173		Total right-of-use assets		$	58,393		$	61,410
Lease liabilities:	Lease liabilities:								Lease liabilities:
Operating leases	Operating leases	Operating lease liabilities	$	70,610		$	46,367		Operating leases	Operating lease liabilities	$	67,345		$	69,754
Finance leases	Finance leases	Borrowings	1,443			1,518			Finance leases	Borrowings	1,397			1,420
Total lease liabilities	Total lease liabilities		$	72,053		$	47,885		Total lease liabilities		$	68,742		$	71,174
Weighted average remaining lease term (in years) - operating	Weighted average remaining lease term (in years) - operating		12.2			12.4			Weighted average remaining lease term (in years) - operating		11.9			12.1
Weighted average remaining lease term (in years) - finance	Weighted average remaining lease term (in years) - finance		12.6			13.4			Weighted average remaining lease term (in years) - finance		12.1			12.4
Weighted average discount rate - operating	Weighted average discount rate - operating		3.05		%	2.73		%	Weighted average discount rate - operating		3.21		%	3.08		%
Weighted average discount rate - finance	Weighted average discount rate - finance		1.76		%	1.76		%	Weighted average discount rate - finance		1.76		%	1.76		%

The components of total lease expense included in the consolidated statements of income were as follows:


			Three Months Ended				Nine Months Ended						Three Months Ended March 31,
			September 30,				September 30,
		Classification	2022		2021		2022		2021			Classification		2023		2022
Operating lease costs:	Operating lease costs:										Operating lease costs:
Amortization of right-of-use asset	Amortization of right-of-use asset	Occupancy and equipment	$	2,269	$	1,838	$	5,830	$	5,948	Amortization of right-of-use asset	Occupancy and equipment		$	1,815	$	1,710
Short-term lease cost	Short-term lease cost	Occupancy and equipment	132		107		387		296		Short-term lease cost	Occupancy and equipment		121		111
Variable lease cost	Variable lease cost	Occupancy and equipment	215		284		764		760		Variable lease cost	Occupancy and equipment		298		256
Lease impairment		Mortgage restructuring expense	—		—		364		—

Gain on lease modifications and terminations	Gain on lease modifications and terminations	Occupancy and equipment	—		(14)		(18)		(801)		Gain on lease modifications and terminations	Occupancy and equipment		(72)		(18)
Finance lease costs:	Finance lease costs:										Finance lease costs:
Interest on lease liabilities	Interest on lease liabilities	Interest expense on borrowings	7		7		22		21		Interest on lease liabilities	Interest expense on borrowings		6		9
Amortization of right-of-use asset	Amortization of right-of-use asset	Occupancy and equipment	27		28		92		83		Amortization of right-of-use asset	Occupancy and equipment		28		37

Sublease income											Sublease income	Occupancy and equipment		(281)		(195)
Total lease cost	Total lease cost		$	2,650	$	2,250	$	7,441	$	6,307	Total lease cost			$	1,915	$	1,910

During the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, the Company recorded ~~$364 of lease impairment related to vacating two locations associated with the Mortgage restructuring~~$72 and ~~recorded gains of~~ $18 ~~related to early lease terminations and modifications on other vacated locations. During the three and nine months ended September 30, 2021, the Company recorded $14 and $801, respectively,~~ in gains on lease modifications and terminations on certain vacated locations that were consolidated as a result of previous ~~acquisitions.~~business combinations, respectively.

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

2827

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

A maturity analysis of operating and finance lease liabilities and a reconciliation of undiscounted cash flows to the total lease liability as of ~~September 30, 2022~~March 31, 2023 is as follows:


		Operating		Finance			Operating		Finance
		Leases		Lease			Leases		Lease
Lease payments due:	Lease payments due:					Lease payments due:
September 30, 2023		$	7,508	$	29
September 30, 2024		8,257		118
September 30, 2025		7,797		120
September 30, 2026		7,650		121
September 30, 2027		7,449		123
March 31, 2024						March 31, 2024	$	6,596	$	89
March 31, 2025						March 31, 2025	7,956		120
March 31, 2026						March 31, 2026	7,885		121
March 31, 2027						March 31, 2027	7,715		123
March 31, 2028						March 31, 2028	7,326		125
Thereafter	Thereafter	48,089		1,102		Thereafter	45,839		977
Total undiscounted future minimum lease payments	Total undiscounted future minimum lease payments	86,750		1,613		Total undiscounted future minimum lease payments	83,317		1,555
Less: imputed interest	Less: imputed interest	(16,140)		(170)		Less: imputed interest	(15,972)		(158)
Lease liability	Lease liability	$	70,610	$	1,443	Lease liability	$	67,345	$	1,397

Note (6)—Mortgage servicing rights:

Changes in the Company’s mortgage servicing rights were as follows for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022

Carrying value at beginning of period	Carrying value at beginning of period	$	158,678	$	101,615	$	115,512	$	79,997	Carrying value at beginning of period		$	168,365	$	115,512
Capitalization	Capitalization	4,453		9,215		19,523		31,382		Capitalization		1,788		9,812

Change in fair value:	Change in fair value:									Change in fair value:
Due to pay-offs/pay-downs	Due to pay-offs/pay-downs	(3,670)		(7,302)		(13,165)		(24,488)		Due to pay-offs/pay-downs		(2,520)		(4,471)
Due to change in valuation inputs or assumptions	Due to change in valuation inputs or assumptions	11,966		7,063		49,557		23,700		Due to change in valuation inputs or assumptions		(2,754)		23,822
Carrying value at end of period	Carrying value at end of period	$	171,427	$	110,591	$	171,427	$	110,591	Carrying value at end of period		$	164,879	$	144,675

The following table summarizes servicing income and expense, which are included in 'Mortgage banking income' and 'Other noninterest expense', respectively, within the Mortgage segment operating results for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Servicing income:	Servicing income:									Servicing income:
Servicing income	Servicing income	$	8,104	$	7,539	$	23,499	$	21,258	Servicing income		$	7,768	$	7,429
Change in fair value of mortgage servicing rights	Change in fair value of mortgage servicing rights	8,296		(239)		36,392		(788)		Change in fair value of mortgage servicing rights		(5,274)		19,351
Change in fair value of derivative hedging instruments	Change in fair value of derivative hedging instruments	(12,641)		(2,128)		(41,636)		(9,987)		Change in fair value of derivative hedging instruments		1,867		(19,098)
Servicing income	Servicing income	3,759		5,172		18,255		10,483		Servicing income		4,361		7,682
Servicing expenses	Servicing expenses	1,923		2,156		7,848		7,381		Servicing expenses		1,883		2,548
Net servicing income~~(1)~~	Net servicing income~~(1)~~	$	1,836	$	3,016	$	10,407	$	3,102	Net servicing income~~(1)~~		$	2,478	$	5,134

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

2928

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

Data and key economic assumptions related to the Company’s mortgage servicing rights as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 are as follows:


		September 30,			December 31,				March 31,			December 31,
		2022			2021				2023			2022
Unpaid principal balance	Unpaid principal balance	$	11,233,249		$	10,759,286		Unpaid principal balance	$	11,028,420		$	11,086,582
Weighted-average prepayment speed (CPR)	Weighted-average prepayment speed (CPR)	5.40		%	9.31		%	Weighted-average prepayment speed (CPR)	5.96		%	5.55		%
Estimated impact on fair value of a 10% increase	Estimated impact on fair value of a 10% increase	$	(4,751)		$	(4,905)		Estimated impact on fair value of a 10% increase	$	(5,017)		$	(4,886)
Estimated impact on fair value of a 20% increase	Estimated impact on fair value of a 20% increase	$	(9,191)		$	(9,429)		Estimated impact on fair value of a 20% increase	$	(9,695)		$	(9,447)

Discount rate	Discount rate	9.6		%	9.81		%	Discount rate	8.97		%	9.10		%
Estimated impact on fair value of a 100 bp increase	Estimated impact on fair value of a 100 bp increase	$	(8,164)		$	(4,785)		Estimated impact on fair value of a 100 bp increase	$	(7,924)		$	(8,087)
Estimated impact on fair value of a 200 bp increase	Estimated impact on fair value of a 200 bp increase	$	(15,623)		$	(9,198)		Estimated impact on fair value of a 200 bp increase	$	(15,163)		$	(15,475)

Weighted-average coupon interest rate	Weighted-average coupon interest rate	3.29		%	3.23		%	Weighted-average coupon interest rate	3.35		%	3.31		%
Weighted-average servicing fee (basis points)	Weighted-average servicing fee (basis points)	27			27			Weighted-average servicing fee (basis points)	27			27
Weighted-average remaining maturity (in months)	Weighted-average remaining maturity (in months)	331			330			Weighted-average remaining maturity (in months)	333			332

The Company economically hedges the mortgage servicing rights portfolio with various derivative instruments to offset changes in the fair value of the related mortgage servicing rights. See Note 9, "Derivatives" for additional information on these hedging instruments.

As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, mortgage escrow deposits totaled to ~~$140,768~~$92,947 and ~~$127,617,~~$75,612, respectively.

Note (7)—Income taxes:

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

The following table presents a reconciliation of ~~federal~~ income taxes ~~at the statutory federal rate of 21% to the Company's effective tax rates~~ for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:

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

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

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

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

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

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

The Company had a net operating loss carryforward generated as a result of a previous acquisition amounting to $5,515 and $6,523 as of September 30, 2022 and December 31, 2021, respectively. The net operating loss carryforward can be used to offset taxable income in future periods and reduce income tax liabilities in those future periods. While net operating losses are subject to certain annual utilization limits under Section 382, the Company believes the net operating loss carryforwards will be realized based on the projected annual limitation and the length of the net operating loss carryover period. The Company's determination of the realization of the net deferred tax asset is based on its assessment of all available positive and negative evidence. The net operating loss carryforward will begin to expire in 2029.


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


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


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

Note (8)—Commitments and contingencies:

Commitments to extend credit & letters of credit

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

~~Commitments may expire without being used. Off-balance sheet risk of credit loss exists up to the face amount of these instruments, although material losses are not anticipated.~~ The same credit and underwriting policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment. Many commitments expire without being used and are only recorded in the consolidated financial statements when drawn upon. The Company's maximum off-balance sheet exposure to credit loss is represented by the contractual amount of these instruments.

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

~~As of September 30, 2022 and December 31, 2021, loan commitments included above with floating interest rates totaled $2.97 billion and $2.26 billion, respectively.~~


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

3129

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

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

The Company estimates expected credit losses on off-balance sheet loan commitments ~~that are not accounted for as derivatives~~ under the CECL methodology. When applying this methodology, the Company considers the likelihood that funding will occur, the contractual period of exposure to credit loss, the risk of loss, historical loss experience, and current conditions along with expectations of future economic conditions.

The table below presents activity within the allowance for credit losses on unfunded commitments included in accrued expenses and other liabilities on the Company's consolidated balance sheets for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Balance at beginning of period	Balance at beginning of period	$	20,399	$	13,202	$	14,380	$	16,378	Balance at beginning of period		$	22,969	$	14,380

Provision for credit losses on unfunded commitments	Provision for credit losses on unfunded commitments	3,178		301		9,197		(2,875)		Provision for credit losses on unfunded commitments		(4,506)		1,882
Balance at end of period	Balance at end of period	$	23,577	$	13,503	$	23,577	$	13,503	Balance at end of period		$	18,463	$	16,262

Loan repurchases or indemnifications

In connection with the sale of mortgage loans to third party investors, the Company makes usual and customary representations and warranties as to the propriety of its origination activities. Occasionally, the investors require the Company to repurchase loans sold to them under the terms of the warranties. When this happens, the loans are recorded at fair value with a corresponding charge to a recorded valuation reserve. The total principal amount of loans repurchased (or indemnified for) was ~~$4,442~~$3,326 and ~~$5,988~~$1,348 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~respectively, and $2,917 and $4,386 for the three and nine months ended September 30, 2021,~~ respectively. The Company has established a reserve associated with loan repurchases.

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Balance at beginning of period	Balance at beginning of period	$	3,445	$	5,489	$	4,802	$	5,928	Balance at beginning of period		$	1,621	$	4,802
Provision for loan repurchases or indemnifications	Provision for loan repurchases or indemnifications	(800)		—		(1,989)		(266)		Provision for loan repurchases or indemnifications		(250)		(389)

Losses on loans repurchased or indemnified	Losses on loans repurchased or indemnified	16		(120)		(152)		(293)		Losses on loans repurchased or indemnified		(13)		(96)
Balance at end of period	Balance at end of period	$	2,661	$	5,369	$	2,661	$	5,369	Balance at end of period		$	1,358	$	4,317

Legal Proceedings

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

Note (9)—Derivatives:

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

Derivatives not designated as hedging instruments

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

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

The Company also enters into forward commitments, futures and options contracts as economic hedges to offset the changes in fair value of ~~Mortgage~~mortgage servicing rights. Gains and losses associated with these instruments are included in earnings and are reflected under the line item “Mortgage banking income” on the consolidated statements of income.

Additionally, the Company enters into derivative instruments to help its commercial customers manage their exposure to interest rate fluctuations. To mitigate the interest rate risk associated with customer contracts, the Company enters into an offsetting derivative contract. The Company manages its credit risk, or potential risk of default by its commercial customers through credit limit approval and monitoring procedures.

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

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

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

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


	March 31, 2023
	Notional Amount		Asset		Liability

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

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


	December 31, 2022
	Notional Amount		Asset		Liability

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

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

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

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Included in mortgage banking income:	Included in mortgage banking income:									Included in mortgage banking income:
Interest rate lock commitments	Interest rate lock commitments	$	(3,980)	$	(3,316)	$	(7,419)	$	(24,587)	Interest rate lock commitments		$	1,207	$	(5,446)
Forward commitments	Forward commitments	4,795		(806)		57,130		23,252		Forward commitments		(295)		37,903
Futures contracts	Futures contracts	(10,105)		(2,152)		(35,805)		(9,380)		Futures contracts		1,937		(16,535)
Option contracts	Option contracts	—		—		36		—		Option contracts		(664)		36
Total	Total	$	(9,290)	$	(6,274)	$	13,942	$	(10,715)	Total		$	2,185	$	15,958

Derivatives designated as cash flow hedges

The Company also maintains two interest rate swap agreements with notional amounts totaling $30,000 used to hedge interest rate exposure on outstanding subordinated debentures included in long-term debt totaling $30,930. Under these agreements, the Company receives a variable rate of interest equal to 3-month LIBOR and pays a weighted average fixed rate of interest of 2.08%. Upon the cessation of LIBOR in June 2023, the rate will convert to SOFR plus an adjustment in accordance with market standards. The interest rate swap contracts, which mature in June of 2024, are designated as cash flow hedges with the objective of reducing the variability in cash flows resulting from changes in interest rates.

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

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

March 31, 2023

December 31, 2022

Notional Amount

Estimated fair value

Balance sheet location

Estimated fair value

Balance sheet location

Interest rate swap agreements-
subordinated debt

30,000

988

Other assets

1,255

Other Assets

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

The Company's consolidated statements of income included a gain of ~~$26~~$197 and a loss of ~~$214~~$139 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~respectively, and losses of $148 and $428 for the three and nine months ended September 30, 2021,~~ respectively, in interest expense on borrowings related to these cash flow hedges. The cash flow hedges were effective during the periods presented and as a result qualified for hedge accounting treatment. As such, no amounts were reclassified from accumulated other comprehensive ~~(loss) income~~loss into earnings during either period presented.

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

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

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

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Amount of gain recognized in other comprehensive
loss, net of tax expense of $145, $38, $517 and $173
$ 409 $ 106 $ 1,466 $ 489


	Three Months Ended March 31,
		2023		2022

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

Derivatives designated as fair value hedges

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


		September 30, 2022											March 31, 2023				December 31, 2022
		Notional Amount		Remaining Maturity (In Years)	Receive Fixed Rate	Pay Floating Rate	Estimated fair value			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:	Derivatives included in other liabilities:								Derivatives included in other liabilities:
Interest rate swap agreement- subordinated debt	Interest rate swap agreement- subordinated debt	$	100,000	1.42	1.46%	SOFR	$	(3,831)	Interest rate swap agreement- subordinated debt	0.92	1.46%	SOFR	$	100,000	$	(2,952)	$	100,000	$	(3,830)
Interest rate swap agreement- fixed rate money market deposits	Interest rate swap agreement- fixed rate money market deposits	75,000		1.89	1.50%	SOFR	(3,816)		Interest rate swap agreement- fixed rate money market deposits	1.39	1.50%	SOFR	75,000		(3,274)		75,000		(3,693)
Interest rate swap agreement- fixed rate money market deposits	Interest rate swap agreement- fixed rate money market deposits	125,000		1.89	1.50%	SOFR	(6,359)		Interest rate swap agreement- fixed rate money market deposits	1.39	1.50%	SOFR	125,000		(5,457)		125,000		(6,154)
Total	Total	$	300,000	1.73	1.48%		$	(14,006)	Total	1.23	1.48%		$	300,000	$	(11,683)	$	300,000	$	(13,677)

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


		Three Months Ended September 30,		Nine Months Ended September 30,				Three Months Ended March 31,
		2022			2022				2023		2022
Designated fair value hedge:	Designated fair value hedge:						Designated fair value hedge:
Interest expense on deposits		$	(331)		$	377
Interest expense on borrowings		(181)			167
Interest (expense) income on deposits							Interest (expense) income on deposits		$	(1,508)	$	313
Interest (expense) income on borrowings							Interest (expense) income on borrowings		(760)		162
Total	Total	$	(512)		$	544	Total		$	(2,268)	$	475

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

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

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

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

3432

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

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



	Carrying Amount of the Hedged Item					Cumulative Decrease in Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Item
Line item on the balance sheet	March 31, 2023		December 31, 2022			March 31, 2023		December 31, 2022
Borrowings	$	96,146	$	95,171	(1)	$	(2,952)	$	(3,830)
Money market and savings deposits	196,704		196,520		(2)	(8,731)		(9,847)

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

(2) The carrying value also includes an unaccreted purchase accounting fair value premium of $5,435 and $6,367 as of March 31, 2023 and December 31, 2022, respectively.

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

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













							Gross amounts not offset in the consolidated balance sheets
	Gross amounts recognized		Gross amounts offset in the consolidated balance sheets		Net amounts presented in the consolidated balance sheets		Financial instruments		Financial collateral pledged		Net Amount
March 31, 2023
Derivative financial assets	$	35,641	$	—	$	35,641	$	12,771	$	—	$	22,870
Derivative financial liabilities	$	18,528	$	—	$	18,528	$	12,771	$	5,757	$	—

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

Most derivative contracts with clients are secured by collateral. Additionally, in accordance with the interest rate agreements with derivatives dealers, the Company may be required to post margin to these counterparties. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company had minimum collateral posting thresholds with certain derivative counterparties and had collateral posted of ~~$19,169~~$18,590 and ~~$57,868,~~$23,325, respectively, against its obligations under these agreements. Cash pledged as collateral on derivative contracts is recorded in ~~other assets~~"Other assets" on the consolidated balance sheets.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

Note (10)—Fair value of financial instruments:

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

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

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

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

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

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

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


Investment Securities						Investment securities are recorded at fair value on a recurring basis. Fair values for securities are based on quoted market prices, where available. If quoted prices are not available, fair values are based on quoted market prices of similar instruments or are determined by matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the pricing relationship or correlation among other benchmark quoted securities. Investment securities valued using quoted market prices of similar instruments or that are valued using matrix pricing are classified as Level 2. When significant inputs to the valuation are unobservable, the available-for-sale securities are classified within Level 3 of the fair value hierarchy. Where no active market exists for a security or other benchmark securities, fair value is estimated by the Company with reference to discount margins for other high-risk securities.

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

Derivatives						The fair value of the Company's interest rate swap agreements to facilitate customer transactions are based upon fair values provided from entities that engage in interest rate swap activity and is based upon projected future cash flows and interest rates. The fair value of interest rate lock commitments associated with the mortgage pipeline is based on fees currently charged to enter into similar agreements, and for fixed-rate commitments, the difference between current levels of interest rates and the committed rates is also considered. The fair values of the Company's designated cash flow and fair value hedges are determined by calculating the difference between the discounted fixed rate cash flows and the discounted variable rate cash flows. The fair values of both the Company's hedges, including designated cash flow hedges and designated fair value hedges are based on pricing models that utilize observable market inputs. These financial instruments are classified as Level 2.

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

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

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

3635

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

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


				Fair Value											Fair Value
September 30, 2022		Carrying amount		Level 1		Level 2		Level 3		Total
March 31, 2023												March 31, 2023	Carrying amount		Level 1		Level 2		Level 3		Total
Financial assets:	Financial assets:											Financial assets:
Cash and cash equivalents	Cash and cash equivalents	$	618,290	$	618,290	$	—	$	—	$	618,290	Cash and cash equivalents	$	1,319,951	$	1,319,951	$	—	$	—	$	1,319,951
Investment securities	Investment securities	1,485,133		—		1,485,133		—		1,485,133		Investment securities	1,474,064		—		1,474,064		—		1,474,064

Loans, net		8,970,540		—		—		8,859,226		8,859,226
Loans held for sale		130,733		—		97,011		33,722		130,733
Net loans held for investment												Net loans held for investment	9,227,187		—		—		9,090,899		9,090,899
Loans held for sale, at fair value												Loans held for sale, at fair value	61,987		—		52,477		9,510		61,987
Interest receivable	Interest receivable	39,034		107		6,546		32,381		39,034		Interest receivable	44,737		1,027		6,705		37,005		44,737
Mortgage servicing rights	Mortgage servicing rights	171,427		—		—		171,427		171,427		Mortgage servicing rights	164,879		—		—		164,879		164,879
Derivatives	Derivatives	53,990		—		53,990		—		53,990		Derivatives	39,799		—		39,799		—		39,799
Financial liabilities:	Financial liabilities:											Financial liabilities:
Deposits:	Deposits:											Deposits:
Without stated maturities	Without stated maturities	$	8,843,012	$	8,843,012	$	—	$	—	$	8,843,012	Without stated maturities	$	9,686,045	$	9,686,045	$	—	$	—	$	9,686,045
With stated maturities	With stated maturities	1,163,070		—		1,158,686		—		1,158,686		With stated maturities	1,496,870		—		1,485,091		—		1,485,091
Securities sold under agreement to repurchase and federal funds sold		29,008		29,008		—		—		29,008
Securities sold under agreements to repurchase and federal funds purchased												Securities sold under agreements to repurchase and federal funds purchased	38,130		38,130		—		—		38,130
Federal Home Loan Bank advances	Federal Home Loan Bank advances	540,000		—		540,000		—		540,000		Federal Home Loan Bank advances	125,000		—		125,000		—		125,000
Subordinated debt		126,004		—		—		117,263		117,263
Subordinated debt, net												Subordinated debt, net	127,076		—		—		120,584		120,584

Interest payable	Interest payable	3,927		730		2,822		375		3,927		Interest payable	11,834		3,731		7,704		399		11,834
Derivatives	Derivatives	63,532		—		63,532		—		63,532		Derivatives	48,461		—		48,461		—		48,461


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

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

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

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

3736

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

The balances and levels of the assets measured at fair value on a recurring basis at ~~September 30, 2022~~March 31, 2023 are presented in the following table:


At September 30, 2022		Quoted prices in active markets for identical assets (liabilities) (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)		Total
At March 31, 2023										At March 31, 2023	Quoted prices in active markets for identical assets (liabilities) (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)		Total
Recurring valuations:	Recurring valuations:									Recurring valuations:
Financial assets:	Financial assets:									Financial assets:
Available-for-sale securities:	Available-for-sale securities:									Available-for-sale securities:
U.S. government agency securities	U.S. government agency securities	$	—	$	39,831	$	—	$	39,831	U.S. government agency securities	$	—	$	40,928	$	—	$	40,928
Mortgage-backed securities - residential	Mortgage-backed securities - residential	—		1,057,763		—		1,057,763		Mortgage-backed securities - residential	—		1,025,388		—		1,025,388
Mortgage-backed securities - commercial	Mortgage-backed securities - commercial	—		17,847		—		17,847		Mortgage-backed securities - commercial	—		17,723		—		17,723
Municipal securities	Municipal securities	—		252,143		—		252,143		Municipal securities	—		270,994		—		270,994
Treasury securities		—		107,297		—		107,297
U.S. Treasury securities										U.S. Treasury securities	—		108,823		—		108,823
Corporate securities	Corporate securities	—		7,290		—		7,290		Corporate securities	—		7,149		—		7,149
Equity securities, at fair value	Equity securities, at fair value	—		2,962		—		2,962		Equity securities, at fair value	—		3,059		—		3,059
Total securities	Total securities	$	—	$	1,485,133	$	—	$	1,485,133	Total securities	$	—	$	1,474,064	$	—	$	1,474,064
Loans held for sale		$	—	$	97,011	$	33,722	$	130,733
Loans held for sale, at fair value										Loans held for sale, at fair value	$	—	$	52,477	$	9,510	$	61,987
Mortgage servicing rights	Mortgage servicing rights	—		—		171,427		171,427		Mortgage servicing rights	—		—		164,879		164,879
Derivatives	Derivatives	—		53,990		—		53,990		Derivatives	—		39,799		—		39,799
Financial Liabilities:	Financial Liabilities:									Financial Liabilities:
Derivatives	Derivatives	—		63,532		—		63,532		Derivatives	—		48,461		—		48,461

The balances and levels of the assets measured at fair value on a non-recurring basis at ~~September 30, 2022~~March 31, 2023 are presented in the following table:


At September 30, 2022		Quoted prices in active markets for identical assets (liabilities (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)		Total
At March 31, 2023										At March 31, 2023	Quoted prices in active markets for identical assets (liabilities (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)		Total
Non-recurring valuations:	Non-recurring valuations:									Non-recurring valuations:
Financial assets:	Financial assets:									Financial assets:
Other real estate owned	Other real estate owned	$	—	$	—	$	2,193	$	2,193	Other real estate owned	$	—	$	—	$	224	$	224
Collateral dependent loans:
Commercial and industrial		$	—	$	—	$	12	$	12
Collateral dependent net loans held for investment:										Collateral dependent net loans held for investment:

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

Total collateral dependent loans	Total collateral dependent loans	$	—	$	—	$	374	$	374	Total collateral dependent loans	$	—	$	—	$	389	$	389

3837

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

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


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

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


At December 31, 2021		Quoted prices in active markets for identical assets (liabilities) (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)		Total
At December 31, 2022										At December 31, 2022	Quoted prices in active markets for identical assets (liabilities) (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)		Total
Non-recurring valuations:	Non-recurring valuations:									Non-recurring valuations:
Financial assets:	Financial assets:									Financial assets:
Other real estate owned	Other real estate owned	$	—	$	—	$	6,308	$	6,308	Other real estate owned	$	—	$	—	$	2,497	$	2,497
Collateral dependent loans:

Construction		—		—		606		606

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

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

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

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

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

As of ~~September 30, 2022~~March 31, 2023

Financial instrument

Fair Value

Valuation technique

Significant
unobservable inputs

Range of
inputs

Collateral dependent net loans
held for investment

~~374~~389

Valuation of collateral

Discount for comparable sales

10%-35%

Other real estate owned

~~2,193~~224

Appraised value of property less costs to sell

Discount for costs to sell

0%-15%

3938

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

As of December 31, ~~2021~~2022

Financial instrument

Fair Value

Valuation technique

Significant
unobservable inputs

Range of
inputs

Collateral dependent loans
held for investment

~~5,477~~2,860

Valuation of collateral

Discount for comparable sales

10%-35%

Other real estate owned

~~6,308~~2,497

Appraised value of property less costs to sell

Discount for costs to sell

0%-15%

For collateral dependent loans, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. Fair value of the loan's collateral is determined by third-party appraisals, which are then adjusted for estimated selling and closing costs related to liquidation of the collateral. Collateral dependent loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on changes in market conditions from the time of valuation and management's knowledge of the borrower and borrower's business. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, total amortized cost of collateral dependent loans measured on a non-recurring basis amounted to ~~$578~~$558 and ~~$5,781,~~$3,054, respectively.

