UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 20232024
OR
☐ 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)
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Tennessee | 62-1216058 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
211 Commerce Street,1221 Broadway, Suite 3001300 Nashville, Tennessee | 3720137203 |
(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:
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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: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 registrantRegistrant 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.
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Large accelerated filer | | ☒ | | | Accelerated filer | | ☐ |
Non-accelerated filer | | ☐ | | | Small reporting company | | ☐ |
Emerging growth company | | ☐ | | | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares of registrant’s Common Stock outstanding as of April 28, 202330, 2024 was 46,781,020.46,987,655.
Table of Contents
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PART I. | | |
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Item 1. | | |
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Item 2. | | |
Item 3. | | |
Item 4. | | |
PART II. | | |
Item 1. | | |
Item 1A. | | |
Item 2. | | |
Item 5. | | |
Item 6. | | |
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PART I
GLOSSARY OF ABBREVIATIONS AND ACRONYMS
As used in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2023,2024, 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 Statementsconsolidated financial statements (unaudited) as well as in the Management’s discussion and analysis of financial condition and results of operations. You may find it helpful to refer to this page as you read this Report.
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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 |
ASUALCO | Asset Liability Management Committee | | GDP | Gross domestic product |
ASC | Accounting Standard UpdateCodification | | GNMA | Government National Mortgage Association |
ASU | Accounting Standard Update | | HFI | Held for investment |
Bank | FirstBank, subsidiary bank | | HFS | Held for sale |
CD | Certificate of Deposit | | IRLCNIM | Interest rate lock commitmentNet interest margin |
CECL | Current expected credit losses | | LIBOR | London Interbank Offered Rate |
CEO | Chief Executive Officer | | MSR | Mortgage servicing rights |
CET1 | Common Equity Tier 1 | | NIM | Net interest margin |
COVID-19 | Coronavirus pandemic | | OREO | Other real estate owned |
CPRCompany | Conditional prepayment rateFB Financial Corporation | | PSU | Performance-based restricted stock units |
EPSCPR | Earnings per shareConditional prepayment rate | | Report | Form 10-Q for the quarterly period ended March 31, 20232024 |
CRE | Commercial real estate | | ROAA | Return on average assets |
EPS | Earnings per share | | ROAE | Return on average common equity |
ESPP | Employee Stock Purchase Plan | | RSUROATCE | Restricted stock unitsReturn on average tangible common equity |
EVE | Economic value of equity | | RSU | Restricted stock units |
FASB | Financial Accounting Standards Board | | SEC | U.S. Securities and Exchange Commission |
FASBFDIC | Financial Accounting Standards BoardFederal Deposit Insurance Corporation | | SOFR | Secured overnight financing rate |
FDICFDM | Federal Deposit Insurance CorporationFinancial Difficulty Modification | | TDFI | Tennessee Department of Financial Institutions |
Federal Reserve | Board of Governors of the Federal Reserve System | | | TDR | Troubled debt restructuring
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FB Financial Corporation and subsidiaries
Consolidated balance sheets
(Amounts are in thousands except share and per share amounts)
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| | | | | March 31, | | December 31, | |
| | | 2023 (Unaudited) | | 2022 | | |
ASSETS | ASSETS | | | | | |
ASSETS | |
ASSETS | |
Cash and due from banks | |
Cash and due from banks | |
Cash and due from banks | Cash and due from banks | | $ | 133,874 | | | $ | 259,872 | | |
Federal funds sold and reverse repurchase agreements | Federal funds sold and reverse repurchase agreements | | 63,994 | | | 210,536 | | |
Federal funds sold and reverse repurchase agreements | |
Federal funds sold and reverse repurchase agreements | |
Interest-bearing deposits in financial institutions | |
Interest-bearing deposits in financial institutions | |
Interest-bearing deposits in financial institutions | Interest-bearing deposits in financial institutions | | 1,122,083 | | | 556,644 | | |
Cash and cash equivalents | Cash and cash equivalents | | 1,319,951 | | | 1,027,052 | | |
Cash and cash equivalents | |
Cash and cash equivalents | |
Investments: | |
Investments: | |
Investments: | Investments: | | |
Available-for-sale debt securities, at fair value | Available-for-sale debt securities, at fair value | | 1,471,005 | | | 1,471,186 | | |
Equity securities, at fair value | | 3,059 | | | 2,990 | | |
Available-for-sale debt securities, at fair value | |
Available-for-sale debt securities, at fair value | |
| Federal Home Loan Bank stock, at cost | Federal Home Loan Bank stock, at cost | | 43,369 | | | 58,641 | | |
Loans held for sale (includes $61,987 and $113,240 at fair value, respectively) | | 82,515 | | | 139,451 | | |
| Federal Home Loan Bank stock, at cost | |
| Federal Home Loan Bank stock, at cost | |
Loans held for sale (includes $61,828 and $46,618 at fair value, respectively) | |
Loans held for sale (includes $61,828 and $46,618 at fair value, respectively) | |
Loans held for sale (includes $61,828 and $46,618 at fair value, respectively) | |
Loans held for investment | Loans held for investment | | 9,365,996 | | | 9,298,212 | | |
Less: allowance for credit losses | | 138,809 | | | 134,192 | | |
Loans held for investment | |
Loans held for investment | |
Less: allowance for credit losses on loans HFI | |
Less: allowance for credit losses on loans HFI | |
Less: allowance for credit losses on loans HFI | |
Net loans held for investment | |
Net loans held for investment | |
Net loans held for investment | Net loans held for investment | | 9,227,187 | | | 9,164,020 | | |
Premises and equipment, net | Premises and equipment, net | | 153,397 | | | 146,316 | | |
Other real estate owned, net | | 4,085 | | | 5,794 | | |
Premises and equipment, net | |
Premises and equipment, net | |
Operating lease right-of-use assets | |
Operating lease right-of-use assets | |
Operating lease right-of-use assets | Operating lease right-of-use assets | | 57,054 | | | 60,043 | | |
Interest receivable | Interest receivable | | 44,737 | | | 45,684 | | |
Interest receivable | |
Interest receivable | |
Mortgage servicing rights, at fair value | Mortgage servicing rights, at fair value | | 164,879 | | | 168,365 | | |
Mortgage servicing rights, at fair value | |
Mortgage servicing rights, at fair value | |
Bank-owned life insurance | |
Bank-owned life insurance | |
Bank-owned life insurance | |
Other real estate owned, net | |
Other real estate owned, net | |
Other real estate owned, net | |
Goodwill | |
Goodwill | |
Goodwill | Goodwill | | 242,561 | | | 242,561 | | |
Core deposit and other intangibles, net | Core deposit and other intangibles, net | | 11,378 | | | 12,368 | | |
Bank-owned life insurance | | 74,963 | | | 75,329 | | |
Core deposit and other intangibles, net | |
Core deposit and other intangibles, net | |
Other assets | |
Other assets | |
Other assets | Other assets | | 201,007 | | | 227,956 | | |
Total assets | Total assets | | $ | 13,101,147 | | | $ | 12,847,756 | | |
Total assets | |
Total assets | |
LIABILITIES | |
LIABILITIES | |
LIABILITIES | LIABILITIES | | | |
Deposits | Deposits | | |
Deposits | |
Deposits | |
Noninterest-bearing | |
Noninterest-bearing | |
Noninterest-bearing | Noninterest-bearing | | $ | 2,489,149 | | | $ | 2,676,631 | | |
Interest-bearing checking | Interest-bearing checking | | 3,292,883 | | | 3,059,984 | | |
Interest-bearing checking | |
Interest-bearing checking | |
Money market and savings | |
Money market and savings | |
Money market and savings | Money market and savings | | 3,904,013 | | | 3,697,245 | | |
Customer time deposits | Customer time deposits | | 1,496,024 | | | 1,420,131 | | |
Customer time deposits | |
Customer time deposits | |
Brokered and internet time deposits | |
Brokered and internet time deposits | |
Brokered and internet time deposits | Brokered and internet time deposits | | 846 | | | 1,843 | | |
Total deposits | Total deposits | | 11,182,915 | | | 10,855,834 | | |
Total deposits | |
Total deposits | |
Borrowings | |
Borrowings | |
Borrowings | Borrowings | | 312,131 | | | 415,677 | | |
Operating lease liabilities | Operating lease liabilities | | 67,345 | | | 69,754 | | |
Operating lease liabilities | |
Operating lease liabilities | |
Accrued expenses and other liabilities | |
Accrued expenses and other liabilities | |
Accrued expenses and other liabilities | Accrued expenses and other liabilities | | 168,967 | | | 180,973 | | |
Total liabilities | Total liabilities | | 11,731,358 | | | 11,522,238 | | |
Commitments and contingencies (Note 8) | | |
Total liabilities | |
Total liabilities | |
SHAREHOLDERS' EQUITY | SHAREHOLDERS' EQUITY | | |
Common stock, $1 par value per share; 75,000,000 shares authorized; 46,762,626 and 46,737,912 shares issued and outstanding, respectively | | 46,763 | | | 46,738 | | |
SHAREHOLDERS' EQUITY | |
SHAREHOLDERS' EQUITY | |
Common stock, $1 par value per share; 75,000,000 shares authorized; 46,897,378 and 46,848,934 shares issued and outstanding, respectively | |
Common stock, $1 par value per share; 75,000,000 shares authorized; 46,897,378 and 46,848,934 shares issued and outstanding, respectively | |
Common stock, $1 par value per share; 75,000,000 shares authorized; 46,897,378 and 46,848,934 shares issued and outstanding, respectively | |
Additional paid-in capital | |
Additional paid-in capital | |
Additional paid-in capital | Additional paid-in capital | | 856,628 | | | 861,588 | | |
Retained earnings | Retained earnings | | 615,871 | | | 586,532 | | |
Retained earnings | |
Retained earnings | |
Accumulated other comprehensive loss, net | |
Accumulated other comprehensive loss, net | |
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 | | 1,369,696 | | | 1,325,425 | | |
Total FB Financial Corporation common shareholders' equity | |
Total FB Financial Corporation common shareholders' equity | |
Noncontrolling interest | |
Noncontrolling interest | |
Noncontrolling interest | Noncontrolling interest | | 93 | | | 93 | | |
Total equity | Total equity | | 1,369,789 | | | 1,325,518 | | |
Total equity | |
Total equity | |
Total liabilities and shareholders' equity | Total liabilities and shareholders' equity | | $ | 13,101,147 | | | $ | 12,847,756 | | |
Total liabilities and shareholders' equity | |
Total liabilities and shareholders' equity | |
See the accompanying notes to the consolidated financial statements.
FB Financial Corporation and subsidiaries
Consolidated statements of income
(Unaudited)
(Amounts are in thousands, except per share amounts)
5
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| | | | | Three Months Ended March 31, | | | | | Three Months Ended March 31, |
| | | | 2023 | | | 2022 | | |
Interest income: | Interest income: | | | | | | |
Interest income: | |
Interest income: | |
Interest and fees on loans | Interest and fees on loans | | | $ | 140,356 | | | $ | 86,864 | | |
Interest on securities | | | |
Interest and fees on loans | |
Interest and fees on loans | |
Interest on investment securities | |
Interest on investment securities | |
Interest on investment securities | |
Taxable | |
Taxable | |
Taxable | Taxable | | | 6,570 | | | 5,420 | | |
Tax-exempt | Tax-exempt | | | 1,804 | | | 1,866 | | |
Tax-exempt | |
Tax-exempt | |
Other | Other | | | 10,750 | | | 977 | | |
Other | |
Other | |
Total interest income | |
Total interest income | |
Total interest income | Total interest income | | | 159,480 | | | 95,127 | | |
| Interest expense: | Interest expense: | | | |
| Interest expense: | |
| Interest expense: | |
Deposits | |
Deposits | |
Deposits | Deposits | | | 52,863 | | | 5,462 | | |
Borrowings | Borrowings | | | 2,957 | | | 1,483 | | |
Borrowings | |
Borrowings | |
Total interest expense | |
Total interest expense | |
Total interest expense | Total interest expense | | | 55,820 | | | 6,945 | | |
Net interest income | Net interest income | | | 103,660 | | | 88,182 | | |
Provision for credit losses | | | 4,997 | | | (6,129) | | |
Provision for credit losses on unfunded commitments | | | (4,506) | | | 1,882 | | |
Net interest income after provisions for credit losses | | | 103,169 | | | 92,429 | | |
Net interest income | |
Net interest income | |
Provision for credit losses on loans HFI | |
Provision for credit losses on loans HFI | |
Provision for credit losses on loans HFI | |
Reversal of credit losses on unfunded commitments | |
Reversal of credit losses on unfunded commitments | |
Reversal of credit losses on unfunded commitments | |
Net interest income after provision for credit losses | |
Net interest income after provision for credit losses | |
Net interest income after provision for credit losses | |
| Noninterest income: | |
| Noninterest income: | |
| Noninterest income: | Noninterest income: | | | |
Mortgage banking income | Mortgage banking income | | | 12,086 | | | 29,531 | | |
Mortgage banking income | |
Mortgage banking income | |
Service charges on deposit accounts | Service charges on deposit accounts | | | 3,053 | | | 2,914 | | |
Service charges on deposit accounts | |
Service charges on deposit accounts | |
Investment services and trust income | |
Investment services and trust income | |
Investment services and trust income | |
ATM and interchange fees | ATM and interchange fees | | | 2,396 | | | 5,087 | | |
Investment services and trust income | | | 2,378 | | | 2,132 | | |
Gain (loss) from securities, net | | | 69 | | | (152) | | |
Loss on sales or write-downs of other real estate owned and other assets | | | (183) | | | (434) | | |
ATM and interchange fees | |
ATM and interchange fees | |
(Loss) gain from investment securities, net | |
(Loss) gain from investment securities, net | |
(Loss) gain from investment securities, net | |
Gain (loss) on sales or write-downs of other real estate owned and other assets | |
Gain (loss) on sales or write-downs of other real estate owned and other assets | |
Gain (loss) on sales or write-downs of other real estate owned and other assets | |
| Other income | |
| Other income | |
| Other income | Other income | | | 3,550 | | | 2,314 | | |
Total noninterest income | Total noninterest income | | | 23,349 | | | 41,392 | | |
Total noninterest income | |
Total noninterest income | |
| Noninterest expenses: | |
| Noninterest expenses: | |
| Noninterest expenses: | Noninterest expenses: | | | |
Salaries, commissions and employee benefits | Salaries, commissions and employee benefits | | | 48,788 | | | 59,443 | | |
Salaries, commissions and employee benefits | |
Salaries, commissions and employee benefits | |
Occupancy and equipment expense | Occupancy and equipment expense | | | 5,909 | | | 5,403 | | |
Occupancy and equipment expense | |
Occupancy and equipment expense | |
Data processing | |
Data processing | |
Data processing | |
Legal and professional fees | Legal and professional fees | | | 3,108 | | | 2,607 | | |
Data processing | | | 2,113 | | | 2,481 | | |
Legal and professional fees | |
Legal and professional fees | |
| Advertising | |
| Advertising | |
| Advertising | |
Amortization of core deposit and other intangibles | |
Amortization of core deposit and other intangibles | |
Amortization of core deposit and other intangibles | Amortization of core deposit and other intangibles | | | 990 | | | 1,244 | | |
| Advertising | | | 2,133 | | | 4,033 | | |
| Other expense | |
| Other expense | |
| | Other expense | Other expense | | | 17,399 | | | 14,061 | | |
Total noninterest expense | Total noninterest expense | | | 80,440 | | | 89,272 | | |
Total noninterest expense | |
Total noninterest expense | |
Income before income taxes | |
Income before income taxes | |
Income before income taxes | Income before income taxes | | | 46,078 | | | 44,549 | | |
Income tax expense | Income tax expense | | | 9,697 | | | 9,313 | | |
Income tax expense | |
Income tax expense | |
Net income applicable to FB Financial Corporation and noncontrolling interest | |
Net income applicable to FB Financial Corporation and noncontrolling interest | |
Net income applicable to FB Financial Corporation and noncontrolling interest | 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 | | | — | | | — | | |
Net income applicable to noncontrolling interest | |
Net income applicable to noncontrolling interest | |
Net income applicable to FB Financial Corporation | |
Net income applicable to FB Financial Corporation | |
Net income applicable to FB Financial Corporation | Net income applicable to FB Financial Corporation | | | $ | 36,381 | | | $ | 35,236 | | |
| Earnings per common share | | | |
Earnings per common share: | |
| Earnings per common share: | |
| Earnings per common share: | |
Basic | |
Basic | |
Basic | Basic | | | $ | 0.78 | | | $ | 0.74 | | |
Diluted | Diluted | | | 0.78 | | | 0.74 | | |
Diluted | |
Diluted | |
See the accompanying notes to the consolidated financial statements.
FB Financial Corporation and subsidiaries
Consolidated statements of comprehensive income (loss)
(Unaudited)
(Amounts are in thousands)
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| | | | 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 | | | |
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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) | | | |
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| | | | Three Months Ended March 31, |
| | | | | | 2024 | | | 2023 | | | |
Net income | | | | | | $ | 27,950 | | | $ | 36,381 | | | |
Other comprehensive income, net of tax: | | | | | | | | | | |
Net unrealized (loss) gain in available-for-sale securities, net of tax (benefit) expense of $(3,432) and $7,059 | | | | | | (9,573) | | | 20,064 | | | |
Reclassification adjustment for loss on sale of securities included in net income, net of tax benefit of $4,225 and $— | | | | | | 11,988 | | | — | | | |
Net unrealized loss in hedging activities, net of tax benefit of $62 and $70 | | | | | | (174) | | | (197) | | | |
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Total other comprehensive income, net of tax | | | | | | 2,241 | | | 19,867 | | | |
Comprehensive income applicable to FB Financial Corporation and noncontrolling interest | | | | | | 30,191 | | | 56,248 | | | |
Comprehensive income applicable to noncontrolling interest | | | | | | — | | | — | | | |
Comprehensive income applicable to FB Financial Corporation | | | | | | $ | 30,191 | | | $ | 56,248 | | | |
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)
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| | Common stock | | Additional paid-in capital | | Retained earnings | | Accumulated other comprehensive income (loss), net | | Total common shareholders' equity | | Noncontrolling interest | | Total shareholders' equity |
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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) | |
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Balance at March 31, 2022 | | $ | 47,488 | | | $ | 888,168 | | | $ | 515,664 | | | $ | (71,544) | | | $ | 1,379,776 | | | $ | 93 | | | $ | 1,379,869 | |
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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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common stock | | Additional paid-in capital | | Retained earnings | | Accumulated other comprehensive loss, net | | Total common shareholders' equity | | Noncontrolling interest | | Total shareholders' equity |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
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, net of taxes | | 92 | | | (1,544) | | | — | | | — | | | (1,452) | | | — | | | (1,452) | |
Performance-based restricted stock units vested, net of taxes | | 60 | | | (1,205) | | | — | | | — | | | (1,145) | | | — | | | (1,145) | |
Shares issued under employee stock purchase program | | 8 | | | 313 | | | — | | | — | | | 321 | | | — | | | 321 | |
Dividends declared and paid ($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 | |
| | | | | | | | | | | | | | |
Balance at December 31, 2023: | | $ | 46,849 | | | $ | 864,258 | | | $ | 678,412 | | | $ | (134,725) | | | $ | 1,454,794 | | | $ | 93 | | | $ | 1,454,887 | |
Net income attributable to FB Financial Corporation and noncontrolling interest | | — | | | — | | | 27,950 | | | — | | | 27,950 | | | — | | | 27,950 | |
Other comprehensive income, net of taxes | | — | | | — | | | — | | | 2,241 | | | 2,241 | | | — | | | 2,241 | |
| | | | | | | | | | | | | | |
Stock based compensation expense | | 1 | | | 2,819 | | | — | | | — | | | 2,820 | | | — | | | 2,820 | |
Restricted stock units vested, net of taxes | | 11 | | | (292) | | | — | | | — | | | (281) | | | — | | | (281) | |
Performance-based restricted stock units vested, net of taxes | | 25 | | | (370) | | | — | | | — | | | (345) | | | — | | | (345) | |
Shares issued under employee stock purchase program | | 11 | | | 388 | | | — | | | — | | | 399 | | | — | | | 399 | |
Dividends declared and paid ($0.17 per share) | | — | | | — | | | (8,052) | | | — | | | (8,052) | | | — | | | (8,052) | |
| | | | | | | | | | | | | | |
Balance at March 31, 2024 | | $ | 46,897 | | | $ | 866,803 | | | $ | 698,310 | | | $ | (132,484) | | | $ | 1,479,526 | | | $ | 93 | | | $ | 1,479,619 | |
See the accompanying notes to the consolidated financial statements.
FB Financial Corporation and subsidiaries
Consolidated statements of cash flows
(Unaudited)
(Amounts are in thousands)
| | Three Months Ended March 31, | |
| 2023 | | | 2022 | | |
| | Three Months Ended March 31, | |
| | Three Months Ended March 31, | |
| | Three Months Ended March 31, | |
| | 2024 | |
Cash flows from operating activities: | |
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 | | $ | 36,381 | | | $ | 35,236 | | |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | |
Net income applicable to FB Financial Corporation and noncontrolling interest | |
Net income applicable to FB Financial Corporation and noncontrolling interest | |
Adjustments to reconcile net income to net cash provided by operating activities: | |
Adjustments to reconcile net income to net cash provided by operating activities: | |
Adjustments to reconcile net income to net cash provided by operating activities: | |
Depreciation and amortization of fixed assets and software | |
Depreciation and amortization of fixed assets and software | |
Depreciation and amortization of fixed assets and software | 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 | | 990 | | | 1,244 | | |
Amortization of core deposit and other intangibles | |
Amortization of core deposit and other intangibles | |
Amortization of issuance costs on subordinated debt | |
Amortization of issuance costs on subordinated debt | |
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 | | (1,788) | | | (9,812) | | |
Capitalization of mortgage servicing rights | |
Capitalization of mortgage servicing rights | |
Net change in fair value of mortgage servicing rights | |
Net change in fair value of mortgage servicing rights | |
Net change in fair value of mortgage servicing rights | Net change in fair value of mortgage servicing rights | | 5,274 | | | (19,351) | | |
Stock-based compensation expense | Stock-based compensation expense | | 2,285 | | | 2,582 | | |
Provision for credit losses | | 4,997 | | | (6,129) | | |
Provision for credit losses on unfunded commitments | | (4,506) | | | 1,882 | | |
Stock-based compensation expense | |
Stock-based compensation expense | |
Provision for credit losses on loans HFI | |
Provision for credit losses on loans HFI | |
Provision for credit losses on loans HFI | |
Reversal of credit losses on unfunded commitments | |
Reversal of credit losses on unfunded commitments | |
Reversal of credit losses on unfunded commitments | |
Provision for mortgage loan repurchases | Provision for mortgage loan repurchases | | (250) | | | (389) | | |
(Accretion) amortization of discounts and premiums on acquired loans, net | | (319) | | | 2,352 | | |
Amortization of premiums and accretion of discounts on securities, net | | 1,382 | | | 1,992 | | |
(Gain) loss from securities, net | | (69) | | | 152 | | |
Provision for mortgage loan repurchases | |
Provision for mortgage loan repurchases | |
Accretion of discounts and premiums on acquired loans, net | |
Accretion of discounts and premiums on acquired loans, net | |
Accretion of discounts and premiums on acquired loans, net | |
Amortization of premiums and discounts on securities, net | |
Amortization of premiums and discounts on securities, net | |
Amortization of premiums and discounts on securities, net | |
Loss (gain) from investment securities, net | |
Loss (gain) from investment securities, net | |
Loss (gain) from investment securities, net | |
Originations of loans held for sale | |
Originations of loans held for sale | |
Originations of loans held for sale | Originations of loans held for sale | | (295,760) | | | (993,733) | | |
| Proceeds from sale of loans held for sale | Proceeds from sale of loans held for sale | | 340,108 | | | 1,330,701 | | |
| Proceeds from sale of loans held for sale | |
| Proceeds from sale of loans held for sale | |
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 | |
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 | | (8,635) | | | (21,675) | | |
| Net loss on write-downs of other real estate owned and other assets | | 183 | | | 434 | | |
Net (gain) loss on write-downs of other real estate owned and other assets | |
| Net (gain) loss on write-downs of other real estate owned and other assets | |
| Net (gain) loss on write-downs of other real estate owned and other assets | |
| Provision for deferred income taxes | |
| Provision for deferred income taxes | |
| Provision for deferred income taxes | Provision for deferred income taxes | | 1,396 | | | 9,313 | | |
Earnings on bank-owned life insurance | Earnings on bank-owned life insurance | | (605) | | | (354) | | |
Earnings on bank-owned life insurance | |
Earnings on bank-owned life insurance | |
Changes in: | |
Changes in: | |
Changes in: | Changes in: | | |
Operating lease assets and liabilities, net | Operating lease assets and liabilities, net | | 580 | | | (190) | | |
Operating lease assets and liabilities, net | |
Operating lease assets and liabilities, net | |
Other assets and interest receivable | |
Other assets and interest receivable | |
Other assets and interest receivable | Other assets and interest receivable | | 62,512 | | | (62,043) | | |
Accrued expenses and other liabilities | Accrued expenses and other liabilities | | (48,099) | | | 13,900 | | |
Accrued expenses and other liabilities | |
Accrued expenses and other liabilities | |
Net cash provided by operating activities | |
Net cash provided by operating activities | |
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: | |
Cash flows from investing activities: | |
Activity in available-for-sale securities: | Activity in available-for-sale securities: | | |
| Activity in available-for-sale securities: | |
Activity in available-for-sale securities: | |
Sales | |
Sales | |
Sales | |
Maturities, prepayments and calls | |
Maturities, prepayments and calls | |
Maturities, prepayments and calls | Maturities, prepayments and calls | | 26,827 | | | 57,443 | | |
Purchases | Purchases | | (660) | | | (170,093) | | |
Purchases | |
Purchases | |
| Net change in loans | Net change in loans | | (52,540) | | | (362,408) | | |
| Sales of FHLB stock | | 21,637 | | | — | | |
Purchases of FHLB stock | | (6,365) | | | (2,216) | | |
Net change in loans | |
| Net change in loans | |
| Proceeds from sales of FHLB stock, net | |
| Proceeds from sales of FHLB stock, net | |
| Proceeds from sales of FHLB stock, net | |
| | Purchases of premises and equipment | Purchases of premises and equipment | | (9,450) | | | (601) | | |
| Proceeds from the sale of other real estate owned and other assets | | 2,031 | | | 121 | | |
| | Purchases of premises and equipment | |
| Purchases of premises and equipment | |
Proceeds from the sale of premises and equipment | |
Proceeds from the sale of premises and equipment | |
Proceeds from the sale of premises and equipment | |
Proceeds from the sale of other real estate owned | |
Proceeds from the sale of other real estate owned | |
Proceeds from the sale of other real estate owned | |
Proceeds from the sale of other assets | |
Proceeds from the sale of other assets | |
Proceeds from the sale of other assets | |
Proceeds from bank-owned life insurance | |
Proceeds from bank-owned life insurance | |
Proceeds from bank-owned life insurance | Proceeds from bank-owned life insurance | | 236 | | | — | | |
| Net cash used in investing activities | | (18,284) | | | (477,754) | | |
Net cash provided by (used in) investing activities | |
| Net cash provided by (used in) investing activities | |
| Net cash provided by (used in) investing activities | |
Cash flows from financing activities: | Cash flows from financing activities: | | | |
Net increase in demand deposits | | 251,069 | | | 238,893 | | |
Net increase (decrease) in time deposits | | 74,896 | | | (75,765) | | |
Cash flows from financing activities: | |
Cash flows from financing activities: | |
Net (decrease) increase in deposits | |
Net (decrease) increase in deposits | |
Net (decrease) increase in deposits | |
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 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 | |
| Net decrease in short-term FHLB advances | |
| Net decrease in short-term FHLB advances | |
| Net decrease in short-term FHLB advances | Net decrease in short-term FHLB advances | | (50,000) | | | — | | |
| | Share based compensation withholding payments | Share based compensation withholding payments | | (2,597) | | | (1,488) | | |
Net proceeds from sale of common stock under employee stock purchase program | | 321 | | | 687 | | |
Repurchase of common stock | | (4,944) | | | (6,203) | | |
Dividends paid on common stock | | (6,994) | | | (6,194) | | |
Dividend equivalent payments made upon vesting of equity compensation | | (135) | | | (71) | | |
| Net cash provided by financing activities | | 212,801 | | | 135,080 | | |
Net change in cash and cash equivalents | | 292,899 | | | (54,429) | | |
Cash and cash equivalents at beginning of the period | | 1,027,052 | | | 1,797,740 | | |
Cash and cash equivalents at end of the period | | $ | 1,319,951 | | | $ | 1,743,311 | | |
Supplemental cash flow information: | | | |
Interest paid | | $ | 52,634 | | | $ | 8,631 | | |
Taxes (refunded) paid, net | | (904) | | | 72 | | |
Supplemental noncash disclosures: | | |
Transfers from loans to other real estate owned | | $ | 235 | | | $ | 563 | | |
| Transfers from loans to loans held for sale | | 7,126 | | | 8,700 | | |
Transfers from loans held for sale to loans | | 776 | | | 47,956 | | |
Decrease in rebooked GNMA loans under optional repurchase program | | (5,683) | | | — | | |
| Share based compensation withholding payments | |
| Trade date payable - securities | | 245 | | | — | | |
| Dividends declared not paid on restricted stock units | | 48 | | | 60 | | |
Share based compensation withholding payments | |
Net proceeds from sale of common stock under employee stock purchase program | |
Net proceeds from sale of common stock under employee stock purchase program | |
Net proceeds from sale of common stock under employee stock purchase program | |
Repurchase of common stock | |
Repurchase of common stock | |
Repurchase of common stock | |
Dividends paid on common stock | |
Dividends paid on common stock | |
Dividends paid on common stock | |
Dividend equivalent payments made upon vesting of equity compensation | |
Dividend equivalent payments made upon vesting of equity compensation | |
Dividend equivalent payments made upon vesting of equity compensation | |
| Net cash (used in) provided by financing activities | |
| Right-of-use assets obtained in exchange for operating lease liabilities | | 3,375 | | | 283 | | |
Net cash (used in) provided by financing activities | |
| Net cash (used in) provided by financing activities | |
Net change in cash and cash equivalents | |
Net change in cash and cash equivalents | |
Net change in cash and cash equivalents | |
Cash and cash equivalents at beginning of the period | |
Cash and cash equivalents at beginning of the period | |
Cash and cash equivalents at beginning of the period | |
Cash and cash equivalents at end of the period | |
Cash and cash equivalents at end of the period | |
Cash and cash equivalents at end of the period | |
|
FB Financial Corporation and subsidiaries
Consolidated statements of cash flows (continued)
(Unaudited)
(Amounts are in thousands)
| | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2024 | | | 2023 | | | |
Supplemental cash flow information: | | | | | | |
Interest paid | | $ | 74,943 | | | $ | 52,634 | | | |
Taxes paid (refunded), net | | 277 | | | (904) | | | |
Supplemental noncash disclosures: | | | | | | |
Transfers from loans to other real estate owned | | $ | 753 | | | $ | 235 | | | |
Transfers from loans to other assets | | 1,031 | | | — | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Transfers from loans to loans held for sale | | 167 | | | 7,126 | | | |
Transfers from loans held for sale to loans | | 40 | | | 776 | | | |
Loans provided for sales of other assets | | 65 | | | — | | | |
Decrease in rebooked GNMA loans under optional repurchase program | | (353) | | | (5,683) | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Trade date payable - securities | | — | | | 245 | | | |
| | | | | | |
Dividends declared not paid on restricted stock units | | 87 | | | 48 | | | |
| | | | | | |
| | | | | | |
Right-of-use assets obtained in exchange for operating lease liabilities | | — | | | 3,375 | | | |
| | | | | | |
See the accompanying notes to the consolidated financial statements.