Other real estate owned acquired in settlement of indebtedness is recorded at fair value of the real estate less estimated costs to sell. Subsequently, it may be necessary to record nonrecurring fair value adjustments for declines in fair value. Any write-downs based on the asset's fair value at the date of foreclosure are charged to the allowance for credit losses. Appraisals for both collateral dependent loans and other real estate owned are performed by certified ~~general~~ appraisers ~~(for commercial properties) or certified residential appraisers (for residential properties)~~ whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the lending administrative department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry wide statistics. Collateral dependent loans that are dependent on recovery through sale of equipment, such as farm equipment, automobiles and aircrafts are generally valued based on public source pricing or subscription services while more complex assets are valued through leveraging brokers who have expertise in the collateral involved.

Fair value option

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

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


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

Mortgage loans held for sale	52,477		82,750
Total loans held for sale, at fair value	61,987		113,240
Loans held for sale not accounted for under a fair value option:
Mortgage loans held for sale - guaranteed GNMA repurchase option	20,528		26,211
Total loans held for sale	$	82,515	$	139,451

Mortgage loans held for sale

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

Net losses of ~~$4,276~~$51 and ~~$16,479~~$16,874 resulting from fair value changes of mortgage loans were recorded in income during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~respectively, compared to net losses of $3,908 and $14,894 during the three and nine months ended September 30, 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 held for sale and derivatives resulted in net losses of $421 and $7,548 for the three months ended March 31, 2023 and 2022, respectively. The change in fair value of both loans held for sale and the related derivative instruments are recorded in ~~Mortgage Banking~~mortgage banking Income in the consolidated statements of income. Election of the fair value option allows the Company to reduce the accounting volatility that would otherwise result from the asymmetry created by accounting for the financial instruments at the lower of cost or fair value and the derivatives at fair value.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

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

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

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

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

Commercial loans held for sale

The Company also has a portfolio of shared ~~national credits and~~ institutional healthcare loans that were acquired during a 2020 ~~in the acquisition of Franklin.~~business combination. These commercial loans are also being measured under the fair value option. As such, these loans are excluded from the allowance for credit losses. The following tables ~~sets~~set forth the changes in fair value associated with this portfolio for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.


		Three Months Ended September 30, 2022							Three Months Ended March 31, 2023
		Principal Balance		Fair Value Discount		Fair Value			Principal Balance		Fair Value Discount		Fair Value
Carrying value at beginning of period	Carrying value at beginning of period	$	47,462	$	(9,647)	$	37,815	Carrying value at beginning of period	$	34,357	$	(3,867)	$	30,490
Change in fair value:	Change in fair value:							Change in fair value:
Pay-downs and pay-offs	Pay-downs and pay-offs	(3,706)		—		(3,706)		Pay-downs and pay-offs	(21,890)		—		(21,890)
Write-offs to discount		(8,729)		8,729		—
Changes in valuation included in other noninterest income		—		(387)		(387)
Carrying value at end of period		$	35,027	$	(1,305)	$	33,722

		Nine Months Ended September 30, 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		(43,006)				(43,006)
Write-offs to discount		(8,729)		8,729		—
Changes in valuation included in other noninterest income	Changes in valuation included in other noninterest income	—		(2,571)		(2,571)		Changes in valuation included in other noninterest income	—		910		910
Carrying value at end of period	Carrying value at end of period	$	35,027	$	(1,305)	$	33,722	Carrying value at end of period	$	12,467	$	(2,957)	$	9,510


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

Changes in valuation included in other noninterest income		—		740		740
Carrying value at end of period		$	111,606	$	(11,110)	$	100,496

		Nine Months Ended September 30, 2021							Three Months Ended March 31, 2022
		Principal balance		Fair Value discount		Fair Value			Principal balance		Fair Value discount		Fair Value
Carrying value at beginning of period	Carrying value at beginning of period	$	239,063	$	(23,660)	$	215,403	Carrying value at beginning of period	$	86,762	$	(7,463)	$	79,299

Change in fair value:	Change in fair value:							Change in fair value:
Pay-downs and pay-offs	Pay-downs and pay-offs	(116,158)		—		(116,158)		Pay-downs and pay-offs	(946)		—		(946)
Write-offs to discount		(11,299)		11,299		—

Changes in valuation included in other noninterest income	Changes in valuation included in other noninterest income	—		1,251		1,251		Changes in valuation included in other noninterest income	—		(174)		(174)
Carrying value at end of period	Carrying value at end of period	$	111,606	$	(11,110)	$	100,496	Carrying value at end of period	$	85,816	$	(7,637)	$	78,179

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

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

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

The following table summarizes the differences between the fair value and the principal balance for loans held for sale and nonaccrual loans measured at fair value as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


September 30, 2022		Aggregate fair value		Aggregate Unpaid Principal Balance		Difference
March 31, 2023								March 31, 2023	Aggregate fair value		Aggregate Unpaid Principal Balance		Difference
Mortgage loans held for sale measured at fair value	Mortgage loans held for sale measured at fair value	$	70,526	$	72,098	$	(1,572)	Mortgage loans held for sale measured at fair value	$	52,477	$	51,298	$	1,179
Commercial loans held for sale measured at fair value	Commercial loans held for sale measured at fair value	33,722		35,027		(1,305)		Commercial loans held for sale measured at fair value	232		236		(4)

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

December 31, 2021		Aggregate fair value		Aggregate Unpaid Principal Balance		Difference
December 31, 2022								December 31, 2022	Aggregate fair value		Aggregate Unpaid Principal Balance		Difference
Mortgage loans held for sale measured at fair value	Mortgage loans held for sale measured at fair value	$	672,924	$	658,017	$	14,907	Mortgage loans held for sale measured at fair value	$	82,750	$	81,520	$	1,230
Commercial loans held for sale measured at fair value	Commercial loans held for sale measured at fair value	74,082		76,863		(2,781)		Commercial loans held for sale measured at fair value	21,201		22,126		(925)

Nonaccrual commercial loans held for sale	Nonaccrual commercial loans held for sale	5,217		9,899		(4,682)		Nonaccrual commercial loans held for sale	9,289		12,231		(2,942)

Note (11)—Segment reporting:

The Company and the Bank are engaged in the business of banking and provide a full range of financial services. The Company determines reportable segments based on the significance of the segment’s operating results to the overall Company, the products and services offered, customer characteristics, processes and service delivery of the segments and the regular financial performance review and allocation of resources by the Chief Executive Officer, the Company’s chief operating decision maker. The Company has identified two distinct reportable segments—Banking and Mortgage. The Company’s primary segment is Banking, which provides a full range of deposit and lending products and services to corporate, commercial and consumer customers. The Company also ~~offers~~originates conforming residential mortgage loans through the Mortgage segment, which activities also include the servicing of residential mortgage loans and the packaging and securitization of loans to governmental agencies. The Company’s mortgage division represents a distinct reportable segment which differs from the Company’s primary business of commercial and retail banking.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

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

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

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

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

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


		Three months ended September 30,						Nine months ended September 30,							Three Months Ended March 31,
		2022			2021			2022			2021					2023		2022
Interest rate lock commitment volume by line of business:
Interest rate lock commitment volume by delivery channel:														Interest rate lock commitment volume by delivery channel:
Direct-to-consumer	Direct-to-consumer	$	—		$	1,085,180		$	663,848		$	2,948,530		Direct-to-consumer		$	—	$	568,092
Retail	Retail	408,879			926,723			1,755,008			2,726,956			Retail		375,042		741,015
Total	Total	$	408,879		$	2,011,903		$	2,418,856		$	5,675,486		Total		$	375,042	$	1,309,107
Interest rate lock commitment volume % by line of business:
Direct-to-consumer		—		%	53.9		%	27.4		%	52.0		%
Retail		100.0		%	46.1		%	72.6		%	48.0		%
Mortgage sales by line of business:
Direct-to-consumer		$	48,490		$	809,887		$	1,024,838		$	2,562,681
Retail		521,165			726,010			1,698,987			2,226,795
Total		$	569,655		$	1,535,897		$	2,723,825		$	4,789,476
Mortgage sales % by line of business:
Direct-to-consumer		8.5		%	52.7		%	37.6		%	53.5		%
Retail		91.5		%	47.3		%	62.4		%	46.5		%

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

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


Three Months Ended September 30, 2022		Banking(4)		Mortgage		Consolidated
Three Months Ended March 31, 2023								Three Months Ended March 31, 2023	Banking(3)		Mortgage		Consolidated
Net interest income	Net interest income	$	111,384	$	—	$	111,384	Net interest income	$	103,660	$	—	$	103,660
Provisions for credit losses(1)	Provisions for credit losses(1)	11,367		—		11,367		Provisions for credit losses(1)	491		—		491
Mortgage banking income(2)	Mortgage banking income(2)	—		16,729		16,729		Mortgage banking income(2)	—		15,493		15,493
Change in fair value of mortgage servicing rights, net of hedging(2)	Change in fair value of mortgage servicing rights, net of hedging(2)	—		(4,345)		(4,345)		Change in fair value of mortgage servicing rights, net of hedging(2)	—		(3,407)		(3,407)
Other noninterest income	Other noninterest income	10,293		(85)		10,208		Other noninterest income	11,493		(230)		11,263
Depreciation and amortization	Depreciation and amortization	1,867		190		2,057		Depreciation and amortization	2,049		179		2,228
Amortization of intangibles	Amortization of intangibles	1,108		—		1,108		Amortization of intangibles	990		—		990

Other noninterest expense	Other noninterest expense	62,911		15,771		78,682		Other noninterest expense	65,311		11,911		77,222
Income (loss) before income taxes	Income (loss) before income taxes	$	44,424	$	(3,662)	$	40,762	Income (loss) before income taxes	$	46,312	$	(234)	$	46,078
Income tax expense	Income tax expense					8,931		Income tax expense					9,697
Net income applicable to FB Financial Corporation and noncontrolling interest	Net income applicable to FB Financial Corporation and noncontrolling interest					31,831		Net income applicable to FB Financial Corporation and noncontrolling interest					36,381
Net income applicable to noncontrolling interest(3)	Net income applicable to noncontrolling interest(3)					—		Net income applicable to noncontrolling interest(3)					—
Net income applicable to FB Financial Corporation	Net income applicable to FB Financial Corporation					$	31,831	Net income applicable to FB Financial Corporation					$	36,381
Total assets	Total assets	$	11,648,610	$	609,472	$	12,258,082	Total assets	$	12,530,039	$	571,108	$	13,101,147
Goodwill	Goodwill	242,561		—		242,561		Goodwill	242,561		—		242,561

(1)Includes ~~$3,178~~$4,997 in provision for credit losses on loans and $(4,506) in provision for credit losses on unfunded commitments.

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

~~(3)Banking segment includes noncontrolling interest.~~

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

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

Three Months Ended September 30, 2021
Banking(3)
Mortgage Consolidated
Net interest income $ 88,576 $ (100) $ 88,476
Provisions for credit losses(1)
(2,531) — (2,531)
Mortgage banking income(2)
— 47,751 47,751
Change in fair value of mortgage servicing rights, net of hedging(2)
— (2,367) (2,367)
Other noninterest income 13,823 (201) 13,622
Depreciation and amortization 1,791 349 2,140
Amortization of intangibles 1,344 — 1,344
Other noninterest expense 55,642 35,881 91,523
Income before income taxes $ 46,153 $ 8,853 $ 55,006
Income tax expense 9,716
Net income applicable to FB Financial Corporation and noncontrolling
interest 45,290
Net income applicable to noncontrolling interest(3)
—
Net income applicable to FB Financial Corporation $ 45,290
Total assets $ 10,712,281 $ 1,098,009 $ 11,810,290
Goodwill 242,561 — 242,561

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

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

(3) Banking segment includes noncontrolling interest.

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

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

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

~~(3) Includes $12,458 in Mortgage restructuring expenses in the Mortgage segment related to the exit from the direct-to-consumer delivery channel.~~

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

4441

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

Nine Months Ended September 30, 2021
Banking(3)
Mortgage Consolidated
Net interest income $ 257,726 $ (111) $ 257,615
Provisions for credit losses(1)
(30,224) — (30,224)
Mortgage banking income(2)
— 146,990 146,990
Change in fair value of mortgage servicing rights, net of hedging(2)
— (10,775) (10,775)
Other noninterest income 39,223 (402) 38,821
Depreciation and amortization 5,267 1,021 6,288
Amortization of intangibles 4,178 — 4,178
Other noninterest expense(3)
163,261 108,938 272,199
Income before income taxes $ 154,467 $ 25,743 $ 180,210
Income tax expense 38,744
Net income applicable to FB Financial Corporation and noncontrolling
interest
141,466
Net income applicable to noncontrolling interest(3)
8
Net income applicable to FB Financial Corporation $ 141,458
Total assets $ 10,712,281 $ 1,098,009 $ 11,810,290
Goodwill 242,561 — 242,561


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

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


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

(1)Includes ~~$(2,875)~~$(6,129) in provision for credit losses on loans and $1,882 in provision for credit losses on unfunded commitments.

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

(3)Banking segment includes noncontrolling interest.

The Banking segment provides the Mortgage segment with a warehouse line of credit that is used to fund mortgage loans held for sale. The warehouse line of credit, which is eliminated in consolidation, is limited based on interest income earned by the Mortgage segment. The amount of interest paid by the Mortgage segment to the Banking segment under this warehouse line of credit is recorded as interest income to ~~our~~the Company's Banking segment and as interest expense to the Mortgage segment, both of which are included in the calculation of net interest income for each segment. The amount of interest paid by the Mortgage segment to the Banking segment under this warehouse line of credit was ~~$4,143~~$3,931 and ~~$14,659~~$5,666 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~respectively, and $6,075 and $17,585 for the three and nine months ended September 30, 2021,~~ respectively.

Note (12)—Minimum capital requirements:

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

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

In March 2020, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC announced a final rule to delay the estimated impact on regulatory capital stemming from the implementation of CECL. The final rule maintained the three-year transition option in the previous rule and provides banks the option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period (five-year transition option). The Company adopted the capital transition relief over the permissible five-year period and delayed the initial impact of CECL adoption plus 25% of the quarterly increases in ACL ~~through December 31, 2021. As of~~in the first two years after adoption. Beginning on January 1, 2022, the cumulative amount of the transition adjustments became fixed and are being phased out of regulatory capital calculations evenly over a three year period, with 75% of the transition provision’s impact being recognized in 2022, 50% recognized in 2023, and 25% recognized in 2024.

4542

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

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


As oAs of September 30, 2022		Actual				Minimum Capital adequacy with capital buffer			To be well capitalized under prompt corrective action provisions
As of March 31, 2023															As of March 31, 2023	Actual				Minimum Capital adequacy with capital buffer			To be well capitalized under prompt corrective action provisions
		Amount		Ratio			Amount		Ratio		Amount		Ratio			Amount		Ratio			Amount		Ratio		Amount		Ratio

Total Capital (to risk-weighted assets)	Total Capital (to risk-weighted assets)														Total Capital (to risk-weighted assets)
FB Financial Corporation	FB Financial Corporation	$	1,501,110	13.0	%		$	1,210,236	10.5	%	N/A		N/A		FB Financial Corporation	$	1,557,049	13.6	%		$	1,205,137	10.5	%	N/A		N/A
FirstBank	FirstBank	1,472,955		12.8	%		1,208,502		10.5	%	$	1,150,954	10.0	%	FirstBank	1,524,500		13.3	%		1,204,213		10.5	%	$	1,146,869	10.0	%
Tier 1 Capital (to risk-weighted assets)	Tier 1 Capital (to risk-weighted assets)														Tier 1 Capital (to risk-weighted assets)
FB Financial Corporation	FB Financial Corporation	$	1,287,489	11.2	%		$	979,715	8.5	%	N/A		N/A		FB Financial Corporation	$	1,331,158	11.6	%		$	975,587	8.5	%	N/A		N/A
FirstBank	FirstBank	1,259,334		10.9	%		978,311		8.5	%	$	920,764	8.0	%	FirstBank	1,298,609		11.3	%		974,839		8.5	%	$	917,495	8.0	%
Tier 1 Capital (to average assets)	Tier 1 Capital (to average assets)														Tier 1 Capital (to average assets)
FB Financial Corporation	FB Financial Corporation	$	1,287,489	10.7	%		$	479,489	4.0	%	N/A		N/A		FB Financial Corporation	$	1,331,158	10.4	%		$	512,344	4.0	%	N/A		N/A
FirstBank	FirstBank	1,259,334		10.5	%		479,290		4.0	%	$	599,113	5.0	%	FirstBank	1,298,609		10.2	%		511,666		4.0	%	$	639,583	5.0	%
Common Equity Tier 1 Capital (to risk-weighted assets)	Common Equity Tier 1 Capital (to risk-weighted assets)														Common Equity Tier 1 Capital (to risk-weighted assets)
FB Financial Corporation	FB Financial Corporation	$	1,257,489	10.9	%		$	806,824	7.0	%	N/A		N/A		FB Financial Corporation	$	1,301,158	11.3	%		$	803,424	7.0	%	N/A		N/A
FirstBank	FirstBank	1,259,334		10.9	%		805,668		7.0	%	$	748,120	6.5	%	FirstBank	1,298,609		11.3	%		802,808		7.0	%	$	745,465	6.5	%


As of December 31, 2021		Actual				Minimum Capital adequacy with capital buffer			To be well capitalized under prompt corrective action provisions
As of December 31, 2022															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			Amount		Ratio			Amount		Ratio		Amount		Ratio

Total Capital (to risk-weighted assets)	Total Capital (to risk-weighted assets)														Total Capital (to risk-weighted assets)
FB Financial Corporation	FB Financial Corporation	$	1,434,581	14.5	%		$	1,039,984	10.5	%	N/A		N/A		FB Financial Corporation	$	1,528,344	13.1	%		$	1,225,161	10.5	%	N/A		N/A
FirstBank	FirstBank	1,396,407		14.1	%		1,038,760		10.5	%	$	989,295	10.0	%	FirstBank	1,506,543		12.9	%		1,222,922		10.5	%	$	1,164,688	10.0	%
Tier 1 Capital (to risk-weighted assets)	Tier 1 Capital (to risk-weighted assets)														Tier 1 Capital (to risk-weighted assets)
FB Financial Corporation	FB Financial Corporation	$	1,251,874	12.6	%		$	841,892	8.5	%	N/A		N/A		FB Financial Corporation	$	1,315,386	11.3	%		$	991,797	8.5	%	N/A		N/A
FirstBank	FirstBank	1,213,700		12.3	%		840,901		8.5	%	$	791,436	8.0	%	FirstBank	1,293,585		11.1	%		989,985		8.5	%	$	931,750	8.0	%
Tier 1 Capital (to average assets)	Tier 1 Capital (to average assets)														Tier 1 Capital (to average assets)
FB Financial Corporation	FB Financial Corporation	$	1,251,874	10.5	%		$	474,831	4.0	%	N/A		N/A		FB Financial Corporation	$	1,315,386	10.5	%		$	499,648	4.0	%	N/A		N/A
FirstBank	FirstBank	1,213,700		10.2	%		474,044		4.0	%	$	592,555	5.0	%	FirstBank	1,293,585		10.4	%		499,194		4.0	%	$	623,992	5.0	%
Common Equity Tier 1 Capital (to risk-weighted assets)	Common Equity Tier 1 Capital (to risk-weighted assets)														Common Equity Tier 1 Capital (to risk-weighted assets)
FB Financial Corporation	FB Financial Corporation	$	1,221,874	12.3	%		$	693,322	7.0	%	N/A		N/A		FB Financial Corporation	$	1,285,386	11.0	%		$	816,774	7.0	%	N/A		N/A
FirstBank	FirstBank	1,213,700		12.3	%		692,507		7.0	%	$	643,042	6.5	%	FirstBank	1,293,585		11.1	%		815,281		7.0	%	$	757,047	6.5	%

Note (13)—Stock-Based Compensation:

Restricted Stock Units

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

The following table summarizes ~~information about the~~ changes in restricted stock units for the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023.


		Restricted Stock Units Outstanding	Weighted Average Grant Date Fair Value			Restricted Stock Units Outstanding	Weighted Average Grant Date Fair Value
Balance at beginning of period (unvested)	Balance at beginning of period (unvested)	492,320	$	36.06	Balance at beginning of period (unvested)	365,155	$	39.02
Granted	Granted	143,036	43.74		Granted	144,578	37.17
Vested	Vested	(202,652)	36.12		Vested	(134,601)	34.11
Forfeited	Forfeited	(46,496)	34.51		Forfeited	(1,428)	43.62
Balance at end of period (unvested)	Balance at end of period (unvested)	386,208	$	38.99	Balance at end of period (unvested)	373,704	$	39.05

4643

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

The total fair value of restricted stock units vested and released was ~~$1,474~~$4,591 and ~~$7,320~~$3,397 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~respectively, and $10,749 and $15,941 for the three and nine months ended September 30, 2021,~~ respectively.

The compensation cost related to stock grants and vesting of restricted stock units was $~~1,701~~1,706 and ~~$5,753~~$1,856 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~respectively, and $2,365 and $7,024 for the three and nine months ended September 30, 2021,~~ respectively. This included amounts paid related to director grants and compensation elected to be settled in stock amounting to $~~171~~175 and ~~$485~~$166 during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~respectively, and $168 and $467 during the three and nine months ended September 30, 2021,~~ respectively.

As of ~~September 30, 2022,~~March 31, 2023, there was ~~$10,686~~$12,523 of total unrecognized compensation cost related to unvested restricted stock units which is expected to be recognized over a weighted-average period of ~~2.3~~2.9 years. Additionally, as of ~~September 30, 2022,~~March 31, 2023, there were ~~1,737,539~~1,571,098 shares available for issuance under the Company's stock compensation plans. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, there were ~~$265~~$205 and ~~$274,~~$292, respectively, accrued in other liabilities related to dividend equivalent units declared to be paid upon vesting and distribution of the underlying restricted stock units.

Performance Based Restricted Stock Units

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

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

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

AsThe following table summarizes information about the changes in PSUs as of ~~September 30, 2022,~~and for the ~~Company determined~~three months ended March 31, 2023.






	Performance Stock Units Outstanding	Weighted Average Grant Date Fair Value
Balance at beginning of period (unvested)	161,667	$	41.73
Granted	86,010	37.17
Performance adjustment (1)	44,319	37.17
Vested	(90,583)	36.21
Forfeited or expired	(1,153)	44.25
Balance at end of period (unvested)	200,260	$	40.98
(1) PSUs are presented as outstanding, granted and forfeited in the table above assuming targets are met and the awards pay out at 100%. PSU awards are settled with payouts ranging from 0% and 200% of the target award value based on the Company's performance relative to a predefined peer group over a fixed three-year performance period. The performance adjustment represents the difference in shares ultimately awarded due to performance attainment above or below target.

The following table summarizes data related to the ~~probability~~Company's outstanding PSUs as of ~~meeting the performance criteria for each grant and recorded compensation cost associated when factoring in the conversion of PSUs to shares of common stock.~~March 31, 2023:

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


Grant Year	Grant Price		Vest Year	PSUs Outstanding
2021 (1)	$	43.20	2024	54,922
2022 (2)	$	44.44	2025	59,328
2023 (2)	$	37.17	2026	86,010
(1)Vesting factor will be either at 0%, 25%, 100%, or 200% of PSUs outstanding based on the Company's performance relative to a predefined peer group over a fixed three-year performance period. (2)Vesting factor will be interpolated between 0% and 200% of PSUs outstanding based on the Company's performance relative to a predefined peer group over a fixed three-year performance period.

The Company recorded compensation cost of ~~$832~~$579 and ~~$2,400 during the three and nine months ended September 30, 2022 respectively, and $551 and $1,041~~$726 for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2023 and 2022, respectively. As of ~~September 30, 2022,~~March 31, 2023, maximum unrecognized compensation cost at 200% payout related to the unvested PSUs was ~~$9,753,~~$14,182, and the weighted average remaining performance period over which the cost could be recognized was ~~2.0~~2.50 years.

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

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

Employee Stock Purchase Plan:

The Company maintains an employee stock purchase plan under which employees, through payroll deductions, are able to purchase shares of Company common stock. The employee purchase price is 95% of the lower of the market price on the first or last day of the offering period. The maximum number of shares issuable during any offering period is 200,000

~~FB Financial Corporation and subsidiaries~~

~~Notes to consolidated financial statements~~

~~(Unaudited)~~

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

shares and a participant may not purchase more than 725 shares during any offering period (and, in any event, no more than $25 worth of common stock in any calendar year). ~~During the three~~There were 8,214 and ~~nine months ended September 30, 2022, there were 11,798 and 26,950~~15,152 shares of common stock ~~respectively,~~ issued under the ESPP with proceeds from employee payroll withholdings of ~~$499~~$305 and ~~$1,087. During~~$588 during the three ~~and nine~~ months ended ~~September 30, 2021, there were 15,744~~March 31, 2023 and ~~37,310 shares of common stock issued under the ESPP, respectively, with proceeds from employee payroll withholdings of $632 and $1,443,~~2022, respectively. As of ~~September 30, 2022,~~March 31, 2023, there were ~~2,314,746~~2,306,532 shares available for issuance under the ~~ESPP, respectively.~~ESPP.

Note (14)—Related party transactions:

(A) Loans:

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

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


Loans outstanding at January 1, ~~2022~~2023	$	~~29,010~~82,559
New loans and advances	~~55,428~~23,098
~~Change in related party status~~	~~(9,939)~~
Repayments	~~(2,345)~~(2,365)
Loans outstanding at ~~September 30, 2022~~March 31, 2023	$	~~72,154~~103,292

Unfunded commitments to certain executive officers, certain management and directors and their related interests totaled ~~$34,875~~$34,089 and ~~$10,994~~$31,564 at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

(B) Deposits:

The Bank held deposits from related parties totaling ~~$311,197~~$336,448 and ~~$312,956~~$347,660 as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

The Bank leases various office spaces from entities owned by certain directors of the Company under varying terms. The Company had $1 and $6 in unamortized leasehold improvements related to these leases at September 30, 2022 and December 31, 2021, respectively. These improvements are being amortized over a term not to exceed the length of the lease. Lease expense for these properties totaled ~~$96~~$90 and ~~$297~~$101 for the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023 and ~~$128 and $388 for the three and nine months ended September 30, 2021.~~2022.

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

During the year ended December 31, 2021, the Bank formed a subsidiary, FBK Aviation, LLC and purchased an aircraft under this entity. FBK Aviation, LLC also maintains a non-exclusive aircraft lease agreement with an entity owned by one of the Company's directors. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, the Company recognized income amounting to ~~$17~~$7 and ~~$36,~~$11, respectively, under this agreement. ~~No such income was recognized during~~

(E) Equity investment in preferred stock:

During the ~~three and nine months~~year ended ~~September 30, 2021. Additionally,~~December 31, 2022, the Company invested in preferred stock of a privately held entity of which an executive officer of the Company is ~~a participant to an aviation time sharing agreement for an aircraft owned by an entity that is owned by one~~on the Board of directors of the ~~Company's directors~~investee. This investment is included in other assets on the consolidated balance sheets with a carrying amount of $10,000 as of both March 31, 2023 and ~~one of the Company's former directors. During the nine months ended September 30, 2021, the Company made payments of $32 under~~December 31, 2022, and is being accounted for as an equity security without readily determinable market value. No gains or losses have been recognized to date associated with this ~~agreement. No such payments were made during the three months ended September 30, 2021 nor the three and nine months ended September 30, 2022.~~investment.

~~(E) Registration rights agreement:~~

The Company is party to a registration rights agreement with its former majority shareholder entered into in connection with the 2016 IPO, under which the Company is responsible for payment of expenses (other than underwriting discounts and commissions) relating to sales to the public by the shareholder of shares of the Company’s common stock beneficially owned by him. Such expenses include registration fees, legal and accounting fees, and printing costs payable by the Company and expensed when incurred. During the nine months ended September 30, 2021, the Company paid $605 under this agreement related to the secondary offering completed during the second quarter of 2021. No such expenses were incurred during the three months ended September 30, 2021 nor three and nine months ended September 30, 2022.

4845

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

The following is a discussion of our financial condition at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, and our results of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ and should be read in conjunction with our audited consolidated financial statements set forth in our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, that was filed with the SEC on February ~~25, 2022,~~28, 2023, and with the accompanying unaudited notes to the condensed consolidated financial statements set forth in this Report.

Forward-looking statements

Certain statements contained in this Report that are not historical in nature may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements regarding the Company’s ~~business operations, assets, valuations, financial conditions, results of operations,~~ future plans, results, strategies, and expectations, including expectations around ~~interest rates, inflation, unemployment, mortgage markets, and~~ changing economic ~~markets generally .~~markets. These statements can generally be identified by the use of the words and phrases “may,” “will,” “should,” “could,” “would,” “goal,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target,” “aim,” “predict,” “continue,” “seek,” “project,” and other variations of such words and phrases and similar expressions. These forward-looking statements are not historical facts, and are based upon management's current expectations, estimates, and projections, many of which, by their nature, are inherently uncertain and beyond the Company’s control. The inclusion of these forward-looking statements should not be regarded as a representation by the Company or any other person that such expectations, estimates, and projections will be achieved. Accordingly, the Company cautions shareholders and investors that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, and uncertainties that are difficult to predict. Actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. A number of factors could cause actual results to differ materially from those contemplated by the forward-looking statements including, without limitation, (1) current and future economic conditions, including the effects of inflation, interest rate fluctuations, changes in the economy or global supply chain, supply-demand imbalances affecting local real estate prices, and high unemployment rates in the local or regional economies in which the Company operates and/or the US economy generally, (2) changes in government interest rate policies and its impact on the Company’s business, ~~NIM,~~net interest margin, and mortgage operations, (3) any continuation of the recent turmoil in the banking industry, including the associated impact to the Company and other financial institutions of any regulatory changes or other mitigation efforts taken by government agencies in response, (4) increased competition for deposits, (5) the Company’s ability to effectively manage problem credits, ~~(4)~~(6) any deterioration in commercial real estate market fundamentals, (7) the Company’s ability to identify potential candidates for, consummate, and achieve synergies from, potential future acquisitions, ~~(5) difficulties and delays in integrating acquired businesses or fully realizing costs savings, revenue synergies and other benefits from future and prior acquisitions, (6)~~(8) the Company’s ability to successfully execute its various business strategies, ~~(7)~~(9) changes in state and federal legislation, regulations or policies applicable to banks and other financial service providers, including legislative developments, ~~(8)~~(10) the potential impact of the phase-out of ~~LIBOR~~the London Interbank Offered Rate ("LIBOR") or other changes involving LIBOR, ~~(9)~~(11) the effectiveness of the Company’s cybersecurity controls and procedures to prevent and mitigate attempted intrusions, ~~(10)~~(12) the Company's dependence on information technology systems of third party service providers and the risk of systems failures, interruptions, or breaches of security, ~~(11)~~and (13) the ~~adverse effects~~impact of ~~the ongoing global COVID-19 pandemic, including the effect of actions taken to mitigate its impact on individuals or the economy broadly, (12)~~ natural disasters, pandemics, and/or acts of war or terrorism, ~~(13)~~(14) international or political instability, including the impacts related to or resulting from Russia’s military action in Ukraine and additional sanctions and export controls, as well as the broader impacts to financial markets and the global macroeconomic and geopolitical environments, and ~~(14)~~(15) general competitive, economic, political, and market conditions. Further information regarding the Company and factors which could affect the forward-looking statements contained herein can be found in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021,~~2022, and in any of the Company’s subsequent filings with the SEC. Many of these factors are beyond the Company’s ability to control or predict. If one or more events related to these or other risks or uncertainties materialize, or if the underlying assumptions prove to be incorrect, actual results may differ materially from the forward-looking statements. Accordingly, shareholders and investors should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date of this Report, and the Company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. New risks and uncertainties may emerge from time to time, and it is not possible for the Company to predict their occurrence or how they will affect the ~~company.~~Company. The Company qualifies all forward-looking statements by these cautionary ~~statements.~~statements.

Critical accounting policies

Our financial statements are prepared in accordance with U.S. GAAP and general practices within the banking industry. Within our financial statements, certain financial information contains approximate measurements of financial effects of

transactions and impacts at the consolidated balance sheet dates and our results of operations for the reporting periods. We monitor the status of proposed and newly issued accounting standards to evaluate the impact on our financial condition and results of operations. Our accounting policies, including the impact of any newly issued accounting standards if applicable, are discussed in further detail in Note 1, "Basis of presentation," in the notes to our consolidated financial statements in our Annual Report. ~~Further, any updates made to our accounting policies since our Annual report are detailed in Note 1, "Basis of presentation," within this Report herein.~~

Financial highlights

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


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

		September 30,						September 30,						December 31,				March 31,				December 31,
(dollars in thousands, except per share data and %)	(dollars in thousands, except per share data and %)	2022			2021			2022			2021			2021			(dollars in thousands, except per share data and %)		2023			2022			2022
Statement of Income Data
Selected Statement of Income Data																	Selected Statement of Income Data

Net interest income	Net interest income	111,384			88,476			$	301,737		$	257,615		$	347,370		Net interest income		$	103,660		$	88,182		$	412,235
Provisions for credit losses	Provisions for credit losses	11,367			(2,531)			19,438			(30,224)			(40,993)			Provisions for credit losses		491			(4,247)			18,982
Total noninterest income	Total noninterest income	22,592			59,006			97,198			175,036			228,255			Total noninterest income		23,349			41,392			114,667
Total noninterest expense	Total noninterest expense	81,847			95,007			268,116			282,665			373,567			Total noninterest expense		80,440			89,272			348,346
Income before income taxes	Income before income taxes	40,762			55,006			111,381			180,210			243,051			Income before income taxes		46,078			44,549			159,574
Income tax expense	Income tax expense	8,931			9,716			24,961			38,744			52,750			Income tax expense		9,697			9,313			35,003
Net income applicable to noncontrolling interest	Net income applicable to noncontrolling interest	—			—			8			8			16			Net income applicable to noncontrolling interest		—			—			16
Net income applicable to FB Financial Corporation	Net income applicable to FB Financial Corporation	$	31,831		$	45,290		$	86,412		$	141,458		$	190,285		Net income applicable to FB Financial Corporation		$	36,381		$	35,236		$	124,555
Net income applicable to FB Financial Corporation and noncontrolling interest		31,831			45,290			86,420			141,466			190,301

Net interest income (tax-equivalent basis)	Net interest income (tax-equivalent basis)	$	112,145		$	89,230		$	304,003		$	259,919		$	350,456		Net interest income (tax-equivalent basis)		$	104,493		$	88,932		$	415,282
Per Common Share	Per Common Share																Per Common Share
Basic net income	Basic net income	$	0.68		$	0.96		$	1.83		$	2.99		$	4.01		Basic net income		$	0.78		$	0.74		$	2.64
Diluted net income	Diluted net income	0.68			0.94			1.83			2.95			3.97			Diluted net income		0.78			0.74			2.64
Book value(1)	Book value(1)	27.30			29.36			27.30			29.36			30.13			Book value(1)		29.29			29.06			28.36
Tangible book value(2)	Tangible book value(2)	21.85			23.90			21.85			23.90			24.67			Tangible book value(2)		23.86			23.62			22.90
Cash dividends declared	Cash dividends declared	0.13			0.11			0.39			0.33			0.44			Cash dividends declared		0.15			0.13			0.52

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

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

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

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

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

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

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

5048

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


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

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

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

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

(1)Book value per share equals our total common shareholders’ equity as of the date presented divided by the number of shares of our common stock outstanding as of the date presented. The number of shares of our common stock outstanding was ~~46,926,377, 47,707,634~~46,762,626, 47,487,874 and ~~47,549,241~~46,737,912 as of ~~September 30,~~March 31, 2023, March 31, 2022 ~~September 30, 2021~~ and December 31, ~~2021,~~2022, respectively.

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

(3)We have calculated our return on average assets and return on average common equity for a period by dividing annualized net income or loss for that period by our average assets and average equity, as the case may be, for that period. We calculate our average assets and average common equity for a period by dividing the sum of our total asset balance or total common shareholders' equity balance, as the case may be, as of the close of business on each day in the relevant period and dividing by the number of days in the period.

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

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

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

~~(6)~~(7)We calculate our risk-weighted assets using the standardized method of the Basel III ~~Framework.~~Framework and reflect the election to opt-out of including accumulated other comprehensive income.

GAAP reconciliation and management explanation of non-GAAP financial measures

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

In accordance with the SEC's rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the United States in our statements of income, balance sheets or statements of cash flows.

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

Adjusted Efficiency ratio (tax-equivalent basis)

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

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


(In Thousands, Except Share Data and %)		Three Months Ended September 30,						Nine Months Ended September 30,						Year Ended December 31,
		2022			2021			2022			2021			2021
(dollars in thousands, except %)																	(dollars in thousands, except %)	Three Months Ended March 31,				Year Ended December 31,
																			2023			2022			2022
Adjusted efficiency ratio (tax-equivalent basis)	Adjusted efficiency ratio (tax-equivalent basis)																Adjusted efficiency ratio (tax-equivalent basis)
Total noninterest expense	Total noninterest expense	$	81,847		$	95,007		$	268,116		$	282,665		$	373,567		Total noninterest expense		$	80,440		$	89,272		$	348,346

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

Less certain charitable contributions		—			—			—			—			1,422

Adjusted noninterest expense	Adjusted noninterest expense	$	81,847		$	95,007		$	255,658		$	282,847		$	372,327		Adjusted noninterest expense		$	80,440		$	89,272		$	335,888
Net interest income (tax-equivalent basis)	Net interest income (tax-equivalent basis)	$	112,145		$	89,230		$	304,003		$	259,919		$	350,456		Net interest income (tax-equivalent basis)		$	104,493		$	88,932		$	415,282
Total noninterest income	Total noninterest income	22,592			59,006			97,198			175,036			228,255			Total noninterest income		23,349			41,392			114,667
Less (loss) gain on change in fair value on commercial loans held for sale		(387)			740			(2,571)			1,251			11,172
Less loss on swap cancellation		—			(1,510)			—			(1,510)			(1,510)
Less gain (loss) on change in fair value of commercial loans held for sale																	Less gain (loss) on change in fair value of commercial loans held for sale		910			(174)			(5,133)

Less gain (loss) on sales or write-downs of other real estate owned		435			2,005			(89)			2,478			2,504
Less (loss) gain on other assets		(6)			177			76			162			323
Less (loss) gain from securities, net		(140)			51			(401)			278			324

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

Less gain (loss) from securities, net																	Less gain (loss) from securities, net		69			(152)			(376)
Adjusted noninterest income	Adjusted noninterest income	$	22,690		$	57,543		$	100,183		$	172,377		$	215,442		Adjusted noninterest income		$	22,553		$	42,152		$	120,441
Adjusted operating revenue	Adjusted operating revenue	$	134,835		$	146,773		$	404,186		$	432,296		$	565,898		Adjusted operating revenue		$	127,046		$	131,084		$	535,723
Efficiency ratio (GAAP)	Efficiency ratio (GAAP)	61.1		%	64.4		%	67.2		%	65.3		%	64.9		%	Efficiency ratio (GAAP)		63.3		%	68.9		%	66.1		%
Adjusted efficiency ratio (tax-equivalent basis)	Adjusted efficiency ratio (tax-equivalent basis)	60.7		%	64.7		%	63.3		%	65.4		%	65.8		%	Adjusted efficiency ratio (tax-equivalent basis)		63.3		%	68.1		%	62.7		%

5250

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

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

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


		As of September 30,						As of December 31,				As of March 31,						As of December 31,
(In Thousands, Except Share Data and %)		2022			2021			2021
(dollars in thousands, except share data and %)											(dollars in thousands, except share data and %)	2023			2022			2022
Tangible Assets	Tangible Assets										Tangible Assets
Total assets	Total assets	$	12,258,082		$	11,810,290		$	12,597,686		Total assets	$	13,101,147		$	12,674,191		$	12,847,756
Adjustments:	Adjustments:										Adjustments:
Goodwill	Goodwill	(242,561)			(242,561)			(242,561)			Goodwill	(242,561)			(242,561)			(242,561)
Core deposit and other intangibles	Core deposit and other intangibles	(13,407)			(18,248)			(16,953)			Core deposit and other intangibles	(11,378)			(15,709)			(12,368)
Tangible assets	Tangible assets	$	12,002,114		$	11,549,481		$	12,338,172		Tangible assets	$	12,847,208		$	12,415,921		$	12,592,827
Tangible Common Equity	Tangible Common Equity										Tangible Common Equity
Total common shareholders' equity	Total common shareholders' equity	$	1,281,161		$	1,400,913		$	1,432,602		Total common shareholders' equity	$	1,369,696		$	1,379,776		$	1,325,425
Adjustments:	Adjustments:										Adjustments:
Goodwill	Goodwill	(242,561)			(242,561)			(242,561)			Goodwill	(242,561)			(242,561)			(242,561)
Core deposit and other intangibles	Core deposit and other intangibles	(13,407)			(18,248)			(16,953)			Core deposit and other intangibles	(11,378)			(15,709)			(12,368)
Tangible common equity	Tangible common equity	$	1,025,193		$	1,140,104		$	1,173,088		Tangible common equity	$	1,115,757		$	1,121,506		$	1,070,496
Common shares outstanding	Common shares outstanding	46,926,377			47,707,634			47,549,241			Common shares outstanding	46,762,626			47,487,874			46,737,912
Book value per common share	Book value per common share	$	27.30		$	29.36		$	30.13		Book value per common share	$	29.29		$	29.06		$	28.36
Tangible book value per common share	Tangible book value per common share	$	21.85		$	23.90		$	24.67		Tangible book value per common share	$	23.86		$	23.62		$	22.90
Total common shareholders' equity to total assets	Total common shareholders' equity to total assets	10.5		%	11.9		%	11.4		%	Total common shareholders' equity to total assets	10.5		%	10.9		%	10.3		%
Tangible common equity to tangible assets	Tangible common equity to tangible assets	8.54		%	9.87		%	9.51		%	Tangible common equity to tangible assets	8.68		%	9.03		%	8.50		%

Return on average tangible common equity

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


		Three Months Ended September 30,						Nine Months Ended September 30,						Year Ended December 31,				Three Months Ended March 31,				Year Ended December 31,
(In Thousands, Except %)		2022			2021			2022			2021			2021
(dollars in thousands, except %)																	(dollars in thousands, except %)		2023			2022			2022
Return on average tangible common equity	Return on average tangible common equity																Return on average tangible common equity
Total average common shareholders' equity	Total average common shareholders' equity	$	1,336,143		$	1,389,201		$	1,368,025		$	1,344,613		$	1,361,637		Total average common shareholders' equity		$	1,343,227		$	1,415,985		$	1,349,583
Adjustments:	Adjustments:																Adjustments:
Average goodwill	Average goodwill	(242,561)			(242,561)			(242,561)			(242,561)			(242,561)			Average goodwill		(242,561)			(242,561)			(242,561)
Average intangibles, net	Average intangibles, net	(13,953)			(18,950)			(15,149)			(22,289)			(19,606)			Average intangibles, net		(11,862)			(16,376)			(14,573)
Average tangible common equity	Average tangible common equity	$	1,079,629		$	1,127,690		$	1,110,315		$	1,079,763		$	1,099,470		Average tangible common equity		$	1,088,804		$	1,157,048		$	1,092,449
Net income applicable to FB Financial Corporation	Net income applicable to FB Financial Corporation	$	31,831		$	45,290		$	86,412		$	141,458		$	190,285		Net income applicable to FB Financial Corporation		$	36,381		$	35,236		$	124,555
Return on average common shareholders' equity	Return on average common shareholders' equity	9.45		%	12.9		%	8.45		%	14.1		%	14.0		%	Return on average common shareholders' equity		11.0		%	10.1		%	9.23		%
Return on average tangible common equity	Return on average tangible common equity	11.7		%	15.9		%	10.4		%	17.5		%	17.3		%	Return on average tangible common equity		13.6		%	12.4		%	11.4		%

5351

Company overview

We are a financial holding company headquartered in Nashville, Tennessee. We operate primarily through our wholly-owned bank subsidiary, ~~FirstBank, the third largest bank headquartered in Tennessee, based on total assets.~~FirstBank. FirstBank provides a comprehensive suite of commercial and consumer banking services to clients in select markets in Tennessee, Kentucky, Alabama and North ~~Georgia, and mortgage offices across the Southeast.~~Georgia. As of ~~September 30, 2022,~~March 31, 2023, our footprint included 82 full-service branches serving the following Tennessee Metropolitan Statistical Areas: Nashville, Chattanooga (including North Georgia), Knoxville, Memphis, and Jackson in addition to Bowling Green, Kentucky and Birmingham, Florence and Huntsville, Alabama. ~~We also provide~~Our banking services extend to 16 community markets throughout Tennessee and North Georgia. FirstBank also provides retail mortgage banking services utilizing its bank branch network and mortgage banking offices strategically located throughout the southeastern United States.

We operate through two segments, Banking and Mortgage. We generate most of our revenue in our Banking segment from interest on loans and investments, loan-related fees, trust and investment services and deposit-related fees. Our primary source of funding for our loans is customer deposits, ~~and, to a lesser extent,~~however we have other sources of funds including unsecured credit lines, brokered ~~and internet deposits,~~CDs, and other borrowings. We generate most of our revenue in our Mortgage segment from origination fees and gains on sales in the secondary ~~market of~~ mortgage ~~loans,~~loan market, as well as from mortgage servicing revenues.

Recent developments

~~Mortgage restructuring~~Recent banking events

~~On May 10, 2022, we announced the restructuring~~In light of ~~our Mortgage segment (referred to herein as "Mortgage restructuring"), including the exit from our direct-to-consumer channel, which is one of two delivery channels~~recent events in the ~~Mortgage segment.~~ banking sector, including recent bank failures, continuing interest rate hikes and recessionary concerns, we have proactively positioned the balance sheet to mitigate the risks affecting the Company and the overall banking industry in order to serve our clients and communities.

As ~~a result~~ of ~~exiting this channel,~~March 31, 2023, we ~~recorded restructuring expenses~~carried on-balance sheet liquidity of ~~$12.5 million~~$1.61 billion. We maintain the ability to access $6.78 billion of contingent liquidity from the FHLB, Federal Reserve, untapped brokered CDs, and unsecured lines of credit. Our available-for-sale debt securities portfolio is 11.2% of total assets and we do not maintain any held-to-maturity investment securities. Management considers our current liquidity position to be more than adequate to meet both short-term and long-term liquidity needs. Refer to the section 'Liquidity and capital resources' for additional information.

Further, our capital ratios of the Company, and its subsidiary bank are well above the standards to be considered well-capitalized under regulatory requirements. Refer to Note 12, "Minimum capital requirements," in the notes to our consolidated financial statements for additional details.

Non-performing assets were 0.61% of total assets as of March 31, 2023 and net charge-offs during the ~~nine~~three months ended ~~September 30, 2022. The repositioning~~March 31, 2023 were 0.02%, reflecting our disciplined underwriting and conservative lending philosophy. Refer to the section 'Asset quality' for additional information.

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

Overview of recent financial performance

Results of operations

Three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~September 30, 2021~~March 31, 2022

Our net income ~~decreased~~increased during the three months ended ~~September 30, 2022~~March 31, 2023 to ~~$31.8~~$36.4 million ~~down~~ from ~~$45.3~~$35.2 million for the three months ended ~~September 30, 2021.~~March 31, 2022. Diluted earnings per common share were ~~$0.68~~$0.78 and ~~$0.94~~$0.74 for the three months ended ~~September 30,~~March 31, 2023 and 2022, and 2021, respectively. Our net income represented a return on average assets, or ROAA, of 1.05% and 1.51% for the three months ended September 30, 2022 and 2021, respectively and a return on average shareholders’ equity, or ROAE, of 9.45% and 12.9% for the same periods. Our ratio of return on average tangible common equity, or ROATCE for the three months ended September 30, 2022 and 2021 was 11.7% and 15.9%, respectively. See “GAAP reconciliation and management explanation of non-GAAP financial measures” in this Report for a discussion of tangible common equity and return on average tangible common equity.

Du~~ring the three months ended September 30, 2022, our net interest income increased to $111.4 million compared with $88.5 million for the three months ended September 30, 2021.~~ ~~Our net interest margin, on a tax-equivalent basis, increased to~~ 3.93% for the three months ended September 30, 2022, compared with 3.20% for the three months ended September 30, 2021. The increase was primarily driven by our loan growth, increased interest rates and a shift in balance sheet composition during the three months ended September 30, 2022 compared to the three months ended September 30, 2021.

We experienced a decrease in noninterest income of $36.4 million to $22.6 million for the three months ended September 30, 2022, compared with $59.0 million for the same period in the prior year. A decrease of $33.0 million in mortgage banking income was the primary driver for the downward movement in noninterest income, which was the result of interest rate increases and an overall slowdown in mortgage activity experienced throughout the industry.

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

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

Our net income decreased during the nine months ended September 30, 2022 to $86.4 million from $141.5 million for the nine months ended September 30, 2021. Diluted earnings per common share were $1.83 and $2.95 for the nine months ended September 30, 2022 and 2021, respectively. Our net income represented a return on average assets of ~~0.93%~~1.15% and ~~1.61%~~1.13% for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, and a return on average equity of ~~8.45%~~11.0% and ~~14.1%~~10.1% for the same periods. Our ~~ratio of~~ return on average tangible common equity for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 were 13.6% and ~~2021 were 10.4% and 17.5%~~12.4%, respectively. See “GAAP reconciliation and management explanation of non-GAAP financial measures” in this Report for a discussion of tangible common equity and return on average tangible common equity.

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, our net interest income before provision for credit losses increased to ~~$301.7~~$103.7 million compared with ~~$257.6~~$88.2 million in the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. Our net interest margin, on a tax-equivalent basis, increased to ~~3.50%~~3.51% for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 as compared to ~~3.19%~~3.04% for the ~~nine~~ three

months ended ~~September 30, 2021.~~March 31, 2022. The increase was primarily driven by an increase in ~~loan~~interest rates on loans HFI, ~~origination volume,~~ which was ~~slightly~~partially offset by ~~an increase in cost~~the impact of increasing costs of funds ~~of $1.9 million driven by rising interest rates~~as competition over customer deposits has risen in ~~deposits and new short-term FHLB advances borrowed during~~ the ~~period.~~industry.

Noninterest income for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 decreased by ~~$77.8~~$18.0 million to ~~$97.2~~$23.3 million, down from ~~$175.0~~$41.4 million in the same period in the prior year. The decrease in noninterest income was primarily ~~made up of~~due to a ~~$71.7~~$17.4 million decrease in mortgage banking income for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. These results were impacted by increasing interest rates, compressing margins, and a decrease in demand for residential mortgages ~~experienced throughout the industry~~ during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared with the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The change also reflects the closure of our direct-to-consumer mortgage internet delivery channel in the second quarter of 2022. Refer to the section "Business segment highlights" for additional information on the restructuring of our Mortgage segment.

Noninterest expense decreased to ~~$268.1~~$80.4 million for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, compared with ~~$282.7~~$89.3 million for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The decrease in noninterest expense is reflective of the ~~$31.8~~$12.5 million decrease in salaries, commissions and employee-related costs in the Mortgage segment related to the ~~reduction in mortgage production, which was partially offset by mortgage~~ restructuring ~~expenses of $12.5 million incurred during the nine months ended September 30, 2022 associated with the exit~~ of our ~~direct-to-consumer internet delivery channel.~~Mortgage segment and reduced headcount and mortgage production.

Business segment highlights

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

Banking

Three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~September 30, 2021~~March 31, 2022

Income before taxes from the Banking segment ~~decreased~~increased for the three months ended ~~September 30, 2022~~March 31, 2023 to ~~$44.4~~$46.3 million, compared to ~~$46.2~~$44.8 million for the three months ended ~~September 30, 2021. These results were primarily driven~~March 31, 2022. Net interest income increased by ~~an increase in provisions for credit losses of $13.9~~$15.5 million to $11.4 million (including a provision for credit losses on unfunded commitments of $3.2 million) for the three months ended September 30, 2022 compared to a net reversal in provisions for credit losses of $2.5 million for the three months ended September 30, 2021, reflecting growth in loans HFI during the three months ended September 30, 2022 and changing economic outlook when compared to the three months ended September 30, 2021. Noninterest income decreased to $10.3 million in the three months ended September 30, 2022 as compared to $13.8 million in the three months ended September 30, 2021. The decrease in our noninterest income during the three months ended September 30, 2022 is partially attributable to a $2.3 million decrease in ATM and interchange fees due to the expiration of our exemption from the Durbin amendment becoming effective for the Company during the current period, which limits interchange fees for banking institutions with asset sizes greater than $10 billion. Additionally, gains on sales or write-downs of other real estate owned decreased $1.6 million to $0.4$103.7 million during the three months ended ~~September 30, 2022,~~March 31, 2023 compared to ~~gains of $2.0~~$88.2 million during the three months ended September 30, 2021. Noninterest expense increased during the three months ended September 30, 2022 to $65.9 million, from $58.8 million for three months ended September 30, 2021 due to increases in salaries, marketing and occupancy and temporary increases in legal and professional expenses.

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

Income before taxes from the Banking segment decreased for the nine months ended September 30, 2022 to $130.5 million, compared to $154.5 million for the nine months ended September 30, 2021. Net interest income increased by $44.0 million to $301.7 million during the nine months ended September 30, 2022 compared to $257.7 million during the nine months ended September 30, 2021.March 31, 2022. Our provisions for credit losses on loans HFI and unfunded loan commitments resulted in ~~$19.4~~$0.5 million of expense during the three months ended March 31, 2023 compared to a $4.2 million net reversal of provision expense during the ~~nine~~three months ended ~~September 30, 2022 compared to $30.2 million reversal of provision expense in the same period in the previous year.~~March 31, 2022. Noninterest income decreased slightly to ~~$33.0~~$11.5 million in the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 as compared to ~~$39.2~~$12.0 million in the ~~nine~~three months ended ~~September 30, 2021. Similar to the discussion above, the~~March 31, 2022. The decrease includes a $2.7 million decrease in ATM and interchange ~~fees, gain on sales or write-downs of other real estate owned and~~fee income partially offset by a $1.1 million increase in the change in ~~the~~ fair value of ~~our~~the commercial loans held for sale ~~were~~portfolio during the ~~main drivers in the decrease in our noninterest income period-over-period. During the nine~~three months ended ~~September 30, 2022, ATM and interchange fees decreased $1.5~~March 31, 2023 compared to the three months ended March 31, 2022. Noninterest expense increased to $68.4 million ~~gain on sales or write-downs of other real estate owned decreased $2.6 million and the change in the fair value of our commercial loans held~~ for ~~sale decreased $3.9~~three months ended March 31, 2023 compared to $59.6 million for the ~~nine~~three months ended ~~September 30, 2021. Noninterest expense was $184.8 million for nine months ended September 30,~~March 31, 2022 ~~compared to $172.7 million for the same period in the previous year mainly~~ due to increases in ~~salaries,~~regulatory fees, advertising, occupancy, and ~~temporary increases in~~ legal and professional fees.