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Note (1)—Basis of presentation:presentation
Overview and presentation
FB Financial Corporation (the “Company”"Company") is a financial holding company headquartered in Nashville, Tennessee. The Company operates primarily through its wholly-owned subsidiary bank, FirstBank (the "Bank"). and its subsidiaries. As of March 31, 2023,2024, the Bank had 8276 full-service branches throughout Tennessee, Alabama, southern Kentucky and northNorth Georgia, and a mortgage business with office locations across the Southeast, which primarily originates loans to be sold to third party private investors or government sponsored agencies 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 affectcause the Company's financial condition and results of operations. Actual results could differoperations to vary significantly from those estimates.
Certain prior period amounts have been reclassified to conform to the current period presentation without any impact on the reported amounts of net income or shareholders’ equity.
Earnings per share
Basic EPS excludes dilution and is computed by dividing earnings availableattributable 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 availableattributable to common shareholders by the weighted average number of common shares outstanding for the period,year, plus an incremental number of common-equivalent shares computed using the treasury stock method.
Unvested share-based paymentCertain restricted stock awards whichgranted by the Company include the right to receive non-forfeitable dividends or dividend equivalents,equivalent rights and are considered to participate with common shareholders in undistributed earningsparticipating securities for the purposes of computing EPS. Companies that have such participating securities areAccordingly, the Company is required to calculate basic and diluted EPS using the two-class method. Certain restricted stock awards granted by the Company include non-forfeitable dividend equivalents and are considered participating securities. Calculations of EPS under the two-class method (i) exclude from the numerator any dividends paid or owed on participating securities and any undistributed earnings considered to be attributable to participating securities and (ii) exclude from the denominator the dilutive impact of the participating securities.
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The following is a summary of the basic and diluted earnings per common share calculations for each of the periods presented:
| | |
| | | | | Three Months Ended March 31, | | | | | | Three Months Ended March 31, |
| | | | 2023 | | 2022 | |
Basic earnings per common share: | Basic earnings per common share: | | | |
Basic earnings per common share: | |
Basic earnings per common share: | |
Net income applicable to FB Financial Corporation | |
Net income applicable to FB Financial Corporation | |
Net income applicable to FB Financial Corporation | Net income applicable to FB Financial Corporation | | | $ | 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 | |
Dividends paid on and undistributed earnings allocated to participating securities | |
Earnings available to common shareholders | |
Earnings available to common shareholders | |
Earnings available to common shareholders | Earnings available to common shareholders | | | $ | 36,381 | | | $ | 35,236 | | |
Weighted average basic shares outstanding | Weighted average basic shares outstanding | | | 46,679,618 | | | 47,530,520 | | |
Weighted average basic shares outstanding | |
Weighted average basic shares outstanding | |
Basic earnings per common share | |
Basic earnings per common share | |
Basic earnings per common share | Basic earnings per common share | | | $ | 0.78 | | | $ | 0.74 | | |
Diluted earnings per common share: | 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 | |
Earnings available to common shareholders | Earnings available to common shareholders | | | $ | 36,381 | | | $ | 35,236 | | |
Weighted average basic shares outstanding | Weighted average basic shares outstanding | | | 46,679,618 | | | 47,530,520 | | |
Weighted average basic shares outstanding | |
Weighted average basic shares outstanding | |
Weighted average diluted shares contingently issuable(1) | |
Weighted average diluted shares contingently issuable(1) | |
Weighted average diluted shares contingently issuable(1) | Weighted average diluted shares contingently issuable(1) | | | 85,536 | | | 193,382 | | |
Weighted average diluted shares outstanding | Weighted average diluted shares outstanding | | | 46,765,154 | | | 47,723,902 | | |
Weighted average diluted shares outstanding | |
Weighted average diluted shares outstanding | |
Diluted earnings per common share | |
Diluted earnings per common share | |
Diluted earnings per common share | Diluted earnings per common share | | | $ | 0.78 | | | $ | 0.74 | | |
|
(1)Excludes 159,946 2,949and 123,709159,946 restricted stock units outstanding considered to be antidilutive for the three months ended March 31, 2024 and 2023, and 2022, respectively.
Recently adopted accounting standards:
In MarchJune 2022, the FASB issued ASU 2022-01, "Derivatives and Hedging2022-03, “Fair Value Measurement (Topic 815)820): Fair Value Hedging-Portfolio Layer Method",Measurement of Equity Securities Subject 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.Contractual Sale Restrictions.” The amendments inFASB issued this update to clarify the guidance in ASC 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 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 amendmentsmeasured at fair value in ASU No.2017-12 for the corresponding period.accordance with Topic 820. The Company adopted thethis update effective January 1, 2023.2024. The adoption of this standard did not have an impact on the Company's consolidated financial statements or disclosures.
Additionally, in March 2022, the FASB issued ASU 2022-02, "Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures" related to troubled debt restructurings and vintage disclosures for financing receivables. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan modifications and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require disclosure of current-period gross write-offs for financing receivables by year of origination in the vintage disclosures. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The Company prospectively adopted the amendment effective January 1, 2023 and updated its disclosures for the first quarter of 2023. Refer to Note 3 for further information. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.
Newly issued not yet effective accounting standards:
In March 2023, the FASB issued ASU 2023-01, “Leases (Topic 842): Common Control Arrangements” as part of the Post-Implementation Review process of TopicASC 842, “Leases,” around related party arrangements between entities under common control. Under previous guidance, a lessee is generally required to amortize leasehold improvements that it owns over the shorter of the useful life of those improvements or the lease term. However, due to the nature of leasehold improvements made under leases between entities under common control, ASU 2023-01 requires a lessee in a common-control arrangement to amortize such leasehold improvements that it owns over the improvements' useful life to the common control group, regardless of the lease term. The ASU becomes effectiveCompany adopted this standard on January 1, 2024 and ison a prospective basis. The adoption of this standard did not expected to have a material impact on the Company's consolidated financial statements andor related disclosures.
Additionally, in March 2023, the FASB issued ASU 2023-02, "Investments-Equity“Investments – Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method".Method.” The amendments in this update permit reporting entities to elect to account for tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. The Company adopted this standard effective January 1, 2024. The adoption of this accounting pronouncement did not have an impact on the Company's historical consolidated financial statements but could influence the Company's decisions with respect to investments in certain tax credits prospectively.
Newly issued not yet effective accounting standards:
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The amendments in this update are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. The ASU requires disclosures to include significant segment expenses that are regularly provided to the chief operating decision maker, a description of other segment items by reportable segment, and any additional measures of a segment's profit or loss used by the chief operating decision maker when deciding how to allocate resources. The ASU also requires all annual disclosures currently required by Topic 280, “Segment Reporting,” to be included in interim periods. This update is effective for fiscal years
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
which the income tax credits are received, using the proportional amortization method if certain conditions are met.beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted and retrospective application is required for all periods presented. The ASU becomes effective January 1, 2024 and the Company is evaluating the potential impact of this standardwill have on itsthe Company's consolidated financial statements and related disclosures.
In June 2022,December 2023, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820)2023-08, “Intangibles – Goodwill and Other-Crypto Assets (Subtopic 350-60): Fair Value MeasurementAccounting for and Disclosure of Equity Securities SubjectCrypto Assets.” This update requires entities 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 arepresent crypto assets measured at fair value separately from other intangible assets on the balance sheet and reflect changes from remeasurement in accordancethe net income. Additionally, an entity that receives crypto assets as noncash consideration in the ordinary course of business and converts them nearly immediately into cash is required to classify those cash receipts as cash flows from operating activities. Lastly, the update requires entities to provide interim and annual disclosures about the types of crypto assets they hold and any changes in their holdings of crypto assets. While the Company does not currently hold or facilitate transactions with Topic 820. The ASU becomes effective January 1, 2024 andcrypto assets, the Company is evaluating the potential future financial statement and disclosure impact offrom adopting this standardguidance when it becomes applicable based on its consolidated financial statements and related disclosures.the Company's crypto asset activities.
In March 2020,December 2023, the FASB issued ASU 2020-04, “Reference Rate Reform2023-09, “Income Taxes (Topic 848)740): FacilitationImprovements to Income Tax Disclosures.” The amendments in this update enhance the transparency and decision usefulness of income tax disclosures. This ASU requires disclosures of specific categories and disaggregation of information in the rate reconciliation table. The ASU also requires disclosure of disaggregated information related to income taxes paid, income or loss from continuing operations before income tax expense or benefit, and income tax expense or benefit from continuing operations. The requirements of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 is intended to provide relief for companies preparing for discontinuation of interest rates based on LIBOR. The ASU provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or other reference rates expected to be discontinued. ASU 2020-04 also provides for a one-time sale and/or transfer to AFS or trading to be made for HTM debt securities that both reference an eligible reference rate and were classified as HTM before January 1, 2020. ASU 2020-04 wasare effective for all entities as of March 12, 2020annual periods beginning after December 15, 2024. Early adoption is permitted and through December 31, 2022. Companies can apply the amendments should be applied on a prospective basis. Retrospective application is permitted. The Company is currently evaluating the effect that ASU as of the beginning of the interim period that includes March 12, 2020 or any date thereafter. The guidance requires companies to apply the guidance prospectively to contract modifications and hedging relationships while the one-time election to sell and/or transfer debt securities classified as HTM may be made any time after March 12, 2020. In December 2022, the FASB issued ASU 2022-06, "Reference rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848" to extend the date to December 31, 2024 for companies to apply the relief in Topic 848.
The Company's LIBOR Transition Committee was established to transition from LIBOR to alternative rates and has continued2023-09 will have on its efforts consistent with industry timelines. As part of these efforts, during the fourth quarter of 2021, the Company ceased utilization of LIBOR as an index in newly originated loans or loans that are refinanced. Additionally, the Company identified existing products that utilize LIBOR and are implementing contract modifications to facilitate the transition to alternative reference rates. ASU 2020-04 and ASU 2021-01 are not expected to have a material impact on the Company's consolidated financial statements.disclosures.
Subsequent events
The Company has evaluated, for consideration of recognition or disclosure, subsequent events that occurred through the date of issuance of these financial statements. The Company has determined that there were no subsequent events that occurred after March 31, 2023,2024, but prior to the issuance of these financial statements that would have a material impact on the Company’s consolidated financial statements.
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Note (2)—Investment securities:securities
The following tables summarize the amortized cost, allowance for credit losses and fair value of the available-for-saleAFS debt securities and the corresponding amounts of unrealized gains and losses recognized in accumulated other comprehensive loss at March 31, 20232024 and December 31, 2022:2023:
| | March 31, 2023 |
| | March 31, 2024 | | | | March 31, 2024 |
| | | 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 | | | | | |
AFS debt securities | |
U.S. government agency securities | |
U.S. government agency securities | |
U.S. government agency securities | U.S. government agency securities | | $ | 45,176 | | | $ | — | | | $ | (4,248) | | | $ | — | | | $ | 40,928 | |
Mortgage-backed securities - residential | Mortgage-backed securities - residential | | 1,197,702 | | | — | | | (172,314) | | | — | | | 1,025,388 | |
Mortgage-backed securities - commercial | Mortgage-backed securities - commercial | | 18,979 | | | — | | | (1,256) | | | — | | | 17,723 | |
Municipal securities | Municipal securities | | 295,010 | | | 967 | | | (24,983) | | | — | | | 270,994 | |
U.S. Treasury securities | U.S. Treasury securities | | 113,403 | | | — | | | (4,580) | | | — | | | 108,823 | |
Corporate securities | Corporate securities | | 8,000 | | | — | | | (851) | | | — | | | 7,149 | |
Total | Total | | $ | 1,678,270 | | | $ | 967 | | | $ | (208,232) | | | $ | — | | | $ | 1,471,005 | |
| | | December 31, 2023 | |
| | December 31, 2023 | |
| | December 31, 2023 | |
| | | December 31, 2022 | |
| | | Amortized cost | | Gross unrealized gains | | Gross unrealized losses | | Allowance for credit losses for investments | | Fair Value | |
Investment Securities | Investment Securities | | | | | | | | | |
Available-for-sale debt securities | | | | | | | | | |
Investment Securities | |
Investment Securities | |
AFS debt securities | |
AFS debt securities | |
AFS debt securities | |
U.S. government agency securities | |
U.S. government agency securities | |
U.S. government agency securities | U.S. government agency securities | | $ | 45,167 | | | $ | — | | | $ | (5,105) | | | $ | — | | | $ | 40,062 | | |
Mortgage-backed securities - residential | Mortgage-backed securities - residential | | 1,224,522 | | | — | | | (190,329) | | | — | | | 1,034,193 | | |
Mortgage-backed securities - residential | |
Mortgage-backed securities - residential | |
Mortgage-backed securities - commercial | |
Mortgage-backed securities - commercial | |
Mortgage-backed securities - commercial | Mortgage-backed securities - commercial | | 19,209 | | | — | | | (1,565) | | | — | | | 17,644 | | |
Municipal securities | Municipal securities | | 295,375 | | | 458 | | | (31,413) | | | — | | | 264,420 | | |
Municipal securities | |
Municipal securities | |
U.S. Treasury securities | |
U.S. Treasury securities | |
U.S. Treasury securities | U.S. Treasury securities | | 113,301 | | | — | | | (5,621) | | | — | | | 107,680 | | |
Corporate securities | Corporate securities | | 8,000 | | | — | | | (813) | | | — | | | 7,187 | | |
Corporate securities | |
Corporate securities | |
Total | |
Total | |
Total | Total | | $ | 1,705,574 | | | $ | 458 | | | $ | (234,846) | | | $ | — | | | $ | 1,471,186 | | |
|
The components of amortized cost for AFS debt securities on the consolidated balance sheets excludes accrued interest receivable since the Company elected to present accrued interest receivable separately on the consolidated balance sheets. As of March 31, 20232024 and December 31, 2022,2023, total accrued interest receivable on AFS debt securities was $5,399$5,409 and $5,470,$7,212, respectively.
Securities pledged at March 31, 20232024 and December 31, 20222023 had carrying amounts of $1,184,836$949,958 and $1,191,021,$929,546, respectively, and were pledged to secure a Federal Reserve Bank line of credit, Bank Term Funding Program borrowings, public deposits and repurchase agreements.
There were no holdings of AFS debt securities of any one issuer, other than U.S. Government sponsored enterprises, in an amount greater than 10% of shareholders' equity during any period presented.
Investment securities transactions are recorded as of the trade date. As ofAt March 31, 2024 and December 31, 2023, there were $245 inno 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.
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The amortized cost and fair value of debt securities by contractual maturity as of March 31, 2023 and December 31, 2022 are shown below. Maturities may differ from contractual maturities in mortgage-backed securities because the mortgage underlying the security may be called or repaid without any penalties. Therefore, mortgage-backed securities are not included in the maturity categories in the following summary.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, | | December 31, |
| | 2023 | | | 2022 | |
| | Available-for-sale | | Available-for-sale |
| | Amortized cost | | Fair value | | Amortized cost | | Fair value |
Due in one year or less | | $ | 34,965 | | | $ | 34,270 | | | $ | 4,277 | | | $ | 4,225 | |
Due in one to five years | | 138,189 | | | 130,585 | | | 161,556 | | | 152,181 | |
Due in five to ten years | | 58,876 | | | 56,982 | | | 61,290 | | | 57,859 | |
Due in over ten years | | 229,559 | | | 206,057 | | | 234,720 | | | 205,084 | |
| | 461,589 | | | 427,894 | | | 461,843 | | | 419,349 | |
Mortgage-backed securities - residential | | 1,197,702 | | | 1,025,388 | | | 1,224,522 | | | 1,034,193 | |
Mortgage-backed securities - commercial | | 18,979 | | | 17,723 | | | 19,209 | | | 17,644 | |
Total debt securities | | $ | 1,678,270 | | | $ | 1,471,005 | | | $ | 1,705,574 | | | $ | 1,471,186 | |
Sales and other dispositions of available-for-sale securities were as follows:
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2023 | | | 2022 | | | |
Proceeds from sales | | | | | $ | — | | | $ | — | | | |
Proceeds from maturities, prepayments and calls | | | | | 26,827 | | | 57,443 | | | |
Gross realized gains | | | | | — | | | 2 | | | |
Gross realized losses | | | | | — | | | — | | | |
| | | | | | | | | |
The following tables show gross unrealized losses for which an allowance for credit losses has not been recorded at March 31, 2023 and December 31, 2022, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2023 |
| | Less than 12 months | | 12 months or more | | Total |
| | Fair Value | | Unrealized Loss | | Fair Value | | Unrealized Loss | | Fair Value | | Unrealized Loss |
U.S. government agency securities | | $ | 4,014 | | | $ | (94) | | | $ | 36,913 | | | $ | (4,154) | | | $ | 40,927 | | | $ | (4,248) | |
Mortgage-backed securities - residential | | 101,194 | | | (4,425) | | | 924,189 | | | (167,889) | | | 1,025,383 | | | (172,314) | |
Mortgage-backed securities - commercial | | 11,311 | | | (740) | | | 6,415 | | | (516) | | | 17,726 | | | (1,256) | |
Municipal securities | | 43,100 | | | (1,872) | | | 161,743 | | | (23,111) | | | 204,843 | | | (24,983) | |
U.S. Treasury securities | | 60,669 | | | (1,276) | | | 48,154 | | | (3,304) | | | 108,823 | | | (4,580) | |
Corporate securities | | 946 | | | (55) | | | 6,281 | | | (796) | | | 7,227 | | | (851) | |
Total | | $ | 221,234 | | | $ | (8,462) | | | $ | 1,183,695 | | | $ | (199,770) | | | $ | 1,404,929 | | | $ | (208,232) | |
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2022 |
| | Less than 12 months | | 12 months or more | | Total |
| | Fair Value | | Unrealized Loss | | Fair Value | | Unrealized Loss | | Fair Value | | Unrealized loss |
U.S. government agency securities | | $ | 23,791 | | | $ | (2,802) | | | $ | 16,271 | | | $ | (2,303) | | | $ | 40,062 | | | $ | (5,105) | |
Mortgage-backed securities - residential | | 316,656 | | | (32,470) | | | 717,533 | | | (157,859) | | | 1,034,189 | | | (190,329) | |
Mortgage-backed securities - commercial | | 11,104 | | | (968) | | | 6,541 | | | (597) | | | 17,645 | | | (1,565) | |
Municipal securities | | 196,419 | | | (26,811) | | | 36,726 | | | (4,602) | | | 233,145 | | | (31,413) | |
U.S. Treasury securities | | 94,248 | | | (4,122) | | | 13,434 | | | (1,499) | | | 107,682 | | | (5,621) | |
Corporate securities | | 4,008 | | | (492) | | | 3,270 | | | (321) | | | 7,278 | | | (813) | |
Total | | $ | 646,226 | | | $ | (67,665) | | | $ | 793,775 | | | $ | (167,181) | | | $ | 1,440,001 | | | $ | (234,846) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
The following tables show gross unrealized losses for which an allowance for credit losses has not been recorded at March 31, 2024 and December 31, 2023, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2024 |
| | Less than 12 months | | 12 months or more | | Total |
| | Fair Value | | Gross Unrealized Loss | | Fair Value | | Gross Unrealized Loss | | Fair Value | | Gross Unrealized Loss |
U.S. government agency securities | | $ | 203,870 | | | $ | (484) | | | $ | 7,251 | | | $ | (687) | | | $ | 211,121 | | | $ | (1,171) | |
Mortgage-backed securities - residential | | — | | | — | | | 776,208 | | | (158,259) | | | 776,208 | | | (158,259) | |
Mortgage-backed securities - commercial | | — | | | — | | | 16,615 | | | (1,284) | | | 16,615 | | | (1,284) | |
Municipal securities | | 9,131 | | | (41) | | | 155,959 | | | (22,802) | | | 165,090 | | | (22,843) | |
U.S. Treasury securities | | — | | | — | | | 30,857 | | | (128) | | | 30,857 | | | (128) | |
Corporate securities | | — | | | — | | | 3,397 | | | (103) | | | 3,397 | | | (103) | |
Total | | $ | 213,001 | | | $ | (525) | | | $ | 990,287 | | | $ | (183,263) | | | $ | 1,203,288 | | | $ | (183,788) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2023 |
| | Less than 12 months | | 12 months or more | | Total |
| | Fair Value | | Gross Unrealized Loss | | Fair Value | | Gross Unrealized Loss | | Fair Value | | Gross Unrealized Loss |
U.S. government agency securities | | $ | 25,923 | | | $ | (21) | | | $ | 14,040 | | | $ | (1,156) | | | $ | 39,963 | | | $ | (1,177) | |
Mortgage-backed securities - residential | | — | | | — | | | 896,971 | | | (160,418) | | | 896,971 | | | (160,418) | |
Mortgage-backed securities - commercial | | — | | | — | | | 16,961 | | | (1,225) | | | 16,961 | | | (1,225) | |
Municipal securities | | 14,480 | | | (148) | | | 188,669 | | | (21,271) | | | 203,149 | | | (21,419) | |
U.S. Treasury securities | | — | | | — | | | 108,496 | | | (3,233) | | | 108,496 | | | (3,233) | |
Corporate securities | | — | | | — | | | 3,326 | | | (174) | | | 3,326 | | | (174) | |
Total | | $ | 40,403 | | | $ | (169) | | | $ | 1,228,463 | | | $ | (187,477) | | | $ | 1,268,866 | | | $ | (187,646) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
As of March 31, 20232024 and December 31, 2022,2023, the Company’s AFS debt securities portfolio consisted of 506340 and 503439 securities, 409316 and 454370 of which were in an unrealized loss position, respectively.