Mortgage

Three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~three months ended September 30, 2021~~

~~The Mortgage segment reported a pre-tax loss of $3.7 million for~~ the three months ended ~~September 30,~~March 31, 2022 compared to income of $8.9 million for the three months ended September 30, 2021. Noninterest income decreased by $32.9 million to $12.3 million for the three months ended September 30, 2022, compared with $45.2 million for the three months ended September 30, 2021, primarily related to a decrease in mortgage banking income and compressing margins impacted by the rising interest rate environment and a reduction in interest rate lock commitment volume.

Noninterest expense for the three months ended September 30, 2022 and 2021 was $16.0 million and $36.2 million, respectively. This reflects a decrease in salaries, commissions, incentives and employee benefits due to a reduction in production volume.

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

Activity in our Mortgage segment resulted in a pre-tax net loss of ~~$19.1~~$0.2 million for the ~~nine~~three months ended ~~September 30, 2022 as~~March 31, 2023 compared to ~~income~~a pre-tax net loss of ~~$25.7~~$0.3 million for the ~~nine~~three months ended ~~September 30, 2021. There was a decrease in mortgage~~March 31, 2022. Mortgage banking income ~~of $71.7~~decreased $17.4 million to ~~$64.5~~$12.1 million during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~$136.2~~$29.5 million for the ~~nine~~three months ended ~~September 30, 2021. This was a result of interest~~March 31, 2022. Interest rate increases, compressing margins, and a decrease in demand for residential mortgages ~~which lead~~contributed to a ~~57.4%~~71.4% decrease in interest rate lock volume during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared with the same period in the prior year. Mortgage banking income and the decrease in interest rate lock volume reflect the restructuring of our mortgage business (referred to herein as "Mortgage restructuring"), including the exit of our direct-to-consumer internet delivery channel during the second quarter of 2022. Noninterest expense for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ was ~~$83.3~~$12.1 million and ~~$110.0~~$29.7 million, respectively, reflecting decreases in advertising, salaries, commissions and incentive costs associated with the decrease in production volume ~~partially offset by mortgage restructuring expenses of $12.5 million during~~and headcount reduction from the ~~current period compared with the same period in the previous year.~~Mortgage restructuring.

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

Results of operations

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

The adjustment to convert certain income to a tax-equivalent basis consists of dividing tax exempt income by one minus the combined federal and blended state statutory income tax rate of 26.06% for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~

2022.

Net interest income

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

Net interest income is the most significant component of our earnings, generally comprising over 50% of our total revenues in a given period. Net interest income and margin are shaped by many factors, primarily the volume, term structure and mix of earning assets, funding mechanisms, and interest rate fluctuations. Other factors include accretion or amortization of discounts or premiums on purchased loans, prepayment risk on mortgage and investment–related assets, and the composition and maturity of earning assets and interest-bearing liabilities. Loans typically generate more interest income than investment securities with similar maturities. Funding from client deposits generally costs less than wholesale funding sources. Factors such as general economic activity, Federal Reserve monetary policy, and price volatility of competing alternative investments, can also exert significant influence on our ability to optimize the mix of assets and funding, net interest income, and margin.

During the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, the US Treasury yield curve remained inverted as long-term rates increased at a slower pace than short-term rates. This compares to the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, when the US Treasury yield curve steepened as long-term rates rose and short-term rates remained constant. The Federal Funds Target Rate range was 0%4.75% - ~~0.25%~~5.00% and ~~3.00%~~4.25% - ~~3.25%~~4.50% as of March 31, 2023 and December 31, ~~2021 and September 30,~~ 2022, respectively. ~~Effective November 2, 2022, the Federal Reserve increased the target range for the federal funds rate to 3.75% to 4.00% and additional increases in the target range are anticipated to slow inflation.~~

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

On a tax-equivalent basis, net interest income increased ~~by $22.9~~$15.6 million to ~~$112.1~~$104.5 million for the three months ended ~~September 30, 2022~~March 31, 2023 as compared to ~~$89.2~~$88.9 million for the three months ended ~~September 30, 2021.~~March 31, 2022. The increase in tax-equivalent net interest income for the three months ended ~~September 30, 2022~~March 31, 2023 was primarily driven by an increase in interest rates and volume of loans HFI ~~combined with increased~~partially offset by increases in deposit interest rates for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021. These fluctuations resulted in a 150.2% average interest-earning assets to average interest-bearing liabilities ratio compared to a 142.3% average interest-earning assets to average interest-bearing liabilities ratio for the three months ended September 30, 2021.expense resulting primarily from interest rate increases.

Interest income, on a tax-equivalent basis, was ~~$129.2~~$160.3 million for the three months ended ~~September 30, 2022,~~March 31, 2023, compared to ~~$97.4~~$95.9 million for the three months ended ~~September 30, 2021,~~March 31, 2022, an increase of ~~$31.8 million primarily driven by increased~~$64.4 million. This interest income represents an increase in yield on ~~loans HFI.~~interest-earning assets to 5.38% for the three months ended March 31, 2023 compared with 3.28% for the three months ended March 31, 2022. Interest income on loans ~~HFI,~~held for investment, on a tax-equivalent basis, increased ~~$30.4~~$57.0 million to ~~$114.5~~$139.5 million for the three months ended ~~September 30, 2022~~March 31, 2023 from ~~$84.1~~$82.5 million for the three months ended ~~September 30, 2021.~~March 31, 2022 due primarily to increased interest rates. The ~~increase in interest income~~average yield on loans HFI ~~was driven~~increased by ~~both an increase~~174 basis points period-over-period to 6.05% for the three months ended March 31, 2023. Contractual loan interest rates yielded 5.90% in ~~volume and yield period-over-period. The~~the three months ended March 31, 2023 compared with 4.12% in the three months ended March 31, 2022. Additionally, average loans HFI ~~outstanding~~ increased ~~by $1.56 billion~~ to ~~$8.81~~$9.35 billion for the three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~$7.25~~$7.76 billion for the three months ended ~~September 30, 2021.~~March 31, 2022. The ~~increased loan HFI volume attributed $20.3 million to the total~~ increase in ~~interest income.~~ average loans HFI is due to strong demand in our primary markets during the three months ended March 31, 2023.

The ~~tax-equivalent~~components of our loan yield ~~on loans held for investment was 5.16%~~ for the three months ended ~~September 30,~~March 31, 2023 and 2022 ~~up 55 basis points from~~were as follows:


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

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

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

For the three months ended ~~September 30, 2021. The increase in yield was primarily~~March 31, 2023 and 2022, net accretion on purchased loans increased the NIM by 1 basis point and net amortization on purchased loans decreased the NIM by 8 basis points, respectively. Net accretion/amortization is due to the continued impact of ~~interest rate hikes as well as~~purchase accounting resulting from our previously-completed business combinations, which can fluctuate based on volume of early pay-offs. As of March 31, 2023 and December 31, 2022, the remaining net discount on all acquired loans ~~with lower contractual rates maturing~~amounted to $3.0 million and new loans originated at higher interest rates. We expect loan yields to continue to increase due to the current interest rate environment discussed above. The increase in loan HFI tax-equivalent yield attributed $10.0$3.3 million, ~~to the total increase in interest income for the three months ended September 30, 2022.~~respectively.

Interest expense was ~~$17.1~~$55.8 million for the three months ended ~~September 30, 2022,~~March 31, 2023, an increase of ~~$8.9~~$48.9 million as compared to the three months ended ~~September 30, 2021.~~March 31, 2022. The ~~primary driver for the~~ increase was ~~due an increase~~largely attributed to a rise in interest ~~expense~~rates in interest-bearing deposit accounts, and specifically on ~~interest bearing checking,~~ money market ~~deposits~~ and ~~FHLB advances. Interest expense on~~ interest-bearing checking ~~deposits increased by $3.5 million to $5.8 million for the three months ended September 30, 2022, compared to $2.3 million for the three months ended September 30, 2021.~~deposit products. Interest expense on money market deposits increased ~~by $2.4~~$22.9 million to ~~$4.7~~$24.5 million for the three months ended ~~September 30, 2022,~~March 31, 2023 compared to ~~$2.3~~$1.6 million for the three months ended ~~September 30, 2021. The driver for the increase in~~March 31, 2022 and interest expense on ~~interest bearing~~interest-bearing checking deposits ~~and money market deposits is due~~increased $16.6 million to an increase in deposit rate which increased by 51 basis points and 42 basis points period-over-period, respectively. In addition, during three months ended September 30, 2022, we drew on FHLB advances which resulted in a $2.2$19.1 million ~~in interest expense. There was no such interest expense~~ for the three months ended ~~September 30, 2021.~~

~~During~~March 31, 2023 from $2.5 million for the ~~first quarter of 2022, we entered into~~ three ~~designated fair value hedges to mitigate the effect of changing rates on various fixed~~months ended March 31, 2022. The average rate ~~liabilities, including certain money market deposits and subordinated debt. The fair value hedge~~ on money market deposits increased ~~interest expense by $0.3 million during~~274 basis points from 0.21% for the three months ended ~~September 30, 2022.~~March 31, 2022 to 2.95% for the three months ended March 31, 2023 and the average rate on interest-bearing checking deposits increased 216 basis points from 0.28% for the three months ended March 31, 2022 to 2.44% for the three months ended March 31, 2023.

~~Our~~Overall, our NIM, on a tax-equivalent basis, increased to ~~3.93% during~~3.51% for the three months ended ~~September 30, 2022~~March 31, 2023 from ~~3.20% in~~3.04% for the three months ended ~~September 30, 2021,~~March 31, 2022, driven by the interest rate increases previously discussed along with a ~~change~~shift in balance sheet ~~mix which is reflected in the increase in our average interest-earning assets to average interest-bearing liabilities ratio discussed above. This change in balance sheet mix was further illustrated by~~composition, including a ~~decrease~~decline in excess liquidity, which we estimate to be interest-bearing deposits with other financial institutions in excess of 5% of average tangible assets. ~~During the three months ended September 30, 2022, we deployed excess~~Excess liquidity in our balance sheet funding strategy and as such, excess liquidity did not impact our NIM for the three months ended September 30, 2022. In contrast, we estimate excess liquidity during the three months ended September 30, 2021is estimated to have negatively impacted our NIM by approximately ~~28 basis points. Origination and other loan fees increased the NIM by 23~~1 basis point for the three months ended ~~September 30, 2022 and 2021.~~

~~The components of our loan yield, a key driver~~March 31, 2023 compared to ~~our NIM~~approximately 29 basis points for the three months ended ~~September 30, 2022 and 2021, were as follows:~~

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

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

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

March 31, 2022.

5855

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

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

Three Months Ended September 30,
2022 2021
(dollars in thousands on tax-equivalent basis)
Average
balances (1)
Interest
income/
expense Average
yield/
rate
Average
balances (1)
Interest
income/
expense Average
yield/
rate
Interest-earning assets:
Loans(2)(3)
$ 8,810,094 $ 114,488 5.16 % $ 7,245,313 $ 84,115 4.61 %
Mortgage loans held for sale(4)
124,358 1,626 5.19 % 709,654 4,687 2.62 %
Commercial loans held for sale 36,291 670 7.32 % 108,863 1,282 4.67 %
Securities:(4)
Taxable 1,469,934 6,843 1.85 % 1,117,647 3,989 1.42 %
Tax-exempt(3)
298,905 2,459 3.26 % 311,151 2,546 3.25 %
Total Securities(3)
1,768,839 9,302 2.09 % 1,428,798 6,535 1.81 %
Federal funds sold and reverse repurchase agreements’ 160,597 877 2.17 % 145,315 135 0.37 %
Interest-bearing deposits with other financial institutions 361,684 1,850 2.03 % 1,404,772 508 0.14 %
FHLB stock 49,478 431 3.46 % 28,422 157 2.19 %
Total interest earning assets(3)
11,311,341 129,244 4.53 % 11,071,137 97,419 3.49 %
Noninterest Earning Assets:
Cash and due from banks 109,681 107,263
Allowance for credit losses (127,710) (144,652)
Other assets(5)
744,803 881,314
Total noninterest earning assets 726,774 843,925
Total assets $ 12,038,115 $ 11,915,062
Interest-bearing liabilities:
Interest bearing deposits:
Interest-bearing checking $ 2,821,415 $ 5,831 0.82 % $ 2,937,273 $ 2,298 0.31 %
Money market(6)
2,551,521 4,684 0.73 % 2,997,595 2,322 0.31 %
Savings deposits 515,882 70 0.05 % 439,470 60 0.05 %
Customer time deposits(6)
1,151,843 2,535 0.87 % 1,200,760 1,840 0.61 %
Brokered and internet time deposits(6)
3,501 13 1.47 % 32,009 76 0.94 %
Time deposits 1,155,344 2,548 0.87 % 1,232,769 1,916 0.62 %
Total interest-bearing deposits 7,044,162 13,133 0.74 % 7,607,107 6,596 0.34 %
Other interest-bearing liabilities:
Securities sold under agreements to repurchase and federal funds
purchased 29,580 12 0.16 % 40,437 20 0.20 %
Federal Home Loan Bank advances 329,130 2,155 2.60 % — — — %
Subordinated debt 127,263 1,792 5.59 % 129,395 1,565 4.80 %
Other borrowings 1,457 7 1.91 % 1,547 8 2.05 %
Total other interest-bearing liabilities 487,430 3,966 3.23 % 171,379 1,593 3.69 %
Total Interest-bearing liabilities 7,531,592 17,099 0.90 % 7,778,486 8,189 0.42 %
Noninterest bearing liabilities:
Demand deposits 2,973,650 2,596,650
Other liabilities 196,637 150,632
Total noninterest-bearing liabilities 3,170,287 2,747,282
Total liabilities 10,701,879 10,525,768
FB Financial Corporation common shareholders' equity 1,336,143 1,389,201
Noncontrolling interest 93 93
Shareholders' equity 1,336,236 1,389,294
Total liabilities and shareholders' equity $ 12,038,115 $ 11,915,062
Net interest income (tax-equivalent basis) $ 112,145 $ 89,230
Interest rate spread (tax-equivalent basis) 3.63 % 3.07 %
Net interest margin (tax-equivalent basis)(7)
3.93 % 3.20 %
Cost of total deposits 0.52 % 0.26 %
Average interest-earning assets to average interest-bearing liabilities 150.2 % 142.3 %

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

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

~~(3)~~Interest income includes the effects of taxable-equivalent adjustments using a U.S. federal income tax rate and, where applicable, state income tax to increase tax-exempt interest income to a tax-equivalent basis. The net taxable-equivalent adjustment amounts included were $0.8 million for both the three months ended September 30, 2022 and 2021.

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

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

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

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

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

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

Interest income, on a tax-equivalent basis, was $336.1 million for the nine months ended September 30, 2022, compared to $290.1 million for the nine months ended September 30, 2021, an increase of $46.0 million. Interest income on loans held for investment, on a tax-equivalent basis, increased $43.1 million to $293.6 million for the nine months ended September 30, 2022 from $250.5 million for the nine months ended September 30, 2021. This is due to an increase in the average loans held for investment balance outstanding which increased to $8.30 billion for the nine months ended September 30, 2022 compared to $7.11 billion for the nine months ended September 30, 2021. The increase in average loan balance is due to the increased economic activity in our primary markets and combined with lower than expected payoffs during the period. We expect loan growth to slow down in future quarters relative to prior quarters to position for potential economic headwinds in 2023. The average yield on loans HFI increased by 2 basis points period-over-period to 4.73% for the nine months ended September 30, 2022. Contractual loan interest rates yielded 4.40% in the nine months ended September 30, 2022 compared with 4.31% in the nine months ended September 30, 2021. Excluding PPP loans, which have a 1% contractual loan yield, our contractual loan yield would have been 5 points higher for the nine months ended September 30, 2021. PPP loans did not impact our contractual loan yield for the nine months ended September 30, 2022.

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

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

The increase in interest expense during the period was partially offset by a $1.2 million decrease in interest expense on customer time deposits period-over-period. This decrease was largely driven by an decrease in the average customer time deposits outstanding which decreased to $1.12 billion for the nine months ended September 30, 2022 compared to $1.29 billion for the nine months ended September 30, 2021.

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

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

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

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

Nine Months Ended September 30,
2022 2021
(dollars in thousands) Interest
income Average
yield Interest
income Average
yield
Loans HFI yield components:
Contractual interest rate on loans held for
investment (1)(2)
$ 273,199 4.40 % $ 229,105 4.31 %
Origination and other loan fee income (2)
18,574 0.30 % 19,945 0.37 %
Amortization on purchased loans (1,339) (0.02) % (127) — %
Nonaccrual interest collections 2,059 0.03 % 1,623 0.03 %
Syndicated loan fee income 1,150 0.02 % — — %
Total loans HFI yield $ 293,643 4.73 % $ 250,546 4.71 %

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

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

Net amortization on purchased loans lowered the NIM by 2 basis points for the nine months ended September 30, 2022. Amortization on purchased loans did not impact our NIM for the nine months ended September 30, 2021. The increase in net amortization is due to the continued impact of purchase accounting resulting from our mergers, which can fluctuate based on volume of early pay-offs as discussed above. As a result of the Franklin merger, a $11.3 million premium was recorded on August 15, 2020 which is being amortized as a reduction to loan interest income. As of September 30, 2022 and December 31, 2021, the remaining net discount on all acquired loans amounted to $3.6 million and $2.3 million, respectively. Excluding PPP loans, our NIM would have been 5 basis points higher for the nine months ended September 30, 2021. PPP loans did not impact our NIM for the nine months ended September 30, 2022.

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


		Nine Months Ended September 30,												Three Months Ended March 31,
		2022						2021							2023				2022
(dollars in thousands on tax-equivalent basis)		Average balances(1)		Interest income/ expense		Average yield/ rate		Average balances(1)		Interest income/ expense		Average yield/ rate
(dollars in thousands on a tax-equivalent basis)																(dollars in thousands on a tax-equivalent basis)	Average balances(1)		Interest income/ expense		Average yield/ rate		Average balances(1)		Interest income/ expense		Average yield/ rate
Interest-earning assets:	Interest-earning assets:															Interest-earning assets:
Loans (2)(3)		$	8,302,649	$	293,643	4.73	%	$	7,111,240	$	250,546	4.71	%
Loans HFI (2)(3)																Loans HFI (2)(3)	$	9,346,708	$	139,467	6.05	%	$	7,762,566	$	82,463	4.31	%
Mortgage loans held for sale~~(4)~~	Mortgage loans held for sale~~(4)~~	269,794		7,542		3.74	%	695,056		13,925		2.68	%			Mortgage loans held for sale~~(4)~~	56,204		927		6.69	%	470,005		3,566		3.08	%
Commercial loans held for sale	Commercial loans held for sale	56,951		2,316		5.44	%	152,802		5,065		4.43	%			Commercial loans held for sale	16,608		159		3.88	%	78,567		928		4.79	%
Securities:~~(4)~~	Securities:~~(4)~~															Securities:~~(4)~~
Taxable	Taxable	1,442,397		18,762		1.74	%	975,886		10,652		1.46	%			Taxable	1,402,535		6,570		1.90	%	1,380,897		5,420		1.59	%
Tax-exempt (3)	Tax-exempt (3)	308,418		7,474		3.24	%	323,034		7,806		3.23	%			Tax-exempt (3)	294,652		2,440		3.36	%	318,849		2,523		3.21	%
Total Securities (3)		1,750,815		26,236		2.00	%	1,298,920		18,458		1.90	%
Total securities (3)																Total securities (3)	1,697,187		9,010		2.15	%	1,699,746		7,943		1.90	%
Federal funds sold and reverse repurchase agreements	Federal funds sold and reverse repurchase agreements	196,282		1,490		1.01	%	128,504		196		0.20	%			Federal funds sold and reverse repurchase agreements	188,013		1,855		4.00	%	206,829		192		0.38	%
Interest-bearing deposits with other financial institutions	Interest-bearing deposits with other financial institutions	1,012,061		4,039		0.53	%	1,481,939		1,423		0.13	%			Interest-bearing deposits with other financial institutions	728,576		8,008		4.46	%	1,599,991		638		0.16	%
FHLB stock	FHLB stock	39,030		824		2.82	%	30,527		470		2.06	%			FHLB stock	47,094		887		7.64	%	32,894		147		1.81	%
Total interest earning assets (3)	Total interest earning assets (3)	11,627,582		336,090		3.86	%	10,898,988		290,083		3.56	%			Total interest earning assets (3)	12,080,390		160,313		5.38	%	11,850,598		95,877		3.28	%
Noninterest Earning Assets:	Noninterest Earning Assets:															Noninterest Earning Assets:
Cash and due from banks	Cash and due from banks	98,202						137,934								Cash and due from banks	154,270						93,419
Allowance for credit losses	Allowance for credit losses	(124,635)						(157,910)								Allowance for credit losses	(134,803)						(125,980)
Other assets ~~(5)~~(6)	Other assets ~~(5)~~(6)	759,791						896,042								Other assets ~~(5)~~(6)	761,757						823,452
Total noninterest earning assets	Total noninterest earning assets	733,358						876,066								Total noninterest earning assets	781,224						790,891
Total assets	Total assets	$	12,360,940					$	11,775,054							Total assets	$	12,861,614					$	12,641,489
Interest-bearing liabilities:	Interest-bearing liabilities:															Interest-bearing liabilities:
Interest bearing deposits:
Interest bearing checking		$	3,262,730	$	11,573	0.47	%	$	2,904,387	$	8,005	0.37	%
Interest-bearing deposits:																Interest-bearing deposits:
Interest-bearing checking																Interest-bearing checking	$	3,165,058	$	19,060	2.44	%	$	3,559,755	$	2,457	0.28	%
Money market deposits~~(6)~~(7)	Money market deposits~~(6)~~(7)	2,802,070		7,672		0.37	%	2,958,864		8,753		0.40	%			Money market deposits~~(6)~~(7)	3,369,953		24,510		2.95	%	3,017,746		1,572		0.21	%
Savings deposits	Savings deposits	504,215		202		0.05	%	407,183		170		0.06	%			Savings deposits	458,023		64		0.06	%	487,945		64		0.05	%
Customer time deposits~~(6)~~(7)	Customer time deposits~~(6)~~(7)	1,119,905		5,653		0.67	%	1,288,348		6,892		0.72	%			Customer time deposits~~(6)~~(7)	1,472,221		9,221		2.54	%	1,077,386		1,320		0.50	%
Brokered and internet time deposits~~(6)~~	Brokered and internet time deposits~~(6)~~	8,605		86		1.34	%	37,347		521		1.87	%			Brokered and internet time deposits~~(6)~~	1,607		8		2.02	%	16,065		49		1.24	%
Time deposits	Time deposits	1,128,510		5,739		0.68	%	1,325,695		7,413		0.75	%			Time deposits	1,473,828		9,229		2.54	%	1,093,451		1,369		0.51	%
Total interest bearing deposits		7,697,525		25,186		0.44	%	7,596,129		24,341		0.43	%
Total interest-bearing deposits																Total interest-bearing deposits	8,466,862		52,863		2.53	%	8,158,897		5,462		0.27	%
Other interest-bearing liabilities:	Other interest-bearing liabilities:															Other interest-bearing liabilities:
Securities sold under agreements to repurchase and federal funds purchased	Securities sold under agreements to repurchase and federal funds purchased	28,954		38		0.18	%	34,807		77		0.30	%			Securities sold under agreements to repurchase and federal funds purchased	27,139		46		0.69	%	30,056		14		0.19	%
Federal Home Loan Bank advances	Federal Home Loan Bank advances	110,916		2,155		2.60	%	—		—		—	%			Federal Home Loan Bank advances	41,389		499		4.89	%	—		—		—	%
Subordinated debt~~(7)~~(8)	Subordinated debt~~(7)~~(8)	128,387		4,686		4.88	%	155,704		5,725		4.92	%			Subordinated debt~~(7)~~(8)	126,161		2,402		7.72	%	129,578		1,460		4.57	%
Other borrowings	Other borrowings	1,480		22		1.99	%	2,997		21		0.94	%			Other borrowings	1,688		10		2.40	%	1,502		9		2.43	%
Total other interest-bearing liabilities	Total other interest-bearing liabilities	269,737		6,901		3.42	%	193,508		5,823		4.02	%			Total other interest-bearing liabilities	196,377		2,957		6.11	%	161,136		1,483		3.73	%
Total interest-bearing liabilities	Total interest-bearing liabilities	7,967,262		32,087		0.54	%	7,789,637		30,164		0.52	%			Total interest-bearing liabilities	8,663,239		55,820		2.61	%	8,320,033		6,945		0.34	%
Noninterest bearing liabilities:
Noninterest-bearing liabilities:																Noninterest-bearing liabilities:
Demand deposits	Demand deposits	2,874,223						2,477,454								Demand deposits	2,588,756						2,767,087
Other liabilities(6)	Other liabilities(6)	151,337						163,257								Other liabilities(6)	266,299						138,291
Total noninterest-bearing liabilities	Total noninterest-bearing liabilities	3,025,560						2,640,711								Total noninterest-bearing liabilities	2,855,055						2,905,378
Total liabilities	Total liabilities	10,992,822						10,430,348								Total liabilities	11,518,294						11,225,411
FB Financial Corporation common shareholders' equity	FB Financial Corporation common shareholders' equity	1,368,025						1,344,613								FB Financial Corporation common shareholders' equity	1,343,227						1,415,985
Noncontrolling interest	Noncontrolling interest	93						93								Noncontrolling interest	93						93
Shareholders' equity	Shareholders' equity	1,368,118						1,344,706								Shareholders' equity	1,343,320						1,416,078
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	12,360,940					$	11,775,054							Total liabilities and shareholders' equity	$	12,861,614					$	12,641,489
Net interest income (tax-equivalent basis)	Net interest income (tax-equivalent basis)			$	304,003					$	259,919					Net interest income (tax-equivalent basis)			$	104,493					$	88,932
Interest rate spread (tax-equivalent basis)	Interest rate spread (tax-equivalent basis)					3.32	%					3.04	%			Interest rate spread (tax-equivalent basis)					2.77	%					2.94	%
Net interest margin (tax-equivalent basis) ~~(8)~~(9)	Net interest margin (tax-equivalent basis) ~~(8)~~(9)					3.50	%					3.19	%			Net interest margin (tax-equivalent basis) ~~(8)~~(9)					3.51	%					3.04	%
Cost of total deposits	Cost of total deposits					0.32	%					0.32	%			Cost of total deposits					1.94	%					0.20	%
Average interest-earning assets to average interest-bearing liabilities	Average interest-earning assets to average interest-bearing liabilities					145.9	%					139.9	%			Average interest-earning assets to average interest-bearing liabilities					139.4	%					142.4	%

(1)Calculated using daily averages.