During the three months ended March 31, 2023, the Company's available-for-sale debt securities portfolio unrealized value increased $27,123 to an unrealized loss position of $207,265 from an unrealized loss position of $234,388 as of December 31, 2022. During the three months ended March 31, 2022, the Company's available-for-sale debt securities portfolio unrealized value declined $105,660 to an unrealized loss position of $100,933 from an unrealized gain position of $4,727 as of December 31, 2021.
The majority of the investment portfolio was either government guaranteed, an issuance of a government sponsored entity or highly rated by major credit rating agencies, and the Company has historically not recorded any credit losses associated with these investments. Municipal securities with market values below amortized cost at March 31, 20232024 were reviewed for material credit events and/or rating downgrades with individual credit reviews performed. The issuers of these AFS debt securities continue to make timely principal and interest payments under the contractual terms of the securities and the issuers will continue to be observed as a part of the Company’s ongoing credit monitoring. As such, as of March 31, 20232024 and December 31, 2022,2023, it was determined that all available-for-saleAFS debt securities that experienced a decline in fair value below amortized cost basis were due to noncredit-related factors. Further, the Company does not intend to sell those available-for-sale securities that have an unrealized loss as of March 31, 2023, and it is not likely that the Company will be required to sell thethese securities before recovery of their amortized cost basis. Therefore, there was no provisionallowance for credit losses recognized on available-for-saleAFS debt securities during the three months endedas of March 31, 2024 or December 31, 2023. Periodically, AFS debt securities may be sold or the composition of the portfolio realigned to improve yields, quality or marketability, or to implement changes in investment or asset/liability strategy, including maintaining collateral requirements and raising funds for liquidity purposes or preparing for anticipated changes in market interest rates.
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 AFS debt securities by contractual maturity as of March 31, 2024 and December 31, 2023 are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or 2022.prepay obligations with or without call or prepayment penalties.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, | | December 31, |
| | |
| | 2024 | | | 2023 | |
| | Available-for-sale | | Available-for-sale |
| | Amortized cost | | Fair value | | Amortized cost | | Fair value |
Due in one year or less | | $ | 34,073 | | | $ | 33,910 | | | $ | 64,776 | | | $ | 64,279 | |
Due in one to five years | | 10,851 | | | 10,080 | | | 75,996 | | | 71,801 | |
Due in five to ten years | | 40,939 | | | 39,932 | | | 51,162 | | | 49,630 | |
Due in over ten years | | 560,045 | | | 537,931 | | | 391,270 | | | 372,331 | |
| | 645,908 | | | 621,853 | | | 583,204 | | | 558,041 | |
Mortgage-backed securities - residential | | 984,473 | | | 826,214 | | | 1,057,389 | | | 896,971 | |
Mortgage-backed securities - commercial | | 17,899 | | | 16,615 | | | 18,186 | | | 16,961 | |
Total AFS debt securities | | $ | 1,648,280 | | | $ | 1,464,682 | | | $ | 1,658,779 | | | $ | 1,471,973 | |
Sales and other dispositions of AFS debt securities were as follows:
| | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2024 | | | 2023 | | | |
Proceeds from sales | | | | | $ | 207,882 | | | $ | — | | | |
Proceeds from maturities, prepayments and calls | | | | | 66,627 | | | 26,827 | | | |
Gross realized gains | | | | | 90 | | | — | | | |
Gross realized losses | | | | | 16,303 | | | — | | | |
| | | | | | | | | |
Equity Securities
As of March 31, 2023 and December 31, 2022, the Company had $3,059 and $2,990, in marketable equity securities recorded at fair value, respectively. The Company had equity securities without readily determinable market value included in other assets on the consolidated balance sheets with carrying amounts of $22,483$25,589 and $22,496$25,191 at March 31, 20232024 and December 31, 2022,2023, respectively. Additionally, the Company had $43,369$33,948 and $58,641$34,190 of Federal Home Loan BankFHLB stock carried at cost at March 31, 20232024 and December 31, 2022,2023, respectively, included separately from the other equity securities discussed above.
The change in the fair value of equity securities and sale of equity securities with readily determinable fair values resulted in a net gain of $69 and a net loss of $154 for the three months ended March 31, 2023 and 2022, respectively.
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Note (3)—Loans and allowance for credit losses:losses on loans HFI
Loans outstanding as of March 31, 20232024 and December 31, 2022,2023, by class of financing receivable are as follows:
| | | | | March 31, | | December 31, |
| | | | | March 31, | | December 31, |
| | | 2023 | | | 2022 | |
Commercial and industrial | Commercial and industrial | | $ | 1,671,398 | | | $ | 1,645,783 | |
Construction | Construction | | 1,697,513 | | | 1,657,488 | |
Residential real estate: | Residential real estate: | |
1-to-4 family mortgage | 1-to-4 family mortgage | | 1,562,503 | | | 1,573,121 | |
1-to-4 family mortgage | |
1-to-4 family mortgage | |
Residential line of credit | Residential line of credit | | 497,391 | | | 496,660 | |
Multi-family mortgage | Multi-family mortgage | | 489,379 | | | 479,572 | |
Commercial real estate: | Commercial real estate: | |
Owner-occupied | Owner-occupied | | 1,136,978 | | | 1,114,580 | |
Owner-occupied | |
Owner-occupied | |
Non-owner occupied | Non-owner occupied | | 1,939,517 | | | 1,964,010 | |
Consumer and other | Consumer and other | | 371,317 | | | 366,998 | |
Gross loans | Gross loans | | 9,365,996 | | | 9,298,212 | |
Less: Allowance for credit losses | | (138,809) | | | (134,192) | |
Less: Allowance for credit losses on loans HFI | |
Net loans | Net loans | | $ | 9,227,187 | | | $ | 9,164,020 | |
As of March 31, 20232024 and December 31, 2022, $849,3492023, $950,787 and $909,734,$1,030,016, respectively, of qualifying residential mortgage loans (including loans held for sale) and $1,709,763$1,563,819 and $1,763,730,$1,984,007, respectively, of qualifying commercial mortgage loans were pledged to the Federal Home Loan Bank of CincinnatiFHLB system securing advances against the Bank’s line of credit. Additionally, as of March 31, 20232024 and December 31, 2022,2023, qualifying commercial and industrial, construction and consumer loans, of $3,164,317$2,982,391 and $3,118,172,$3,107,495, respectively, were pledged to the Federal Reserve Bank under the Borrower-in-Custody program.
The components of amortized cost forof loans HFI on the consolidated balance sheets exclude accrued interest receivable as the Company presents accrued interest receivable separately on the balance sheet. As of March 31, 20232024 and December 31, 2022,2023, accrued interest receivable on loans held for investmentHFI amounted to $37,005$45,840 and $38,507,$43,776, respectively.
Allowance for Credit Losses
The Company calculates its expected credit loss using a lifetime loss rate methodology. The Company utilizes probability-weighted forecasts, which consider multiple macroeconomic variables from a third-party vendor that are applicable to the type of loan. Each of the Company's loss rate models incorporate forward-looking macroeconomic projections throughout the reasonable and supportable forecast period and the subsequent historical reversion at the macroeconomic variable input level. In order to estimate the life of a loan, the contractual term of the loan is adjusted for estimated prepayments based on market information and the Company’s prepayment history.
The Company's loss rate models estimate the lifetime loss rate for pools of loans by combining the calculated loss rate based on each variable within the model (including the macroeconomic variables). The lifetime loss rate for the pool is then multiplied by the loan balances to determine the expected credit losses on the pool.
The quantitative models require loan data and macroeconomic variables based on the inherent credit risks in each portfolio to more accurately measure the credit risks associated with each. Each of the quantitative models pools loans with similar risk characteristics and collectively assesses the lifetime loss rate for each pool to estimate its expected credit loss.
The Company considers the need to qualitatively adjust its modeled quantitative expected credit loss estimate for information not already captured in the model loss estimation process. These qualitative factor adjustments may increase or decrease the Company’s estimate of expected credit losses. The Company reviews the qualitative adjustments so as to validate that information that has already been considered and included in the modeled quantitative loss estimation process is not also included in the qualitative adjustment. The Company considers the qualitative factors that are relevant to the institution as of the reporting date, which may include, but are not limited to: levels of and trends in delinquencies and performance of loans; levels of and trends in write-offs and recoveries collected; trends in volume and terms of loans; effects of any changes in reasonable and supportable economic forecasts; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and expertise; available relevant information sources that contradict the Company’s own forecast;
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
effects of changes in prepayment expectations or other factors affecting assessments of loan contractual terms; industry conditions; and effects of changes in credit concentrations.
The Company performed qualitative evaluations within the Company's established qualitative framework, assessing the impact of the current economic outlook (including uncertainty due to inflation, recent bank failures, negative economic forecasts, predicted Federal Reserve rate increases, status of federal government stimulus programs, and other considerations). The increase in estimated required reserve during the three months ended March 31, 2023 was a result of increased loan growth and a tightening monetary policy environment both of which were incorporated into the Company's reasonable and supportable forecasts. These forecasts included weighted projections that the economy may be nearing a recession, reflected through deterioration in asset quality projected over life of the loan portfolio. Loss rates on residential loans and HELOC were qualitatively adjusted downwards, addressing the relative strength of asset values in the Company's predominant markets.
The Company calculates its allowance for credit losses using a lifetime loss rate methodology and disaggregates the loan portfolio into three pools. The following presents a summary of quantitative and qualitative factors considered as of March 31, 2023, which resulted in changes in the allowance for credit losses compared to December 31, 2022 as described below.
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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.
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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.
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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.
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When a loan no longer shares similar risk characteristics with other loans in any given pool, the loan is individually assessed. The Company has determined the following circumstances in which a loan may require an individual evaluation: collateral dependent loans; loans for which foreclosure is probable; and loans with other unique risk characteristics. A loan is deemed collateral dependent when 1) the borrower is experiencing financial difficulty and 2) the repayment is expected to be primarily through sale or operation of the collateral. The allowance for credit losses for collateral dependent loans as well as loans where foreclosure is probable is calculated as the amount for which the loan’s amortized cost basis exceeds fair value. Fair value is determined based on appraisals performed by qualified appraisers and reviewed by qualified personnel. In cases where repayment is to be provided substantially through the sale of collateral, the Company reduces the fair value by the estimated costs to sell.
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Effective January 1, 2023, the Company prospectively adopted the accounting guidance in ASU 2022-02, "Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures", which eliminates the recognition and measurement of TDRs. Upon adoption of this guidance, the Company no longer measures an allowance for credit losses for TDRs it reasonably expects will occur, and it evaluates all loan modifications according to the accounting guidance for loan refinancing and modifications to determine whether the modification should be accounted for as a new loan or a continuation of the existing loan. After adoption, the Company now derecognizes the existing loan and accounts for the modified loan as a new loan if the effective yield on the modified loan is at least equal to the effective yield for comparable loans with similar collection risks and the modifications to the original loan are more than minor. If a loan modification does not meet these conditions, it extends the existing loan’s amortized cost basis and accounts for the modified loan as a continuation of the existing loan.
Prior to January 1, 2023, loans experiencing financial difficulty for which a concession has not yet been provided may be identified as reasonably expected TDRs. Reasonably expected TDRs and TDRs used the same methodology. In cases where the expected credit loss can only be captured through a discounted cash flow analysis (such as an interest rate modification for a TDR loan), the allowance was measured by the amount which the loan’s amortized cost exceeds the discounted cash flow analysis.
As a result of the difference in methodology between periods, disclosures related to loan modifications made to borrowers experiencing financial difficulty and TDRs may not be comparative in nature.
The following tables provide the changes in the allowance for credit losses by class of financing receivable for the three months ended March 31, 2023 and 2022:
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| | 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 |
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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 | |
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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) | |
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Ending balance - March 31, 2023 | | $ | 11,117 | | | $ | 41,025 | | | $ | 27,213 | | | $ | 9,034 | | | $ | 6,619 | | | $ | 7,952 | | | $ | 21,868 | | | $ | 13,981 | | | $ | 138,809 | |
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| | 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 | |
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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 | | |
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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) | | |
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Ending balance - March 31, 2022 | | $ | 12,699 | | | $ | 31,782 | | | $ | 21,024 | | | $ | 6,545 | | | $ | 6,398 | | | $ | 8,416 | | | $ | 21,290 | | | $ | 11,895 | | | $ | 120,049 | | |
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Credit Quality - Commercial Type Loans
The Company categorizes commercial loan types into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans that share similar risk characteristics collectively. Loans that do not share similar risk characteristics are evaluated individually.
The Company uses the following definitions for risk ratings:
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| 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. |
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| Special Mention. | Loans rated Special Mention are those that have potential weaknessweaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the institution’s credit position at some future date. Management does not believe there will be a loss of principal or interest. These loans require intensive servicing and may possess more than normal credit risk. |
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| 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 areDoubtful 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. |
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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)
The following tables present the credit quality of the Company's commercial type loan portfolio as of March 31, 20232024 and December 31, 20222023 and the gross charge-offs for the three months ended March 31, 2024 and the year ended December 31, 2023 by year of origination. Revolving loans are presented separately. Management considers the guidance in ASC 310-20 when determining whether a modification, extension, or renewal constitutes a current period origination. Generally, current period renewals of credit
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As of and for the three months ended March 31, 2024 | | 2024 | | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | Prior | | Revolving Loans Amortized Cost Basis | | Total | | |
Commercial and industrial | | | | | | | | | | | | | | | | | | |
Pass | | $ | 16,449 | | | $ | 202,050 | | | $ | 237,139 | | | $ | 72,725 | | | $ | 36,876 | | | $ | 129,057 | | | $ | 864,065 | | | $ | 1,558,361 | | | |
Special Mention | | — | | | 3,675 | | | 17,572 | | | 2,913 | | | — | | | 247 | | | 4,521 | | | 28,928 | | | |
Classified | | — | | | 457 | | | 4,328 | | | 3,017 | | | 2,987 | | | 6,350 | | | 17,183 | | | 34,322 | | | |
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Total | | 16,449 | | | 206,182 | | | 259,039 | | | 78,655 | | | 39,863 | | | 135,654 | | | 885,769 | | | 1,621,611 | | | |
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Current-period gross charge-offs | | — | | | — | | | — | | | 14 | | | — | | | 7 | | | 22 | | | 43 | | | |
Construction | | | | | | | | | | | | | | | | | | |
Pass | | 39,360 | | | 193,203 | | | 551,909 | | | 124,878 | | | 36,531 | | | 86,713 | | | 187,955 | | | 1,220,549 | | | |
Special Mention | | — | | | 711 | | | 4,689 | | | 2,508 | | | — | | | 657 | | | 12,000 | | | 20,565 | | | |
Classified | | — | | | — | | | 3,986 | | | 2,590 | | | 6,877 | | | — | | | 14,316 | | | 27,769 | | | |
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Total | | 39,360 | | | 193,914 | | | 560,584 | | | 129,976 | | | 43,408 | | | 87,370 | | | 214,271 | | | 1,268,883 | | | |
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Current-period gross charge-offs | | — | | | — | | | — | | | — | | | — | | | — | | | 92 | | | 92 | | | |
Residential real estate: | | | | | | | | | | | | | | | | | | |
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Multi-family mortgage | | | | | | | | | | | | | | | | | | |
Pass | | — | | | 29,861 | | | 193,591 | | | 244,770 | | | 54,744 | | | 68,104 | | | 22,953 | | | 614,023 | | | |
Special Mention | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | |
Classified | | — | | | — | | | — | | | — | | | — | | | 1,058 | | | — | | | 1,058 | | | |
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Total | | — | | | 29,861 | | | 193,591 | | | 244,770 | | | 54,744 | | | 69,162 | | | 22,953 | | | 615,081 | | | |
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Current-period gross charge-offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | |
Owner occupied | | | | | | | | | | | | | | | | | | |
Pass | | 24,636 | | | 112,168 | | | 253,377 | | | 231,354 | | | 113,481 | | | 428,182 | | | 53,516 | | | 1,216,714 | | | |
Special Mention | | — | | | — | | | 1,283 | | | 1,811 | | | — | | | 2,547 | | | — | | | 5,641 | | | |
Classified | | — | | | — | | | 6,281 | | | 16 | | | 65 | | | 6,228 | | | 1,062 | | | 13,652 | | | |
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Total | | 24,636 | | | 112,168 | | | 260,941 | | | 233,181 | | | 113,546 | | | 436,957 | | | 54,578 | | | 1,236,007 | | | |
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Current-period gross charge-offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | |
Non-owner occupied | | | | | | | | | | | | | | | | | | |
Pass | | 3,755 | | | 45,516 | | | 533,649 | | | 468,553 | | | 122,699 | | | 750,943 | | | 43,090 | | | 1,968,205 | | | |
Special Mention | | — | | | — | | | — | | | 3,966 | | | — | | | 83 | | | — | | | 4,049 | | | |
Classified | | — | | | — | | | — | | | 998 | | | — | | | 18,274 | | | — | | | 19,272 | | | |
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Total | | 3,755 | | | 45,516 | | | 533,649 | | | 473,517 | | | 122,699 | | | 769,300 | | | 43,090 | | | 1,991,526 | | | |
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Current-period gross charge-offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | |
Total commercial loan types | | | | | | | | | | | | | | | | | | |
Pass | | 84,200 | | | 582,798 | | | 1,769,665 | | | 1,142,280 | | | 364,331 | | | 1,462,999 | | | 1,171,579 | | | 6,577,852 | | | |
Special Mention | | — | | | 4,386 | | | 23,544 | | | 11,198 | | | — | | | 3,534 | | | 16,521 | | | 59,183 | | | |
Classified | | — | | | 457 | | | 14,595 | | | 6,621 | | | 9,929 | | | 31,910 | | | 32,561 | | | 96,073 | | | |
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Total | | $ | 84,200 | | | $ | 587,641 | | | $ | 1,807,804 | | | $ | 1,160,099 | | | $ | 374,260 | | | $ | 1,498,443 | | | $ | 1,220,661 | | | $ | 6,733,108 | | | |
Current-period gross charge-offs | | $ | — | | | $ | — | | | $ | — | | | $ | 14 | | | $ | — | | | $ | 7 | | | $ | 114 | | | $ | 135 | | | |
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are reunderwritten at the point of renewalin thousands, except share and considered current period originations for the purposes of the tables below.per share amounts)
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As of and for the year ended December 31, 2023 | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | | | Prior | | Revolving Loans Amortized Cost Basis | | Total | | |
Commercial and industrial | | | | | | | | | | | | | | | | | | |
Pass | | $ | 225,734 | | | $ | 255,921 | | | $ | 151,492 | | | $ | 39,897 | | | $ | 70,302 | | | $ | 73,415 | | | $ | 839,918 | | | $ | 1,656,679 | | | |
Special Mention | | — | | | 17,947 | | | 3,083 | | | — | | | 151 | | | 108 | | | 7,549 | | | 28,838 | | | |
Classified | | 457 | | | 4,253 | | | 3,075 | | | 3,027 | | | 254 | | | 6,129 | | | 18,021 | | | 35,216 | | | |
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Total | | 226,191 | | | 278,121 | | | 157,650 | | | 42,924 | | | 70,707 | | | 79,652 | | | 865,488 | | | 1,720,733 | | | |
Current-period gross charge-offs | | 14 | | | 7 | | | 201 | | | 22 | | | — | | | 87 | | | 131 | | | 462 | | | |
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Construction | | | | | | | | | | | | | | | | | | |
Pass | | 179,929 | | | 677,387 | | | 148,312 | | | 46,697 | | | 39,140 | | | 49,954 | | | 208,491 | | | 1,349,910 | | | |
Special Mention | | 1 | | | 4,659 | | | 2,943 | | | 1,202 | | | — | | | 690 | | | 12,000 | | | 21,495 | | | |
Classified | | — | | | 2,349 | | | 1,484 | | | 6,620 | | | — | | | — | | | 15,455 | | | 25,908 | | | |
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Total | | 179,930 | | | 684,395 | | | 152,739 | | | 54,519 | | | 39,140 | | | 50,644 | | | 235,946 | | | 1,397,313 | | | |
Current-period gross charge-offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | |
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Residential real estate: | | | | | | | | | | | | | | | | | | |
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Multi-family mortgage | | | | | | | | | | | | | | | | | | |
Pass | | 29,982 | | | 151,495 | | | 223,889 | | | 92,745 | | | 29,933 | | | 43,479 | | | 31,209 | | | 602,732 | | | |
Special Mention | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | |
Classified | | — | | | — | | | — | | | — | | | — | | | 1,072 | | | — | | | 1,072 | | | |
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Total | | 29,982 | | | 151,495 | | | 223,889 | | | 92,745 | | | 29,933 | | | 44,551 | | | 31,209 | | | 603,804 | | | |
Current-period gross charge-offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | |
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Commercial real estate: | | | | | | | | | | | | | | | | | | |
Owner occupied | | | | | | | | | | | | | | | | | | |
Pass | | 118,030 | | | 261,196 | | | 231,241 | | | 115,397 | | | 151,146 | | | 281,253 | | | 53,970 | | | 1,212,233 | | | |
Special Mention | | — | | | 1,297 | | | 1,827 | | | — | | | 154 | | | 2,617 | | | — | | | 5,895 | | | |
Classified | | — | | | 6,305 | | | 16 | | | — | | | 760 | | | 5,789 | | | 1,073 | | | 13,943 | | | |
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Total | | 118,030 | | | 268,798 | | | 233,084 | | | 115,397 | | | 152,060 | | | 289,659 | | | 55,043 | | | 1,232,071 | | | |
Current-period gross charge-offs | | — | | | — | | | 144 | | | — | | | — | | | — | | | — | | | 144 | | | |
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Non-owner occupied | | | | | | | | | | | | | | | | | | |
Pass | | 47,026 | | | 474,560 | | | 478,878 | | | 117,429 | | | 178,448 | | | 580,168 | | 43,577 | | | 1,920,086 | | | |
Special Mention | | — | | | — | | | 3,975 | | | — | | | — | | | 10,435 | | — | | | 14,410 | | | |
Classified | | — | | | — | | | 1,001 | | | — | | | 381 | | | 7,647 | | — | | | 9,029 | | | |
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Total | | 47,026 | | | 474,560 | | | 483,854 | | | 117,429 | | | 178,829 | | | 598,250 | | | 43,577 | | | 1,943,525 | | | |
Current-period gross charge-offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | |
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Total commercial loan types | | | | | | | | | | | | | | | | | | |
Pass | | 600,701 | | | 1,820,559 | | | 1,233,812 | | | 412,165 | | | 468,969 | | | 1,028,269 | | | 1,177,165 | | | 6,741,640 | | | |
Special Mention | | 1 | | | 23,903 | | | 11,828 | | | 1,202 | | | 305 | | | 13,850 | | | 19,549 | | | 70,638 | | | |
Classified | | 457 | | | 12,907 | | | 5,576 | | | 9,647 | | | 1,395 | | | 20,637 | | | 34,549 | | | 85,168 | | | |
Total | | $ | 601,159 | | | $ | 1,857,369 | | | $ | 1,251,216 | | | $ | 423,014 | | | $ | 470,669 | | | $ | 1,062,756 | | | $ | 1,231,263 | | | $ | 6,897,446 | | | |