(2)Average balances of nonaccrual loans and overdrafts (before deduction of ACL) are included in average loan balances. ~~Syndication fee income $1.2 million and $0, origination~~Origination and other loan fee income of ~~$18.6~~$3.1 million and ~~$19.9~~$5.0 million, net ~~amortization~~accretion (amortization) of ~~$1.3~~$0.3 million and ~~$0.1~~$(2.4) million, and nonaccrual interest collections of ~~$2.1~~$0.2 million and ~~$1.6~~$1.0 million are included in interest income for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

(3)Includes the effects of taxable-equivalent adjustments using a U.S. federal income tax rate and, where applicable, state income tax to increase tax-exempt interest income to a tax-equivalent basis. ~~For the nine months ended September 30, 2022 and 2021, the~~The net ~~taxable-equivalent~~tax-equivalent adjustment amounts included ~~was $2.3~~in income were $0.8 million and $0.8 million for ~~both the nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

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

(5)Includes average ~~balance for unrealized gains (losses) for~~of optional rights to repurchase government guaranteed GNMA mortgage loans ~~held~~previously sold that have become past due greater than 90 days of $23,180 for ~~sale and investments carried at fair value.~~the three months ended March 31, 2023.

~~(5)~~(6)Includes investments in premises and equipment, OREO, interest receivable, mortgage servicing rights, core deposit and other intangibles, goodwill, and other miscellaneous assets.

~~(6)~~(7)Includes ~~$2.8~~$0.9 million and ~~$2.8~~$0.9 million of interest rate premium accretion on money market deposits, ~~$0.6~~$1.5 million of interest expense and $0.3 million of interest income from fair value hedging instruments on money market deposits,and $0.1 million and ~~$1.9~~$0.2 million on customer time deposits ~~and $0.1 million and $0.4 million on brokered and internet time deposits~~ for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

~~(7)~~(8)Includes ~~$0.4~~$0.8 million of ~~accretion on subordinated debt~~interest expense and $0.2 million of interest income from fair value ~~premium~~hedging for the ~~nine~~three months ended ~~September 30, 2021. There was no such accretion for nine months ended September 30, 2022.~~March 31, 2023 and 2022, respectively.

~~(8)~~(9)The NIM is calculated by dividing annualized net interest income, on a tax-equivalent basis, by average total earning assets.

~~Rate/~~Yield/rate and volume analysis

The tables below present the components of the changes in net interest income for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022. For each major category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes due to average volumes and changes due to rates, with the changes in both volumes and rates allocated to these two categories based on the proportionate absolute changes in each category.

Three months ended ~~September 30, 2022~~March 31, 2023 compared to three months ended ~~September 30, 2021~~March 31, 2022


		Three months ended September 30, 2022 compared to three months ended September 30, 2021 due to changes in							Three months ended March 31, 2023 compared to three months ended March 31, 2022 due to changes in
(in thousands on a tax-equivalent basis)		Volume		Yield/ rate		Net increase (decrease)
(dollars in thousands on a tax-equivalent basis)								(dollars in thousands on a tax-equivalent basis)	Volume		Yield/ rate		Net increase (decrease)
Interest-earning assets:	Interest-earning assets:							Interest-earning assets:
Loans(1)(2)	Loans(1)(2)	$	20,334	$	10,039	$	30,373	Loans(1)(2)	$	23,638	$	33,366	$	57,004
Loans held for sale - residential		(7,653)		4,592		(3,061)
Loans held for sale - mortgage								Loans held for sale - mortgage	(6,825)		4,186		(2,639)
Loans held for sale - commercial	Loans held for sale - commercial	(1,340)		728		(612)		Loans held for sale - commercial	(593)		(176)		(769)
Securities available-for-sale and other securities:	Securities available-for-sale and other securities:							Securities available-for-sale and other securities:
Taxable	Taxable	1,640		1,214		2,854		Taxable	101		1,049		1,150
Tax Exempt(2)	Tax Exempt(2)	(101)		14		(87)		Tax Exempt(2)	(200)		117		(83)
Federal funds sold and reverse repurchase agreements	Federal funds sold and reverse repurchase agreements	83		659		742		Federal funds sold and reverse repurchase agreements	(186)		1,849		1,663
Time deposits in other financial institutions		(5,335)		6,677		1,342
Interest-bearing deposits with other financial institutions								Interest-bearing deposits with other financial institutions	(9,578)		16,948		7,370
FHLB stock	FHLB stock	183		91		274		FHLB stock	267		473		740
Total interest income(2)	Total interest income(2)	7,811		24,014		31,825		Total interest income(2)	6,624		57,812		64,436
Interest-bearing liabilities:	Interest-bearing liabilities:							Interest-bearing liabilities:
Interest-bearing checking		(239)		3,772		3,533
Money market(3)		(819)		3,181		2,362
Interest-bearing checking deposits								Interest-bearing checking deposits	(2,377)		18,980		16,603
Money market deposits(3)								Money market deposits(3)	2,562		20,376		22,938
Savings deposits	Savings deposits	10		—		10		Savings deposits	(4)		4		—
Customer time deposits(3)	Customer time deposits(3)	(108)		803		695		Customer time deposits(3)	2,473		5,428		7,901
Brokered and internet time deposits~~(3)~~	Brokered and internet time deposits~~(3)~~	(106)		43		(63)		Brokered and internet time deposits~~(3)~~	(72)		31		(41)
Securities sold under agreements to repurchase and federal funds purchased	Securities sold under agreements to repurchase and federal funds purchased	(4)		(4)		(8)		Securities sold under agreements to repurchase and federal funds purchased	(5)		37		32
Federal Home Loan Bank advances	Federal Home Loan Bank advances	2,155		—		2,155		Federal Home Loan Bank advances	499		—		499
Subordinated debt(4)	Subordinated debt(4)	(30)		257		227		Subordinated debt(4)	(65)		1,007		942
Other borrowings	Other borrowings	—		(1)		(1)		Other borrowings	1		—		1
Total interest expense	Total interest expense	859		8,051		8,910		Total interest expense	3,012		45,863		48,875
Change in net interest income(2)	Change in net interest income(2)	$	6,952	$	15,963	$	22,915	Change in net interest income(2)	$	3,612	$	11,949	$	15,561

(1)~~Average loans are gross, including nonaccrual loans and overdrafts (before deduction of allowance for credit losses).~~ Origination and other loan fee income of ~~$6.7~~$3.1 million and ~~$6.4~~$5.0 million, net accretion (amortization) of ~~$0.9~~$0.3 million and ~~$0.2~~$(2.4) million, and nonaccrual interest collections of ~~$0.5~~$0.2 million and ~~$0.4~~$1.0 million are included in interest income infor the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

(2)~~Interest income includes~~Includes the effects of ~~the tax-equivalent~~taxable-equivalent adjustments using a U.S. federal income tax rate and, where applicable, state income tax to increase tax-exempt interest income to a tax-equivalent basis. The net taxable-equivalent adjustment amounts included was $0.8 million and $0.8 million for three months ended March 31, 2023 and 2022, respectively.

(3)Includes $0.9 million and $0.9 million of interest rate premium accretion on money market deposits, ~~$180 thousand and $426 thousand~~$1.5 million of interest ~~rate premium accretion~~expense and $0.3 million of interest income from fair value hedging instruments on money market deposits, and $0.1 million and $0.2 million on customer time ~~deposits and $5 thousand and $99 thousand of interest rate premium accretion on brokered and internet~~ deposits for the three months ended ~~September 30,~~March 31, 2023 and 2022, respectively.

(4)Includes $0.8 million of interest expense and ~~2021,~~$0.2 million of interest income from fair value hedging instrument for the three months ended March 31, 2023 and 2022, respectively.

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

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

~~(1)~~Average loans are gross, including nonaccrual loans and overdrafts (before deduction of ACL). Syndication fee income $1.2 million and $0, origination and other loan fee income of $18.6 million and $19.9 million, net amortization of $1.3 million and $0.1 million, and nonaccrual interest collections of $2.1 million and $1.6 million are included in interest income for the nine months ended September 30, 2022 and 2021, respectively.

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

~~(3)Includes $0.4 million of accretion on subordinated debt fair value premium for the nine months ended September 30, 2021. There was no such accretion for nine months ended September 30, 2022.~~

~~(4)~~Includes $2.8 million and $2.8 million of interest rate premium accretion on money market deposits, $0.6 million and $1.9 million on customer time deposits and $0.1 million and $0.4 million on brokered and internet time deposits for the nine months ended September 30, 2022 and 2021, respectively.

6457

Provision for credit losses

The provision for credit losses charged to operating expense is an amount which, in the judgment of management, is necessary to maintain the allowance for credit losses at an appropriate level under the current expected credit loss model. The determination of the amount of the allowance is complex and involves a high degree of judgment and subjectivity. Refer to Note 1, "Basis of presentation" in the notes to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 for a detailed discussion regarding ACL methodology.

Our allowance for credit losses calculation as of ~~September 30, 2022~~March 31, 2023 resulted from management’s best estimate of losses over the life of loans and unfunded commitments in our portfolio in accordance with the CECL approach. Our calculation included qualitative adjustments for projected slower GDP growth over the next two to three ~~fiscal~~ years, expected elevated unemployment levels, and expected interest rate increases ~~in the short-term~~ from the Federal Reserve. We also considered the current global economic environment, including continued pressures on supply chains (and more specifically, oil and energy) and increased uncertainty due primarily to inflation surrounding the potential impact and hardship on the U.S. economy. The qualitative evaluations above include considered projections that the economy may be nearing a recession. These factors may continue to lead to increased volatility in forecasted macroeconomic variables, a key input to our calculated level of allowance for credit losses.

Three months ended ~~September 30, 2022~~March 31, 2023 compared to three months ended ~~September 30, 2021~~March 31, 2022

We recognized a provision for credit losses on loans HFI ~~of $8.2 million as compared to a reversal of provision for credit losses of $2.8 million~~ for the three months ended ~~September 30, 2022 and 2021, respectively. The increase~~March 31, 2023 of $5.0 million. This compares to a reversal in ~~our~~ provision for credit losses on loans HFI ~~during the three months ended September 30, 2022 was a result~~ of increased loan growth and the factors discussed above. The increase in our loans HFI combined with the economic variables signaling a possible recession in our forward-looking model compared to the improving economic variables used$6.1 million recorded for the three months ended ~~September 30, 2021 are~~March 31, 2022. The current period provision resulted from management’s best estimate of losses over the ~~primary drivers~~life of loans in our portfolio in accordance with the CECL approach driven by an $67.8 million increase in loans HFI outstanding from December 31, 2022 to March 31, 2023 and the deteriorating economic forecasts as discussed in further detail above. For the three months ended March 31, 2022, the reversal in total provision for credit losses ~~on loans HFI during~~was primarily the ~~three months ended September 30, 2022. In addition,~~result of improving economic forecasts allowing for a reduction of our allowance for credit losses calculation as of September 30, 2022 considered our loans and unfunded commitments with commercial exposure to address elevated risk in these assets not covered by the model.See further discussion under the subheading "Allowance for credit losses."reserves.

We also estimate expected credit losses on off-balance sheet loan commitments ~~that are not accounted for as derivatives.~~under the CECL methodology. When applying the CECL methodology to estimate expected credit loss, we consider the likelihood that funding will occur, the contractual period of exposure to credit loss, the risk of loss, historical loss experience, and current conditions along with expectations of future economic conditions. WeFor the three months ended March 31, 2023, we recorded a reversal in provision for credit losses on unfunded commitments of ~~$3.2~~$4.5 million ~~and $0.3~~compared to provision expense of $1.9 million ~~for the three months ended September 30, 2022 and 2021, respectively. The increase in expense period-over-period is due to a $328.9 million increase in our unfunded commitment balance~~ during the three months ended ~~September 30, 2022 and change~~March 31, 2022. The decrease in ~~macroeconomic variables discussed above.~~the provision for credit losses on unfunded commitments is primarily due to an intentional decrease in the total loan commitments.

During the three months ended ~~September 30,~~March 31, 2023, the unrealized value in our available-for-sale debt securities portfolio improved to an unrealized loss position of $207.3 million from $234.4 million as of December 31, 2022. During the three months ended March 31, 2022, our available-for-sale debt securities portfolio unrealized value declined ~~$91.1~~$105.6 million to an unrealized loss position of $258.6 million as of September 30, 2022 from an unrealized loss position of $167.5 million as of June 30, 2022. During the three months ended September 30, 2021, our available-for-sale debt securities portfolio unrealized value decreased $7.9 million to an unrealized gain position of $14.4 million as of September 30, 2021 from an unrealized gain position of ~~$22.3~~$4.7 million as of ~~June 30,~~December 31, 2021. The majority of the investment portfolio was either government guaranteed or an issuance of a government sponsored entity or highly rated by major credit rating agencies and we historically have not ~~recorded~~realized any losses associated with these investments. As such, ~~as of September 30, 2022 and December 31, 2021,~~ it was determined that all available-for-sale debt securities that experienced a decline in fair value below amortized cost basis were due to noncredit-related factors. ~~Therefore, there was no provision for credit losses recognized on~~The Company does not intend to sell those available-for-sale ~~debt~~ securities ~~during the three months ended September 30, 2022 or 2021.~~

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

~~We recognized a provision for credit losses on loans HFI for the nine months ended September 30, 2022~~that have an unrealized loss as of $10.2 million. This compares to a reversal in provision for credit losses on loans HFI of $27.3 million recorded for the nine months ended September 30, 2021. The current period provision resulted from management’s best estimate of losses over the life of loans in our portfolio in accordance with the CECL approach driven by an $1.50 billion increase in loans HFI outstanding from DecemberMarch 31, ~~2021 to September 30, 2022~~2023, and the increased possibility of a future recession and inflationary pressures as discussed in further detail above. For the nine months ended September 30, 2021, the reversal in total provision for credit losses was primarily the result of improving economic forecasts allowing for a reduction of our reserves.

~~For the nine months ended September 30, 2022,~~it is unlikely that the Company ~~recorded a provision for credit losses on unfunded commitments of $9.2 million compared~~will be required to ~~a release in provision of $2.9 million for~~sell the ~~nine months ended September 30, 2021. The increase in the provision for credit losses on unfunded commitments is primarily~~securities before recovery to amortized cost basis at maturity due to ~~the increase in the total loan commitment balance combined with the qualitative evaluations discussed above.~~

~~During the nine months ended September 30, 2022, the unrealized value in~~ our ~~available-for-sale debt securities portfolio declined $263.3 million from an unrealized gain~~liquidity position and access to other sources of $4.7 million as of December 31, 2021. During the nine months ended September 30, 2021, the Company's available-for-sale debt securities portfolio unrealized value declined $20.2 million from an unrealized gain position of $34.6 million as of December 31, 2020.funds. Based on our evaluation of potential credit risk in the portfolio, no provision for credit losses on available-for-sale debt securities was required during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 or ~~2021.~~2022.

Noninterest income

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(dollars in thousands)	(dollars in thousands)	2022		2021		2022		2021		(dollars in thousands)		2023		2022
Mortgage banking income	Mortgage banking income	$	12,384	$	45,384	$	64,474	$	136,215	Mortgage banking income		$	12,086	$	29,531
Service charges on deposit accounts	Service charges on deposit accounts	3,208		2,612		9,030		7,217		Service charges on deposit accounts		3,053		2,914
ATM and interchange fees	ATM and interchange fees	2,614		4,868		13,054		14,590		ATM and interchange fees		2,396		5,087
Investment services and trust income	Investment services and trust income	2,227		2,511		6,634		7,518		Investment services and trust income		2,378		2,132
(Loss) gain from securities, net		(140)		51		(401)		278
Gain (loss) on sales or write-downs of other real estate owned		435		2,005		(89)		2,478
(Loss) gain from other assets		(6)		177		76		162
Gain (loss) from securities, net										Gain (loss) from securities, net		69		(152)
Loss on sales or write-downs of other real estate owned and other assets										Loss on sales or write-downs of other real estate owned and other assets		(183)		(434)

Other income	Other income	1,870		1,398		4,420		6,578		Other income		3,550		2,314
Total noninterest income	Total noninterest income	$	22,592	$	59,006	$	97,198	$	175,036	Total noninterest income		$	23,349	$	41,392

Three months ended ~~September 30, 2022~~March 31, 2023 compared to three months ended ~~September 30, 2021~~March 31, 2022

Noninterest income amounted to ~~$22.6~~$23.3 million for the three months ended ~~September 30, 2022,~~March 31, 2023, a decrease of ~~$36.4~~$18.0 million, or ~~61.7%~~43.6%, as compared to ~~$59.0~~$41.4 million for the three months ended ~~September 30, 2021.~~March 31, 2022. Changes in selected components of noninterest income in the above table are discussed below.

Mortgage banking income primarily includes origination fees and realized gains and losses on the sale of mortgage loans, unrealized change in fair value of mortgage loans and derivatives, and mortgage loan servicing fees, which includes the net change in fair value of MSRs and related derivatives. Mortgage banking income is initially driven by the recognition of interest rate lock commitments at fair value at inception of the IRLCs. This is subsequently adjusted for changes in the overall interest rate environment offset by derivative contracts entered into to mitigate the interest rate exposure. Upon sale of the loan, the net fair value gain is reclassified as a realized gain on sale. Mortgage banking income was ~~$12.4~~$12.1 million and ~~$45.4~~$29.5 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively.~~respectively, representing a $17.4 million, or 59.1% decrease year-over-year.

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

During the three months ended ~~September 30, 2022, the Company’s~~March 31, 2023, our mortgage operations had sales of ~~$569.7 million~~$0.33 billion which generated a gain on sales margin of ~~1.95%~~2.45%. This compares to ~~$1.54~~$1.28 billion and ~~2.55%~~2.29% for the three months ended ~~September 30, 2021. The industry benefited greatly from historically low~~March 31, 2022. Sales of mortgage loans slowed as interest rates ~~during~~continue to rise and affordability constraints hinder many of our markets. The decrease in gain on sales is a result of over-capacity in the ~~three months ended September 30, 2021, causing an increase in interest rate lock commitment volume, which slowed dramatically in 2022 across the industry.~~industry and compressing margins. Mortgage banking income from gains on sale and related fair value changes decreased to ~~$8.6~~$7.7 million during the three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~$40.2~~$21.8 million for the three months ended ~~September 30, 2021.~~March 31, 2022. Total interest rate lock volume decreased ~~$1,603.0 million,~~$0.93 billion, or ~~79.7%~~71.4%, during the three months ended March 31, 2023 compared to ~~$408.9 million~~the three months ended March 31, 2022. Market conditions during the three months ended March 31, 2023, including declining consumer demand for mortgages and increased interest rates, have also shifted the mix of interest rate lock commitments by purpose down to 13.8% refinance volume for the three months ended ~~September 30, 2022~~March 31, 2023 compared ~~to the same period in~~with 43.0% refinance interest rate lock volume for the previous year. ~~The exit of direct-to-consumer internet delivery channel attributed $1,085.2 million of the $1,603.0 million decrease in our interest rate lock volume.~~

Our mortgage business is directly impacted by the interest rate environment, increased regulations, consumer demand, economic conditions, and investor demand for mortgage production. Mortgage production, especially refinance activity, declines in rising interest rate environments. Our interest rate lock volume during three months ended September 30, 2022 was composed of 14.2% refinancing activity compared with 66.1% during the same period in the previous year. As interest rates have increased, we continue to see margin compression and reduced volumes due to excess capacity in the

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

Income from mortgage servicing ~~of $8.1~~was $7.8 million and ~~$7.5~~$7.4 million for three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, was partially offset by losses on~~respectively. During the three months ended March 31, 2023, the changes in fair value of MSRs and related hedging activity resulted in a loss of ~~$4.3~~$3.4 million. This compares to a $0.3 million benefit from the changes in fair value of MSRs and ~~$2.4 million in the~~related hedging activity for three months ended ~~September 30, 2022 and 2021, respectively.~~March 31, 2022.

The components of mortgage banking income for the three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ were as follows:


		Three Months Ended September 30,						Three Months Ended March 31,
(in thousands)		2022			2021
Mortgage banking income:
Origination and sales of mortgage loans		$	11,085		$	39,210
(dollars in thousands)									(dollars in thousands)	2023			2022
Mortgage banking income									Mortgage banking income
Gains and fees from origination and sale of mortgage loans held for sale									Gains and fees from origination and sale of mortgage loans held for sale	$	8,146		$	29,397
Net change in fair value of loans held for sale and derivatives	Net change in fair value of loans held for sale and derivatives	(2,460)			1,002				Net change in fair value of loans held for sale and derivatives	(421)			(7,548)
Change in fair value on MSRs	Change in fair value on MSRs	(4,345)			(2,367)				Change in fair value on MSRs	(3,407)			253
Mortgage servicing income	Mortgage servicing income	8,104			7,539				Mortgage servicing income	7,768			7,429
Total mortgage banking income	Total mortgage banking income	$	12,384		$	45,384			Total mortgage banking income	$	12,086		$	29,531
Interest rate lock commitment volume by line of business:
Interest rate lock commitment volume by delivery channel:									Interest rate lock commitment volume by delivery channel:
Direct-to-consumer	Direct-to-consumer	$	—		$	1,085,180			Direct-to-consumer	$	—		$	568,092

Retail	Retail	408,879			926,723				Retail	375,042			741,015

Total	Total	$	408,879		$	2,011,903			Total	$	375,042		$	1,309,107
Interest rate lock commitment volume by purpose (%):	Interest rate lock commitment volume by purpose (%):								Interest rate lock commitment volume by purpose (%):
Purchase	Purchase	85.8		%	33.9		%		Purchase	86.2		%	57.0		%
Refinance	Refinance	14.2		%	66.1		%		Refinance	13.8		%	43.0		%
Mortgage sales	Mortgage sales	$	569,655		$	1,535,897			Mortgage sales	$	332,307		$	1,284,482
Mortgage sale margin	Mortgage sale margin	1.95		%	2.55		%		Mortgage sale margin	2.45		%	2.29		%
Closing volume	Closing volume	$	409,641		$	1,617,508			Closing volume	$	295,760		$	993,733
Outstanding principal balance of mortgage loans serviced	Outstanding principal balance of mortgage loans serviced	$	11,233,249		$	10,633,805			Outstanding principal balance of mortgage loans serviced	$	11,028,420		$	11,150,118

ATM and interchange fees ~~income for~~decreased $2.7 million to $2.4 million during the three months ended ~~September 30, 2022 decreased by 46.3% to $2.6 million~~March 31, 2023 as compared to ~~$4.9~~$5.1 million for the three months ended ~~September 30, 2021.~~March 31, 2022. The decrease was ~~partially~~primarily attributable to the expiration of our temporary exemption from the Durbin amendment during the ~~current period.~~second half of 2022. The Durbin amendment limits the amount of interchange transaction fees that banks with asset sizes greater than $10 billion are permitted to charge retailers for debit card processing. Interchange fee income varies with size and volume of transactions, which can fluctuate with seasonality, consumer spending habits and economic conditions. While our volume of interchange transactions ~~for the three months ended September 30, 2022~~ increased by approximately 7.00% from the three months ended September 30, 2021, our total interchange fee income declined 48.3% for the same period, primarily driven by the imposition of the Durbin amendment interchange fee cap in the third quarter of 2022.

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

Other noninterest income for the three months ended September 30, 2022 increased $0.5 million to $1.9 million compared with $1.4 million for the three months ended September 30, 2021. This includes a $0.4 million loss associated with the change in fair value in our commercial loans held for sale portfolio for the three months ended September 30, 2022 compared with $0.7 million gain for the three months ended September 30, 2021. Other noninterest income9.00% during the three months ended ~~September 30, 2021 also included a $1.5 million loss on the cancellation of an interest rate swap associated with a loan HFI that was resolved during the period.~~

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

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

~~Mortgage banking income was $64.5 million and $136.2 million for the nine months ended September 30, 2022 and 2021, respectively, representing a $71.7 million, or 52.7% decrease year-over-year.~~

During the nine months ended September 30, 2022, our mortgage operations had sales of $2.72 billion which generated a gain on sales margin of 2.26%. This compares to $4.79 billion and 3.06% for the nine months ended September 30, 2021. Sales of mortgage loans HFS began to slow with the continual rise of interest rates in 2022 and affordability constraints in many of our markets. The decrease in gain on sales is a result of over-capacity in the industry and compressing margins. Mortgage banking incomeMarch 31, 2023 from gains on sale and related fair value changes decreased to $46.2 million during the nine months ended September 30, 2022 compared to $125.7 million for the nine months ended September 30, 2021. Total interest rate lock volume decreased $3.26 billion, or 57.4%, during the nine months ended September 30, 2022 compared to the same period in the previous year. Market conditions during the nine months ended September 30, 2022, including declining consumer demand for mortgages and increased interest rates have also shifted the mix of interest rate lock commitments by purpose down to 30.3% refinance volume for the nine months ended September 30, 2022 compared with 63.7% refinance interest rate lock volume for the same period in the previous year.

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

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

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

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

ATM and interchange fees decreased $1.5 million to $13.1 million during the nine months ended September 30, 2022 as compared to $14.6 million for the nine months ended September 30, 2021. As discussed above, this decrease is attributable to the expiration of our temporary exemption from the Durbin amendment in the third quarter of 2022. While our volume of interchange transactions increased approximately 6.00%% for the nine months ended September 30, 2022 from the nine months ended September 30, 2021,year, interchange fee income declined by ~~10.9% in the same periods,~~54.9%, the majority of which related to the application of the fee cap imposed by the Durbin amendment inimpacting the ~~third quarter of 2022.~~current period.

Other income ~~decreased $2.2~~increased $1.2 million to ~~$4.4~~$3.6 million during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 as compared to ~~$6.6~~$2.3 million during the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. This ~~decrease~~increase is primarily related to ~~$2.6~~a $0.9 million ~~loss from~~gain associated with the change in fair value of the commercial loans held for sale ~~that were acquired through business combination~~portfolio during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~$1.3~~a $0.2 million ~~gain~~loss for the ~~nine~~three months ended ~~September 30, 2021. Other noninterest income during~~March 31, 2022. Additional information on our commercial loans held for sale portfolio is included under the ~~nine months ended September 30, 2021 also~~subheading 'Loans held for sale' included ~~a $1.5 million loss on the cancellation of an interest rate swap associated with a loan HFI that was resolved during the period.~~within this management's discussion and analysis.

Noninterest expense

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(dollars in thousands)	(dollars in thousands)	2022		2021		2022		2021		(dollars in thousands)		2023		2022
Salaries, commissions and employee benefits	Salaries, commissions and employee benefits	$	51,028	$	62,818	$	165,652	$	189,756	Salaries, commissions and employee benefits		$	48,788	$	59,443
Occupancy and equipment expense	Occupancy and equipment expense	6,011		5,979		17,267		17,184		Occupancy and equipment expense		5,909		5,403
Legal and professional fees	Legal and professional fees	4,448		2,177		10,171		6,701		Legal and professional fees		3,108		2,607
Data processing	Data processing	2,334		2,595		7,219		7,456		Data processing		2,113		2,481

Amortization of core deposit and other intangibles	Amortization of core deposit and other intangibles	1,108		1,344		3,546		4,178		Amortization of core deposit and other intangibles		990		1,244

Advertising	Advertising	2,050		4,200		8,114		10,012		Advertising		2,133		4,033
Mortgage restructuring expense		—		—		12,458		—

Other expense	Other expense	14,868		15,894		43,689		47,378		Other expense		17,399		14,061
Total noninterest expense	Total noninterest expense	$	81,847	$	95,007	$	268,116	$	282,665	Total noninterest expense		$	80,440	$	89,272

Three months ended ~~September 30, 2022~~March 31, 2023 compared to three months ended ~~September 30, 2021~~March 31, 2022

Noninterest expense decreased by ~~$13.2~~$8.8 million during the three months ended ~~September 30, 2022~~March 31, 2023 to ~~$81.8~~$80.4 million as compared to ~~$95.0~~$89.3 million in the three months ended ~~September 30, 2021. Changes in selected components of noninterest expense in the above table are discussed below.~~

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

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

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

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

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

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

~~Noninterest expense decreased by $14.6 million during the nine months ended September 30, 2022 to $268.1 million as compared to $282.7 million in the nine months ended September 30, 2021.~~2022. Changes in selected components of noninterest expense in the above table are discussed below.

Salaries, commissions and employee benefits expense was the largest component of noninterest expenses representing ~~61.8%~~60.7% and ~~67.1%~~66.6% of total noninterest expense in the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, salaries and employee benefits expense decreased ~~$24.1~~$10.7 million, or ~~12.7%~~17.9%, to ~~$165.7~~$48.8 million as compared to ~~$189.8~~$59.4 million for the ~~nine~~three months ended ~~September 30, 2021. This~~March 31, 2022. The decrease ~~includes~~was attributable to a ~~$22.5~~$5.2 million decrease in salaries due to the impact of the reduction in headcount from the Mortgage restructuring. Additionally, the decrease included a $5.1 million decrease in incentive and ~~commission~~commission-based compensation during the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, which was driven by the decrease in mortgage production volume and decline in profitability during the ~~period in addition~~period.

Advertising expense includes expenses related to sponsorships, advertising, marketing, customer relations and business development and public relations. During the ~~impact of the Mortgage restructuring.~~

~~Legal and professional~~three months ended March 31, 2023, advertising expense ~~increased by $3.5~~decreased $1.9 million to $2.1 million compared to $4.0 million during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2022. This decrease is primarily attributable to ~~$10.2 million as compared to $6.7 million in~~realigning our expenses after the nine months ended September 30, 2021. As discussed above, the increase in legal and professional expenses was due to temporary increases on consulting, legal, and other fees related to acceleration of some of our internal projects.

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

Other noninterest expense primarily includes mortgage servicing expenses, regulatory fees and deposit insurance assessments, software license and maintenance fees and various other miscellaneous expenses. Other noninterest expense ~~decreased $3.7~~increased $3.3 million during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 to ~~$43.7~~$17.4 million compared to ~~$47.4~~$14.1 million during the ~~nine~~three months ended ~~September 30, 2021. The change~~March 31, 2022. This increase includes a ~~$1.8~~$1.1 million ~~decrease~~increase in ~~franchise tax expense, which reflects the impact of $2.1 million in Tennessee state tax credits. These credits have historically been reflected in the income tax expense line item~~regulatory fees and ~~were required to be reported in~~assessments and other costs associated with our pre-tax results given the limited Tennessee state taxable income earned during the nine months ended September 30, 2022. This compares to $2.5 million in Tennessee State tax credits for the nine months ended September 30, 2021 which was included in income tax expense rather than other noninterest expense. Additionally, during the nine months ended September 30, 2021, we incurred $0.6 million in offering costs under our registration rights agreement from the secondary offering completed during the period. There were no such costs during the nine months ended September 30, 2022.growth.

Efficiency ratio

The efficiency ratio is one measure of productivity in the banking industry. This ratio is calculated to measure the cost of generating one dollar of revenue. That is, the ratio is designed to reflect the percentage of one dollar which must be expended to generate that dollar of revenue. We calculate this ratio by dividing noninterest expense by the sum of net interest income and noninterest income. For an adjusted efficiency ratio, we exclude certain gains, losses and expenses we do not consider core to our business.

Our efficiency ratio was ~~61.1%~~63.3% and ~~67.2%~~68.9% for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~respectively, and 64.4% and 65.3% for the three and nine months ended September 30, 2021,~~ respectively. Our adjusted efficiency ratio, on a tax-equivalent basis, was ~~60.7%~~63.3% and ~~63.3%~~68.1% for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~respectively,~~respectively. The decrease was primarily attributable to our focus on reducing unnecessary expenses and ~~64.7% and 65.4% for~~ the ~~three and nine months ended September 30, 2021, respectively.~~restructuring of the Mortgage segment. See “GAAP reconciliation and management explanation of non-GAAP financial measures” in this Report for athe calculation and discussion of the adjusted efficiency ratio.

Income taxes

Income tax expense was ~~$8.9~~$9.7 million and ~~$9.7~~$9.3 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $25.0 million and $38.7 million for the nine months ended September 30, 2022 and 2021,~~ respectively. This represents effective tax rates of ~~21.9%~~21.0% and ~~17.7%~~20.9% for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and 22.4% and 21.5% for the nine months ended September 30, 2022 and 2021,~~ respectively. The primary differences from the enacted rates are applicable state income taxes and certain expenses that are not deductible reduced for non-taxable income and additional ~~deductions~~adjustments for equity-based compensation upon vesting of restricted stock units. State taxes, net of federal benefits, increased our effective tax rate by ~~2.5%~~0.6% and ~~6.0%~~2.1% for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021 and by 3.2% and 3.8% for~~respectively.

On August 16, 2022, the ~~nine months ended September 30, 2022 and 2021, respectively.~~Inflation Reduction Act (IRA) was signed into law in the United States. Among other provisions, the IRA imposes a 1% excise tax on the fair market value of net stock repurchases made after December 31, 2022. The ~~effect of state taxes were slightly lower during the three and nine months ended September 30, 2022 due to the~~ impact of ~~Tennessee state tax credits~~this provision will be dependent on the extent of $0.7 million and $2.1 million, respectively, which moved to other noninterest expense during the three and nine months ended September 30, 2022 versus in income tax expense in the comparable previous periods. For further information regarding our state credits, please refer to the section captioned 'Noninterest expense' within this Report. We had a net operating loss carryforward generated as a result of one of our previous acquisitions which amounted to $5.5 million and $6.5 million as of September 30, 2022 and December 31, 2021, respectively. The net operating loss carryforward can be used to offset taxable incomeshare repurchases made in future ~~periods and reducing income tax liabilities in those future~~ periods. While net operating losses are subject to certain annual utilization limits under Section 382, we believe the net operating loss carryforwards will be realized based on the projected annual limitation and the length of the net operating loss carryover period. Our determination of the realization of the net deferred tax asset is based on its assessment of all available positive and negative evidence. The net operating loss carryforward will begin to expire in 2029.

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

7161

Financial condition

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

Loan portfolio

The following table sets forth the balance and associated percentage of each class of financing receivable in our loan portfolio as of the dates indicated:

September 30, December 31,
2022 2021
(dollars in thousands) Committed Amount Outstanding % of total outstanding Committed Amount Outstanding % of total outstanding
Loan Type:
Commercial and industrial (1)

$ 2,596,816 $ 1,534,159 17 % $ 2,060,028 $ 1,290,565 17 %
Construction 3,376,230 1,679,497 18 % 2,886,088 1,327,659 17 %
Residential real estate:
1-to-4 family mortgage 1,546,120 1,545,252 17 % 1,272,477 1,270,467 17 %
Residential line of credit 1,101,608 460,774 5 % 935,571 383,039 5 %
Multi-family mortgage 422,773 394,366 4 % 339,882 326,551 4 %
Commercial real estate:
Owner-occupied 1,221,800 1,158,343 13 % 1,005,534 951,582 13 %
Non-owner occupied 2,090,382 1,954,219 22 % 1,839,990 1,730,165 23 %
Consumer and other 408,764 378,406 4 % 351,153 324,634 4 %
Total loans $ 12,764,493 $ 9,105,016 100 % $ 10,690,723 $ 7,604,662 100 %

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


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

Our loans HFI portfolio is our most significant earning asset, comprising ~~74.3%~~71.5% and ~~60.4%~~72.4% of our total assets as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Our strategy is to grow our loan portfolio by originating quality commercial and consumer loans that comply with our credit policies and that produce revenues consistent with our financial objectives. Our overall lending approach is primarily focused on providing credit to our customers directly in the markets we serve, but we are also party to loan syndications and participations from other banks (collectively, “participated loans”). ~~At September 30, 2022~~As of March 31, 2023 and December 31, ~~2021,~~2022, loans held for investment included approximately ~~$292.3~~$300.0 million and ~~$263.9~~$280.5 million, respectively, related to ~~purchased~~ participated loans. We also sell loan participations to unaffiliated third parties as part of our credit risk management and balance sheet management strategy. During the three months ended March 31, 2023 and 2022, we sold $4.4 million and $0.3 million loan participations, respectively. All loans, whether or not we act as a participant, are underwritten to the same standards as all other loans we originate. We believe our loan portfolio is well-balanced, which provides us with the opportunity to grow while monitoring our loan concentrations.

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

Banking regulators have established ~~thresholds~~guidelines of less than 100% of tier 1 capital plus allowance for credit losses in construction lending and less than 300% of tier 1 capital plus allowance for credit losses in commercial real estate lending that management monitors as part of the risk management process. The construction concentration ratio is a percentage of the outstanding construction and land development loans to total tier 1 capital plus allowance for credit losses. The commercial real estate concentration ratio is a percentage of the outstanding balance of non-owner occupied commercial real estate, multifamily, and construction and land development loans to tier 1 capital plus allowance for credit losses. Management strives to operate within the thresholds set forth above.

When ~~a company's~~our ratios are in excess of one or both of these guidelines, banking regulators generally require an increased level of monitoring in these lending areas by management.

7262

The table below shows concentration ratios for the Bank and Company as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.


		As a percentage (%) of tier 1 capital plus allowance for credit losses					As a percentage (%) of tier 1 capital plus allowance for credit losses
		FirstBank		FB Financial Corporation			FirstBank		FB Financial Corporation
September 30, 2022
March 31, 2023						March 31, 2023
Construction	Construction	123.6	%	121.1	%	Construction	120.0	%	117.3	%
Commercial real estate	Commercial real estate	298.5	%	292.4	%	Commercial real estate	293.7	%	287.1	%
December 31, 2021
December 31, 2022						December 31, 2022
Construction	Construction	102.7	%	99.8	%	Construction	119.0	%	117.2	%
Commercial real estate	Commercial real estate	263.5	%	256.0	%	Commercial real estate	296.5	%	291.9	%

Loan categories

The principal categories of our loans held for investment portfolio are discussed below:


Commercial and industrial loans.			We provide a mix of variable and fixed rate commercial and industrial loans. Our commercial and industrial loans are typically made to small and medium-sized manufacturing, wholesale, retail and service businesses for working capital and operating needs and business expansions, including the purchase of capital equipment and loans made to farmers relating to their operations. This category also includes loans secured by manufactured housing receivables. Commercial and industrial loans generally include lines of credit and loans with maturities of five years or less. Commercial and industrial loans are generally made with operating cash flows as the primary source of repayment, but may also include collateralization by inventory, accounts receivable, equipment and personal guarantees. ~~Growth in our~~We plan to continue to make commercial and industrial loans an area of emphasis in our lending portfolio ~~is expected to decrease as we position for potential economic headwinds.~~in the future.









Construction loans.			Our construction loans include commercial construction, land acquisition and land development loans and single-family interim construction loans to small- and medium-sized businesses and individuals. These loans are generally secured by the land or the real property being built and are made based on our assessment of the value of the property on an as-completed basis. These loans can carry risk of repayment when projects incur cost overruns, have an increase in the price of building materials, encounter zoning and environmental issues, or encounter other factors that may affect the completion of a project on time and on budget. Additionally, repayment risk may be negatively impacted when the market experiences a deterioration in the value of real estate. We ~~expect~~continue to ~~make~~focus on decreasing these commitments. While commitments made in 2021 and the first quarter of 2022 have continued to fund up, commitments to extend additional funds in this category have slowed and the unfunded commitments in our construction ~~loans at a more moderate pace~~portfolio have declined $298.8 million or 18.2% compared to ~~prior~~December 31, 2022. We expect our outstanding balances in the construction portfolio to decrease over the coming quarters ~~due~~as loans mature and unfunded commitments continue to ~~our current macroeconomic forecasts and our increasing expectation that the economy may be nearing a recession.~~decrease.










~~Residential real estate~~

1-4 family mortgage loans.			Our residential real estate 1-4 family mortgage loans are primarily made with respect to and secured by single family homes, including manufactured homes with real estate, which are both owner-occupied and investor owned. Our future origination volume could be impacted by any deterioration of housing values in our markets and increased unemployment or underemployment.





Residential line of credit loans.			Our residential line of credit loans are primarily revolving, open-end lines of credit secured by 1-4 family residential properties. We intend to continue to make residential line of credit loans if housing values in our markets do not deteriorate from current prevailing levels and we are able to make such loans consistent with our current credit and underwriting standards. Residential line of credit loans may also be affected by unemployment or underemployment and deteriorating market values of real estate.




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

7363


Commercial real estate owner-occupied loans.			Our commercial real estate owner-occupied loans include loans to finance commercial real estate owner occupied properties for various purposes including use as offices, warehouses, production facilities, health care facilities, retail centers, restaurants, churches and agricultural based facilities. Commercial real estate owner-occupied loans are typically repaid through the ongoing business operations of the borrower, and hence are dependent on the success of the underlying business for repayment and are more exposed to general economic conditions. Due to current market conditions and macroeconomic forecasts, we expect growth in commercial real estate owner-occupied loans ~~in future quarters~~ to be moderated compared to ~~prior quarters.~~historical growth.







Commercial real estate non-owner occupied loans.			Our commercial real estate non-owner occupied loans include loans to finance commercial real estate non-owner occupied investment properties for various purposes including use as offices, warehouses, health care facilities, hotels, mixed-use residential/commercial, manufactured housing communities, retail centers, multifamily properties, assisted living facilities and agricultural based facilities. Commercial real estate non-owner occupied loans are typically repaid with the funds received from the sale of the completed property or rental proceeds from such property, and are therefore more sensitive to adverse conditions in the real estate market, which can also be affected by general economic conditions. We expect growth in commercial real estate non-owner occupied loans to be reduced in comparison to ~~prior quarters~~historical growth due to our current macroeconomic outlook.








Consumer and other loans.			Consumer and other loans include consumer loans made to individuals for personal, family and household purposes, including car, boat, manufactured homes (without real estate) and other recreational vehicle loans and personal lines of credit. These loans are generally secured by vehicles, manufactured homes, and other household goods. The collateral securing consumer loans may depreciate over time. ~~The company seeks~~We seek to minimize these risks through its underwriting standards. Other loans also include loans to states and political subdivisions in the U.S. These loans are generally subject to the risk that the borrowing municipality or political subdivision may lose a significant portion of its tax base or that the project for which the loan was made may produce inadequate revenue. None of these categories of loans ~~represents~~represent a significant portion of our loan portfolio.

Loan maturity and sensitivities

The following table presents the contractual maturities of our loan portfolio as of ~~September 30, 2022.~~March 31, 2023. Loans with scheduled maturities are reported in the maturity category in which the payment is due. Demand loans with no stated maturity and overdrafts are reported in the “due in 1 year or less” category. Loans that have adjustable rates are shown as amortizing to final maturity rather than when the interest rates are next subject to change. The tables do not include prepayment assumptions or scheduled repayments.


																		March 31, 2023
Loan type (dollars in thousands)	Loan type (dollars in thousands)	Maturing in one year or less			Maturing in one to five years			Maturing in five years to fifteen years			Maturing after fifteen years			Total			Loan type (dollars in thousands)	Maturing in one year or less			Maturing in one to five years			Maturing in five to fifteen years			Maturing after fifteen years			Total
As of September 30, 2022
Commercial and industrial	Commercial and industrial	$	541,119		$	771,016		$	221,110		$	914		$	1,534,159		Commercial and industrial	$	658,527		$	817,286		$	194,600		$	985		$	1,671,398
Commercial real estate:	Commercial real estate:																Commercial real estate:
Owner-occupied	Owner-occupied	129,047			549,679			449,825			29,792			1,158,343			Owner-occupied	116,227			564,532			429,717			26,502			1,136,978
Non-owner occupied	Non-owner occupied	165,373			845,148			916,603			27,095			1,954,219			Non-owner occupied	165,618			887,871			866,862			19,166			1,939,517
Residential real estate:	Residential real estate:																Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	73,853			418,281			301,628			751,490			1,545,252			1-to-4 family mortgage	83,614			420,287			285,082			773,520			1,562,503
Residential line of credit	Residential line of credit	28,203			94,291			337,647			633			460,774			Residential line of credit	33,577			94,987			368,440			387			497,391
Multi-family mortgage	Multi-family mortgage	13,137			231,698			132,973			16,558			394,366			Multi-family mortgage	57,835			287,093			128,812			15,639			489,379
Construction	Construction	840,313			619,513			195,832			23,839			1,679,497			Construction	938,585			573,838			179,523			5,567			1,697,513
Consumer and other	Consumer and other	44,064			88,120			59,214			187,008			378,406			Consumer and other	38,350			66,070			69,561			197,336			371,317
Total ($)	Total ($)	$	1,835,109		$	3,617,746		$	2,614,832		$	1,037,329		$	9,105,016		Total ($)	$	2,092,333		$	3,711,964		$	2,522,597		$	1,039,102		$	9,365,996
Total (%)	Total (%)	20.2		%	39.7		%	28.7		%	11.4		%	100.0		%	Total (%)	22.3		%	39.6		%	26.9		%	11.2		%	100.0		%

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


												March 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 September 30, 2022
Commercial and industrial	Commercial and industrial	$	471,945		$	521,095		$	993,040		Commercial and industrial	$	502,457		$	510,414		$	1,012,871
Commercial real estate:	Commercial real estate:										Commercial real estate:
Owner-occupied	Owner-occupied	755,304			273,992			1,029,296			Owner-occupied	784,961			235,790			1,020,751
Non-owner occupied	Non-owner occupied	951,746			837,100			1,788,846			Non-owner occupied	977,567			796,332			1,773,899
Residential real estate:	Residential real estate:										Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	1,173,229			298,170			1,471,399			1-to-4 family mortgage	1,161,189			317,700			1,478,889
Residential line of credit	Residential line of credit	4,999			427,572			432,571			Residential line of credit	4,328			459,486			463,814
Multi-family mortgage	Multi-family mortgage	242,392			138,837			381,229			Multi-family mortgage	327,557			103,987			431,544
Construction	Construction	307,791			531,393			839,184			Construction	276,203			482,725			758,928
Consumer and other	Consumer and other	328,632			5,710			334,342			Consumer and other	319,043			13,924			332,967
Total ($)	Total ($)	$	4,236,038		$	3,033,869		$	7,269,907		Total ($)	$	4,353,305		$	2,920,358		$	7,273,663
Total (%)	Total (%)	58.3		%	41.7		%	100.0		%	Total (%)	59.9		%	40.1		%	100.0		%

The following table presents the contractual maturities of our loan portfolio segregated into fixed and floating interest rate loans as of ~~September 30, 2022.~~March 31, 2023. As of March 31, 2023 and December 31, 2022, we had $17.2 million and $17.4 million, respectively, in fixed-rate loans in which we have entered into variable rate swap contracts.

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


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

7565

Of the loans shown above with floating interest rates as of ~~September 30, 2022,~~March 31, 2023, many have interest rate floors as follows:


Loans with interest rate floors (dollars in thousands)	Loans with interest rate floors (dollars in thousands)	Maturing in one year or less		Weighted average level of support (bps)	Maturing in one to five years		Weighted average level of support (bps)	Maturing in five years to fifteen years		Weighted average level of support (bps)	Maturing after fifteen years		Weighted average level of support (bps)	Total		Weighted average level of support (bps)	Loans with interest rate floors (dollars in thousands)	Maturing in one year or less		Weighted average level of support (bps)	Maturing in one to five years		Weighted average level of support (bps)	Maturing in five years to fifteen years		Weighted average level of support (bps)	Maturing after fifteen years		Weighted average level of support (bps)	Total		Weighted average level of support (bps)
Loans with current rates above floors:	Loans with current rates above floors:																Loans with current rates above floors:

1-25 bps	1-25 bps	$	1,438	24.98	$	29,791	22.45	$	3,430	13.62	$	91	25.00	$	34,750	21.69	1-25 bps	$	2,112	24.92	$	—	—	$	—	—	$	—	—	$	2,112	24.92
26-50 bps	26-50 bps	1,850		46.90	4,680		50.00	8,590		31.63	—		—	15,120		39.18	26-50 bps	1,704		50.00	3,183		29.94	494		33.73	2,007		28.00	7,388		34.29
51-75 bps	51-75 bps	19,485		75.00	11,308		74.32	4,883		69.92	5,744		67.91	41,420		73.23	51-75 bps	223		75.00	2,590		67.66	17,228		60.20	4,639		63.09	24,680		61.66
76-100 bps	76-100 bps	2,989		98.60	37,613		99.99	19,443		88.98	5,957		92.28	66,002		95.99	76-100 bps	816		100.00	13,711		89.53	4,875		84.12	3,239		79.79	22,641		87.35
101-125 bps		5,285		119.49	16,834		120.65	10,994		117.93	5,773		115.15	38,886		118.90
126-150 bps		32,563		147.73	50,762		142.88	35,921		137.40	9,014		144.17	128,260		142.67
151-200 bps		103,336		188.10	71,761		187.93	130,261		175.35	11,504		180.71	316,862		182.55
201-250 bps		259,123		235.03	330,537		233.68	299,825		236.79	125,311		241.34	1,014,796		235.89
251 bps and above		536,364		297.51	429,643		301.98	443,023		310.19	71,312		375.07	1,480,342		306.34
101-200 bps																	101-200 bps	23,209		169.97	95,689		161.57	87,155		150.47	10,708		169.55	216,761		158.40
201-300 bps																	201-300 bps	83,098		270.59	85,855		267.46	141,351		252.12	21,607		261.00	331,911		261.29
301-400 bps																	301-400 bps	326,557		378.40	241,584		375.47	181,356		363.67	38,384		367.84	787,881		373.60
401-500 bps																	401-500 bps	664,140		460.19	513,397		454.36	455,390		452.45	143,024		460.20	1,775,951		456.52
501-600 bps																	501-600 bps	6,446		535.80	6,740		542.72	26,664		545.20	33,184		524.94	73,034		534.94
601 bps and above																	601 bps and above	668		788.60	2,736		675.48	11,237		686.53	2,157		800.00	16,798		703.36
Total loans with current rates above floors	Total loans with current rates above floors	$	962,433	256.88	$	982,929	239.34	$	956,370	250.82	$	234,706	264.05	$	3,136,438	250.08	Total loans with current rates above floors	$	1,108,973	414.66	$	965,485	382.61	$	925,750	372.09	$	258,949	413.77	$	3,259,157	393.00
Loans at interest rate floors providing support:	Loans at interest rate floors providing support:																Loans at interest rate floors providing support:
1-25 bps	1-25 bps	$	2,132	23.60	$	6,928	25.00	$	16,886	15.12	$	140	19.00	$	26,086	18.46	1-25 bps	$	—	—	$	1,250	22.00	$	—	—	$	—	—	$	1,250	22.00
26-50 bps	26-50 bps	—		—	7,015		50.00	36		50.00	—		—	7,051		50.00	26-50 bps	—		—	—		—	428		47.00	138		47.00	566		47.00
51-75 bps		—		—	2,391		62.21	—		—	—		—	2,391		62.21
76-100 bps		—		—	—		—	1,544		87.63	—		—	1,544		87.63
101-125 bps		—		—	—		—	292		119.00	—		—	292		119.00
126-150 bps		—		—	42		134.00	—		—	—		—	42		134.00

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

Total loans at interest rate floors providing support	Total loans at interest rate floors providing support	$	2,132	23.60	$	16,376	41.42	$	18,758	22.77	$	140	19.00	$	37,406	30.97	Total loans at interest rate floors providing support	$	—	—	$	1,289	26.28	$	709	86.61	$	138	47.00	$	2,136	47.64

Asset quality

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

Nonperforming assets

Our nonperforming assets consist of nonperforming loans, other real estate owned and other ~~miscellaneous~~repossessed non-earning assets. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, we had ~~$75.7~~$79.9 million and ~~$63.0~~$87.5 million, respectively, in nonperforming assets. Nonperforming loans are those on which the accrual of interest has stopped, as well as loans that are contractually 90 days past due on which interest continues to accrue. Generally, the accrual of interest is discontinued when the full collection of principal or interest is in doubt or when the payment of principal or interest has been contractually 90 days past due, unless the obligation is both well secured and in the process of collection. In our loan review process, we seek to identify and proactively address nonperforming loans. Accrued interest receivable written off as an adjustment to interest income amounted to $0.2 million ~~and $0.1 million~~ for both the three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021, respectively, and $0.5 million and $0.7 million for the nine months ended September 30, 2022 and 2021, respectively.~~2022. Additionally, we had net interest recoveries on nonperforming assets previously charged off of ~~$0.5~~$0.2 million and $1.0 million for the three months ended March 31, 2023 and 2022, respectively.

7666

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

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

As of ~~September 30, 2022.~~

~~During the three months ended September 30,~~March 31, 2023 and December 31, 2022, we ~~revised our accounting estimate~~had $20.5 million and methodology with regard to GNMA loans previously sold that are contractually delinquent greater than 90 days and began recording this right to repurchase option on the balance sheet on a prospective basis without impact to prior periods. See Note 1, "Basis of presentation" within this Report for additional information regarding our change in accounting estimate. As a result of this change, as of September 30, 2022, we recorded $26.5$26.2 million, respectively, of delinquent GNMA loans previously sold included on our ~~Consolidated~~consolidated balance sheets in loans held for ~~sale and borrowings.~~sale. These are considered nonperforming assets as ~~the Company does~~we do not earn any interest on the unexercised option to repurchase these loans. ~~Rebooked GNMA optional repurchase loans do not meet the requirements under FASB ASC Topic 825 to be accounted for under the fair value option.~~

As of ~~December~~March 31, 2021, there was $94.6 million of delinquent GNMA loans previously sold that we did not record on its consolidated balance sheets as we determined there not to be a more-than-trivial benefit based on an analysis of interest rates and an assessment of potential reputational risk associated with these loans.