Current-period gross charge-offs | | 14 | | | 7 | | | 345 | | | 22 | | | — | | | 87 | | | 131 | | | 606 | | | |
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Effective January 1, 2023, the Company adopted the accounting guidance in ASU 2022-02 which requires the presentation of gross charge-offs by year of origination. The Company prospectively adopted ASU 2022-02; therefore, prior period activity of gross charge-offs by year of origination are not included in the below tables.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | | | | | | | |
| | | | | | | | |
As of and for the three months ended March 31, 2023 | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | Revolving Loans Amortized Cost Basis | | Total | | |
Commercial and industrial | | | | | | | | | | | | | | | | | | |
Pass | | $ | 40,396 | | | $ | 383,606 | | | $ | 193,605 | | | $ | 53,715 | | | $ | 83,158 | | | $ | 92,586 | | | $ | 785,130 | | | $ | 1,632,196 | | | |
Special Mention | | — | | | 2,625 | | | 4 | | | — | | | 159 | | | 891 | | | 7,040 | | | 10,719 | | | |
Classified | | 457 | | | 2,692 | | | 647 | | | 1,939 | | | 1,476 | | | 6,818 | | | 14,454 | | | 28,483 | | | |
| | | | | | | | | | | | | | | | | | |
Total | | 40,853 | | | 388,923 | | | 194,256 | | | 55,654 | | | 84,793 | | | 100,295 | | | 806,624 | | | 1,671,398 | | | |
| | | | | | | | | | | | | | | | | | |
Current-period gross charge-offs | | — | | | 46 | | | — | | | — | | | — | | | — | | | — | | | 46 | | | |
Construction | | | | | | | | | | | | | | | | | | |
Pass | | 41,824 | | | 769,011 | | | 430,782 | | | 110,280 | | | 77,147 | | | 56,628 | | | 207,940 | | | 1,693,612 | | | |
Special Mention | | — | | | 2,797 | | | — | | | 6 | | | — | | | 698 | | | — | | | 3,501 | | | |
Classified | | — | | | 78 | | | 322 | | | — | | | — | | | — | | | — | | | 400 | | | |
| | | | | | | | | | | | | | | | | | |
Total | | 41,824 | | | 771,886 | | | 431,104 | | | 110,286 | | | 77,147 | | | 57,326 | | | 207,940 | | | 1,697,513 | | | |
| | | | | | | | | | | | | | | | | | |
Current-period gross charge-offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | |
Residential real estate: | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Multi-family mortgage | | | | | | | | | | | | | | | | | | |
Pass | | 10,827 | | | 144,897 | | | 147,358 | | | 95,536 | | | 33,362 | | | 42,701 | | | 13,557 | | | 488,238 | | | |
Special Mention | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | |
Classified | | — | | | — | | | — | | | — | | | — | | | 1,141 | | | — | | | 1,141 | | | |
| | | | | | | | | | | | | | | | | | |
Total | | 10,827 | | | 144,897 | | | 147,358 | | | 95,536 | | | 33,362 | | | 43,842 | | | 13,557 | | | 489,379 | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Current-period gross charge-offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | |
Owner occupied | | | | | | | | | | | | | | | | | | |
Pass | | 24,353 | | | 227,787 | | | 229,910 | | | 114,965 | | | 158,969 | | | 310,138 | | | 43,682 | | | 1,109,804 | | | |
Special Mention | | — | | | 6,295 | | | 677 | | | — | | | 165 | | | 3,397 | | | 5,100 | | | 15,634 | | | |
Classified | | — | | | — | | | 1,293 | | | — | | | 3,501 | | | 6,646 | | | 100 | | | 11,540 | | | |
| | | | | | | | | | | | | | | | | | |
Total | | 24,353 | | | 234,082 | | | 231,880 | | | 114,965 | | | 162,635 | | | 320,181 | | | 48,882 | | | 1,136,978 | | | |
| | | | | | | | | | | | | | | | | | |
Current-period gross charge-offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | |
Non-owner occupied | | | | | | | | | | | | | | | | | | |
Pass | | 7,627 | | | 464,026 | | | 460,997 | | | 125,499 | | | 161,560 | | | 652,952 | | | 44,748 | | | 1,917,409 | | | |
Special Mention | | — | | | — | | | 1,032 | | | — | | | — | | | 2,507 | | | — | | | 3,539 | | | |
Classified | | — | | | — | | | 1,960 | | | — | | | 143 | | | 16,466 | | | — | | | 18,569 | | | |
| | | | | | | | | | | | | | | | | | |
Total | | 7,627 | | | 464,026 | | | 463,989 | | | 125,499 | | | 161,703 | | | 671,925 | | | 44,748 | | | 1,939,517 | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Current-period gross charge-offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | |
Total commercial loan types | | | | | | | | | | | | | | | | | | |
Pass | | 125,027 | | | 1,989,327 | | | 1,462,652 | | | 499,995 | | | 514,196 | | | 1,155,005 | | | 1,095,057 | | | 6,841,259 | | | |
Special Mention | | — | | | 11,717 | | | 1,713 | | | 6 | | | 324 | | | 7,493 | | | 12,140 | | | 33,393 | | | |
Classified | | 457 | | | 2,770 | | | 4,222 | | | 1,939 | | | 5,120 | | | 31,071 | | | 14,554 | | | 60,133 | | | |
| | | | | | | | | | | | | | | | | | |
Total | | $ | 125,484 | | | $ | 2,003,814 | | | $ | 1,468,587 | | | $ | 501,940 | | | $ | 519,640 | | | $ | 1,193,569 | | | $ | 1,121,751 | | | $ | 6,934,785 | | | |
Current-period gross charge-offs | | $ | — | | | $ | 46 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 46 | | | |
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | | | | | | | |
| | | | | | | | |
As of December 31, 2022 | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | Revolving Loans Amortized Cost Basis | | Total | | |
Commercial and industrial | | | | | | | | | | | | | | | | | | |
Pass | | $ | 396,643 | | | $ | 204,000 | | | $ | 67,231 | | | $ | 90,894 | | | $ | 39,780 | | | $ | 62,816 | | | $ | 762,717 | | | $ | 1,624,081 | | | |
Special Mention | | 125 | | | 7 | | | — | | | 160 | | | 143 | | | 771 | | | 2,520 | | | 3,726 | | | |
Classified | | 65 | | | 823 | | | 1,916 | | | 1,651 | | | 273 | | | 6,913 | | | 6,335 | | | 17,976 | | | |
| | | | | | | | | | | | | | | | | | |
Total | | 396,833 | | | 204,830 | | | 69,147 | | | 92,705 | | | 40,196 | | | 70,500 | | | 771,572 | | | 1,645,783 | | | |
| | | | | | | | | | | | | | | | | | |
Construction | | | | | | | | | | | | | | | | | | |
Pass | | 682,885 | | | 495,723 | | | 142,233 | | | 84,599 | | | 17,360 | | | 44,326 | | | 188,906 | | | 1,656,032 | | | |
Special Mention | | — | | | — | | | 15 | | | — | | | — | | | 707 | | | — | | | 722 | | | |
Classified | | 80 | | | 309 | | | — | | | — | | | — | | | 345 | | | — | | | 734 | | | |
| | | | | | | | | | | | | | | | | | |
Total | | 682,965 | | | 496,032 | | | 142,248 | | | 84,599 | | | 17,360 | | | 45,378 | | | 188,906 | | | 1,657,488 | | | |
| | | | | | | | | | | | | | | | | | |
Residential real estate: | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Multi-family mortgage | | | | | | | | | | | | | | | | | | |
Pass | | 142,912 | | | 147,168 | | | 96,819 | | | 33,547 | | | 6,971 | | | 37,385 | | | 13,604 | | | 478,406 | | | |
Special Mention | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | |
Classified | | — | | | — | | | — | | | — | | | — | | | 1,166 | | | — | | | 1,166 | | | |
| | | | | | | | | | | | | | | | | | |
Total | | 142,912 | | | 147,168 | | | 96,819 | | | 33,547 | | | 6,971 | | | 38,551 | | | 13,604 | | | 479,572 | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Commercial real estate: | | | | | | | | | | | | | | | | | | |
Owner occupied | | | | | | | | | | | | | | | | | | |
Pass | | 237,862 | | | 223,883 | | | 110,748 | | | 148,405 | | | 66,101 | | | 246,414 | | | 57,220 | | | 1,090,633 | | | |
Special Mention | | 101 | | | 683 | | | — | | | 168 | | | 2,225 | | | 1,258 | | | 5,000 | | | 9,435 | | | |
Classified | | — | | | 1,293 | | | 224 | | | 4,589 | | | 1,276 | | | 7,018 | | | 112 | | | 14,512 | | | |
| | | | | | | | | | | | | | | | | | |
Total | | 237,963 | | | 225,859 | | | 110,972 | | | 153,162 | | | 69,602 | | | 254,690 | | | 62,332 | | | 1,114,580 | | | |
| | | | | | | | | | | | | | | | | | |
Non-owner occupied | | | | | | | | | | | | | | | | | | |
Pass | | 467,360 | | | 440,319 | | | 131,497 | | | 159,205 | | | 210,752 | | | 473,607 | | 60,908 | | | 1,943,648 | | | |
Special Mention | | — | | | — | | | — | | | — | | | 82 | | | 2,459 | | — | | | 2,541 | | | |
Classified | | — | | | 2,258 | | | — | | | 146 | | | 3,270 | | | 12,147 | | — | | | 17,821 | | | |
| | | | | | | | | | | | | | | | | | |
Total | | 467,360 | | | 442,577 | | | 131,497 | | | 159,351 | | | 214,104 | | | 488,213 | | | 60,908 | | | 1,964,010 | | | |
| | | | | | | | | | | | | | | | | | |
Total commercial loan types | | | | | | | | | | | | | | | | | | |
Pass | | 1,927,662 | | | 1,511,093 | | | 548,528 | | | 516,650 | | | 340,964 | | | 864,548 | | | 1,083,355 | | | 6,792,800 | | | |
Special Mention | | 226 | | | 690 | | | 15 | | | 328 | | | 2,450 | | | 5,195 | | | 7,520 | | | 16,424 | | | |
Classified | | 145 | | | 4,683 | | | 2,140 | | | 6,386 | | | 4,819 | | | 27,589 | | | 6,447 | | | 52,209 | | | |
Total | | $ | 1,928,033 | | | $ | 1,516,466 | | | $ | 550,683 | | | $ | 523,364 | | | $ | 348,233 | | | $ | 897,332 | | | $ | 1,097,322 | | | $ | 6,861,433 | | | |
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Credit Quality - Consumer Type Loans
For consumer and residential loan classes, the companyCompany primarily evaluates credit quality based on delinquency and accrual status of the loan, credit documentation and by payment activity. The performing or nonperforming status is updated on an on-going basis dependent upon improvement and deterioration in credit quality.
The following tables present the credit quality by classification (performing or nonperforming) of the Company's consumer type loan portfolio as of March 31, 20232024 and December 31, 20222023 and the gross charge-offs for the three months ended March 31, 2024 and the year ended December 31, 2023 by year of origination. Revolving loans are presented separately. Management considers the guidance in ASC 310-20 when determining whether a modification, extension, or renewal constitutes a current period origination. Generally, current period renewals of credit are reunderwritten at the point of renewal and considered current period originations for the purposes of the tables below.
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 |
As of and for the three months ended March 31, 2024 | |
| As of and for the three months ended March 31, 2024 | |
| As of and for the three months ended March 31, 2024 | | | 2024 | | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | Prior | | Revolving Loans Amortized Cost Basis | | Total |
| Residential real estate: | Residential real estate: | |
| Residential real estate: | |
| Residential real estate: | |
1-to-4 family mortgage | 1-to-4 family mortgage | |
1-to-4 family mortgage | |
1-to-4 family mortgage | |
Performing | |
Performing | |
Performing | Performing | | $ | 36,402 | | | $ | 550,052 | | | $ | 439,949 | | | $ | 157,470 | | | $ | 88,489 | | | $ | 269,548 | | | $ | — | | | $ | 1,541,910 | |
Nonperforming | Nonperforming | | — | | | 1,945 | | | 4,671 | | | 4,834 | | | 1,115 | | | 8,028 | | | — | | | 20,593 | |
Total | Total | | 36,402 | | | 551,997 | | | 444,620 | | | 162,304 | | | 89,604 | | | 277,576 | | | — | | | 1,562,503 | |
Current-period gross charge-offs | Current-period gross charge-offs | | — | | | — | | | — | | | — | | | — | | | 16 | | | — | | | 16 | |
Residential line of credit | Residential line of credit | |
Performing | Performing | | — | | | — | | | — | | | — | | | — | | | — | | | 496,309 | | | 496,309 | |
Performing | |
Performing | |
Nonperforming | Nonperforming | | — | | | — | | | — | | | — | | | — | | | — | | | 1,082 | | | 1,082 | |
Total | Total | | — | | | — | | | — | | | — | | | — | | | — | | | 497,391 | | | 497,391 | |
Current-period gross charge-offs | Current-period gross charge-offs | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Consumer and other | Consumer and other | |
Performing | |
Performing | |
Performing | Performing | | 24,159 | | | 108,985 | | | 53,452 | | | 39,098 | | | 27,758 | | | 105,751 | | | 4,198 | | | 363,401 | |
Nonperforming | Nonperforming | | — | | | 233 | | | 1,536 | | | 1,481 | | | 966 | | | 3,700 | | | — | | | 7,916 | |
Total | Total | | 24,159 | | | 109,218 | | | 54,988 | | | 40,579 | | | 28,724 | | | 109,451 | | | 4,198 | | | 371,317 | |
Current-period gross charge-offs | Current-period gross charge-offs | | 171 | | | 339 | | | 38 | | | 81 | | | 9 | | | 65 | | | 2 | | | 705 | |
Total consumer type loans | Total consumer type loans | |
Performing | Performing | | 60,561 | | | 659,037 | | | 493,401 | | | 196,568 | | | 116,247 | | | 375,299 | | | 500,507 | | | 2,401,620 | |
Performing | |
Performing | |
Nonperforming | Nonperforming | | — | | | 2,178 | | | 6,207 | | | 6,315 | | | 2,081 | | | 11,728 | | | 1,082 | | | 29,591 | |
Total | Total | | $ | 60,561 | | | $ | 661,215 | | | $ | 499,608 | | | $ | 202,883 | | | $ | 118,328 | | | $ | 387,027 | | | $ | 501,589 | | | $ | 2,431,211 | |
Current-period gross charge-offs | Current-period gross charge-offs | | $ | 171 | | | $ | 339 | | | $ | 38 | | | $ | 81 | | | $ | 9 | | | $ | 81 | | | $ | 2 | | | $ | 721 | |
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
| | | As of December 31, 2022 | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | Revolving Loans Amortized Cost Basis | | Total |
As of and for the year ended December 31, 2023 | |
| As of and for the year ended December 31, 2023 | |
| As of and for the year ended December 31, 2023 | | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | | | Prior | | Revolving Loans Amortized Cost Basis | | Total |
| Residential real estate: | Residential real estate: | |
| Residential real estate: | |
| Residential real estate: | |
1-to-4 family mortgage | 1-to-4 family mortgage | |
1-to-4 family mortgage | |
1-to-4 family mortgage | |
Performing | |
Performing | |
Performing | Performing | | $ | 568,210 | | | $ | 448,401 | | | $ | 160,715 | | | $ | 93,548 | | | $ | 68,113 | | | $ | 211,019 | | | $ | — | | | $ | 1,550,006 | |
Nonperforming | Nonperforming | | 1,227 | | | 5,163 | | | 5,472 | | | 1,778 | | | 2,044 | | | 7,431 | | | — | | | 23,115 | |
Total | Total | | 569,437 | | | 453,564 | | | 166,187 | | | 95,326 | | | 70,157 | | | 218,450 | | | — | | | 1,573,121 | |
Prior-period gross charge-offs | |
Residential line of credit | Residential line of credit | |
Performing | |
Performing | |
Performing | Performing | | — | | | — | | | — | | | — | | | — | | | — | | | 495,129 | | | 495,129 | |
Nonperforming | Nonperforming | | — | | | — | | | — | | | — | | | — | | | — | | | 1,531 | | | 1,531 | |
Total | Total | | — | | | — | | | — | | | — | | | — | | | — | | | 496,660 | | | 496,660 | |
Prior-period gross charge-offs | |
Consumer and other | Consumer and other | |
Performing | |
Performing | |
Performing | Performing | | 118,637 | | | 56,779 | | | 41,008 | | | 29,139 | | | 26,982 | | | 82,318 | | | 4,175 | | | 359,038 | |
Nonperforming | Nonperforming | | 166 | | | 1,396 | | | 1,460 | | | 906 | | | 1,507 | | | 2,525 | | | — | | | 7,960 | |
Total | Total | | 118,803 | | | 58,175 | | | 42,468 | | | 30,045 | | | 28,489 | | | 84,843 | | | 4,175 | | | 366,998 | |
Prior-period gross charge-offs | |
Total consumer type loans | Total consumer type loans | |
Performing | |
Performing | |
Performing | Performing | | 686,847 | | | 505,180 | | | 201,723 | | | 122,687 | | | 95,095 | | | 293,337 | | | 499,304 | | | 2,404,173 | |
Nonperforming | Nonperforming | | 1,393 | | | 6,559 | | | 6,932 | | | 2,684 | | | 3,551 | | | 9,956 | | | 1,531 | | | 32,606 | |
Total | Total | | $ | 688,240 | | | $ | 511,739 | | | $ | 208,655 | | | $ | 125,371 | | | $ | 98,646 | | | $ | 303,293 | | | $ | 500,835 | | | $ | 2,436,779 | |
Prior-period gross charge-offs | |
Nonaccrual and Past Due Loans
Nonperforming loans include loans that are no longer accruing interest (non-accrual(nonaccrual loans) and loans past due ninety or more days and still accruing interest.
The following tables represent an analysis of the aging by class of financing receivable as of March 31, 20232024 and December 31, 2022:2023:
| 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 |
March 31, 2024 | |
March 31, 2024 | |
March 31, 2024 | | | 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 | | $ | 574 | | | $ | 42 | | | $ | 2,413 | | | | $ | 1,668,369 | | | $ | 1,671,398 | |
Construction | Construction | | 2,708 | | | — | | | 382 | | | | 1,694,423 | | | 1,697,513 | |
Residential real estate: | Residential real estate: | | | |
1-to-4 family mortgage | |
1-to-4 family mortgage | |
1-to-4 family mortgage | 1-to-4 family mortgage | | 13,348 | | | 11,505 | | | 9,088 | | | | 1,528,562 | | | 1,562,503 | |
Residential line of credit | Residential line of credit | | 678 | | | 158 | | | 924 | | | | 495,631 | | | 497,391 | |
Multi-family mortgage | Multi-family mortgage | | — | | | — | | | 39 | | | | 489,340 | | | 489,379 | |
Commercial real estate: | Commercial real estate: | | | |
Owner occupied | Owner occupied | | 851 | | | — | | | 7,211 | | | | 1,128,916 | | | 1,136,978 | |
Owner occupied | |
Owner occupied | |
Non-owner occupied | Non-owner occupied | | — | | | — | | | 5,802 | | | | 1,933,715 | | | 1,939,517 | |
Consumer and other | Consumer and other | | 6,918 | | | 875 | | | 7,041 | | | | 356,483 | | | 371,317 | |
Total | 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 |
December 31, 2023 | |
December 31, 2023 | |
December 31, 2023 | | | 30-89 days past due and accruing interest | | 90 days or more and accruing interest | | Nonaccrual loans | | | | Loans current on payments and accruing interest | | Total |
Commercial and industrial | Commercial and industrial | | $ | 1,650 | | | $ | 136 | | | $ | 1,307 | | | | $ | 1,642,690 | | | $ | 1,645,783 | |
Construction | Construction | | 1,246 | | | — | | | 389 | | | | 1,655,853 | | | 1,657,488 | |
Residential real estate: | Residential real estate: | | | |
1-to-4 family mortgage | |
1-to-4 family mortgage | |
1-to-4 family mortgage | 1-to-4 family mortgage | | 15,470 | | | 16,639 | | | 6,476 | | | | 1,534,536 | | | 1,573,121 | |
Residential line of credit | Residential line of credit | | 772 | | | 131 | | | 1,400 | | | | 494,357 | | | 496,660 | |
Multi-family mortgage | Multi-family mortgage | | — | | | — | | | 42 | | | | 479,530 | | | 479,572 | |
Commercial real estate: | Commercial real estate: | | | |
Owner occupied | Owner occupied | | 1,948 | | | — | | | 5,410 | | | | 1,107,222 | | | 1,114,580 | |
Owner occupied | |
Owner occupied | |
Non-owner occupied | Non-owner occupied | | 102 | | | — | | | 5,956 | | | | 1,957,952 | | | 1,964,010 | |
Consumer and other | Consumer and other | | 10,108 | | | 1,509 | | | 6,451 | | | | 348,930 | | | 366,998 | |
Total | Total | | $ | 31,296 | | | $ | 18,415 | | | $ | 27,431 | | | | $ | 9,221,070 | | | $ | 9,298,212 | |
The following tables provide the amortized cost basis of loans on non-accrual status, as well as any related allowance as of March 31, 20232024 and December 31, 20222023 by class of financing receivable.
| | March 31, 2023 | | Nonaccrual with no related allowance | | Nonaccrual with related allowance | | Related allowance | |
March 31, 2024 | |
| March 31, 2024 | |
| March 31, 2024 | |
Commercial and industrial | |
Commercial and industrial | |
Commercial and industrial | Commercial and industrial | | $ | 1,804 | | | $ | 609 | | | $ | 11 | | |
Construction | Construction | | — | | | 382 | | | 7 | | |
Construction | |
Construction | |
Residential real estate: | |
Residential real estate: | |
Residential real estate: | Residential real estate: | | |
1-to-4 family mortgage | 1-to-4 family mortgage | | 1,955 | | | 7,133 | | | 143 | | |
1-to-4 family mortgage | |
1-to-4 family mortgage | |
Residential line of credit | |
Residential line of credit | |
Residential line of credit | Residential line of credit | | 842 | | | 82 | | | 1 | | |
Multi-family mortgage | Multi-family mortgage | | — | | | 39 | | | 1 | | |
Multi-family mortgage | |
Multi-family mortgage | |
Commercial real estate: | |
Commercial real estate: | |
Commercial real estate: | Commercial real estate: | | |
Owner occupied | Owner occupied | | 7,008 | | | 203 | | | 12 | | |
Owner occupied | |
Owner occupied | |
Non-owner occupied | |
Non-owner occupied | |
Non-owner occupied | Non-owner occupied | | 5,610 | | | 192 | | | 4 | | |
Consumer and other | Consumer and other | | 110 | | | 6,931 | | | 354 | | |
Consumer and other | |
Consumer and other | |
Total | Total | | $ | 17,329 | | | $ | 15,571 | | | $ | 533 | | |
Total | |
Total | |
| December 31, 2022 | | Nonaccrual with no related allowance | | Nonaccrual with related allowance | | Related allowance | |
December 31, 2023 | |
December 31, 2023 | |
December 31, 2023 | |
| Commercial and industrial | |
| Commercial and industrial | |
| Commercial and industrial | Commercial and industrial | | $ | 790 | | | $ | 517 | | | $ | 10 | | |
Construction | Construction | | — | | | 389 | | | 7 | | |
Construction | |
Construction | |
Residential real estate: | |
Residential real estate: | |
Residential real estate: | Residential real estate: | | |
1-to-4 family mortgage | 1-to-4 family mortgage | | 2,834 | | | 3,642 | | | 78 | | |
1-to-4 family mortgage | |
1-to-4 family mortgage | |
Residential line of credit | |
Residential line of credit | |
Residential line of credit | Residential line of credit | | 1,134 | | | 266 | | | 4 | | |
Multi-family mortgage | Multi-family mortgage | | 1 | | | 41 | | | 1 | | |
Multi-family mortgage | |
Multi-family mortgage | |
Commercial real estate: | |
Commercial real estate: | |
Commercial real estate: | Commercial real estate: | | |
Owner occupied | Owner occupied | | 5,200 | | | 210 | | | 1 | | |
Owner occupied | |
Owner occupied | |
Non-owner occupied | |
Non-owner occupied | |
Non-owner occupied | Non-owner occupied | | 5,755 | | | 201 | | | 5 | | |
Consumer and other | Consumer and other | | — | | | 6,451 | | | 327 | | |
Consumer and other | |
Consumer and other | |
Total | Total | | $ | 15,714 | | | $ | 11,717 | | | $ | 433 | | |
Total | |
Total | |
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The following presents interest income recognized on nonaccrual loans for the three months ended March 31, 20232024 and 2022:2023:
| | | Three Months Ended March 31, |
| | 2023 | | 2022 |
| Three Months Ended March 31, | | | Three Months Ended March 31, |
| 2024 | | | 2024 | | 2023 |
Commercial and industrial | Commercial and industrial | | $ | 20 | | | $ | 54 | |
Construction | Construction | | 6 | | | 19 | |
Residential real estate: | Residential real estate: | | |
1-to-4 family mortgage | |
1-to-4 family mortgage | |
1-to-4 family mortgage | 1-to-4 family mortgage | | 79 | | | 52 | |
Residential line of credit | Residential line of credit | | 24 | | | 40 | |
Multi-family mortgage | Multi-family mortgage | | 1 | | | — | |
Commercial real estate: | Commercial real estate: | | |
Owner occupied | Owner occupied | | 58 | | | 25 | |
Owner occupied | |
Owner occupied | |
Non-owner occupied | Non-owner occupied | | 82 | | | 70 | |
Consumer and other | Consumer and other | | 173 | | | 15 | |
Total | Total | | $ | 443 | | | $ | 275 | |
Accrued interest receivable written off as an adjustment to interest income amounted to $181$201 and $184$181 for the three months ended March 31, 2024 and 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 includemay be in the form of an interest rate reduction, a term extension, principal forgiveness, payment deferral 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 andcharged off against the allowance for credit losses is adjusted by the same amount.
on loans HFI. The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.
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 totable presents the adoptionamortized cost of ASU 2022-02. The Company has included this disclosureFDM loans as of DecemberMarch 31, 2022 or for2024 by class of financing receivable and type of concession granted that were modified during the three months ended March 31, 2022.2024.
Prior | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Term extension | | Payment deferral and term extension | | Total | | % of total class of financing receivables |
| | | | | | | | |
Construction | | $ | — | | | $ | 14,316 | | | $ | 14,316 | | | 1.1 | % |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Commercial real estate: | | | | | | | | |
| | | | | | | | |
Non-owner occupied | | 10,351 | | | — | | | 10,351 | | | 0.5 | % |
Consumer and other | | 22 | | | — | | | 22 | | | — | % |
Total | | $ | 10,373 | | | $ | 14,316 | | | $ | 24,689 | | | 0.3 | % |
No financing receivables that were modified in the prior twelve months had a payment default during the three months ended March 31, 2024. Defaults are defined as the earlier of the FDM being placed on non-accrual status or reaching 90 days past due with respect to the Company's adoptionprincipal and/or interest payments. As of ASU 2022-02, the Company accounted forMarch 31, 2024, there were no commitments to lend a modificationmaterial amount of additional funds to the contractual terms of aany borrower whose loan that resulted in granting a concession to a borrower experiencing financial difficultieswas classified 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 toFDM.
The following tables describe the adoption of ASU 2022-02 will continue to be accounted for under the historical TDR accounting until the loan is paid off, liquidated or subsequently modified. See Note 1, "Basis of presentation" for more information on the Company's adoption of ASU 2022-02.
As of December 31, 2022, the Company had a recorded investment in TDRs of $13,854. The modifications included extensionsfinancial effect of the maturity date and/or a stated rate of interest to one lower than the current market ratemodifications made 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.difficultly:
| | | | | | | | | | | | | | |
Three Months Ended March 31, 2024 | | Weighted average term extension (in months) | | Weighted average payment deferral (in months) |
| | | | |
Construction | | 6 | | 3 |
| | | | |
| | | | |
| | | | |
| | | | |
Commercial real estate: | | | | |
| | | | |
Non-owner occupied | | 6 | | — |
Consumer and other | | 42 | | — |
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 presentsCompany closely monitors the financial effectperformance of TDRs recorded during the three months ended March 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of loans | | Pre-modification outstanding recorded investment | | Post-modification outstanding recorded investment | | Charge offs and specific reserves |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Residential real estate: | | | | | | | | |
1-to-4 family mortgage | | 1 | | | 80 | | | 80 | | | — | |
| | | | | | | | |
| | | | | | | | |
Consumer and other | | 1 | | | 22 | | | 22 | | | — | |
Total | | 2 | | | $ | 102 | | | $ | 102 | | | $ | — | |
Troubled debt restructurings for which there was a payment default within twelve months following the modification totaled $304 during the three months ended March 31, 2022. A loan is consideredloans that are modified to be in payment default once it is 90 days contractually past due under the modified terms.
In order to determine whether a borrower isborrowers experiencing financial difficulty an evaluation is performed ofto understand the probability that the borrower will be in payment default on anyeffectiveness of its debtmodification efforts. The table below depicts the performance of loans held for investment as of March 31, 2024 made to borrowers experiencing financial difficulty that were modified in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy. The terms of certain other loansprior twelve months.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
March 31, 2024 | | 30-89 days past due and accruing interest | | 90 days or more and accruing interest | | Nonaccrual loans(1) | | Loans current on payments and accruing interest | | Total |
Commercial and industrial | | $ | — | | | $ | — | | | $ | 179 | | | $ | — | | | $ | 179 | |
Construction | | — | | | — | | | — | | | 14,316 | | | 14,316 | |
Residential real estate: | | | | | | | | | | |
1-to-4 family mortgage | | — | | | — | | | 65 | | | — | | | 65 | |
| | | | | | | | | | |
| | | | | | | | | | |
Commercial real estate: | | | | | | | | | | |
| | | | | | | | | | |
Non-owner occupied | | — | | | — | | | — | | | 10,351 | | | 10,351 | |
Consumer and other | | — | | | — | | | — | | | 22 | | | 22 | |
Total | | $ | — | | | $ | — | | | $ | 244 | | | $ | 24,689 | | | $ | 24,933 | |
1) Loans were on non-accrual when modified during the three months ended March 31, 2022 that did not meet the definition of a TDR. The modification of these loans usually involves either a modification of the terms of a loan to borrowers who are not experiencing financial difficulties or an insignificant delay in payments.and subsequently classified as FDM.Collateral-Dependent Loans
For loans for which the repayment (based on the Company's assessment) is expected to be provided substantially through the operation or sale of collateral and the borrower is experiencing financial difficulty, the following tables present the loans and the corresponding individually assessed allowance for credit losses by class of financing receivable. Significant changes in individually assessed reserves are due to changes in the valuation of the underlying collateral in addition to changes in accrual and past due status.
| | March 31, 2023 |
| Type of Collateral | | |
| Real Estate | | | | Financial Assets and Equipment | | Total | | | Individually assessed allowance for credit loss |
| | March 31, 2024 | |
| | March 31, 2024 | |
| | March 31, 2024 | |
| | Type of Collateral | |
| | Real Estate | |
| | Real Estate | |
| | Real Estate | | | Farmland | | | | Business Assets | | Total | | | | Individually assessed allowance for credit loss |
Commercial and industrial | Commercial and industrial | | $ | 2,597 | | | | | $ | 800 | | | $ | 3,397 | | | | $ | — | |
| Construction | |
Residential real estate: | Residential real estate: | | | | | | | |
1-to-4 family mortgage | 1-to-4 family mortgage | | 5,332 | | | | | — | | | 5,332 | | | | 169 | |
1-to-4 family mortgage | |
1-to-4 family mortgage | |
Residential line of credit | Residential line of credit | | 1,109 | | | | | — | | | 1,109 | | | | 5 | |
| Multi-family mortgage | |
Commercial real estate: | Commercial real estate: | | | | | | | |
Owner occupied | Owner occupied | | 7,651 | | | | | — | | | 7,651 | | | | 4 | |
Owner occupied | |
Owner occupied | |
Non-owner occupied | Non-owner occupied | | 5,610 | | | | | — | | | 5,610 | | | | — | |
Consumer and other | | 132 | | | | | — | | | 132 | | | | — | |
| Total | Total | | $ | 22,431 | | | | | $ | 800 | | | $ | 23,231 | | | | $ | 178 | |
Total | |
Total | |
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
| | December 31, 2022 |
| Type of Collateral | | |
| Real Estate | | | | Financial Assets and Equipment | | Total | | | Individually assessed allowance for credit loss |
| | December 31, 2023 | |
| | December 31, 2023 | |
| | December 31, 2023 | |
| | Type of Collateral | |
| | Real Estate | |
| | Real Estate | |
| | Real Estate | | | Farmland | | | | Business Assets | | Total | | | | Individually assessed allowance for credit loss |
Commercial and industrial | Commercial and industrial | | $ | 2,596 | | | | | $ | — | | | $ | 2,596 | | | | $ | — | |
| Construction | |
Residential real estate: | Residential real estate: | | | | | | | |
1-to-4 family mortgage | |
1-to-4 family mortgage | |
1-to-4 family mortgage | 1-to-4 family mortgage | | 4,467 | | | | | — | | | 4,467 | | | | 194 | |
Residential line of credit | Residential line of credit | | 1,135 | | | | | — | | | 1,135 | | | | — | |
| Commercial real estate: | Commercial real estate: | | | | | | | |
Commercial real estate: | |
Commercial real estate: | |
Owner occupied | |
Owner occupied | |
Owner occupied | Owner occupied | | 5,424 | | | | | — | | | 5,424 | | | | — | |
Non-owner occupied | Non-owner occupied | | 5,755 | | | | | — | | | 5,755 | | | | — | |
Consumer and other | Consumer and other | | 134 | | | | | — | | | 134 | | | | — | |
Total | Total | | $ | 19,511 | | | | | $ | — | | | $ | 19,511 | | | | $ | 194 | |
Allowance for Credit Losses on Loans HFI
The Company performed evaluations within its established qualitative framework, assessing the impact of the current economic outlook, including: continued actions taken by the Federal Reserve with regard to monetary policy, interest rates and the potential impact of those actions, potential impact of persistent high inflation on economic growth, potential negative economic forecasts, and other considerations. The increase in the allowance for credit losses on loans HFI as of March 31, 2024 compared with December 31, 2023 is primarily the result of expected deterioration in the CRE portfolio which was adjusted upward qualitatively to address risks not captured by the model. These adjustments factor in the possibility that the economy may be nearing a recession, reflected through deterioration in asset quality projected over life of the loan portfolio. As of March 31, 2024, all CRE asset classes are expected to be negatively impacted by slowing demand coupled with refinancing risk in the current rate environment.
The following tables provide the changes in the allowance for credit losses on loans HFI by class of financing receivable for the three months ended March 31, 2024 and 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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, 2024 | |
Beginning balance - December 31, 2023 | | $ | 19,599 | | | $ | 35,372 | | | $ | 26,505 | | | $ | 9,468 | | | $ | 8,842 | | | $ | 10,653 | | | $ | 22,965 | | | $ | 16,922 | | | $ | 150,326 | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
(Reversal of) provision for credit losses on loans HFI | | (2,298) | | | 2,028 | | | (433) | | | 470 | | | 131 | | | 56 | | | 984 | | | 914 | | | 1,852 | | |
Recoveries of loans previously charged-off | | 14 | | | — | | | 56 | | | — | | | — | | | 40 | | | — | | | 306 | | | 416 | | |
Loans charged off | | (43) | | | (92) | | | — | | | (20) | | | — | | | — | | | — | | | (772) | | | (927) | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Ending balance - March 31, 2024 | | $ | 17,272 | | | $ | 37,308 | | | $ | 26,128 | | | $ | 9,918 | | | $ | 8,973 | | | $ | 10,749 | | | $ | 23,949 | | | $ | 17,370 | | | $ | 151,667 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
(Reversal of) provision for credit losses on loans HFI | | (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 | | |
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Note (4)—Other real estate owned
The amount reported as other real estate owned includes property acquired through foreclosure in addition to excess facilities held for sale and is carried at the lower of the carrying amount of the underlying loan or the fair value of the real estate less costs to sell. The following table summarizes the other real estate owned for the three months ended March 31, 20232024 and 2022:2023:
| | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended |
| | | | | | March 31, | | |
| | | | | | 2023 | | 2022 | | |
Balance at beginning of period | | | | | | $ | 5,794 | | | $ | 9,777 | | | |
Transfers from loans | | | | | | 235 | | | 563 | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Proceeds from sale of other real estate owned | | | | | | (2,031) | | | (121) | | | |
Gain (loss) on sale of other real estate owned | | | | | | 87 | | | (104) | | | |
| | | | | | | | | | |
Write-downs and partial liquidations | | | | | | — | | | (394) | | | |
| | | | | | | | | | |
Balance at end of period | | | | | | $ | 4,085 | | | $ | 9,721 | | | |
Foreclosed | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | | 2024 | | 2023 | | |
Balance at beginning of period | | | | | | $ | 3,192 | | | $ | 5,794 | | | |
Transfers from loans | | | | | | 753 | | | 235 | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Proceeds from sale of other real estate owned | | | | | | (389) | | | (2,031) | | | |
Gain on sale of other real estate owned | | | | | | 57 | | | 87 | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Balance at end of period | | | | | | $ | 3,613 | | | $ | 4,085 | | | |
Included within the other real estate owned balance above, foreclosed residential real estate properties totaled $798$2,344 and $840$2,414 as of March 31, 20232024 and December 31, 2022,2023, respectively.The recorded investment in residential mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process totaled $4,769$4,330 and $2,653$3,377 as of March 31, 20232024 and December 31, 2022,2023, respectively.
Note (5)—Leases:Leases
As of March 31, 2023,2024, the Company was the lessee in 6048 operating leases and 1 finance lease of certain branch, mortgage and operations locations with original terms greater than one year. Leases with initial terms of less than one year and equipment leases are not included on the consolidated balance sheets in accordance with U.S. GAAP.
Many leases include one or more options to renew, with renewal terms that can extend the lease up to an additional 20 years or more. Certain lease agreements contain provisions to periodically adjust rental payments for inflation. Renewal options that management is reasonably certain to renew and fixed rent escalations are included in the right-of-use asset and lease liability.
Information related to the Company's leases is presented below as of March 31, 2024 and December 31, 2023: | | | | | | | | | | | | | | | | | |
| | | March 31, | | December 31, |
| | | |
| Classification | | 2024 | | 2023 |
Right-of-use assets: | | | | | |
Operating leases | Operating lease right-of-use assets | | $ | 51,421 | | $ | 54,295 |
Finance leases | Premises and equipment, net | | 1,228 | | 1,256 |
Total right-of-use assets | | | $ | 52,649 | | $ | 55,551 |
Lease liabilities: | | | | | |
Operating leases | Operating lease liabilities | | $ | 64,562 | | $ | 67,643 |
Finance leases | Borrowings | | 1,302 | | 1,326 |
Total lease liabilities | | | $ | 65,864 | | $ | 68,969 |
Weighted average remaining lease term (in years) - operating | | | 11.5 | | 11.6 |
Weighted average remaining lease term (in years) - finance | | | 11.1 | | 11.4 |
Weighted average discount rate - operating | | | 3.40 | % | | 3.39 | % |
Weighted average discount rate - finance | | | 1.76 | % | | 1.76 | % |
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Information related to the Company's leases is presented below as of March 31, 2023 and December 31, 2022:
| | | | | | | | | | | | | | | | | |
| | | March 31, | | December 31, |
| Classification | | 2023 | | 2022 |
Right-of-use assets: | | | | | |
Operating leases | Operating lease right-of-use assets | | $ | 57,054 | | $ | 60,043 |
Finance leases | Premises and equipment, net | | 1,339 | | 1,367 |
Total right-of-use assets | | | $ | 58,393 | | $ | 61,410 |
Lease liabilities: | | | | | |
Operating leases | Operating lease liabilities | | $ | 67,345 | | $ | 69,754 |
Finance leases | Borrowings | | 1,397 | | 1,420 |
Total lease liabilities | | | $ | 68,742 | | $ | 71,174 |
Weighted average remaining lease term (in years) - operating | | | 11.9 | | 12.1 |
Weighted average remaining lease term (in years) - finance | | | 12.1 | | 12.4 |
Weighted average discount rate - operating | | | 3.21 | % | | 3.08 | % |
Weighted average discount rate - finance | | | 1.76 | % | | 1.76 | % |
The components of total lease expense included in the consolidated statements of income were as follows:
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | Three Months Ended March 31, |
| | | | | |
| Classification | | | | | | 2023 | | | | 2022 | | | |
Operating lease costs: | | | | | | | | | | | | |
Amortization of right-of-use asset | Occupancy and equipment | | | | | | $ | 1,815 | | | | $ | 1,710 | | | |
Short-term lease cost | Occupancy and equipment | | | | | | 121 | | | | 111 | | | |
Variable lease cost | Occupancy and equipment | | | | | | 298 | | | | 256 | | | |
| | | | | | | | | | | | |
Gain on lease modifications and terminations | Occupancy and equipment | | | | | | (72) | | | | (18) | | | |
Finance lease costs: | | | | | | | | | | | | |
Interest on lease liabilities | Interest expense on borrowings | | | | | | 6 | | | | 9 | | | |
Amortization of right-of-use asset | Occupancy and equipment | | | | | | 28 | | | | 37 | | | |
| | | | | | | | | | | | |
Sublease income | Occupancy and equipment | | | | | | (281) | | | | (195) | | | |
Total lease cost | | | | | | | $ | 1,915 | | | | $ | 1,910 | | | |
During the three months ended March 31, 2023 and 2022, the Company recorded $72 and $18 in gains on lease modifications and terminations on certain vacated locations that were consolidated as a result of previous business combinations, respectively. | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Three Months Ended March 31, |
| | | | | |
| Classification | | | | | | 2024 | | | | 2023 | | | |
Operating lease costs: | | | | | | | | | | | | |
Amortization of right-of-use asset | Occupancy and equipment | | | | | | $ | 1,927 | | | | $ | 1,815 | | | |
Short-term lease cost | Occupancy and equipment | | | | | | 97 | | | | 121 | | | |
Variable lease cost | Occupancy and equipment | | | | | | 336 | | | | 298 | | | |
| | | | | | | | | | | | |
Gain on lease modifications and terminations
| Occupancy and equipment | | | | | | — | | | | (72) | | | |
Finance lease costs: | | | | | | | | | | | | |
Interest on lease liabilities | Interest expense on borrowings | | | | | | 6 | | | | 6 | | | |
Amortization of right-of-use asset | Occupancy and equipment | | | | | | 28 | | | | 28 | | | |
| | | | | | | | | | | | |
Sublease income | Occupancy and equipment | | | | | | (172) | | | | (281) | | | |
Total lease cost | | | | | | | $ | 2,222 | | | | $ | 1,915 | | | |
The Company does not separate lease and non-lease components and instead elects to account for them as a single lease component. Variable lease cost primarily represents variable payments such as common area maintenance, utilities, and property taxes.
A maturity analysis of operating and finance lease liabilities and a reconciliation of undiscounted cash flows to lease liabilities as of March 31, 2024 is as follows:
| | | | | | | | | | | |
| Operating | | Finance |
| Leases | | Lease |
Lease payments due: | | | |
March 31, 2025 | $ | 6,358 | | | $ | 90 | |
March 31, 2026 | 8,454 | | | 121 | |
March 31, 2027 | 8,314 | | | 123 | |
March 31, 2028 | 7,864 | | | 125 | |
March 31, 2029 | 6,939 | | | 127 | |
Thereafter | 44,094 | | | 850 | |
Total undiscounted future minimum lease payments | 82,023 | | | 1,436 | |
Less: imputed interest | (17,461) | | | (134) | |
Lease liabilities | $ | 64,562 | | | $ | 1,302 | |
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
A maturity analysis of operating and finance lease liabilities and a reconciliation of undiscounted cash flows to the total lease liability as of March 31, 2023 is as follows:
| | | | | | | | | | | |
| Operating | | Finance |
| Leases | | Lease |
Lease payments due: | | | |
March 31, 2024 | $ | 6,596 | | | $ | 89 | |
March 31, 2025 | 7,956 | | | 120 | |
March 31, 2026 | 7,885 | | | 121 | |
March 31, 2027 | 7,715 | | | 123 | |
March 31, 2028 | 7,326 | | | 125 | |
Thereafter | 45,839 | | | 977 | |
Total undiscounted future minimum lease payments | 83,317 | | | 1,555 | |
Less: imputed interest | (15,972) | | | (158) | |
Lease liability | $ | 67,345 | | | $ | 1,397 | |
Note (6)—Mortgage servicing rights:rights
Changes in the Company’s mortgage servicing rights were as follows for the three months ended March 31, 20232024 and 2022:2023:
| | |
| | | | | Three Months Ended March 31, | | | | Three Months Ended March 31, |
| | | | 2023 | | 2022 | | |
| Carrying value at beginning of period | Carrying value at beginning of period | | | $ | 168,365 | | $ | 115,512 | | |
| Carrying value at beginning of period | |
| Carrying value at beginning of period | |
Capitalization | |
Capitalization | |
Capitalization | Capitalization | | | 1,788 | | 9,812 | | |
| Change in fair value: | Change in fair value: | | | |
Due to pay-offs/pay-downs | | | (2,520) | | (4,471) | | |
| Change in fair value: | |
| Change in fair value: | |
Due to payoffs/paydowns | |
Due to payoffs/paydowns | |
Due to payoffs/paydowns | |
Due to change in valuation inputs or assumptions | |
Due to change in valuation inputs or assumptions | |
Due to change in valuation inputs or assumptions | Due to change in valuation inputs or assumptions | | | (2,754) | | 23,822 | | |
Carrying value at end of period | Carrying value at end of period | | | $ | 164,879 | | $ | 144,675 | | |
Carrying value at end of period | |
Carrying value at end of period | |
The following table summarizes servicing income and expense, which are included in 'Mortgagemortgage banking income'income and 'Otherother noninterest expense',expense, respectively, withinin the Mortgage segment operating resultsconsolidated statements of income for the three months ended March 31, 20232024 and 2022:2023:
| | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | 2023 | | 2022 | | |
Servicing income: | | | | | | | |
Servicing income | | | | | $ | 7,768 | | $ | 7,429 | | |
Change in fair value of mortgage servicing rights | | | | | (5,274) | | 19,351 | | |
Change in fair value of derivative hedging instruments | | | | | 1,867 | | (19,098) | | |
Servicing income | | | | | 4,361 | | 7,682 | | |
Servicing expenses | | | | | 1,883 | | 2,548 | | |
Net servicing income | | | | | $ | 2,478 | | $ | 5,134 | | |
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
| | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | 2024 | | | 2023 | | |
| | | | | | | | |
Servicing income | | | | | $ | 7,347 | | | $ | 7,768 | | |
Change in fair value of mortgage servicing rights | | | | | 294 | | | (5,274) | | |
Change in fair value of derivative hedging instruments | | | | | (3,335) | | | 1,867 | | |
Servicing income | | | | | 4,306 | | | 4,361 | | |
Servicing expenses | | | | | 1,947 | | | 1,883 | | |
Net servicing income | | | | | $ | 2,359 | | | $ | 2,478 | | |
Data and key economic assumptions related to the Company’s mortgage servicing rights as of March 31, 20232024 and December 31, 20222023 are as follows:
| | | | March 31, | | December 31, | | | March 31, | | December 31, |
| | | 2023 | | 2022 |
Unpaid principal balance | | $ | 11,028,420 | | | $ | 11,086,582 | |
| |
| |
| | | 2024 | | 2023 |
Unpaid principal balance of mortgage loans sold and serviced for others | |
Weighted-average prepayment speed (CPR) | Weighted-average prepayment speed (CPR) | | 5.96 | % | | 5.55 | % | Weighted-average prepayment speed (CPR) | | 6.06 | % | | 6.19 | % |
Estimated impact on fair value of a 10% increase | 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 | | $ | (9,695) | | | $ | (9,447) | |
| | Discount rate | |
| Discount rate | |
| Discount rate | Discount rate | | 8.97 | % | | 9.10 | % | | 10.2 | % | | 9.62 | % |
Estimated impact on fair value of a 100 bp increase | 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 | | $ | (15,163) | | | $ | (15,475) | |
| Weighted-average coupon interest rate | Weighted-average coupon interest rate | | 3.35 | % | | 3.31 | % |
| Weighted-average coupon interest rate | |
| Weighted-average coupon interest rate | | | 3.50 | % | | 3.47 | % |
Weighted-average servicing fee (basis points) | Weighted-average servicing fee (basis points) | | 27 | | 27 | Weighted-average servicing fee (basis points) | | 27 |
Weighted-average remaining maturity (in months) | Weighted-average remaining maturity (in months) | | 333 | | 332 | Weighted-average remaining maturity (in months) | | 335 | | 334 |
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"“Derivatives” for additional information on these hedging instruments.
As of March 31, 20232024 and December 31, 2022,2023, mortgage escrow deposits totaled to $92,947$92,350 and $75,612,$63,591, respectively.
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Note (7)—Income taxes:taxes
The following table presents a reconciliation of income taxes for the three months ended March 31, 20232024 and 2022:2023:
| | |
| | | | Three Months Ended March 31, | | | | | Three Months Ended March 31, |
| | | 2023 | | | 2022 | | |
Federal taxes calculated at statutory rate | Federal taxes calculated at statutory rate | | $ | 9,676 | | 21.0 | % | | $ | 9,355 | | 21.0 | % | |
Federal taxes calculated at statutory rate | |
Federal taxes calculated at statutory rate | |
Increase (decrease) resulting from: | Increase (decrease) resulting from: | | | |
Increase (decrease) resulting from: | |
Increase (decrease) resulting from: | |
State taxes, net of federal benefit | |
State taxes, net of federal benefit | |
State taxes, net of federal benefit | State taxes, net of federal benefit | | 251 | | 0.6 | % | | 951 | | 2.1 | % | |
| Expense (benefit) from equity based compensation | | 115 | | 0.3 | % | | (291) | | (0.7) | % | |
Expense from equity based compensation | |
| Expense from equity based compensation | |
| Expense from equity based compensation | |
Municipal interest income, net of interest disallowance | Municipal interest income, net of interest disallowance | | (456) | | (1.0) | % | | (444) | | (1.0) | % | |
Municipal interest income, net of interest disallowance | |
Municipal interest income, net of interest disallowance | |
Bank-owned life insurance | |
Bank-owned life insurance | |
Bank-owned life insurance | Bank-owned life insurance | | (127) | | (0.3) | % | | (74) | | (0.2) | % | |
| Section 162(m) limitation | Section 162(m) limitation | | 127 | | 0.2 | % | | 122 | | 0.3 | % | |
| Section 162(m) limitation | |
| Section 162(m) limitation | |
Other | |
Other | |
Other | Other | | 111 | | 0.2 | % | | (306) | | (0.6) | % | |
Income tax expense, as reported | Income tax expense, as reported | | $ | 9,697 | | 21.0 | % | | $ | 9,313 | | 20.9 | % | |
Income tax expense, as reported | |
Income tax expense, as reported | |
Note (8)—Commitments and contingencies:contingencies
Commitments to extend credit &and letters of credit
SomeThe Company issues certain financial instruments such asto meet customer financing needs, including loan commitments, credit lines and letters of credit, are issued to meet customer financing needs. These arecredit. The agreements toassociated with these type of unfunded loan commitments provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates.
The same credit and underwriting policies the Company uses to evaluate and underwrite loans are also used to make suchoriginate unfunded loan commitments, as are used for loans, including obtaining collateral at exercise of the commitment. ManyThese unfunded loan commitments expire without being used and are only recorded in the consolidated financial statements when drawn upon.upon and many expire without being used. The Company's maximum off-balance sheet exposure to credit loss from these unfunded loan commitments is represented by the contractual amount of these instruments.
| | | | | | | | | | | | | | |
| | March 31, | | December 31, |
| | 2023 | | | 2022 | |
Commitments to extend credit, excluding interest rate lock commitments | | $ | 3,341,445 | | | $ | 3,563,982 | |
Letters of credit | | 68,422 | | | 71,250 | |
Balance at end of period | | $ | 3,409,867 | | | $ | 3,635,232 | |
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
| | | | | | | | | | | | | | |
| | March 31, | | December 31, |
| | |
| | 2024 | | | 2023 | |
Commitments to extend credit, excluding interest rate lock commitments | | $ | 2,771,611 | | | $ | 2,906,016 | |
Letters of credit | | 85,487 | | | 77,055 | |
Balance at end of period | | $ | 2,857,098 | | | $ | 2,983,071 | |
As of March 31, 20232024 and December 31, 2022,2023, unfunded loan commitments included above with floating interest rates totaled $2.87 billion$2,388,134 and $2.96 billion,$2,459,669, respectively.
TheAs part of its credit loss process, the Company estimates expected credit losses on off-balance sheetits unfunded loan commitments under the CECL methodology. When applying this methodology, the Company considers the likelihood that funding will occur, the contractual period of exposure to credit loss, the risk of loss, historical loss experience, and current conditions along with expectations of future economic conditions.
The table below presents activity within the allowance for credit losses on unfunded loan commitments included in accrued expenses and other liabilities on the Company's consolidated balance sheets for the three months ended March 31, 2023 and 2022:sheets:
| | | | Three Months Ended March 31, | |
| | | 2023 | | 2022 | | |
| | | | Three Months Ended March 31, | |
| | | | Three Months Ended March 31, | |
| | | | Three Months Ended March 31, | |
| | | | | 2024 | |
Balance at beginning of period | |
Balance at beginning of period | |
Balance at beginning of period | Balance at beginning of period | | | $ | 22,969 | | $ | 14,380 | | |
| Provision for credit losses on unfunded commitments | | | (4,506) | | 1,882 | | |
Reversal of credit losses on unfunded commitments | |
| Reversal of credit losses on unfunded commitments | |
| Reversal of credit losses on unfunded commitments | |
Balance at end of period | Balance at end of period | | | $ | 18,463 | | $ | 16,262 | | |
Balance at end of period | |
Balance at end of period | |
Loan repurchases or indemnifications
In connection with the sale of mortgage loans to third partythird-party private investors or government sponsored agencies, the Company makes usual and customary representations and warranties as to the propriety of its origination activities.activities, which are typical and customary to these types of transactions. Occasionally, the investors require the Company to repurchase loans sold to
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
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.in loans held for investment. The total principal amount of loans repurchased (or indemnified for) was $2,078 and $3,326 and $1,348 for the three months ended March 31, 20232024 and 2022,2023, respectively. The Company has established a reserve associated with potential loan repurchases.