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

The following table provides details of our nonperforming assets, the ratio of such loans and other nonperforming assets to total assets, and certain other related information as of the dates presented:


		September 30,						December 31,				March 31,						December 31,
(dollars in thousands)	(dollars in thousands)	2022			2021			2021			(dollars in thousands)	2023			2022			2022
Loan Type	Loan Type										Loan Type
Commercial and industrial	Commercial and industrial	$	1,768		$	3,022		$	1,583		Commercial and industrial	$	2,455		$	3,940		$	1,443
Construction	Construction	—			4,908			4,340			Construction	382			679			389
Residential real estate:	Residential real estate:										Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	19,347			11,925			13,956			1-to-4 family mortgage	20,593			15,023			23,115
Residential line of credit	Residential line of credit	1,880			1,269			1,736			Residential line of credit	1,082			1,577			1,531
Multi-family mortgage	Multi-family mortgage	44			50			49			Multi-family mortgage	39			48			42
Commercial real estate:	Commercial real estate:										Commercial real estate:
Owner-occupied	Owner-occupied	4,873			6,239			6,710			Owner-occupied	7,211			6,989			5,410
Non-owner occupied	Non-owner occupied	6,960			11,666			14,084			Non-owner occupied	5,802			7,185			5,956
Consumer and other	Consumer and other	7,755			3,948			4,845			Consumer and other	7,916			5,258			7,960
Total nonperforming loans held for investment	Total nonperforming loans held for investment	$	42,627��		$	43,027		$	47,303		Total nonperforming loans held for investment	$	45,480		$	40,699		$	45,846
Commercial loans held for sale	Commercial loans held for sale	—			5,625			5,217			Commercial loans held for sale	9,278			5,087			9,289
Mortgage loans held for sale(1)	Mortgage loans held for sale(1)	26,485			—			—			Mortgage loans held for sale(1)	20,528			—			26,211
Other real estate owned	Other real estate owned	5,919			10,015			9,777			Other real estate owned	4,085			9,721			5,794
Other	Other	639			347			686			Other	498			453			351
Total nonperforming assets	Total nonperforming assets	$	75,670		$	59,014		$	62,983		Total nonperforming assets	$	79,869		$	55,960		$	87,491
Total nonperforming loans held for investment as a percentage of total loans HFI		0.47		%	0.59		%	0.62		%
Total nonperforming assets as a percentage of total assets		0.62		%	0.50		%	0.50		%
Total nonaccrual loans HFI as a percentage of loans HFI		0.29		%	0.47		%	0.47		%
Total accruing loans over 90 days delinquent as a percentage of total assets		0.13		%	0.08		%	0.09		%
Loans restructured as troubled debt restructurings		$	14,959		$	29,645		$	32,435
Troubled debt restructurings as a percentage of total loans held for investment		0.16		%	0.41		%	0.43		%
Nonperforming loans held for investment as a percentage of total loans HFI											Nonperforming loans held for investment as a percentage of total loans HFI	0.49		%	0.51		%	0.49		%
Nonperforming assets as a percentage of total assets											Nonperforming assets as a percentage of total assets	0.61		%	0.44		%	0.68		%
Nonaccrual loans HFI as a percentage of loans HFI											Nonaccrual loans HFI as a percentage of loans HFI	0.35		%	0.35		%	0.30		%

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

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

We have evaluated our ~~nonperforming~~ loans held for investment classified as nonperforming and believe all nonperforming loans have been adequately reserved for in the allowance for credit losses as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. Management also continually monitors past due loans for potential credit quality deterioration. Loans not considered nonperforming include loans 30-89 days past due that continue to accrue interest amounting to ~~$30.6~~$25.1 million at ~~September 30, 2022~~March 31, 2023 as compared to ~~$26.5~~$31.3 million at December 31, ~~2021.~~2022.

Allowance for credit losses

~~The Company calculates its~~We calculate our expected credit loss using a lifetime loss rate methodology. ~~The Company utilizes~~We utilize probability-weighted forecasts, which consider multiple macroeconomic variables from a third-party vendor that are applicable to the type of loan. Each of ~~the Company's~~our loss rate models incorporate forward-looking macroeconomic projections throughout the reasonable and supportable forecast period and the subsequent historical reversion at the macroeconomic variable input level. In order to estimate the life of a loan, the contractual term of the loan is adjusted for estimated prepayments based on market information and ~~the Company’s~~our prepayment history.

The allowance for credit losses represents the portion of the loan's amortized cost basis that we do not expect to collect due to credit losses over the loan's life, considering past events, current conditions, and reasonable and supportable

forecasts of future economic conditions considering macroeconomic forecasts. Loan losses are charged against the allowance when we believe the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance for credit losses is based on the loan's amortized cost basis, excluding accrued interest receivable, as we promptly charge off accrued interest receivable determined to be uncollectible. We determine the appropriateness of the allowance through periodic evaluation of the loan portfolio, lending-related commitments and other relevant factors, including macroeconomic forecasts and historical loss rates. In future quarters, we may update information and forecasts that may cause significant changes in the estimate in those future quarters. See "Critical Accounting Estimates- Allowance for credit losses" within management's discussion and analysis in our Form 10-K and Note 3 “Loans and allowance for credit losses“ in the notes to the consolidated financial statements in this report for additional information regarding our methodology.

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


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

Loan Type:	Loan Type:													Loan Type:
Commercial and industrial	Commercial and industrial	$	10,538	17	%	0.69	%	$	15,751	17	%	1.22	%	Commercial and industrial	$	11,117	0.67	%	$	11,106	0.67	%
Construction	Construction	41,427		18	%	2.47	%	28,576		17	%	2.15	%	Construction	41,025		2.42	%	39,808		2.40	%
Residential real estate:	Residential real estate:													Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	25,366		17	%	1.64	%	19,104		17	%	1.50	%	1-to-4 family mortgage	27,213		1.74	%	26,141		1.66	%
Residential line of credit	Residential line of credit	6,952		5	%	1.51	%	5,903		5	%	1.54	%	Residential line of credit	9,034		1.82	%	7,494		1.51	%
Multi-family mortgage	Multi-family mortgage	5,874		4	%	1.49	%	6,976		4	%	2.14	%	Multi-family mortgage	6,619		1.35	%	6,490		1.35	%
Commercial real estate:	Commercial real estate:													Commercial real estate:
Owner occupied	Owner occupied	8,068		13	%	0.70	%	12,593		13	%	1.32	%	Owner occupied	7,952		0.70	%	7,783		0.70	%
Non-owner occupied	Non-owner occupied	22,783		22	%	1.17	%	25,768		23	%	1.49	%	Non-owner occupied	21,868		1.13	%	21,916		1.12	%
Consumer and other	Consumer and other	13,468		4	%	3.56	%	10,888		4	%	3.35	%	Consumer and other	13,981		3.77	%	13,454		3.67	%
Total allowance	Total allowance	$	134,476	100	%	1.48	%	$	125,559	100	%	1.65	%	Total allowance	$	138,809	1.48	%	$	134,192	1.44	%

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


		Three Months Ended September 30,						Nine Months Ended September 30,						Year Ended December 31,											Three Months Ended March 31,				Year Ended December 31,
(dollars in thousands)	(dollars in thousands)	2022			2021			2022			2021			2021						(dollars in thousands)						2023			2022			2022
Allowance for credit losses at beginning of period	Allowance for credit losses at beginning of period	$	126,272		$	144,663		$	125,559		$	170,389		$	170,389					Allowance for credit losses at beginning of period						$	134,192		$	125,559		$	125,559

Charge-offs:	Charge-offs:																			Charge-offs:
Commercial and industrial	Commercial and industrial	��			(2,175)			(1,755)			(2,812)			(4,036)						Commercial and industrial						(46)			(4)			(2,087)
Construction		—			(1)			—			(30)			(30)

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

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

Owner occupied																	Owner occupied	—			—		(15)
Non-owner occupied	Non-owner occupied	—			—			—			—			(1,566)						Non-owner occupied						—			—			(268)
Consumer and other	Consumer and other	(441)			(438)			(1,630)			(1,634)			(2,063)						Consumer and other						(705)			(575)			(2,254)
Total charge-offs	Total charge-offs	$	(461)		$	(2,614)		$	(3,428)		$	(4,643)		$	(7,868)					Total charge-offs						$	(767)		$	(579)		$	(4,701)
Recoveries:	Recoveries:																			Recoveries:
Commercial and industrial	Commercial and industrial	$	342		$	19		$	1,326		$	235		$	861					Commercial and industrial						$	67		$	958		$	2,005
Construction	Construction	—			3			11			3			3						Construction						—			—			11
Residential real estate:	Residential real estate:																			Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	13			33			39			98			125						1-to-4 family mortgage						15			12			54
Residential line of credit	Residential line of credit	—			1			17			16			115						Residential line of credit						—			1			17

Commercial real estate:	Commercial real estate:																			Commercial real estate:
Owner-occupied	Owner-occupied	51			4			76			143			156						Owner-occupied						66			10			88

Consumer and other	Consumer and other	70			169			635			554			773						Consumer and other						239			217			766
Total recoveries	Total recoveries	$	476		$	229		$	2,104		$	1,049		$	2,033					Total recoveries						$	387		$	1,198		$	2,941
Net charge-offs		15			(2,385)			(1,324)			(3,594)			(5,835)
Net (charge-offs) recoveries																	Net (charge-offs) recoveries	(380)			619		(1,760)
Provision for credit losses	Provision for credit losses	8,189			(2,832)			10,241			(27,349)			(38,995)						Provision for credit losses						4,997			(6,129)			10,393

Allowance for credit losses at the end of period(1)	Allowance for credit losses at the end of period(1)	$	134,476		$	139,446		$	134,476		$	139,446		$	125,559					Allowance for credit losses at the end of period(1)						$	138,809		$	120,049		$	134,192
Ratio of net charge-offs during the period to average loans outstanding during the period		—		%	(0.13)		%	(0.02)		%	(0.07)		%	(0.08)		%
Ratio of net (charge-offs) recoveries during the period to average loans outstanding during the period																	Ratio of net (charge-offs) recoveries during the period to average loans outstanding during the period	(0.02)	%		0.03	%	(0.02)	%
Allowance for credit losses as a percentage of loans at end of period(1)	Allowance for credit losses as a percentage of loans at end of period(1)	1.48		%	1.91		%	1.48		%	1.91		%	1.65		%				Allowance for credit losses as a percentage of loans at end of period(1)						1.48		%	1.50		%	1.44		%
Allowance for credit losses as a percentage of nonaccrual loans HFI(1)	Allowance for credit losses as a percentage of nonaccrual loans HFI(1)	505.1		%	408.6		%	505.1		%	408.6		%	353.0		%				Allowance for credit losses as a percentage of nonaccrual loans HFI(1)						421.9		%	431.4		%	489.2		%
Allowance for credit losses as a percentage of nonperforming loans at end of period(1)	Allowance for credit losses as a percentage of nonperforming loans at end of period(1)	315.5		%	324.1		%	315.5		%	324.1		%	265.4		%				Allowance for credit losses as a percentage of nonperforming loans at end of period(1)						305.2		%	295.0		%	292.7		%
(1) Excludes reserve for credit losses on unfunded commitments of $18.5 million,$16.3 million, and $23.0 million recorded in accrued expenses and other liabilities on our consolidated balance sheets as of March 31, 2023, March 31, 2022, and December 31, 2022, respectively.																	(1) Excludes reserve for credit losses on unfunded commitments of $18.5 million,$16.3 million, and $23.0 million recorded in accrued expenses and other liabilities on our consolidated balance sheets as of March 31, 2023, March 31, 2022, and December 31, 2022, respectively.

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

7969

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


		Provision for credit losses(1)				Net charge-offs				Average loans held for investment		Ratio of annualized net recoveries (charge-offs) to average loans					Provision for credit losses(1)				Net (charge-offs) recoveries			Average loans HFI			Ratio of annualized net (charge-offs) recoveries to average loans HFI
(dollars in thousands)	(dollars in thousands)							(dollars in thousands)
Three months ended September 30, 2022

Three Months Ended March 31, 2023														Three Months Ended March 31, 2023
Commercial and industrial	Commercial and industrial			$	5			$	342						$	1,505,262			0.09	%	Commercial and industrial		$	(10)		$	21		$	1,663,572	0.01	%
Construction	Construction	3,044				—				1,577,025		—	%	Construction			1,217				—			1,687,980			—	%
Residential real estate:	Residential real estate:													Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	3,975				(7)				1,495,509		—	%	1-to-4 family mortgage			1,073				(1)			1,567,471			—	%
Residential line of credit	Residential line of credit	77				—				443,881		—	%	Residential line of credit			1,540				—			497,047			—	%
Multi-family mortgage	Multi-family mortgage	(629)				—				385,030		—	%	Multi-family mortgage			129				—			487,394			—	%
Commercial real estate:	Commercial real estate:													Commercial real estate:
Owner-occupied	Owner-occupied	688				51				1,146,149		0.02	%	Owner-occupied			103				66			1,127,738			0.02	%
Non-owner occupied	Non-owner occupied	247				—				1,904,720		—	%	Non-owner occupied			(48)				—			1,951,024			—	%
Consumer and other	Consumer and other	782				(371)				352,518		(0.42)	%	Consumer and other			993				(466)			364,482			(0.52)	%
Total	Total	$	8,189			$	15			$	8,810,094	—	%	Total			$	4,997			$	(380)		$	9,346,708		(0.02)	%
Three months ended September 30, 2021
Commercial and industrial		$	3,203			$	(2,156)			$	1,248,440	(0.69)	%
Construction		(3,080)				2				1,155,051		—	%
Residential real estate:
1-to-4 family mortgage		(2,677)				33				1,153,768		0.01	%
Residential line of credit		(952)				1				397,300		—	%
Multi-family mortgage		(1,462)				—				366,166		—	%
Commercial real estate:
Owner-occupied		7,665				4				925,069		—	%
Non-owner occupied		(6,450)				—				1,674,382		—	%
Consumer and other		921				(269)				325,137		(0.33)	%
Total		$	(2,832)			$	(2,385)			$	7,245,313	(0.13)	%
Nine months ended September 30, 2022
Commercial and industrial		$	(4,784)			$	(429)			$	1,424,734	(0.04)	%
Construction		12,840				11				1,491,710		—	%
Residential real estate:
1-to-4 family mortgage		6,266				(4)				1,405,879		—	%
Residential line of credit		1,032				17				415,006		0.01	%
Multi-family mortgage		(1,102)				—				383,093		—	%
Commercial real estate:
Owner-occupied		(4,601)				76				1,049,851		0.01	%
Non-owner occupied		(2,985)				—				1,798,010		—	%
Consumer and other		3,575				(995)				334,366		(0.40)	%
Total		$	10,241			$	(1,324)			$	8,302,649	(0.02)	%
Nine months ended September 30, 2021
Three Months Ended March 31, 2022														Three Months Ended March 31, 2022
Commercial and industrial	Commercial and industrial	$	2,667			$	(2,577)			$	1,278,041	(0.27)	%	Commercial and industrial			$	(4,006)			$	954		$	1,314,862		0.29	%
Construction	Construction	(28,690)				(27)				1,112,248		—	%	Construction			3,206				—			1,373,379			—	%
Residential real estate:	Residential real estate:													Residential real estate:
1-to-4 family mortgage	1-to-4 family mortgage	(2,141)				(51)				1,110,943		(0.01)	%	1-to-4 family mortgage			1,908				12			1,296,550			—	%
Residential line of credit	Residential line of credit	(4,767)				(2)				396,695		—	%	Residential line of credit			641				1			384,592			—	%
Multi-family mortgage	Multi-family mortgage	4,839				—				304,709		—	%	Multi-family mortgage			(578)				—			358,449			—	%
Commercial real estate:	Commercial real estate:													Commercial real estate:
Owner occupied	Owner occupied	7,384				143				914,687		0.02	%	Owner occupied			(4,187)				10			974,227			—	%
Non-owner occupied	Non-owner occupied	(7,741)				—				1,685,293		—	%	Non-owner occupied			(4,478)				—			1,691,268			—	%
Consumer and other	Consumer and other	1,100				(1,080)				308,624		(0.47)	%	Consumer and other			1,365				(358)			369,239			(0.39)	%
Total	Total	$	(27,349)			$	(3,594)			$	7,111,240	(0.07)	%	Total			$	(6,129)			$	619		$	7,762,566		0.03	%
Year Ended December 31, 2022														Year Ended December 31, 2022
Commercial and industrial														Commercial and industrial			$	(4,563)			$	(82)		$	1,466,685		(0.01)	%
Construction														Construction			11,221				11			1,549,622			—	%
Residential real estate:														Residential real estate:
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:														Commercial real estate:
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)	%

~~(1)~~1) Excludes (reversal of) provision for credit losses on unfunded commitments of ~~$3.2~~$(4.5) million, $1.9 million and ~~$0.3~~$8.6 million recorded for the three months ended ~~September 30,~~March 31, 2023 and 2022 and 2021, respectively, and $9.2 million for the nine months ended September 30, 2022. For the nine months ended September 30, 2021, excludes a reversal of provision for credit losses on unfunded commitments of $2.9 million.

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

~~1) Excludes reversal of provision for credit losses on unfunded commitments of $2.0 million recorded~~ for the year ended December 31, ~~2021,~~2022, respectively.

The allowance for credit losses was ~~$134.5~~$138.8 million and ~~$125.6~~$134.2 million and represented 1.48% and ~~1.65%~~1.44% of loans held for investment as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. For the three months ended March 31, 2023, we experienced net charge-offs of $0.4 million, or 0.02% of average loans HFI, compared to net recoveries of $0.6 million, or 0.03% for the three months ended March 31, 2022. Our ratio of total nonperforming loans HFI as a percentage of total loans HFI remained constant at 0.49% as of March 31, 2023 compared to December 31, 2022.

The primary reason for the increase in the allowance for credit losses is due to loan growth and a tightening monetary policy environment during the three ~~and nine~~ months ended ~~September 30, 2022.~~March 31, 2023. Specifically, we performed qualitative evaluations within our established qualitative framework, weighting the impact uncertainty due to inflation, negative economic forecasts, predicted Federal Reserve rate increases, status of ~~the current economic outlook, including inflation, employment, global conflicts,~~federal government stimulus programs, supply chain ~~concerns,~~disruptions for our customers, recent bank failures and other considerations. Further, ~~we increased our~~the increase in estimated required reserve was attributable to forecasted deterioration in asset quality projected over life of the loan portfolio. As a ratio of

ACL to loans HFI by loan type, our construction, consumer and other, residential 1-4 family mortgage and HELOC portfolios incurred the largest increases year-over-year due to projected slower GDP growth over the next two to three fiscal years; forecasted elevated unemployment levels; and expected further increases in interest rates in the short term. The qualitative evaluations above include weighted projections that the economy may be nearing a recession.

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

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

We also maintain an allowance for credit losses on unfunded commitments, which ~~increased~~decreased to ~~$23.6~~$18.5 million as of ~~September 30, 2022~~March 31, 2023 from ~~$14.4~~$23.0 million as of December 31, ~~2021~~2022 due to ~~an increase~~a 6.27% or $222.5 million decrease in unfunded loan commitments ~~particularly~~during the period. Notably, there was a $298.8 million decrease in unfunded commitments in our ~~commercial~~construction loan category pipeline which resulted in a $4.5 million decrease in required ACL related to unfunded commitments. Our unfunded commitments in our construction loan category decreased as a result of management's concentrated effort over the last few quarters to reduce commitments in specific categories judged to be inherently higher risk considering the current and ~~construction unfunded pipelines, and change in macroeconomic forecasts as discussed above.~~projected economic conditions.

Loans held for sale

Commercial loans held for sale

Our loans held for sale includes a previously acquired portfolio of commercial loans, including ~~shared~~syndicated national credits and institutional healthcare loans that ~~we have elected to account~~are accounted for as held for sale. The loans had a fair value of ~~$33.7~~$9.5 million as of ~~September 30, 2022~~March 31, 2023 compared to ~~$79.3~~$30.5 million as of December 31, ~~2021.~~2022. The change is primarily attributable to loans within the portfolio being paid off through external refinancing and ~~pay-downs~~pay-downs. As of March 31, 2023, the remaining outstanding balance was made up of only two relationships.

As a result of the payoff of two syndicated national credits and ~~was partially offset by loan fundings on pre-existing loan commitments.~~

~~This decrease also includes losses recognized on the change~~other net changes in fair value of commercial loans held for sale during three months ended March 31, 2023, we recorded a gain of $0.9 million, compared to a loss of $0.2 million for the ~~portfolio~~three months ended March 31, 2022, both of which isare included in 'other noninterest income' on the consolidated statement of income of $0.4 million and $2.6 million for the three and nine months ended September 30, 2022, respectively, compared to gains of $0.7 million and $1.3 million for the three and nine months ended September 30, 2021, respectively.

income.

Mortgage loans held for sale

Mortgage loans held for sale consisted of ~~$70.5~~$52.5 million of residential real estate mortgage loans in the process of being sold to third parties and ~~$26.5~~$20.5 million of GNMA optional repurchase loans. This compares to ~~$672.9~~$82.8 million of residential real estate mortgage loans in the process of being sold to third parties and $26.2 million of GNMA optional repurchase loans as of December 31, 2021. There were no GNMA optional repurchase loans included within our consolidated balance sheet as of December 31, 2021. For additional information regarding GNMA optional repurchase loans, please refer to the nonperforming assets table and discussion included under the section captioned 'Asset Quality' within this MD&A. Interest rate lock volume for the three months ended September 30, 2022 and 2021 totaled $0.41 billion and $2.01 billion, respectively, and $2.42 billion and $5.68 billion for the nine months ended September 30, 2022 and 2021, respectively. 2022.

Generally, mortgage volume decreases in rising interest rate environments and slower housing markets and increases in lower interest rate environments and robust housing markets. Interest rate lock volume for the three months ended March 31, 2023 and 2022 totaled $0.38 billion and $1.31 billion, respectively. The decrease in interest rate lock volume during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 reflects the slow down experienced across the industry compared with the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, which benefited from historically low interest rates pre-empted by the COVID-19 Pandemic. The decrease also reflects the exit from our direct-to-consumer internet delivery channel completed during 2022. Interest rate lock volume within our direct-to-consumer internet delivery channel for the three months ended March 31, 2022 totaled $0.57 billion. Interest rate lock commitments in the pipeline were ~~$188.4~~$157.2 million as of ~~September 30, 2022~~March 31, 2023 compared with ~~$487.4~~$118.3 million as of December 31, ~~2021. We expect our pipeline to remain low relative to the prior year through the remainder of~~ 2022 ~~associated with our exit from our direct-to-consumer channel, which was completed during the third quarter of 2022.~~

Mortgage loans to be sold are sold either on a “best efforts” basis or under a mandatory delivery sales agreement. Under a “best efforts” sales agreement, residential real estate originations are locked in at a contractual rate with third party private investors or directly with government sponsored agencies, and we are obligated to sell the mortgages to such investors only if the mortgages are closed and funded. The risk we assume is conditioned upon loan underwriting and market conditions in the national mortgage market. Under a mandatory delivery sales agreement, we commit to deliver a certain principal amount of mortgage loans to an investor at a specified price and delivery date. Penalties are paid to the investor if we fail to satisfy the contract. Gains and losses are realized at the time consideration is received and all other criteria for sales treatment have been met. These loans are typically sold within fifteen to twenty-five days after the loan is funded, depending on the economic environment and competition in the market. Although loan fees and some interest income are derived from mortgage loans held for sale, the main source of income is gains from the sale of these loans in the secondary market.

Other earning assets

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

We enter into agreements with certain customers to purchase investment securities under agreements to resell at specific dates in the future. This investment deploys some of our liquidity position into an instrument that improves the return on those funds in low interest rate environments. Additionally, we believe it positions us more favorably for a rising interest rate environment. Securities purchased under agreements to resell totaled $26.3 million and $75.4 million at March 31, 2023 and December 31, 2022, respectively.

Available-for-sale debt securities portfolio

Our investment portfolio objectives include maximizing total return after other primary objectives are achieved such as, but not limited to, providing liquidity, capital preservation, and pledging collateral for various lines of credit and other borrowings. The investment objectives guide the portfolio allocation among security types, maturities, and other attributes.

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

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

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

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


	As of March 31,						As of December 31,
	2023						2022
(dollars in thousands)	Fair value		% of total investment securities		Weighted average yield (1)		Fair value		% of total investment securities		Weighted average yield (1)
Treasury securities:
Maturing within one year	$	31,102	2.1	%	2.25	%	$	729	—	%	2.40	%
Maturing in one to five years	77,721		5.3	%	2.04	%	106,951		7.3	%	2.10	%
Maturing in five to ten years	—		—	%	—	%	—		—	%	—	%
Maturing after ten years	—		—	%	—	%	—		—	%	—	%
Total Treasury securities	108,823		7.4	%	2.10	%	107,680		7.3	%	2.10	%
Government agency securities:
Maturing within one year	—		—	%	—	%	—		—	%	—	%
Maturing in one to five years	33,934		2.3	%	1.56	%	27,082		1.8	%	1.50	%
Maturing in five to ten years	6,032		0.4	%	1.58	%	12,011		0.8	%	1.70	%
Maturing after ten years	962		0.1	%	4.55	%	969		0.1	%	3.32	%
Total government agency securities	40,928		2.8	%	1.63	%	40,062		2.7	%	1.60	%
Municipal securities:
Maturing within one year	3,168		0.2	%	2.03	%	3,496		0.2	%	2.18	%
Maturing in one to five years	18,930		1.3	%	2.67	%	17,775		1.2	%	2.38	%
Maturing in five to ten years	43,801		3.0	%	3.13	%	39,034		2.7	%	3.12	%
Maturing after ten years	205,095		13.9	%	2.93	%	204,115		13.9	%	3.18	%
Total obligations of state and municipal subdivisions	270,994		18.4	%	2.91	%	264,420		18.0	%	3.10	%
Residential and commercial mortgage-backed securities guaranteed by FNMA, GNMA and FHLMC:
Maturing within one year	—		—	%	—	%	—		—	%	—	%
Maturing in one to five years	3,758		0.3	%	2.76	%	3,834		0.3	%	2.73	%
Maturing in five to ten years	25,725		1.7	%	2.68	%	23,683		1.6	%	2.65	%
Maturing after ten years	1,013,628		68.9	%	1.85	%	1,024,320		69.6	%	1.84	%
Total residential and commercial mortgage- backed securities guaranteed by FNMA, GNMA and FHLMC	1,043,111		70.9	%	1.87	%	1,051,837		71.5	%	1.86	%






Corporate securities:
Maturing within one year	—		—	%	—	%	—		—	%	—	%
Maturing in one to five years	—		—	%	—	%	373		—	%	5.00	%
Maturing in five to ten years	7,149		0.5	%	3.94	%	6,814		0.5	%	3.87	%
Maturing after ten years	—		—	%	—	%	—		—	%	—	%
Total Corporate securities	7,149		0.5	%	3.94	%	7,187		0.5	%	3.94	%
Total available-for-sale debt securities	$	1,471,005	100.0	%	2.08	%	$	1,471,186	100.0	%	2.10	%

(1)Yields on a tax-equivalent basis.

Equity Securities

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

Deposits

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

Total deposits were ~~$10.01~~$11.18 billion and ~~$10.84~~$10.86 billion as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021, respectively.~~2022, respectively, which represents a 12.2% annualized increase quarter-over-quarter. Noninterest-bearing deposits at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were ~~$2.97~~$2.49 billion and ~~$2.74~~$2.68 billion, respectively, while interest-bearing deposits were ~~$7.04~~$8.69 billion and ~~$8.10~~$8.18 billion at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. ~~This deposit decrease is primarily due~~Included in noninterest-bearing deposits are certain mortgage escrow deposits from our third-party mortgage servicing provider amounting to a ~~decrease in interest-bearing demand~~$92.9 million and $75.6 million at March 31, 2023 and December 31, 2022, respectively.

Interest-bearing checking deposits of ~~$770.5 million~~and ~~decrease in~~ money market ~~deposits of~~ ~~$345.2~~increased by $232.9 million~~from December~~ and $230.9 million during the three months ended March 31, ~~2021.The decrease in the money market deposits and interest-bearing deposits was~~2023, respectively. These increases were primarily driven by ~~a $677.0 million decrease from December 31, 2021~~increases in ~~certain high-cost~~our deposits from municipal and governmental entities (i.e. "public deposits") ~~that we exited. This was~~which increased by $313.2 million during the period. These increases were partially offset by ~~increases~~decreases in ~~customer time and saving~~non-interest bearing deposits of ~~$57.1~~$187.5 million during the same period. Our deposit composition continues to shift as banks are competing for customers who are searching for higher yields.

As a result of the rising interest rate environment and ~~$26.6 million, respectively, as of September 30, 2022 compared to balances as of December 31, 2021. In addition, as noted above,~~the shift in our ~~noninterest-bearing deposits increased by $226.3 million from December 31, 2021.~~

~~During the three months ended September 30, 2022, we increased~~ deposit ~~rates on customer time and money market deposits to improve~~composition, our ~~liquidity profile and future funding cost. The Company's~~ total cost of deposits increased during the three months ended ~~September 30, 2022~~March 31, 2023 from the three months ended ~~September 30, 2021~~March 31, 2022 by 26174 basis points to ~~0.52%~~1.94%, and the cost of interest-bearing deposits increased to ~~0.74%~~2.53% from ~~0.34%~~0.27% in the same period for the prior year.