The following table summarizes the activity in the repurchase reserve included in accrued expenses and other liabilities on the Company's consolidated balance sheets:
| | | Three Months Ended March 31, |
| | | | Three Months Ended March 31, | |
| | | | Three Months Ended March 31, | |
| | | | Three Months Ended March 31, | |
| | | | 2023 | | 2022 | | |
Balance at beginning of period | Balance at beginning of period | | | $ | 1,621 | | $ | 4,802 | | |
Provision for loan repurchases or indemnifications | | | (250) | | (389) | | |
Balance at beginning of period | |
Balance at beginning of period | |
Provision for (reversal of) loan repurchases or indemnifications | |
Provision for (reversal of) loan repurchases or indemnifications | |
Provision for (reversal of) loan repurchases or indemnifications | |
| Losses on loans repurchased or indemnified | |
| Losses on loans repurchased or indemnified | |
| Losses on loans repurchased or indemnified | Losses on loans repurchased or indemnified | | | (13) | | (96) | | |
Balance at end of period | Balance at end of period | | | $ | 1,358 | | $ | 4,317 | | |
Balance at end of period | |
Balance at end of period | |
|
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:Derivatives
The Company utilizes derivative financial instruments as part of its ongoing efforts to manage its interest rate risk exposure as well as theinterest rate exposure for its customers. Derivative financial instruments are included in the consolidated balance sheets line items “Other assets”other assets or “Other liabilities”other liabilities at fair value in accordance with ASC 815, “Derivatives and Hedging.” See Note 1, “Basis of presentation” in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 for additional information on the Company’s accounting policies related to derivative instruments and hedging activities.
Derivatives not designated as hedging instrumentsfair value hedges
The Company enters into fair value hedging relationships using interest rate-lock commitmentsrates swaps to originate loans wherebymitigate the Company’s exposure to losses in market value as interest rates change. Derivative instruments that are used as part of the Company’s interest rate risk management strategy include interest rate swaps that relate to pricing of specific balance sheet assets and liabilities. Interest rate swaps generally involve the exchange of fixed and variable rate interest payments between two parties, based on a common notional principal amount and maturity date. The critical terms of the interest rate swaps match the terms of the corresponding hedged items. All components of each derivative instrument’s gain or loss are included in the assessment of hedge effectiveness. Any initial and ongoing assessment of expected hedge effectiveness is based on regression analysis.
At March 31, 2024, the loan is determined prior to funding. Under such commitments, interest rates for mortgage loans are typically locked in for between 45 to 90 days with the customer. TheseCompany did not have any interest rate lock commitments are recorded atswaps that were designated as fair value hedges. At December 31, 2023, the Company had interest rate swaps designated as fair value hedges to convert fixed rate money market deposits to variable with notional values totaling $200,000and market values totaling $(4,497) recorded in other liabilities on the Company’s consolidated balance sheets. Additionally at December 31, 2023, the Company had an interest rate swap designated as a fair value hedge on subordinated debt with a notional value of $100,000 and market value of $(673) recorded in other liabilities on the consolidated balance sheets.
During the three months ended March 31, 2024, the Company terminated interest rate swaps that were designated as fair value hedges on fixed rate money market deposits and the interest rate swaps covering subordinated debt matured. For the terminated swaps, notional values totaled $200,000 and market values totaled $(4,588) at termination. The remaining fair value adjustment on the terminated hedging relationships will be amortized into interest expense over the respective contract terms of the original hedges. For the matured swap, the notional value totaled $100,000 prior to maturity. The swap involved the receipt of fixed rate amounts from a counterparty in exchange for the Company making variable rate payments over the life of the agreement.
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The following discloses the amount of expense included in interest expense on deposits and borrowings, related to the Company's fair value hedging instruments:
| | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2024 | | 2023 |
Designated fair value hedge: | | | | |
Interest expense on deposits | | $ | — | | | $ | (1,508) | |
Interest expense on borrowings | | (645) | | | (760) | |
Total | | $ | (645) | | | $ | (2,268) | |
During the three months ended March 31, 2024, amortization expense totaling $1,843 related to the terminated fair value hedges was recognized as an increase to interest expense on deposits. As of March 31, 2024, the remaining fair value adjustment related to the terminated fair value hedges of $(2,745) is included in money market and savings deposits on the consolidated balance sheets.
The following amounts were recorded on the balance sheet related to cumulative adjustments of fair value hedges as of December 31, 2023:
| | | | | | | | | | | | | | | | | |
| | | December 31, 2023 |
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 |
Money market and savings deposits | | | $ | 198,143 | | (1) | $ | (4,497) | |
Borrowings | | | 98,715 | | (2) | (673) | |
Total | | | $ | 296,858 | | | $ | (5,170) | |
(1) The carrying value also includes an unaccreted purchase accounting fair value premium of $2,640 as of December 31, 2023.
(2) The carrying value also includes unamortized subordinated debt issuance costs of $612 as of December 31, 2023.
Derivatives designated as cash flow hedges
The Company also enters into best effortcash flow hedging relationships using interest rate swaps to mitigate the exposure to the variability in future cash flows or mandatory delivery forward commitmentsother forecast transactions associated with its floating rate assets and liabilities. The Company uses interest rate swap agreements to sell residential mortgage loans to secondary market investors. Gainshedge the repricing characteristics of its floating rate subordinated debt. All components of each derivative instrument’s gain or loss are included in the assessment of hedge effectiveness. Any initial and losses arising fromongoing assessment of expected hedge effectiveness is based on regression analysis. The ongoing periodic measures of hedge ineffectiveness are based on the expected change in cash flows of the hedged item caused by changes in the valuationbenchmark interest rate.
The following presents a summary of the interest rate-lock commitments and forward commitments are recognized currently in earnings and are reflected underCompany's designated cash flow hedges as of the line item “Mortgage banking income” on thedates presented:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | March 31, 2024 | | December 31, 2023 |
| | Notional Amount | | Estimated fair value | | Balance sheet location | | Estimated fair value | | Balance sheet location |
Interest rate swap agreements- subordinated debt | | $ | 30,000 | | | $ | 343 | | | Other assets | | $ | 579 | | | Other assets |
The Company's consolidated statements of income.income included income of $247 and $197 for the three months ended March 31, 2024 and 2023, respectively, in interest expense on borrowings related to these cash flow hedges. The cash flow hedges were highly effective during the periods presented and as a result qualified for hedge accounting treatment. As such, no amounts were reclassified from accumulated other comprehensive loss into earnings as a result of hedge ineffectiveness during any period presented.
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 entersfollowing discloses the amount included in other comprehensive loss, net of tax, for derivative instruments designated as cash flow hedges for the periods presented:
| | | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2024 | | 2023 | |
Amount of loss recognized in other comprehensive loss, net of tax benefit of $62 and $70 | | $ | (174) | | | $ | (197) | | |
Derivatives not designated as hedging instruments
Derivatives not designated under hedge accounting rules include those that are entered into forward commitments, futures and options contracts as either economic hedges as part of the Company’s overall risk management strategy or to offset the changes infacilitate client needs. Economic hedges are those that are not designated as a fair value of mortgage servicing rights. Gains and lossesor cash flow hedge for accounting purposes but are necessary to economically manage the risk exposure associated with these instruments are included in earningsthe assets and are reflected underliabilities of the line item “Mortgage banking income” on the consolidated statements of income.Company.
Additionally, theThe Company enters into derivative instruments to help its commercial customers manage their exposure to interest rate fluctuations. To mitigate the interest rate risk associated with customer contracts, the Company enters into an offsetting derivative contract. The Company manages its credit risk, or potential risk of default by its commercial customers through credit limit approval and monitoring procedures.
The Company enters into interest rate-lock commitments on residential loan commitments that will be held for resale. These are considered derivative instruments with no hedge accounting designation, and the interest rate exposure on these commitments is economically hedged primarily with forward contracts. Gains and losses arising from changes in the valuation of the interest rate-lock commitments and forward commitments are recognized currently in earnings and are reflected under the line item mortgage banking income in the consolidated statements of income.
The Company also enters into forwards, futures and option contracts to economically hedge the change in fair value of mortgage servicing rights. Gains and losses associated with these instruments are included in earnings and are reflected under the line item mortgage banking income in the consolidated statements of income.
The following tables provide details on the Company’s non-designated derivative financial instruments as of the dates presented: | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2024 | |
| | Notional Amount | | Asset | | Liability | |
| | | | | | | |
Interest rate contracts | | $ | 551,095 | | | $ | 35,925 | | | $ | 35,954 | | |
Forward commitments | | 226,500 | | | — | | | 261 | | |
Interest rate-lock commitments | | 130,315 | | | 2,073 | | | — | | |
Futures contracts | | 235,500 | | | — | | | 189 | | |
| | | | | | | |
Total | | $ | 1,143,410 | | | $ | 37,998 | | | $ | 36,404 | | |
| | | | | | | | | | | | | | | | | | | | |
| | December 31, 2023 |
| | Notional Amount | | Asset | | Liability |
| | | | | | |
Interest rate contracts | | $ | 569,865 | | | $ | 32,179 | | | $ | 32,184 | |
Forward commitments | | 159,000 | | | — | | | 861 | |
Interest rate-lock commitments | | 69,217 | | | 1,203 | | | — | |
Futures contracts | | 254,000 | | | 777 | | | — | |
| | | | | | |
Total | | $ | 1,052,082 | | | $ | 34,159 | | | $ | 33,045 | |
| | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2023 | |
| | Notional Amount | | Asset | | Liability | |
| | | | | | | |
Interest rate contracts | | $ | 567,594 | | | $ | 36,068 | | | $ | 36,087 | | |
Forward commitments | | 268,000 | | | — | | | 691 | | |
Interest rate-lock commitments | | 157,213 | | | 2,640 | | | — | | |
Futures contracts | | 495,500 | | | 103 | | | — | | |
| | | | | | | |
Total | | $ | 1,488,307 | | | $ | 38,811 | | | $ | 36,778 | | |
| | | | | | | | | | | | | | | | | | | | |
| | December 31, 2022 |
| | Notional Amount | | Asset | | Liability |
| | | | | | |
Interest rate contracts | | $ | 560,310 | | | $ | 45,775 | | | $ | 45,762 | |
Forward commitments | | 207,000 | | | 306 | | | — | |
Interest rate-lock commitments | | 118,313 | | | 1,433 | | | — | |
Futures contracts | | 494,300 | | | — | | | 3,790 | |
| | | | | | |
Total | | $ | 1,379,923 | | | $ | 47,514 | | | $ | 49,552 | |
Gains (losses) included in the consolidated statements of income related to the Company’s non-designated derivative financial instruments were as follows:
| | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | 2023 | | 2022 | | |
Included in mortgage banking income: | | | | | | | |
Interest rate lock commitments | | | | | $ | 1,207 | | $ | (5,446) | | |
Forward commitments | | | | | (295) | | 37,903 | | |
Futures contracts | | | | | 1,937 | | (16,535) | | |
Option contracts | | | | | (664) | | 36 | | |
Total | | | | | $ | 2,185 | | $ | 15,958 | | |
Derivatives designated as cash flow hedges
The Company also maintains two interest rate swap agreements with notional amounts totaling $30,000 used to hedge interest rate exposure on outstanding subordinated debentures included in long-term debt totaling $30,930. Under these agreements, the Company receives a variable rate of interest equal to 3-month LIBOR and pays a weighted average fixed rate of interest of 2.08%. Upon the cessation of LIBOR in June 2023, the rate will convert to SOFR plus an adjustment in accordance with market standards. The interest rate swap contracts, which mature in June of 2024, are designated as cash flow hedges with the objective of reducing the variability in cash flows resulting from changes in interest rates.
The following presents a summary of the Company's designated cash flow hedges as of the dates presented:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | March 31, 2023 | | December 31, 2022 | |
| | Notional Amount | | Estimated fair value | | Balance sheet location | | Estimated fair value | | Balance sheet location | |
Interest rate swap agreements- subordinated debt | | $ | 30,000 | | | $ | 988 | | | Other assets | | $ | 1,255 | | | Other Assets | |
| | | | | | | | | | | |
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The Company'sGains (losses) included in the consolidated statements of income included a gain of $197 and a loss of $139 for the three months ended March 31, 2023 and 2022, respectively, in interest expense on borrowings related to these cash flow hedges. The cash flow hedgesthe Company’s non-designated derivative financial instruments were effective during the periods presented and as a result qualified for hedge accounting treatment. As such, no amounts were reclassified from accumulated other comprehensive loss into earnings during either period presented.follows:
The following discloses the amount included in other comprehensive income (loss), net | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | 2024 | | | 2023 | | |
Included in mortgage banking income: | | | | | | | | |
Interest rate lock commitments | | | | | $ | 869 | | | $ | 1,207 | | |
Forward commitments | | | | | 100 | | | (295) | | |
Futures contracts | | | | | (2,997) | | | 1,937 | | |
Option contracts | | | | | — | | | (664) | | |
Total | | | | | $ | (2,028) | | | $ | 2,185 | | |
Netting of tax, for derivative instruments designated as cash flow hedges for the periods presented:
| | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, | |
| | | | | 2023 | | 2022 | | |
| | | | | | | |
Amount of (loss) gain recognized in other comprehensive income (loss), net of tax (benefit) expense of $(70) and $273 | | | | | $ | (197) | | $ | 774 | | |
Derivatives designated as fair value hedges
The Company utilizes designated fair value hedges to mitigate the effect of changing rates on the fair value of various fixed rate liabilities, including certain money market deposits and subordinated debt. The hedging strategy converts the fixed interest rates of the hedged items to the daily compounded SOFR in arrears paid monthly. For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged asset or liability attributable to the hedged risk are recognized in current earnings. The gain or loss on the derivative instrument is presented on the same income statement line item as the earnings effect of the hedged item.As of March 31, 2023 and December 31, 2022, the fair value hedges were deemed effective.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | March 31, 2023 | | December 31, 2022 |
| | Remaining Maturity (In Years) | | Receive Fixed Rate | | Pay Floating Rate | | Notional Amount | | Estimated fair value | | Notional Amount | | Estimated fair value |
Derivatives included in other liabilities: | | | | | | | | | | | | | | |
Interest rate swap agreement- subordinated debt | | 0.92 | | 1.46% | | SOFR | | $ | 100,000 | | | $ | (2,952) | | | $ | 100,000 | | | $ | (3,830) | |
Interest rate swap agreement- fixed rate money market deposits | | 1.39 | | 1.50% | | SOFR | | 75,000 | | | (3,274) | | | 75,000 | | | (3,693) | |
Interest rate swap agreement- fixed rate money market deposits | | 1.39 | | 1.50% | | SOFR | | 125,000 | | | (5,457) | | | 125,000 | | | (6,154) | |
Total | | 1.23 | | 1.48% | | | | $ | 300,000 | | | $ | (11,683) | | | $ | 300,000 | | | $ | (13,677) | |
The following discloses the amount of (expense) income included in interest expense on borrowings and deposits, related to these fair value hedging instruments:
| | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | 2023 | | 2022 | |
Designated fair value hedge: | | | | | | |
Interest (expense) income on deposits | | | | | $ | (1,508) | | $ | 313 | |
Interest (expense) income on borrowings | | | | | (760) | | 162 | |
Total | | | | | $ | (2,268) | | $ | 475 | |
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The following amounts were recorded on the balance sheet related to cumulative adjustments of fair value hedges as of the dates presented:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| | | Carrying Amount of the Hedged Item | | Cumulative Decrease in Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Item |
| Line item on the balance sheet | | March 31, 2023 | | December 31, 2022 | | March 31, 2023 | | December 31, 2022 |
| Borrowings | | $ | 96,146 | | | $ | 95,171 | | (1) | $ | (2,952) | | | $ | (3,830) | |
| Money market and savings deposits | | 196,704 | | | 196,520 | | (2) | (8,731) | | | (9,847) | |
(1) The carrying value also includes unamortized subordinated debt issuance costs of $902 and $999 as of March 31, 2023 and December 31, 2022, respectively.
(2) The carrying value also includes an unaccreted purchase accounting fair value premium of $5,435 and $6,367 as of March 31, 2023 and December 31, 2022, respectively.Derivative Instruments
Certain financial instruments, including derivatives, may be eligible for offset inon the consolidated balance sheets when the “right of offset” exists or when the instruments are subject to an enforceable master netting agreement, which includes the right of the non-defaulting party or non-affected party to offset recognized amounts, including collateral posted with the counterparty, to determine a net receivable or net payable upon early termination of the agreement. Certain of the Company’s derivative instruments are subject to master netting agreements, however the Company has not elected to offset such financial instruments inon the consolidated balance sheets. The following table presents the Company's gross derivative positions as recognized inon the consolidated balance sheets as well as the net derivative positions, including collateral pledged to the extent the application of such collateral did not reduce the net derivative liability position below zero, had the Company elected to offset those instruments subject to an enforceable master netting agreement:
| | | | | | | | | | | Gross amounts not offset on the consolidated balance sheets | |
| | 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 | |
| | | | | | | | | Gross amounts not offset on the consolidated balance sheets | |
| | | | | | | | | Gross amounts not offset on the consolidated balance sheets | |
| | Gross amounts recognized | |
| | Gross amounts recognized | |
| | Gross amounts recognized | | | Gross amounts offset on the consolidated balance sheets | | Net amounts presented on the consolidated balance sheets | | Financial instruments | | Financial collateral pledged | | Net Amount |
March 31, 2024 | |
Derivative financial assets | |
Derivative financial assets | |
Derivative financial assets | Derivative financial assets | | $ | 35,641 | | | $ | — | | | $ | 35,641 | | | $ | 12,771 | | | $ | — | | | $ | 22,870 | |
Derivative financial liabilities | Derivative financial liabilities | | $ | 18,528 | | | $ | — | | | $ | 18,528 | | | $ | 12,771 | | | $ | 5,757 | | | $ | — | |
| December 31, 2022 | |
December 31, 2023 | |
December 31, 2023 | |
December 31, 2023 | |
Derivative financial assets | |
Derivative financial assets | |
Derivative financial assets | Derivative financial assets | | $ | 44,273 | | | $ | — | | | $ | 44,273 | | | $ | 14,229 | | | $ | — | | | $ | 30,044 | |
Derivative financial liabilities | Derivative financial liabilities | | $ | 20,251 | | | $ | — | | | $ | 20,251 | | | $ | 14,229 | | | $ | 6,022 | | | $ | — | |
Collateral Requirements
Most derivative contracts with clientscustomers are secured by collateral. Additionally, in accordance with the interest rate agreements with derivatives dealers,derivative counterparties, the Company may be required to post margin tocollateral with these derivative counterparties. As of March 31, 20232024 and December 31, 2022,2023, the Company had minimum collateral posting thresholds with certain derivative counterparties and had collateral posted of $18,590$13,585 and $23,325,$14,042, 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: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-recurringnonrecurring basis using the following methods and assumptions:
| | | | | | |
Investment Securitiessecurities | | Investment securities are recorded at fair value on a recurring basis. Fair values for securities are based on quoted market prices, where available. If quoted prices are not available, fair values are based on quoted market prices of similar instruments or are determined by matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the pricing relationship or correlation among other benchmark quoted securities. Investment securities valued using quoted market prices of similar instruments or that are valued using matrix pricing are classified as Level 2. When significant inputs to the valuation are unobservable, the available-for-sale securities are classified within Level 3 of the fair value hierarchy. Where no active market exists for a security or other benchmark securities, fair value is estimated by the Company with reference to discount margins for other high-risk securities. |
| | |
Loans held for sale | | LoansMortgage loans held for sale are carried at fair value. Fair value is determined using current secondary market prices for loans with similar characteristics, for the mortgage portfolio, that is, using Level 2 inputs. The fair value ofGNMA optional repurchase loans recorded as held for sale loans are carried at their principal balance. For commercial loans held for sale, fair value is determined using an income approach with various assumptions including expected cash flows, market discount rates, credit metrics and collateral value when appropriate. As such, these are considered Level 3. The guaranteed GNMA optional repurchase loans are excluded from the fair value option. |
| | |
Derivatives | | The fair value of the Company's interest rate swap agreements to facilitate customer transactions are based upon fair values provided from entities that engage in interest rate swap activity and is based upon projected future cash flows and interest rates. The fair value of interest rate lock commitments associated with the mortgage pipeline is based on fees currently charged to enter into similar agreements, and for fixed-rate commitments, the difference between current levels of interest rates and the committed rates is also considered. The fair values of the Company's designated cash flow and fair value hedges are determined by calculating the difference between the discounted fixed rate cash flows and the discounted variable rate cash flows. The fair values of both the Company's hedges, including designated cash flow hedges and designated fair value hedges are based on pricing models that utilize observable market inputs. These financial instruments are classified as Level 2. |
| | |
OREO | | OREO is comprised of commercial and residential real estateproperties 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. TheOREO valuations are classified as Level 3. |
| | |
Mortgage servicing rights | | MSRs are carried at fair value. Fair value is determined using an income approach with various assumptions including expected cash flows, market discount rates, prepayment speeds, servicing costs, and other factors. As such, MSRs are considered Level 3. |
| | |
CollateralCollateral- dependent loans | | Collateral dependentCollateral-dependent loans are loans for which, based on current information and events, the Company has determined foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan to be provided substantially through the operation or sale of the collateral and it is probable that the creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Collateral dependentCollateral-dependent loans are classified as Level 3. |
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The following table contains the estimated fair values and the related carrying values of the Company's financial instruments. Items which are not financial instruments are not included.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Fair Value |
March 31, 2023 | | Carrying amount | | Level 1 | | Level 2 | | Level 3 | | Total |
Financial assets: | | | | | | | | | | |
Cash and cash equivalents | | $ | 1,319,951 | | | $ | 1,319,951 | | | $ | — | | | $ | — | | | $ | 1,319,951 | |
Investment securities | | 1,474,064 | | | — | | | 1,474,064 | | | — | | | 1,474,064 | |
| | | | | | | | | | |
Net loans held for investment | | 9,227,187 | | | — | | | — | | | 9,090,899 | | | 9,090,899 | |
Loans held for sale, at fair value | | 61,987 | | | — | | | 52,477 | | | 9,510 | | | 61,987 | |
Interest receivable | | 44,737 | | | 1,027 | | | 6,705 | | | 37,005 | | | 44,737 | |
Mortgage servicing rights | | 164,879 | | | — | | | — | | | 164,879 | | | 164,879 | |
Derivatives | | 39,799 | | | — | | | 39,799 | | | — | | | 39,799 | |
Financial liabilities: | | | | | | | | | | |
Deposits: | | | | | | | | | | |
Without stated maturities | | $ | 9,686,045 | | | $ | 9,686,045 | | | $ | — | | | $ | — | | | $ | 9,686,045 | |
With stated maturities | | 1,496,870 | | | — | | | 1,485,091 | | | — | | | 1,485,091 | |
Securities sold under agreements to repurchase and federal funds purchased | | 38,130 | | | 38,130 | | | — | | | — | | | 38,130 | |
Federal Home Loan Bank advances | | 125,000 | | | — | | | 125,000 | | | — | | | 125,000 | |
Subordinated debt, net | | 127,076 | | | — | | | — | | | 120,584 | | | 120,584 | |
| | | | | | | | | | |
Interest payable | | 11,834 | | | 3,731 | | | 7,704 | | | 399 | | | 11,834 | |
Derivatives | | 48,461 | | | — | | | 48,461 | | | — | | | 48,461 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Fair Value |
December 31, 2022 | | Carrying amount | | Level 1 | | Level 2 | | Level 3 | | Total |
Financial assets: | | | | | | | | | | |
Cash and cash equivalents | | $ | 1,027,052 | | | $ | 1,027,052 | | | $ | — | | | $ | — | | | $ | 1,027,052 | |
Investment securities | | 1,474,176 | | | — | | | 1,474,176 | | | — | | | 1,474,176 | |
| | | | | | | | | | |
Net loans held for investment | | 9,164,020 | | | — | | | — | | | 9,048,943 | | | 9,048,943 | |
Loans held for sale, at fair value | | 113,240 | | | — | | | 82,750 | | | 30,490 | | | 113,240 | |
Interest receivable | | 45,684 | | | 126 | | | 6,961 | | | 38,597 | | | 45,684 | |
Mortgage servicing rights | | 168,365 | | | — | | | — | | | 168,365 | | | 168,365 | |
Derivatives | | 48,769 | | | — | | | 48,769 | | | — | | | 48,769 | |
Financial liabilities: | | | | | | | | | | |
Deposits: | | | | | | | | | | |
Without stated maturities | | $ | 9,433,860 | | | $ | 9,433,860 | | | $ | — | | | $ | — | | | $ | 9,433,860 | |
With stated maturities | | 1,421,974 | | | — | | | 1,422,544 | | | — | | | 1,422,544 | |
Securities sold under agreements to repurchase and federal funds purchased | | 86,945 | | | 86,945 | | | — | | | — | | | 86,945 | |
Federal Home Loan Bank advances | | 175,000 | | | — | | | 175,000 | | | — | | | 175,000 | |
Subordinated debt, net | | 126,101 | | | — | | | — | | | 118,817 | | | 118,817 | |
| | | | | | | | | | |
Interest payable | | 8,648 | | | 2,571 | | | 4,559 | | | 1,518 | | | 8,648 | |
Derivatives | | 63,229 | | | — | | | 63,229 | | | — | | | 63,229 | |
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The balances and levels of the assets and liabilities measured at fair value on a recurring basis atas of March 31, 2024 and December 31, 2023 are presented in the following table:tables:
| 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 |
At March 31, 2024 | | At March 31, 2024 | | Quoted prices in active markets for identical assets (liabilities) (level 1) | | Significant other observable inputs (level 2) | | Significant unobservable inputs (level 3) | | Total |
Recurring valuations: | Recurring valuations: | | | | | | | | | Recurring valuations: | | |
Financial assets: | Financial assets: | | | | | | | | | Financial assets: | | |
Available-for-sale securities: | Available-for-sale securities: | | | | | | | | | Available-for-sale securities: | | |
U.S. government agency securities | U.S. government agency securities | | $ | — | | | $ | 40,928 | | | $ | — | | | $ | 40,928 | |
Mortgage-backed securities - residential | Mortgage-backed securities - residential | | — | | | 1,025,388 | | | — | | | 1,025,388 | |
Mortgage-backed securities - commercial | Mortgage-backed securities - commercial | | — | | | 17,723 | | | — | | | 17,723 | |
Municipal securities | Municipal securities | | — | | | 270,994 | | | — | | | 270,994 | |
U.S. Treasury securities | U.S. Treasury securities | | — | | | 108,823 | | | — | | | 108,823 | |
Corporate securities | Corporate securities | | — | | | 7,149 | | | — | | | 7,149 | |
Equity securities, at fair value | | — | | | 3,059 | | | — | | | 3,059 | |
| Total securities | |
Total securities | |
Total securities | Total securities | | $ | — | | | $ | 1,474,064 | | | $ | — | | | $ | 1,474,064 | |
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 | | — | | | — | | | 164,879 | | | 164,879 | |
Derivatives | Derivatives | | — | | | 39,799 | | | — | | | 39,799 | |
Financial Liabilities: | Financial Liabilities: | |
Derivatives | Derivatives | | — | | | 48,461 | | | — | | | 48,461 | |
Derivatives | |
Derivatives | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
At December 31, 2023 | | Quoted prices in active markets for identical assets (liabilities) (level 1) | | Significant other observable inputs (level 2) | | Significant unobservable inputs (level 3) | | Total |
Recurring valuations: | | | | | | | | |
Financial assets: | | | | | | | | |
Available-for-sale securities: | | | | | | | | |
U.S. government agency securities | | $ | — | | | $ | 203,956 | | | $ | — | | | $ | 203,956 | |
Mortgage-backed securities - residential | | — | | | 896,971 | | | — | | | 896,971 | |
Mortgage-backed securities - commercial | | — | | | 16,961 | | | — | | | 16,961 | |
Municipal securities | | — | | | 242,263 | | | — | | | 242,263 | |
U.S. Treasury securities | | — | | | 108,496 | | | — | | | 108,496 | |
Corporate securities | | — | | | 3,326 | | | — | | | 3,326 | |
| | | | | | | | |
Total securities | | $ | — | | | $ | 1,471,973 | | | $ | — | | | $ | 1,471,973 | |
Loans held for sale, at fair value | | $ | — | | | $ | 46,618 | | | $ | — | | | $ | 46,618 | |
Mortgage servicing rights | | — | | | — | | | 164,249 | | | 164,249 | |
Derivatives | | — | | | 34,738 | | | — | | | 34,738 | |
Financial Liabilities: | | | | | | | | |
Derivatives | | — | | | 38,215 | | | — | | | 38,215 | |
The balances and levels of the assets measured at fair value on a non-recurringnonrecurring basis atas of March 31, 2024 and December 31, 2023 are presented in the following table:tables:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At March 31, 2023 | | Quoted prices in active markets for identical assets (liabilities (level 1) | | Significant other observable inputs (level 2) | | Significant unobservable inputs (level 3) | | Total | | | | |
Non-recurring valuations: | | | | | | | | | | | | |
Financial assets: | | | | | | | | | | | | |
Other real estate owned | | $ | — | | | $ | — | | | $ | 224 | | | $ | 224 | | | | | |
Collateral dependent net loans held for investment: | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Residential real estate: | | | | | | | | | | | | |
1-4 family mortgage | | $ | — | | | $ | — | | | $ | 389 | | | $ | 389 | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Total collateral dependent loans | | $ | — | | | $ | — | | | $ | 389 | | | $ | 389 | | | | | |
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The balances and levels of the assets measured at fair value on a recurring basis at December 31, 2022 are presented in the following table: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At March 31, 2024 | | Quoted prices in active markets for identical assets (liabilities (level 1) | | Significant other observable inputs (level 2) | | Significant unobservable inputs (level 3) | | Total | | | | |
Nonrecurring valuations: | | | | | | | | | | | | |
Financial assets: | | | | | | | | | | | | |
Other real estate owned | | $ | — | | | $ | — | | | $ | 644 | | | $ | 644 | | | | | |
Collateral-dependent net loans held for investment: | | | | | | | | | | | | |
Commercial and industrial | | — | | | — | | | 5,303 | | | 5,303 | | | | | |
Construction | | — | | | — | | | 1,288 | | | 1,288 | | | | | |
Residential real estate: | | | | | | | | | | | | |
1-4 family mortgage | | — | | | — | | | 499 | | | 499 | | | | | |
Residential line of credit | | — | | | — | | | 561 | | | 561 | | | | | |
| | | | | | | | | | | | |
Commercial real estate: | | | | | | | | | | | | |
Owner occupied | | — | | | — | | | 752 | | | 752 | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Total collateral-dependent loans | | $ | — | | | $ | — | | | $ | 8,403 | | | $ | 8,403 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
At December 31, 2022 | | Quoted prices in active markets for identical assets (liabilities) (level 1) | | Significant other observable inputs (level 2) | | Significant unobservable inputs (level 3) | | Total |
Recurring valuations: | | | | | | | | |
Financial assets: | | | | | | | | |
Available-for-sale securities: | | | | | | | | |
U.S. government agency securities | | $ | — | | | $ | 40,062 | | | $ | — | | | $ | 40,062 | |
Mortgage-backed securities - residential | | — | | | 1,034,193 | | | — | | | 1,034,193 | |
Mortgage-backed securities - commercial | | — | | | 17,644 | | | — | | | 17,644 | |
Municipal securities | | — | | | 264,420 | | | — | | | 264,420 | |
U.S. Treasury securities | | — | | | 107,680 | | | — | | | 107,680 | |
Corporate securities | | — | | | 7,187 | | | — | | | 7,187 | |
Equity securities, at fair value | | — | | | 2,990 | | | — | | | 2,990 | |
Total securities | | $ | — | | | $ | 1,474,176 | | | $ | — | | | $ | 1,474,176 | |
Loans held for sale, at fair value | | $ | — | | | $ | 82,750 | | | $ | 30,490 | | | $ | 113,240 | |
Mortgage servicing rights | | — | | | — | | | 168,365 | | | 168,365 | |
Derivatives | | — | | | 48,769 | | | — | | | 48,769 | |
Financial Liabilities: | | | | | | | | |
Derivatives | | — | | | 63,229 | | | — | | | 63,229 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
At December 31, 2023 | | Quoted prices in active markets for identical assets (liabilities) (level 1) | | Significant other observable inputs (level 2) | | Significant unobservable inputs (level 3) | | Total |
Nonrecurring valuations: | | | | | | | | |
Financial assets: | | | | | | | | |
Other real estate owned | | $ | — | | | $ | — | | | $ | 2,400 | | | $ | 2,400 | |
Collateral-dependent net loans held for investment: | | | | | | | | |
Commercial and industrial | | $ | — | | | $ | — | | | $ | 12,338 | | | $ | 12,338 | |
Construction | | — | | | — | | | 203 | | | 203 | |
Residential real estate: | | | | | | | | |
1-4 family mortgage | | — | | | — | | | 429 | | | 429 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Consumer and other | | — | | | — | | | 71 | | | 71 | |
Total collateral-dependent loans | | $ | — | | | $ | — | | | $ | 13,041 | | | $ | 13,041 | |
The balances and levels of the assets measured at fair value on a non-recurring basis at December 31, 2022 are presented in the following table:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
At December 31, 2022 | | Quoted prices in active markets for identical assets (liabilities) (level 1) | | Significant other observable inputs (level 2) | | Significant unobservable inputs (level 3) | | Total |
Non-recurring valuations: | | | | | | | | |
Financial assets: | | | | | | | | |
Other real estate owned | | $ | — | | | $ | — | | | $ | 2,497 | | | $ | 2,497 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Residential real estate: | | | | | | | | |
1-4 family mortgage | | $ | — | | | $ | — | | | $ | 366 | | | $ | 366 | |
| | | | | | | | |
Commercial real estate: | | | | | | | | |
| | | | | | | | |
Non-owner occupied | | — | | | — | | | 2,494 | | | 2,494 | |
| | | | | | | | |
Total collateral dependent loans | | $ | — | | | $ | — | | | $ | 2,860 | | | $ | 2,860 | |
The following tables present information as of March 31, 2023 and December 31, 2022 about significant unobservable inputs (Level 3) used in the valuation of assets measured at fair value on a nonrecurring basis:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of March 31, 2023
| | | | | | | | | |
Financial instrument | | Fair Value | | Valuation technique | | Significant unobservable inputs | | Range of inputs | |
Collateral dependent net loans held for investment | | $ | 389 | | | Valuation of collateral | | Discount for comparable sales | | 10%-35% | |
Other real estate owned | | $ | 224 | | | Appraised value of property less costs to sell | | Discount for costs to sell | | 0%-15% | |
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Commercial loans held for sale
Historically, the Company had a portfolio of acquired commercial loans. There were no such loans outstanding as of March 31, 2024 as the last relationship was exited during the year ended December 31, 2023. These commercial loans were measured at fair value. As such, these loans were excluded from the ACL.
The following table sets forth the changes in fair value associated with this portfolio for the three months ended March 31, 2023:
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| | Three Months Ended March 31, 2023 |
| | Principal balance | | Fair Value discount | | Fair Value |
Carrying value at beginning of period | | $ | 34,357 | | | $ | (3,867) | | | $ | 30,490 | |
| | | | | | |
Change in fair value: | | | | | | |
Paydowns and payoffs | | (21,890) | | | — | | | (21,890) | |
| | | | | | |
Changes in valuation included in other noninterest income | | — | | | 910 | | | 910 | |
Carrying value at end of period | | $ | 12,467 | | | $ | (2,957) | | | $ | 9,510 | |
The significant unobservable inputs (Level 3) used in the valuation and changes in fair value associated with the Company's mortgage servicing rights for the three months ended March 31, 2024 and 2023 are detailed at Note 6, “Mortgage servicing rights.”
The following tables present information as of March 31, 2024 and December 31, 2023 about significant unobservable inputs (Level 3) used in the valuation of assets measured at fair value on a nonrecurring basis:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of DecemberMarch 31, 20222024 | | | | | | | | | |
Financial instrument | | Fair Value | | Valuation technique | | Significant unobservable inputs | | Range of inputs | |
Collateral dependentCollateral-dependent net loans held for investment | | $ | 2,8608,403 | | | Valuation of collateral | | Discount for comparable sales | | 9%-58% | | 10%-35% |
Other real estate owned | | $ | 2,497644 | | | Appraised value of property less costs to sell | | Discount for costs to sell | | 0%-15% | |
For collateral dependent | | | | | | | | | | | | | | | | | | | | | | | | | | | |
December 31, 2023 | | | | | | | | | |
Financial instrument | | Fair Value | | Valuation technique | | Significant unobservable inputs | | Range of inputs | |
Collateral-dependent net loans held for investment | | $ | 13,041 | | | Valuation of collateral | | Discount for comparable sales | | 10%-61% | |
Other real estate owned | | $ | 2,400 | | | Appraised value of property less costs to sell | | Discount for costs to sell | | 0%-15% | |
Fair value for collateral-dependent loans the ACL is measureddetermined based on the difference between the fair value of the collateralappraisals performed by qualified appraisers and the amortized cost basis of the loan as of the measurement date.reviewed by qualified personnel. Fair value of the loan's collateral is determined by third-party appraisals, which are then adjusted for estimated selling and closing costs related to liquidation of the collateral. Collateral dependentCollateral-dependent loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on changes in market conditions from the time of valuation and management's knowledge of the borrower and borrower's business. As of March 31, 20232024 and December 31, 2022,2023, total amortized cost of collateral dependentcollateral-dependent loans measured on a non-recurringnonrecurring basis amounted to $558$12,754 and $3,054,$18,166, respectively. The allowance for credit losses is calculated as the amount for which the loan’s amortized cost basis exceeds fair value.
Other real estate owned acquired in settlement of indebtedness is recorded at fair value of the real estate less estimated costs to sell. Subsequently, it may be necessary to record nonrecurring fair value adjustments for declines in fair value. Any write-downs based on the asset's fair value at the date of foreclosure are charged to the allowance for credit losses.
Appraisals for both collateral dependentcollateral-dependent loans and other real estate owned are performed by certified appraisers whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the lending administrative department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry wide statistics. Collateral dependentCollateral-dependent loans that are dependent on recovery through sale of equipment, such as farm equipment, automobiles and aircrafts are generally valued based on public source pricing or subscription services while more complex assets are valued through leveraging brokers who have expertise in the collateral involved.
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Fair value option
The following table summarizes the Company's loans held for sale as of the dates presented:
| | | March 31, | | | | March 31, | | December 31, |
| | | 2024 | |
| | 2024 | |
| | 2024 | | | 2023 |
Loans held for sale under a fair value option: | |
| | | March 31, | | December 31, |
Mortgage loans held for sale | |
| | 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 | Mortgage loans held for sale | | 52,477 | | | 82,750 | |
Total loans held for sale, at fair value | | 61,987 | | | 113,240 | |
| Mortgage loans held for sale | |
| Loans held for sale not accounted for under a fair value option: | |
Loans held for sale not accounted for under a fair value option: | |
Loans held for sale not accounted for under a fair value option: | Loans held for sale not accounted for under a fair value option: | | | |
Mortgage loans held for sale - guaranteed GNMA repurchase option | Mortgage loans held for sale - guaranteed GNMA repurchase option | | 20,528 | | | 26,211 | |
Mortgage loans held for sale - guaranteed GNMA repurchase option | |
Mortgage loans held for sale - guaranteed GNMA repurchase option | |
Total loans held for sale | Total loans held for sale | | $ | 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 differencesNet gain of $203 and more accurately matches the changes in fair valuenet loss of the loans with changes in the fair value of derivative instruments used to economically hedge them.
Net losses of $51 and $16,874 resulting from fair value changes of mortgage loans held for sale were recorded in income during the three months ended March 31, 20232024 and 2022,2023, 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.loans held for sale. The net change in fair value of these loans held for sale and derivatives resulted in net lossesgain of $421$1,821 and $7,548net loss of $421 for the three months ended March 31, 20232024 and 2022,2023, respectively. The change in fair value of both mortgage loans held for sale and the related derivative instruments are recorded in mortgage“Mortgage banking Incomeincome” in the consolidated statements of income. Election of the fair value option allows the Company to reduce the accounting volatility that would otherwise result from the asymmetry created by accounting for the financial instruments at the lower of cost or fair value and the derivatives at fair value.
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The Company’s valuation of mortgage loans held for sale incorporates an assumption for credit risk; however, given the short-term period that the Company holds these mortgage loans held for sale, valuation adjustments attributable to instrument-specific credit risk is nominal.
Rebooked GNMA optional repurchase loans do not meet the requirements under FASB ASC Topic 825 to be accounted for under the fair value option. As such, these loans are excluded from the below disclosures.
Commercial loans held for sale
The Company also has a portfolio of shared institutional healthcare loans that were acquired during a 2020 business combination. These commercial loans are also being measured under the fair value option. As such, these loans are excluded from the allowance for credit losses. The following tables set forth the changes in fair value associated with this portfolio for the three months ended March 31, 2023 and 2022.
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| | Three Months Ended March 31, 2023 | |
| | Principal Balance | | Fair Value Discount | | Fair Value | |
Carrying value at beginning of period | | $ | 34,357 | | | $ | (3,867) | | | $ | 30,490 | | |
Change in fair value: | | | | | | | |
Pay-downs and pay-offs | | (21,890) | | | — | | | (21,890) | | |
| | | | | | | |
Changes in valuation included in other noninterest income | | — | | | 910 | | | 910 | | |
Carrying value at end of period | | $ | 12,467 | | | $ | (2,957) | | | $ | 9,510 | | |
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| | Three Months Ended March 31, 2022 |
| | Principal balance | | Fair Value discount | | Fair Value |
Carrying value at beginning of period | | $ | 86,762 | | | $ | (7,463) | | | $ | 79,299 | |
| | | | | | |
Change in fair value: | | | | | | |
Pay-downs and pay-offs | | (946) | | | — | | | (946) | |
| | | | | | |
Changes in valuation included in other noninterest income | | — | | | (174) | | | (174) | |
Carrying value at end of period | | $ | 85,816 | | | $ | (7,637) | | | $ | 78,179 | |
Interest income on loans held for sale measured at fair value is accrued as it is earned based on contractual rates and is reflected in interest income in the consolidated statements of income.
The following table summarizes the differences between the fair value and the principal balance for mortgage loans held for sale and nonaccrual loans measured at fair value as of March 31, 20232024 and December 31, 2022:2023:
| | | | | | | | | | | | | | | | | | | | |
March 31, 2023 | | Aggregate fair value | | Aggregate Unpaid Principal Balance | | Difference |
Mortgage loans held for sale measured at fair value | | $ | 52,477 | | | $ | 51,298 | | | $ | 1,179 | |
Commercial loans held for sale measured at fair value | | 232 | | | 236 | | | (4) | |
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Nonaccrual commercial loans held for sale | | 9,278 | | | 12,231 | | | (2,953) | |
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December 31, 2022 | | Aggregate fair value | | Aggregate Unpaid Principal Balance | | Difference |
Mortgage loans held for sale measured at fair value | | $ | 82,750 | | | $ | 81,520 | | | $ | 1,230 | |
Commercial loans held for sale measured at fair value | | 21,201 | | | 22,126 | | | (925) | |
| | | | | | |
Nonaccrual commercial loans held for sale | | 9,289 | | | 12,231 | | | (2,942) | |
| | | | | | | | | | | | | | |
| | March 31, | | December 31, |
| | |
| | 2024 | | 2023 |
Aggregate fair value | | $ | 61,828 | | | $ | 46,618 | |
Aggregate unpaid principal balance | | 60,516 | | | 45,509 | |
Difference | | $ | 1,312 | | | $ | 1,109 | |
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The following table contains the estimated fair values and the related carrying values of the Company's financial instruments. Non-financial instruments are excluded from the table below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Fair Value |
March 31, 2024 | | Carrying amount | | Level 1 | | Level 2 | | Level 3 | | Total |
Financial assets: | | | | | | | | | | |
Cash and cash equivalents | | $ | 870,730 | | | $ | 870,730 | | | $ | — | | | $ | — | | | $ | 870,730 | |
Investment securities | | 1,464,682 | | | — | | | 1,464,682 | | | — | | | 1,464,682 | |
Net loans held for investment | | 9,137,242 | | | — | | | — | | | 8,809,892 | | | 8,809,892 | |
Loans held for sale, at fair value | | 61,828 | | | — | | | 61,828 | | | — | | | 61,828 | |
Interest receivable | | 53,506 | | | 892 | | | 6,774 | | | 45,840 | | | 53,506 | |
Mortgage servicing rights | | 165,674 | | | — | | | — | | | 165,674 | | | 165,674 | |
Derivatives | | 38,341 | | | — | | | 38,341 | | | — | | | 38,341 | |
Financial liabilities: | | | | | | | | | | |
Deposits: | | | | | | | | | | |
Without stated maturities | | $ | 8,902,546 | | | $ | 8,902,546 | | | $ | — | | | $ | — | | | $ | 8,902,546 | |
With stated maturities | | 1,602,382 | | | — | | | 1,594,332 | | | — | | | 1,594,332 | |
Securities sold under agreements to repurchase and federal funds purchased | | 78,229 | | | 78,229 | | | — | | | — | | | 78,229 | |
| | | | | | | | | | |
Bank Term Funding Program | | 130,000 | | | — | | | 129,462 | | | — | | | 129,462 | |
Subordinated debt, net | | 130,414 | | | — | | | — | | | 123,284 | | | 123,284 | |
| | | | | | | | | | |
Interest payable | | 20,504 | | | 4,187 | | | 15,942 | | | 375 | | | 20,504 | |
Derivatives | | 36,404 | | | — | | | 36,404 | | | — | | | 36,404 | |
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| | Fair Value |
December 31, 2023 | | Carrying amount | | Level 1 | | Level 2 | | Level 3 | | Total |
Financial assets: | | | | | | | | | | |
Cash and cash equivalents | | $ | 810,932 | | | $ | 810,932 | | | $ | — | | | $ | — | | | $ | 810,932 | |
Investment securities | | 1,471,973 | | | — | | | 1,471,973 | | | — | | | 1,471,973 | |
Net loans held for investment | | 9,258,457 | | | — | | | — | | | 9,068,518 | | | 9,068,518 | |
Loans held for sale, at fair value | | 46,618 | | | — | | | 46,618 | | | — | | | 46,618 | |
Interest receivable | | 52,715 | | | 388 | | | 8,551 | | | 43,776 | | | 52,715 | |
Mortgage servicing rights | | 164,249 | | | — | | | — | | | 164,249 | | | 164,249 | |
Derivatives | | 34,738 | | | — | | | 34,738 | | | — | | | 34,738 | |
Financial liabilities: | | | | | | | | | | |
Deposits: | | | | | | | | | | |
Without stated maturities | | $ | 8,927,654 | | | $ | 8,927,654 | | | $ | — | | | $ | — | | | $ | 8,927,654 | |
With stated maturities | | 1,620,633 | | | — | | | 1,614,400 | | | — | | | 1,614,400 | |
Securities sold under agreements to repurchase and federal funds purchased | | 108,764 | | | 108,764 | | | — | | | — | | | 108,764 | |
Bank Term Funding Program | | 130,000 | | | — | | | 130,000 | | | — | | | 130,000 | |
Subordinated debt, net | | 129,645 | | | — | | | — | | | 122,671 | | | 122,671 | |
| | | | | | | | | | |
Interest payable | | 18,809 | | | 4,104 | | | 13,205 | | | 1,500 | | | 18,809 | |
Derivatives | | 38,215 | | | — | | | 38,215 | | | — | | | 38,215 | |
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Note (11)—Segment reporting:reporting
The Company and the Bank are engaged in the business of banking and provide a full range of financial services. The Company determines reportable segments based on the significance of the segment’s operating results to the overall Company, the products and services offered, customer characteristics, processes and service delivery of the segments and the regular financial performance review and allocation of resources by the Chief Executive Officer, the Company’s chief operating decision maker. The Company has identified two distinct reportable segments—Banking and Mortgage. The Company’s primary segment is Banking, which provides a full range of deposit and lending products and services to corporate, commercial and consumer customers. The Company also originates conforming residential mortgage loans through theits Mortgage segment, whichwhose activities also include the servicing of residential mortgage loans and the packaging and securitization of loans to governmentalthird party private investors or government sponsored agencies.
Beginning in 2024, the Company began assigning a transfer rate to allocate net interest income to products and business segments. The Company’sintent of the transfer rate methodology is to transfer interest rate risk among the segments and allow management to better measure the net interest margin contribution of its assets/liabilities by segment. Prior period results have been adjusted to conform to the current methodology.
The following tables present selected financial information with respect to the Company's reportable segments for the three months ended March 31, 2024 and 2023.
| | | | | | | | | | | | | | | | | | | | |
Three Months Ended March 31, 2024 | | Banking | | Mortgage | | Consolidated |
Net interest income | | $ | 97,094 | | | $ | 2,396 | | | $ | 99,490 | |
Provisions for (reversal of) credit losses | | 838 | | | (56) | | | 782 | |
Mortgage banking income | | — | | | 15,626 | | | 15,626 | |
Change in fair value of mortgage servicing rights, net of hedging(1) | | — | | | (3,041) | | | (3,041) | |
Other noninterest (loss) income | | (4,794) | | | 171 | | | (4,623) | |
Depreciation and amortization | | 2,708 | | | 133 | | | 2,841 | |
Amortization of intangibles | | 789 | | | — | | | 789 | |
| | | | | | |
Other noninterest expense | | 56,847 | | | 11,943 | | | 68,790 | |
Income before income taxes | | $ | 31,118 | | | $ | 3,132 | | | $ | 34,250 | |
Income tax expense | | | | | | 6,300 | |
Net income applicable to FB Financial Corporation and noncontrolling interest | | | | | | 27,950 | |
Net income applicable to noncontrolling interest | | | | | | — | |
Net income applicable to FB Financial Corporation | | | | | | $ | 27,950 | |
Total assets | | $ | 11,979,904 | | | $ | 568,416 | | | $ | 12,548,320 | |
Goodwill | | 242,561 | | | — | | | 242,561 | |
(1) Change in fair value of mortgage division represents a distinct reportable segment which differs fromservicing rights, net of hedging is included in Mortgage banking income in the Company’s primary businessCompany's consolidated statements of commercial and retail banking.income.
| | | | | | | | | | | | | | | | | | | | |
Three Months Ended March 31, 2023 | | Banking | | Mortgage | | Consolidated |
Net interest income | | $ | 101,287 | | | $ | 2,373 | | | $ | 103,660 | |
Provisions for credit losses | | 212 | | | 279 | | | 491 | |
Mortgage banking income | | — | | | 15,493 | | | 15,493 | |
Change in fair value of mortgage servicing rights, net of hedging(1) | | — | | | (3,407) | | | (3,407) | |
Other noninterest income (loss) | | 11,493 | | | (230) | | | 11,263 | |
Depreciation and amortization | | 2,049 | | | 179 | | | 2,228 | |
Amortization of intangibles | | 990 | | | — | | | 990 | |
| | | | | | |
Other noninterest expense | | 63,713 | | | 13,509 | | | 77,222 | |
Income before income taxes | | $ | 45,816 | | | $ | 262 | | | $ | 46,078 | |
Income tax expense | | | | | | 9,697 | |
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Net income applicable to FB Financial Corporation and noncontrolling interest | | | | | | 36,381 | |
Net income applicable to noncontrolling interest | | | | | | — | |
Net income applicable to FB Financial Corporation | | | | | | $ | 36,381 | |
Total assets | | $ | 12,534,348 | | | $ | 566,799 | | | $ | 13,101,147 | |
Goodwill | | 242,561 | | | — | | | 242,561 | |
(1)Change in fair value of mortgage servicing rights, net of hedging is included in mortgage banking income in the Company's consolidated statements of income.
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The financial performance of the Mortgage segment is assessed based on results of operations reflecting direct revenues and expenses and allocated expenses. This approach gives management a better indication of the operating performance of the segment. When assessing the Banking segment’s financial performance, the CEO utilizes reports with indirect revenues and expenses including but not limited to the investment portfolio, electronic delivery channels and areas that primarily support the banking segment operations. Therefore, these are included in the results of the Banking segment. Other indirect revenue and expenses related to general administrative areas are also included in the internal financial results reports of the Banking segment utilized by the CEO for analysis and are thus included for Banking segment reporting. Additionally, the Banking segment includes the results of the Company's specialty lending group, which is concentrated in manufactured housing lending. The Mortgage segment utilizes funding sources from the Banking segment in order to fund mortgage loans that are ultimately sold on the secondary market and uses proceeds from loan sales to repay obligations due to the Banking segment.