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

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

Included in noninterest-bearing deposits are certain mortgage escrow and related customer deposits that our third-party servicing provider, Specialized Loan Servicing, transfers to the Bank which totaled $140.8 million and $127.6 million at September 30, 2022March 31, 2023 and December 31, ~~2021,~~2022 was $8.7 million and $9.8 million, respectively. ~~Additionally, our deposits from public deposits totaled $1.61 billion at September 30, 2022, compared to $2.29 billion at December 31, 2021.~~

Our deposit base also includes certain commercial and high net worth individuals that periodically place deposits with the Bank for short periods of time and can cause fluctuations from period to period in the overall level of customer deposits outstanding. These fluctuations may include certain deposits from related parties as disclosed within Note 14, "Related party transactions" in the notes to our consolidated financial statements included in this Report.

Average deposit balances by type, together with the average rates per period are reflected in the average balance sheet amounts, interest paid and rate analysis tables included in this management's discussion and analysis under the subheading "Results of operations" discussion.

~~The following table sets forth the distribution by type of our deposit accounts as of the dates indicated:~~

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

~~Other earning assets~~

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

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

~~Investment portfolio~~

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

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

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

8474

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


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

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



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

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


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

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

Uninsured deposits are defined as the portion of deposit accounts in U.S. offices that exceed the FDIC insurance limit and amounts in any other uninsured investment or deposit account that are classified as deposits and are not subject to any federal or state deposit insurance regimes. Further details related to our estimated uninsured, uncollateralized and estimated insured deposits outstanding is presented below:

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


	March 31,			December 31,
	2023			2022
Estimated insured or collateralized deposits	$	7,926,537		$	7,288,641
Estimated uninsured deposits(1)	$	5,662,346		$	5,644,534
Estimated uninsured and uncollateralized deposits(2)	$	3,256,378		$	3,567,193
Estimated uninsured and uncollateralized deposits as a % of total deposits(2)	29.1		%	32.9		%

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

(2) Amounts are shown on a ~~tax-equivalent basis.~~

fully consolidated basis and exclude deposits of affiliates that are eliminated in consolidation.

Borrowed funds

Deposits and investment securities available-for-sale are the primary source of funds for our lending activities and general business purposes. However, we may also obtain advances from the FHLB, purchase federal funds and engage in overnight borrowing from the Federal Reserve, correspondent banks, or enter into client repurchase agreements. We also use these sources of funds as part of our asset liability management process to control our long-term interest rate risk exposure, even if it may increase our short-term cost of funds.

Our level of short-term borrowing can fluctuate on a daily basis depending on funding needs and the source of funds to satisfy those needs, in addition to the overall interest rate environment and cost of public funds. ~~Borrowings can include securities sold under agreements to repurchase, lines of credit, advances from the FHLB, federal funds purchased, and subordinated debt.~~

Securities sold under agreements to repurchase and federal funds purchased

We enter into agreements with certain customers to sell certain securities under agreements to repurchase the security the following day. These agreements are made to provide customers with comprehensive treasury management programs as a short-term return for their excess funds. Securities sold under agreements to repurchase totaled ~~$29.0~~$26.7 million and ~~$40.7~~$21.9 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

We maintain lines with certain correspondent banks that provide borrowing capacity in the form of federal funds purchased. Federal funds purchased are short-term borrowings that typically mature within one to ninety days. Borrowings against these lines (i.e. federal funds purchased) totaled $11.5 million and $65.0 million as of March 31, 2023 and December 31, 2022, respectively.

FHLB short-term borrowings

As a member of the FHLB Cincinnati, we ~~receive~~may utilize advances from the FHLB ~~pursuant~~in order to ~~the terms of various agreements that assist in funding our mortgage~~provide additional liquidity and ~~loan commitments, as well as providing liquidity for relevant balance sheet funding strategies.~~funding. Under these short-term agreements, we ~~pledged qualifying loans of $2.53 billion as collateral securing~~maintain a line of credit ~~with a~~that as of March 31, 2023 and December 31, 2022 had total borrowing capacity of $1.20 billion ~~as of September 30, 2022.~~and $1.27 billion, respectively. As of March 31, 2023 and December 31, ~~2021, the Company pledged~~2022, we had qualifying loans ~~of $2.72 billion~~pledged as collateral securing athese lines amounting to $2.56 billion and $2.67 billion, respectively. Overnight cash advances against this line ~~of credit with a total borrowing capacity of $1.23 billion. As of September 30, 2022, we had outstanding advances from the FHLB totaling $540.0 million. There were no such borrowings outstanding~~totaled $125.0 million and $175.0 million as of March 31, 2023 and December 31, ~~2021.~~2022, respectively. The borrowing rate on our FHLB short-term borrowings was 4.89% and 3.89% as of March 31, 2023 and December 31, 2022, respectively.

Subordinated debt

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

Additionally, during the year ended December 31, 2021, our $0.9 million investment in the Trusts was included in other assets in the accompanying consolidated balance sheets, and our $30.0 million obligation is reflected as junior subordinated debt, respectively. The junior subordinated debt bears interest at floating interest rates based on a spread over 3-month LIBOR plus 315 basis points (6.79% and 3.37% at September 30, 2022 and December 31, 2021, respectively) for the $21.7 million debenture and 3-month LIBOR plus 325 basis points (6.92% and 3.47% at September 30, 2022 and December 31, 2021, respectively) for the remaining $9.3 million. The $9.3 million debenture may be redeemed prior to the 2033 maturity date upon the occurrence of a special event, and the $21.7 million debenture may be redeemed prior to 2033 at our option. The Company classified both debentures as additional Tier 1 capital as of September 30, 2022 and December 31, 2021.

~~We also have~~2020, we placed $100.0 million of ten year fixed-to-floating rate subordinated notes, ~~scheduled to mature on~~maturing September 1, 2030. This subordinated note pays interest semi-annually in arrears based on a 4.50% fixed annual interest rate for the first five years of the notes. For years six through ten, the interest rate resets on a quarterly basis, and will be based on the 3-month Secured Overnight Financing Rate plus a spread of 439 basis points. We are entitled to redeem the notes in whole or in part on any interest payment date on or after September 1, 2025. During the ~~first quarter of~~three months ended March 31, 2022, ~~the Company entered into a designated fair value hedge to mitigate~~we began mitigating our interest rate exposure associated with these ~~notes. The estimated~~notes through the use of fair value ofhedging instruments. See Note 9, "Derivatives" in the ~~hedge included in borrowings on~~notes to the consolidated ~~balance sheet~~financial statements for additional details related to these instruments.

Further information related to the our subordinated debt as of September 30, 2022 was $3.8 million. The Company classified the subordinated notes issuance, net of the impact of the designated fair value hedge and unamortized issuance costs, as Tier 2 capital as of September 30, 2022, and net of unamortized issuance costs as of DecemberMarch 31, ~~2021.~~2023 is detailed below:

(dollars in thousands, except %)

Year established

Maturity

Call date

Total debt outstanding

Interest rate

Coupon structure

Subordinated debt issued by trust preferred securities:

FBK Trust I (1)

2003

06/09/2033

6/09/2008(2)

9,280

8.41%

3-month LIBOR plus 3.25%

FBK Trust II (1)

2003

06/26/2033

6/26/2008(3)

21,650

8.28%

3-month LIBOR plus 3.15%

Additional subordinated debt:

FBK subordinated debt I(4)

2020

09/01/2030

9/1/2025 (5)

100,000

4.50%

Semi-annual fixed (6)

Unamortized debt issuance costs

(902)

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

(2,952)

Total subordinated debt, net

127,076

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

(2)The Company may also redeem the first junior subordinated debenture listed, in whole or in part, on any distribution payment date within 120 days of the occurrence of a

special event, at the redemption price and must be redeemed no later than 2033.

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

be redeemed no later than 2033.

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

the final five years before maturity.

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

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

the term of the debenture.

Other borrowings

Other borrowings on our consolidated balance sheets includes our finance lease liability totaling ~~$1.4~~$1.3 million and ~~$1.5~~$1.4 million as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. In addition, other borrowings on our consolidated balance sheets includes guaranteed rebooked GNMA loans previously sold that have become past due over 90 days and are eligible for repurchase totaling ~~$26.5~~$20.5 million and $26.2 million as of ~~September 30, 2022. There were no such borrowings outstanding as of~~March 31, 2023 and December 31, ~~2021.~~2022, respectively. See Note 5, "Leases" and Note 10, "Fair ~~Value~~value of financial instruments" within the Notes to our consolidated financial statements for additional information regarding our finance lease and guaranteed GNMA loans eligible for repurchase, respectively.

Liquidity and capital resources

Bank liquidity management

We are expected to maintain adequate liquidity at the Bank to meet the cash flow requirements of clients who may be either depositors wishing to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs. Our Liquidity ~~and Interest Rate Risk~~ Policy is intended to cause the Bank to maintain adequate liquidity and, therefore, enhance our ability to raise funds to support asset growth, meet deposit withdrawals and lending needs, maintain reserve requirements and otherwise sustain our operations. We accomplish this through management of the

maturities of our interest-earning assets and interest-bearing liabilities. We believe that our present position is adequate to meet our current and future liquidity needs.

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

As part of our liquidity management strategy, we ~~also~~ focus on minimizing our costs of liquidity and attempt to decrease these costs by growing our noninterest-bearing and other low-cost deposits, while replacing higher cost funding sources including ~~time deposits and~~ borrowed funds. While we do not control the types of deposit instruments our clients choose, we do influence those choices with the rates and the deposit specials we offer. As of both March 31, 2023 and December 31, 2022, we also had $50.0 million available through the IntraFi network, which allows us to offer banking customers access to FDIC insurance protection on deposits through our Bank which exceed FDIC insurance limits.

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

used to secure certain deposit types and short-term borrowings. As of September 30, 2022 and December 31, 2021, securities with a carrying value of $1.21 billion and $1.23 billion, respectively, were pledged to secure government, public, trust and other deposits and as collateral for short-term borrowings, letters of credit and derivative instruments. As of March 31, 2023 and December 31, 2022, we had pledged securities related to these items with carrying values of $1.18 billion and $1.19 billion, respectively.

Additional sources of liquidity include federal funds purchased, repurchase agreements, FHLB borrowings, and lines of credit. Interest is charged at the prevailing market rate on federal funds purchased, reverse repurchase agreements and FHLB advances. ~~Funds and~~Overnight advances obtained from the FHLB are used primarily to meet day to day liquidity needs, particularly when the cost of such borrowing compares favorably to the rates that we would be required to pay to attract deposits. As of ~~September 30,~~March 31, 2023 and December 31, 2022, we had outstanding overnight cash advances from the FHLB totaling ~~$540.0~~$125.0 million and $175.0 million, respectively. As of March 31, 2023, there was $1.20 billion available to borrow against with a remaining capacity of $473.2 million. ~~There were no outstanding overnight cash management advances or other advances with the FHLB as~~As of December 31, ~~2021. There~~2022, there was ~~$1.20~~$1.27 billion ~~and $1.23 billion as of September 30, 2022 and December 31, 2021, respectively~~ available to borrow ~~against.~~ against with a remaining capacity of $830.0 million.

We ~~also maintain~~maintained unsecured lines of credit with other commercial banks totaling ~~$315.0 million and $325.0~~$350.0 million as of ~~September 30, 2022~~both March 31, 2023 and December 31, ~~2021, respectively.~~2022. These are unsecured, uncommitted lines of credit typically maturing at various times within the next twelve months. ~~There were no borrowings~~Borrowings against these lines (i.e. federal funds purchased) totaled $11.5 million and $65.0 million as of ~~September 30, 2022 or December~~March 31, ~~2021. We also had an additional $50.0 million available through the promontory network as of both September 30, 2022~~2023 and December 31, ~~2021.~~2022, respectively.

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


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

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

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

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

Holding company liquidity management

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

Due to state banking laws, the Bank may not declare dividends in any calendar year in an amount exceeding the total of its net income for that year combined with its retained net income of the preceding two years, without the prior approval of the Tennessee Department of Financial Institutions. Based upon this regulation, as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021, $130.1~~2022, $158.2 million and ~~$170.8~~$161.3 million of the Bank’s retained earnings were available for the payment of dividends without such prior approval. In addition, dividends paid by the Bank to the Company would be prohibited if the effect thereof would cause the Bank’s capital to be reduced below applicable minimum capital requirements. During the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, there were ~~$7.3 million and $41.8~~$23.5 million in cash dividends approved by the board for payment from the Bank to the holding company. During the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, there were ~~$6.3~~$17.3 million ~~and $116.3 million, respectively,~~ in cash dividends approved by the board for payment from the Bank to the holding company. None of these required approval from the

TDFI. Subsequent to ~~September 30, 2022,~~March 31, 2023, the board approved a dividend from the Bank to the holding company to be paid in the ~~fourth~~second quarter for ~~$7.3~~$8.5 million that also did not require approval from the TDFI.

During the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, the Company declared and paid shareholder dividends of ~~$0.13~~$0.15 per share, or ~~$6.1 million and $0.39 per share, or $18.5~~$7.0 million, respectively. During the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, the Company declared and paid dividends of ~~$0.11~~$0.13 per share, or ~~$5.3 million and $0.33 per share, or $15.9~~$6.2 million, respectively. Subsequent to ~~September 30, 2022,~~March 31, 2023, the Company declared a quarterly dividend in the amount of ~~$0.13~~$0.15 per share, payable on ~~November~~May 23, ~~2022,~~2023, to stockholders of record as of ~~November~~May 9, ~~2022.~~2023.

Shareholders’ equity and capital management

Our total shareholders’ equity was ~~$1.28~~$1.37 billion at ~~September 30, 2022~~March 31, 2023 and ~~$1.43~~$1.33 billion at December 31, ~~2021.~~2022. Book value per share was ~~$27.30~~$29.29 at ~~September 30, 2022~~March 31, 2023 and ~~$30.13~~$28.36 at December 31, ~~2021,~~2022, respectively. The ~~decrease~~increase in shareholders’ equity ~~during the first half of 2022,~~ was primarily attributable to ~~a decrease~~an increase in ~~accumulated other comprehensive income related to unrealized losses on our available-for-sale securities portfolio. Additionally, our capital was impacted by~~ retained net income, ~~dividends paid, and $32.7~~net of declared by dividends. In addition, the increase in shareholders’ equity was driven by a $27.1 million ~~in common stock repurchases~~unrealized gain within our available-for-sale debt securities portfolio during the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023.

Our capital management consists of providing adequate equity to support our current and future operations. We are subject to various regulatory capital requirements administered by state and federal banking agencies, including the TDFI, Federal Reserve and the FDIC. Failure to meet minimum capital requirements may prompt certain actions by regulators that, if undertaken, could have a direct material adverse effect on our financial condition and results of operations. The Federal Reserve and the FDIC have issued guidelines governing the levels of capital that banks must maintain. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, we met all capital adequacy requirements for which we are subject. See additional discussion regarding our capital adequacy and ratios at within Note 12, "Minimum capital requirements" in the notes to our consolidated financial statements contained herein.

ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate sensitivity

Our market risk arises primarily from interest rate risk inherent in the normal course of lending and deposit-taking activities. Management believes that our ability to successfully respond to changes in interest rates will have a significant impact on our financial results. To that end, management actively monitors and manages our interest rate risk exposure.

The Asset Liability Management Committee, which is authorized by our board of directors, monitors our interest rate sensitivity and makes decisions relating to that process. The ALCO’s goal is to structure our asset/liability composition to maximize net interest income while managing interest rate risk so as to minimize the adverse impact of changes in interest rates on net interest income and capital in either a rising or declining interest rate environment. Profitability is affected by fluctuations in interest rates. A sudden and substantial change in interest rates may adversely impact our earnings because the interest rates borne by assets and liabilities do not change at the same speed, to the same extent or on the same basis.

We monitor the impact of changes in interest rates on our net interest income and economic value of equity using rate shock analysis. Net interest income simulations measure the short-term earnings exposure from changes in market rates of interest in a rigorous and explicit fashion. Our current financial position is combined with assumptions regarding future business to calculate net interest income under varying hypothetical rate scenarios. Economic Value of Equity measures our long-term earnings exposure from changes in market rates of interest. EVE is defined as the present value of assets minus the present value of liabilities at a point in time. A decrease in EVE due to a specified rate change indicates a decline in the long-term earnings capacity of the balance sheet assuming that the rate change remains in affect over the life of the current balance sheet. For purposes of calculating EVE, a zero percent floor is assumed on discount factors.

The following analysis depicts the estimated impact on net interest income and EVE of immediate changes in interest rates at the specified levels for the periods presented:


						Percentage change in:					Percentage change in:
		Net interest income (1)									Net interest income (1)
		Year 1				Year 2
Change in interest rates	Change in interest rates	September 30,		December 31,		September 30,		December 31,		Change in interest rates	March 31,		December 31,
(in basis points)	(in basis points)	2022		2021		2022		2021		(in basis points)	2023		2022
+400	+400	19.3	%	40.9	%	29.5	%	54.8	%	+400	17.9	%	20.6	%
+300	+300	14.2	%	30.2	%	21.9	%	40.8	%	+300	13.5	%	15.1	%
+200	+200	10.3	%	20.9	%	15.3	%	28.3	%	+200	10.3	%	10.8	%
+100	+100	5.67	%	10.8	%	8.23	%	14.7	%	+100	5.82	%	5.98	%
-100	-100	(5.83)	%	(6.32)	%	(8.59)	%	(10.2)	%	-100	(6.20)	%	(6.32)	%
-200	-200	(12.5)	%	(8.73)	%	(18.2)	%	(13.5)	%	-200	(12.5)	%	(13.2)	%


		Percentage change in:					Percentage change in:
		Economic value of equity (2)					Economic value of equity (2)
Change in interest rates	Change in interest rates	September 30,		December 31,		Change in interest rates	March 31,		December 31,
(in basis points)	(in basis points)	2022		2021		(in basis points)	2023		2022
+400	+400	(9.89)	%	5.30	%	+400	(12.8)	%	(9.90)	%
+300	+300	(6.79)	%	5.67	%	+300	(8.42)	%	(7.00)	%
+200	+200	(3.71)	%	5.72	%	+200	(4.07)	%	(4.00)	%
+100	+100	(1.33)	%	3.90	%	+100	(1.09)	%	(1.66)	%
-100	-100	0.50	%	(8.13)	%	-100	(0.79)	%	0.99	%
-200	-200	(0.08)	%	(21.4)	%	-200	(3.46)	%	1.07	%

(1)The percentage change represents the projected net interest income for 12 ~~months and 24~~ months on a flat balance sheet in a stable interest rate environment versus the projected net interest income in the various rate scenarios.

(2)The percentage change in this column represents our EVE in a stable interest rate environment versus EVE in the various rate scenarios.

The results for the net interest income simulations as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 resulted in an asset sensitive position. The primary influence of our asset sensitivity is the floating rate structure in many of our loans held for investment as well as the composition of our liabilities which is primarily ~~core~~customer deposits. ~~Non-interest bearing deposits continue be a strong source of funding which also increases asset sensitivity. While our~~Our variable rate loan portfolio is indexed to market rates and timing of repricing of loans and deposits ~~typically adjust at a percentage~~varies in proportion to market rate fluctuations. We actively monitor and perform stress tests on our deposit beta's as part of our overall management of interest rate risk. This requires the ~~overall movement~~use of various assumptions based on historical relationships of these variables in reaching any conclusion. Since these correlations are based on competitive pricing in the market, ~~rates.~~we anticipate that our future results will likely be different from the scenario results presented above and such differences could be material.

The preceding measures assume no change in the size or asset/liability compositions of the balance sheet. Thus, the measures do not reflect the actions the ALCO may undertake in response to such changes in interest rates. The scenarios assume instantaneous movements in interest rates in increments of 100, 200, 300 and 400 basis points. As interest rates are adjusted over a period of time, it is our strategy to proactively change the volume and mix of our balance sheet in order to mitigate our interest rate risk. The computation of the prospective effects of hypothetical interest rate changes requires numerous assumptions regarding characteristics of new business and the behavior of existing positions. These business assumptions are based upon our experience, business plans and published industry experience. Key assumptions employed in the model include asset prepayment speeds, competitive factors, the relative price sensitivity of certain assets and liabilities and the expected life of non-maturity deposits. Because these assumptions are inherently uncertain, actual results may differ from simulated results.

We may utilize derivative financial instruments as part of an ongoing effort to mitigate interest rate risk exposure to interest rate fluctuations and facilitate the needs of our customers.

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

ITEM 4 — Controls and Procedures

Evaluation of Disclosure Controls and Procedures

An evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this Report was carried out under the supervision and with the participation of the Company’s Chief Executive Officer, Chief Financial Officer and other members of the Company’s senior management. The Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Report, the Company’s disclosure

controls and procedures were effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is: (i) accumulated and communicated to the Company’s management (including the Chief Executive Officer and Chief Financial Officer) to allow timely decisions regarding required disclosure; and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended ~~September 30, 2022,~~March 31, 2023, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company does not expect that its disclosure controls and procedures and internal control over financial reporting will prevent all errors and fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

PART II

ITEM 1—LEGAL PROCEEDINGS

Various legal proceedings to which we or our subsidiaries are party arise from time to time in the normal course of business. As of the date of this Report, there are no material pending legal proceedings to which we or any of our subsidiaries is a party or of which any of our or our subsidiaries’ properties are subject.

ITEM 1A—RISK FACTORS

~~There have been no material changes to~~The following risk factor supplements and should be read in conjunction with the risk factors set forth in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

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

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

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

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

ITEM 2—UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information about repurchases of common stock by the Company during the quarter ended ~~September 30, 2022:~~March 31, 2023:

~~Period~~

~~(a)~~

~~Total number of shares purchased(1)~~

(b)
Average price paid per share

~~(d)~~

~~Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs(2)~~

~~July 1 - July 31, 2022~~

—

~~73,440,676~~

~~August 1 - August 31, 2022~~

—

~~73,440,676~~

~~September 1 - September 30, 2022~~

—

~~73,440,676~~

~~Total~~

—

~~73,440,676~~


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

(1) On March 14, 2022, the Company announced the board of directors’ authorization of a share repurchase program pursuant to which the Company may purchase up to $100 million in shares of the Company’s issued and outstanding common stock. The purchase authorizations granted under the new repurchase plan will terminate either on the date on which the maximum dollar amount is repurchased under the new repurchase plan or on January 31, 2024, whichever date occurs earlier. The new repurchase plan will be conducted pursuant to a written plan and is intended to comply with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended.

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

9082

ITEM 6—EXHIBITS

The exhibits listed on the accompanying Exhibit Index are filed, furnished or incorporated by reference (as stated therein) as part of this Report.

EXHIBIT INDEX


Exhibit Number			Description

3.1			Amended and Restated Charter of FB Financial Corporation (incorporated by reference as Exhibit 3.1 to the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)
3.2			Amended and Restated Bylaws of FB Financial Corporation (incorporated by reference to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 (File No. 001-37875) Filed on November 14, 2016)
4.1			Registration Rights Agreement by and between FB Financial Corporation and James W. Ayers, dated September 15, 2016 (incorporated by reference as Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 (File No. 001-37875) filed on November 14, 2016)






















31.1			Rule 13a-14(a) Certification of Chief Executive Officer*
31.2			Rule 13a-14(a) Certification of Chief Financial Officer*
32.1			Section 1350 Certification of Chief Executive Officer and Chief Financial Officer**
101.INS			Inline XBRL Instance Document*
101.SCH			Inline XBRL Taxonomy Extension Schema Document*
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document*
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document*
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


*			Filed herewith.
**			Furnished herewith.

†			Represents a management contract or a compensatory plan or arrangement.

9183

Signatures

Pursuant to the requirements of the section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.


						FB Financial Corporation





						/s/ Michael M. Mettee
~~November 7, 2022~~May 8, 2023						Michael M. Mettee Chief Financial Officer (Principal Financial Officer)

						/s/ ~~Keith Rainwater~~Jonathan Pennington
~~November 7, 2022~~May 8, 2023						~~Keith Rainwater~~Jonathan Pennington Chief Accounting Officer (Principal Accounting Officer)

9284


As of September 30, 2022
	Commercial Term Loans
	Amortized Cost Basis by Origination Year
	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Commercial and industrial
Pass	$	284,399	$	220,172	$	83,831	$	96,337	$	40,939	$	63,998	$	718,260	$	1,507,936
Special Mention	26		355		—		375		151		—		2,732		3,639
Classified	65		1,220		2,106		1,593		451		9,015		8,134		22,584

Total	284,490		221,747		85,937		98,305		41,541		73,013		729,126		1,534,159


Construction
Pass	570,166		569,425		215,636		71,706		18,027		46,794		183,738		1,675,492
Special Mention	428		—		18		—		7		2,530		—		2,983
Classified	—		822		—		—		—		—		200		1,022

Total	570,594		570,247		215,654		71,706		18,034		49,324		183,938		1,679,497


Residential real estate:

Multi-family mortgage
Pass	117,654		163,283		33,326		30,470		4,201		35,279		8,966		393,179
Special Mention	—		—		—		—		—		—		—		—
Classified	—		—		—		—		—		1,187		—		1,187

Total	117,654		163,283		33,326		30,470		4,201		36,466		8,966		394,366



Commercial real estate:
Owner occupied
Pass	215,250		231,038		117,751		159,546		78,881		266,021		66,718		1,135,205
Special Mention	103		1,293		—		1,470		2,294		390		—		5,550
Classified	—		—		241		5,992		1,282		9,418		655		17,588

Total	215,353		232,331		117,992		167,008		82,457		275,829		67,373		1,158,343


Non-owner occupied
Pass	411,612		428,087		138,590		171,747		225,519		505,370		56,718		1,937,643
Special Mention	—		1,015		—		—		82		—		—		1,097
Classified	—		—		—		150		3,329		12,000		—		15,479

Total	411,612		429,102		138,590		171,897		228,930		517,370		56,718		1,954,219





Total commercial loans
Pass	1,599,081		1,612,005		589,134		529,806		367,567		917,462		1,034,400		6,649,455
Special Mention	557		2,663		18		1,845		2,534		2,920		2,732		13,269
Classified	65		2,042		2,347		7,735		5,062		31,620		8,989		57,860

Total commercial loans	$	1,599,703	$	1,616,710	$	591,499	$	539,386	$	375,163	$	952,002	$	1,046,121	$	6,720,584



September 30, 2022	Non-accrual with no related allowance		Non-accrual with related allowance		Related allowance
Commercial and industrial	$	1,228	$	502	$	3

Residential real estate:
1-to-4 family mortgage	1,537		4,043		73
Residential line of credit	1,070		601		9
Multi-family mortgage	—		44		1
Commercial real estate:
Owner occupied	4,710		163		1
Non-owner occupied	6,751		209		4
Consumer and other	—		5,767		291
Total	$	15,296	$	11,329	$	382


	Offsetting Derivative Assets				Offsetting Derivative Liabilities
	September 30, 2022		December 31, 2021		September 30, 2022		December 31, 2021
Gross amounts recognized	$	46,973	$	4,990	$	20,272	$	15,733
Gross amounts offset in the consolidated balance sheets	—		—		—		—
Net amounts presented in the consolidated balance sheets	46,973		4,990		20,272		15,733

Gross amounts not offset in the consolidated balance sheets
Less: financial instruments	14,100		4,297		14,100		4,297
Less: financial collateral pledged	—		—		6,172		11,436
Net amounts	$	32,873	$	693	$	—	$	—


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


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