During the second quarter of 2022, the Company exited the direct-to-consumer internet delivery channel, which was one of two delivery channels in the Mortgage segment. The repositioning of the Mortgage segment did not qualify to be reported as discontinued operations. The Company continues to originate and sell residential mortgage loans within its Mortgage segment through its traditional mortgage retail channel, retain mortgage servicing rights and continues to hold residential mortgage loans in the loan HFI portfolio.
Interest rate lock commitment volume and sales volume included in the Mortgage segment are as follows for the periods indicated:
| | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | 2023 | 2022 | |
Interest rate lock commitment volume by delivery channel: | | | | | | | |
Direct-to-consumer | | | | | $ | — | | $ | 568,092 | | |
Retail | | | | | 375,042 | | 741,015 | | |
Total | | | | | $ | 375,042 | | $ | 1,309,107 | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Mortgage loan sales | | | | | $ | 332,307 | | $ | 1,284,482 | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
The following tables provide segment financial information for the periods indicated:
| | | | | | | | | | | | | | | | | | | | |
Three Months Ended March 31, 2023 | | Banking(3) | | Mortgage | | Consolidated |
Net interest income | | $ | 103,660 | | | $ | — | | | $ | 103,660 | |
Provisions for credit losses(1) | | 491 | | | — | | | 491 | |
Mortgage banking income(2) | | — | | | 15,493 | | | 15,493 | |
Change in fair value of mortgage servicing rights, net of hedging(2) | | — | | | (3,407) | | | (3,407) | |
Other noninterest income | | 11,493 | | | (230) | | | 11,263 | |
Depreciation and amortization | | 2,049 | | | 179 | | | 2,228 | |
Amortization of intangibles | | 990 | | | — | | | 990 | |
| | | | | | |
Other noninterest expense | | 65,311 | | | 11,911 | | | 77,222 | |
Income (loss) before income taxes | | $ | 46,312 | | | $ | (234) | | | $ | 46,078 | |
Income tax expense | | | | | | 9,697 | |
Net income applicable to FB Financial Corporation and noncontrolling interest | | | | | | 36,381 | |
Net income applicable to noncontrolling interest(3) | | | | | | — | |
Net income applicable to FB Financial Corporation | | | | | | $ | 36,381 | |
Total assets | | $ | 12,530,039 | | | $ | 571,108 | | | $ | 13,101,147 | |
Goodwill | | 242,561 | | | — | | | 242,561 | |
(1) Includes $4,997 in provision for credit losses on loans and $(4,506) in provision for credit losses on unfunded commitments.(2) Change in fair value of mortgage servicing rights, net of hedging is included in mortgage banking income in the Company's consolidated statements of income.
(3) Banking segment includes noncontrolling interest.
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
| | | | | | | | | | | | | | | | | | | | |
Three Months Ended March 31, 2022 | | Banking(3) | | Mortgage | | Consolidated |
Net interest income | | $ | 88,184 | | | $ | (2) | | | $ | 88,182 | |
Provisions for credit losses(1) | | (4,247) | | | — | | | (4,247) | |
Mortgage banking income(2) | | — | | | 29,278 | | | 29,278 | |
Change in fair value of mortgage servicing rights, net of hedging(2) | | — | | | 253 | | | 253 | |
Other noninterest income | | 11,983 | | | (122) | | | 11,861 | |
Depreciation and amortization | | 1,710 | | | 326 | | | 2,036 | |
Amortization of intangibles | | 1,244 | | | — | | | 1,244 | |
| | | | | | |
Other noninterest expense | | 56,630 | | | 29,362 | | | 85,992 | |
Income (loss) before income taxes | | $ | 44,830 | | | $ | (281) | | | $ | 44,549 | |
Income tax expense | | | | | | 9,313 | |
| | | | | | |
| | | | | | |
Net income applicable to FB Financial Corporation and noncontrolling interest | | | | | | 35,236 | |
Net income applicable to noncontrolling interest(3) | | | | | | — | |
Net income applicable to FB Financial Corporation | | | | | | $ | 35,236 | |
Total assets | | $ | 11,890,847 | | | $ | 783,344 | | | $ | 12,674,191 | |
Goodwill | | 242,561 | | | — | | | 242,561 | |
(1)Includes $(6,129) in provision for credit losses on loans and $1,882 in provision for credit losses on unfunded commitments.
(2)Change in fair value of mortgage servicing rights, net of hedging is included in mortgage banking income in the Company's consolidated statements of income.
(3)Banking segment includes noncontrolling interest.
The Banking segment provides the Mortgage segment with a warehouse line of credit that is used to fund mortgage loans held for sale. The warehouse line of credit, which is eliminated in consolidation, is limited based on interest income earned by the Mortgage segment. The amount of interest paid by the Mortgage segment to the Banking segment under this warehouse line of credit is recorded as interest income to the Company's Banking segment and as interest expense to the Mortgage segment, both of which are included in the calculation of net interest income for each segment. The amount of interest paid by the Mortgage segment to the Banking segment under this warehouse line of credit was $3,931 and $5,666 for the three months ended March 31, 2023 and 2022, respectively.
Note (12)—Minimum capital requirements:requirements
Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action.
Under regulatory guidance for non-advanced approach institutions, the Bank and Company are required to maintain minimum capital ratios as outlined in the table below. Minimum risk-based capital adequacy ratios below include a capital conservation buffer of 2.50%. As of March 31, 2024 and December 31, 2023, the Bank and Company met all capital adequacy requirements to which they are subject. Additionally, under U.S. Basel III Capital Rules, the Bank and Company opted out of including accumulated other comprehensive income in regulatory capital. As of March 31, 2023 and December 31, 2022, the Bank and Company met all capital adequacy requirements to which they are subject.
In March 2020, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC announced a final rule to delay the estimated impact on regulatory capital stemming from the implementation of CECL. The final rule maintained the three-year transition option in the previous rule and provides banks the option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period (five-year transition option). The Company adoptedelected to phase-in the capital transition reliefimpact related to adopting ASU 2016-13 over the permissible five-year transition relief period and delayed the initial impact of CECL adoption plus 25% of the quarterly increases in ACL in the first two years after adoption. Beginning onAs of January 1, 2022, the cumulative amount of the transition adjustments became fixed and are being phased out of regulatory capital calculations evenly over a three yearthree-year period, with 75% of the transition provision’s impact being recognized in 2022, 50% recognized in 2023, and 25% recognized in 2024.
Actual and required capital amounts and ratios are included below as of the dates indicated.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
March 31, 2024 | | Actual | | | | Minimum Requirement for Capital Adequacy with Capital Buffer | | To Qualify as Well-Capitalized Under Prompt Corrective Action Provisions |
| | Amount | | Ratio | | | | | | Amount | | Ratio | | Amount | | Ratio |
| | | | | | | | | | | | | | | | |
Total Capital (to risk-weighted assets) | | | | | | | | | | | | | | | | |
FB Financial Corporation | | $ | 1,657,500 | | | 15.0 | % | | | | | | $ | 1,161,748 | | | 10.5 | % | | N/A | | N/A |
FirstBank | | 1,622,562 | | | 14.7 | % | | | | | | 1,159,716 | | | 10.5 | % | | $ | 1,104,491 | | | 10.0 | % |
Tier 1 Capital (to risk-weighted assets) | | | | | | | | | | | | | | | | |
FB Financial Corporation | | $ | 1,419,546 | | | 12.8 | % | | | | | | $ | 940,462 | | | 8.5 | % | | N/A | | N/A |
FirstBank | | 1,384,847 | | | 12.5 | % | | | | | | 938,818 | | | 8.5 | % | | $ | 883,593 | | | 8.0 | % |
Tier 1 Capital (to average assets) | | | | | | | | | | | | | | | | |
FB Financial Corporation | | $ | 1,419,546 | | | 11.3 | % | | | | | | $ | 500,450 | | | 4.0 | % | | N/A | | N/A |
FirstBank | | 1,384,847 | | | 11.1 | % | | | | | | 499,885 | | | 4.0 | % | | $ | 624,857 | | | 5.0 | % |
Common Equity Tier 1 Capital (to risk-weighted assets) | | | | | | | | | | | | | | | | |
FB Financial Corporation | | $ | 1,389,546 | | | 12.6 | % | | | | | | $ | 774,498 | | | 7.0 | % | | N/A | | N/A |
FirstBank | | 1,384,847 | | | 12.5 | % | | | | | | 773,144 | | | 7.0 | % | | $ | 717,919 | | | 6.5 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
December 31, 2023 | | Actual | | | | Minimum Requirement for Capital Adequacy with Capital Buffer | | To Qualify as Well-Capitalized Under Prompt Corrective Action Provisions |
| | Amount | | Ratio | | | | | | Amount | | Ratio | | Amount | | Ratio |
| | | | | | | | | | | | | | | | |
Total Capital (to risk-weighted assets) | | | | | | | | | | | | | | | | |
FB Financial Corporation | | $ | 1,635,848 | | | 14.5 | % | | | | | | $ | 1,182,028 | | | 10.5 | % | | N/A | | N/A |
FirstBank | | 1,600,950 | | | 14.2 | % | | | | | | 1,179,886 | | | 10.5 | % | | $ | 1,123,701 | | | 10.0 | % |
Tier 1 Capital (to risk-weighted assets) | | | | | | | | | | | | | | | | |
FB Financial Corporation | | $ | 1,405,890 | | | 12.5 | % | | | | | | $ | 956,880 | | | 8.5 | % | | N/A | | N/A |
FirstBank | | 1,370,991 | | | 12.2 | % | | | | | | 955,145 | | | 8.5 | % | | $ | 898,960 | | | 8.0 | % |
Tier 1 Capital (to average assets) | | | | | | | | | | | | | | | | |
FB Financial Corporation | | $ | 1,405,890 | | | 11.3 | % | | | | | | $ | 496,485 | | | 4.0 | % | | N/A | | N/A |
FirstBank | | 1,370,991 | | | 11.1 | % | | | | | | 495,761 | | | 4.0 | % | | $ | 619,701 | | | 5.0 | % |
Common Equity Tier 1 Capital (to risk-weighted assets) | | | | | | | | | | | | | | | | |
FB Financial Corporation | | $ | 1,375,890 | | | 12.2 | % | | | | | | $ | 788,018 | | | 7.0 | % | | N/A | | N/A |
FirstBank | | 1,370,991 | | | 12.2 | % | | | | | | 786,590 | | | 7.0 | % | | $ | 730,405 | | | 6.5 | % |
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Actual and required capital amounts and ratios are included below as of the dates indicated.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of March 31, 2023 | | Actual | | | | Minimum Capital adequacy with capital buffer | | To be well capitalized under prompt corrective action provisions |
| | Amount | | Ratio | | | | | | Amount | | Ratio | | Amount | | Ratio |
| | | | | | | | | | | | | | | | |
Total Capital (to risk-weighted assets) | | | | | | | | | | | | | | | | |
FB Financial Corporation | | $ | 1,557,049 | | | 13.6 | % | | | | | | $ | 1,205,137 | | | 10.5 | % | | N/A | | N/A |
FirstBank | | 1,524,500 | | | 13.3 | % | | | | | | 1,204,213 | | | 10.5 | % | | $ | 1,146,869 | | | 10.0 | % |
Tier 1 Capital (to risk-weighted assets) | | | | | | | | | | | | | | | | |
FB Financial Corporation | | $ | 1,331,158 | | | 11.6 | % | | | | | | $ | 975,587 | | | 8.5 | % | | N/A | | N/A |
FirstBank | | 1,298,609 | | | 11.3 | % | | | | | | 974,839 | | | 8.5 | % | | $ | 917,495 | | | 8.0 | % |
Tier 1 Capital (to average assets) | | | | | | | | | | | | | | | | |
FB Financial Corporation | | $ | 1,331,158 | | | 10.4 | % | | | | | | $ | 512,344 | | | 4.0 | % | | N/A | | N/A |
FirstBank | | 1,298,609 | | | 10.2 | % | | | | | | 511,666 | | | 4.0 | % | | $ | 639,583 | | | 5.0 | % |
Common Equity Tier 1 Capital (to risk-weighted assets) | | | | | | | | | | | | | | | | |
FB Financial Corporation | | $ | 1,301,158 | | | 11.3 | % | | | | | | $ | 803,424 | | | 7.0 | % | | N/A | | N/A |
FirstBank | | 1,298,609 | | | 11.3 | % | | | | | | 802,808 | | | 7.0 | % | | $ | 745,465 | | | 6.5 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of December 31, 2022 | | Actual | | | | Minimum Capital adequacy with capital buffer | | To be well capitalized under prompt corrective action provisions |
| | Amount | | Ratio | | | | | | Amount | | Ratio | | Amount | | Ratio |
| | | | | | | | | | | | | | | | |
Total Capital (to risk-weighted assets) | | | | | | | | | | | | | | | | |
FB Financial Corporation | | $ | 1,528,344 | | | 13.1 | % | | | | | | $ | 1,225,161 | | | 10.5 | % | | N/A | | N/A |
FirstBank | | 1,506,543 | | | 12.9 | % | | | | | | 1,222,922 | | | 10.5 | % | | $ | 1,164,688 | | | 10.0 | % |
Tier 1 Capital (to risk-weighted assets) | | | | | | | | | | | | | | | | |
FB Financial Corporation | | $ | 1,315,386 | | | 11.3 | % | | | | | | $ | 991,797 | | | 8.5 | % | | N/A | | N/A |
FirstBank | | 1,293,585 | | | 11.1 | % | | | | | | 989,985 | | | 8.5 | % | | $ | 931,750 | | | 8.0 | % |
Tier 1 Capital (to average assets) | | | | | | | | | | | | | | | | |
FB Financial Corporation | | $ | 1,315,386 | | | 10.5 | % | | | | | | $ | 499,648 | | | 4.0 | % | | N/A | | N/A |
FirstBank | | 1,293,585 | | | 10.4 | % | | | | | | 499,194 | | | 4.0 | % | | $ | 623,992 | | | 5.0 | % |
Common Equity Tier 1 Capital (to risk-weighted assets) | | | | | | | | | | | | | | | | |
FB Financial Corporation | | $ | 1,285,386 | | | 11.0 | % | | | | | | $ | 816,774 | | | 7.0 | % | | N/A | | N/A |
FirstBank | | 1,293,585 | | | 11.1 | % | | | | | | 815,281 | | | 7.0 | % | | $ | 757,047 | | | 6.5 | % |
Note (13)—Stock-Based Compensation:Stock-based compensation
Restricted Stock Units
The Company grants RSUs under compensation arrangements for the benefit of certain employees executive officers, and directors. RSU grants are subject to time-based vesting.vesting with associated compensation recognized on a straight-line basis based on the grant date fair value of the awards. The total number of restricted stock unitsRSUs granted represents the maximum number of restricted stock unitsawards eligible to vest based upon the service conditions set forth in the grant agreements.
The following table summarizes changes in restricted stock unitsRSUs for the three months ended March 31, 2023.2024:
| | | | | | | | | | | | | | | | | | |
| | | | | | |
| | | | |
| | Restricted Stock Units Outstanding | | Weighted Average Grant Date Fair Value | | | | |
Balance at beginning of period (unvested) | | 365,155 | | | $ | 39.02 | | | | | |
Granted | | 144,578 | | | 37.17 | | | | | |
Vested | | (134,601) | | | 34.11 | | | | | |
Forfeited | | (1,428) | | | 43.62 | | | | | |
Balance at end of period (unvested) | | 373,704 | | | $ | 39.05 | | | | | |
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
| | | | | | | | | | | | | | | | | | |
| | | | | | |
| | | | |
| | Restricted Stock Units Outstanding | | Weighted Average Grant Date Fair Value | | | | |
Balance at beginning of period (unvested) | | 323,520 | | | $ | 37.52 | | | | | |
Granted | | 155,047 | | | 35.60 | | | | | |
Vested | | (18,777) | | | 35.55 | | | | | |
Forfeited | | (853) | | | 40.19 | | | | | |
Balance at end of period (unvested) | | 458,937 | | | $ | 36.95 | | | | | |
The total fair value of restricted stock unitsRSUs vested was $668 and released was $4,591 and $3,397 for the three months ended March 31, 2024 and 2023, and 2022, respectively.
The compensation cost related to stockthe grants and vesting of restricted stock unitsRSUs was$1,706 $2,706 and $1,856$1,706 for the three months ended March 31, 20232024 and 2022,2023, respectively. This includedincludes amounts paid related to director grants and compensation for directors elected to be settled in stock amounting to$175 $199 and $166 during$175 for the three months ended March 31, 2024 and 2023, and 2022, respectively.
As of March 31, 2023,2024, there was $12,523$10,614 of total unrecognized compensation cost related to unvested restricted stock unitsRSUs which is expected to be recognized over a weighted-average period of 2.92.24 years. Additionally, as of March 31, 2023,2024, there were 1,571,0981,459,258 shares available for issuance under the Company's stock compensation plans. As of March 31, 20232024 and December 31, 2022,2023, there were $205was $410 and $292,$353, respectively, accrued in other liabilities related to dividend equivalent units declared to be paid upon vesting and distribution of the underlying restricted stock units.RSUs.
Performance BasedPerformance-Based Restricted Stock Units
The Company awards performance-based restricted stock unitsPSUs to executives and other officers andcertain 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 achievement of certain performance relative to a predefined peer groupmetrics over a fixed three-yearthree-year performance period. The number of shares issued upon vesting willcan range from 0% to 200% of the PSUs granted. The Company's
For PSUs granted prior to December 31, 2023, performance relative to the peer groupfactors will be measured based on adjustedthe Company’s achievement of non-GAAP core return on average tangible common equity (non-GAAP), adjusted for unusual gains/losses, merger expenses, and other items as approved byover the compensation committeeperformance period relative to a predefined peer group.
Beginning with awards issued during the first quarter of 2024, performance factors will be based on a combination of the Company's board of directors. same metric discussed above as well as the Company’s adjusted tangible book value over the performance period.
Compensation expense for PSUs is estimated each period based on the fair value of the Company's stock at the grant date and the most probable outcome of the performance condition, adjusted for the passage of time within the performance period of the awardsawards.
The following table summarizes information about the changes in PSUs as of and for the three months ended March 31, 2023.
| | | | | | | | | | | | | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | |
| | Performance Stock Units Outstanding | | Weighted Average Grant Date Fair Value | | | | |
Balance at beginning of period (unvested) | | 161,667 | | | $ | 41.73 | | | | | |
Granted | | 86,010 | | | 37.17 | | | | | |
Performance adjustment (1) | | 44,319 | | | 37.17 | | | | | |
Vested | | (90,583) | | | 36.21 | | | | | |
Forfeited or expired | | (1,153) | | | 44.25 | | | | | |
Balance at end of period (unvested) | | 200,260 | | | $ | 40.98 | | | | | |
(1) PSUs are presented as outstanding, granted and forfeited in the table above assuming targets are met and the awards pay out at 100%. PSU awards are settled with payouts ranging from 0% and 200% of the target award value based on the Company's performance relative to a predefined peer group over a fixed three-year performance period. The performance adjustment represents the difference in shares ultimately awarded due to performance attainment above or below target. | | | | |
The following table summarizes data related to the Company's outstanding PSUs as of March 31, 2023:
| | | | | | | | | | | | | | | | | | | | |
Grant Year | | Grant Price | | Vest Year | | PSUs Outstanding |
2021 (1) | | $ | 43.20 | | | 2024 | | 54,922 |
2022 (2) | | $ | 44.44 | | | 2025 | | 59,328 |
2023 (2) | | $ | 37.17 | | | 2026 | | 86,010 |
(1)Vesting factor will be either at 0%, 25%, 100%, or 200% of PSUs outstanding based on the Company's performance relative to a predefined peer group over a fixed three-year performance period. (2)Vesting factor will be interpolated between 0% and 200% of PSUs outstanding based on the Company's performance relative to a predefined peer group over a fixed three-year performance period. |
The Company recorded compensation cost of $579 and $726 for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, maximum unrecognized compensation cost at 200% payout related to the unvested PSUs was $14,182, and the weighted average remaining performance period over which the cost could be recognized was 2.50 years.
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The following table summarizes information about the changes in PSUs as of and for the three months ended March 31, 2024:
| | | | | | | | | | | | | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | |
| | Performance Stock Units Outstanding | | Weighted Average Grant Date Fair Value | | | | |
Balance at beginning of period (unvested) | | 176,163 | | | $ | 40.86 | | | | | |
Granted | | 97,738 | | | 35.60 | | | | | |
Performance adjustment (1) | | (12,356) | | | 43.20 | | | | | |
Vested | | (34,915) | | | 43.20 | | | | | |
Forfeited or expired | | (969) | | | 40.00 | | | | | |
Balance at end of period (unvested) | | 225,661 | | | $ | 38.09 | | | | | |
(1) PSUs are presented as outstanding, granted and forfeited in the table above assuming targets are met and the awards pay out at 100%. PSU awards are settled with payouts ranging from 0% and 200% of the target award value based on the Company's performance relative to a predefined peer group over a fixed three-year performance period. The performance adjustment represents the difference in shares ultimately awarded due to performance attainment above or below target. | | | | |
The following table summarizes data related to the Company's outstanding PSUs as of March 31, 2024: | | | | | | | | | | | | | | | | | | | | |
Grant Year(1) | | Grant Price | | Performance Period | | PSUs Outstanding |
2022 | | $ | 44.44 | | | 2022 to 2024 | | 49,836 |
2023 | | $ | 37.17 | | | 2023 to 2025 | | 78,087 |
2024 | | $ | 35.60 | | | 2024 to 2026 | | 97,738 |
(1)Vesting factor will be interpolated between 0% and 200% of PSUs outstanding based on the Company's performance relative to a predefined peer group over a fixed three-year performance period. |
The Company recorded compensation cost associated with PSUs of $114 and $579 for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, maximum unrecognized compensation cost at 200% payout related to the unvested PSUs was $14,786, and the weighted average remaining performance period over which the cost could be recognized was 2.39 years.
Employee Stock Purchase Plan:Plan
The Company maintains an employee stock purchase plan under which employees, through payroll deductions, are able to purchase shares of Company common stock. The employee purchase price is 95% of the lower of the market price on the first or last day of the offering period. The maximum number of shares issuable during any offering period is 200,000 shares, and a participant may not purchase more thanlimited to 725 shares during any offering period (and, in any event, no more than $25 worth of common stock in any calendar year).for each participating employee. There were 8,21410,606 and 15,1528,214 shares of common stock issued under the ESPP with proceeds from employee payroll withholdings of $305$388 and $588$305 during the three months ended March 31, 20232024 and 2022,2023, respectively. As of March 31, 2023,2024, there were 2,306,5322,283,620 shares available for issuance under the ESPP.
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Note (14)—Related party transactions:transactions
(A) Loans:Loans
The Bank has made and expects to continue to make loans to the directors, certain management, significant shareholders, and executive officers of the Company and their related interests in the ordinary course of business, in compliance with regulatory requirements.
An analysis of loans to executive officers, certain management, significant shareholders and directors of the Bank and their related interests is presented below:
| | | | | | | | |
Loans outstanding at January 1, 20232024 | | $ | 82,55949,073 | |
New loans and advances | | 23,0981,894 | |
Change in related party status | | — | |
Repayments | | (2,365)(1,474) | |
Loans outstanding at March 31, 20232024 | | $ | 103,29249,493 | |
Unfunded commitments to certain executive officers, certain management and directors and their related interests totaled $34,089$54,212 and $31,564$44,206 at March 31, 20232024 and December 31, 2022,2023, respectively.
(B) Deposits:Deposits
The Bank held deposits from related parties totaling $336,448 and $347,660totaling $338,935 and $316,141 as of March 31, 20232024 and December 31, 2022,2023, respectively.
(C) Leases:Leases
The Bank leases various office spaces from entities owned by certain directors of the Company under varying terms. Lease expense for these properties totaled $90 and $101 for both the three months ended March 31, 20232024 and 2022.2023.
(D) Aviation lease:lease
During the year ended December 31, 2021, the Bank formedThrough a wholly-owned subsidiary, FBK Aviation, LLC, the Company owns and purchasedmaintains an aircraft under this entity.aircraft. FBK Aviation, LLC also maintains a non-exclusive aircraft lease agreement with an entity owned by one of the Company's directors. DuringThe Company recognized income of $24 and $7 during the three months ended March 31, 20232024 and 2022, the Company recognized income amounting to $7 and $11,2023, respectively, under this agreement.
(E) Subsequent to March 31, 2024, the Company renegotiated the lease agreement with the existing director and executed a non-exclusive aircraft lease with an entity owned by another one of the Company's directors.
Equity investment in preferred stock:stock and master loan purchase agreement
During the year ended December 31, 2022, the Company invested in preferred stock of a privately held entity of which an executive officer of the Company is on the Board of directors of the investee. This investment is included in other assets on the consolidated balance sheets with a carrying amount of $10,000 as of both March 31, 20232024 and December 31, 2022,2023, and is being accounted for as an equity security without readily determinable market value. No gains or losses have been recognized to date associated with this investment.
Concurrently, the Company also entered a separate master loan purchase agreement with the entity to purchase up to $250,000 in manufactured loan housing production over an initial five-year term. During the three months ended March 31, 2024, the Company purchased $9,225 of loans HFI under this agreement. No such loans were purchased during the three months ended March 31, 2023. As of March 31, 2024 and December 31, 2023, the amortized cost of these loans HFI amounted to $41,048 and $32,154, respectively.
ITEM 2 – Management’s discussion and analysis of financial condition and results of operations
The following is a discussion of our financial condition atas of March 31, 20232024 and December 31, 2022,2023, and our results of operations for the three months ended March 31, 20232024 and 2022,2023, and should be read in conjunction with our audited consolidated financial statements set forth in our Annual Report on Form 10-K for the year ended December 31, 2022,2023, that was filed with the SEC on February 28, 2023,27, 2024, and with the accompanying unaudited notes to the condensed consolidated financial statements set forth in this Report.
Forward-looking statements
Certain statements contained in this Report that are not historical in nature may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements regarding the Company’s future plans, results, strategies, and expectations, including expectations around changing economic markets. These statements can generally be identified by the use of the words and phrases “may,” “will,” “should,” “could,” “would,” “goal,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target,” “aim,” “predict,” “continue,” “seek,” “project,” and other variations of such words and phrases and similar expressions. These forward-looking statements are not historical facts, and are based upon management's current expectations, estimates, and projections, many of which, by their nature, are inherently uncertain and beyond the Company’s control. The inclusion of these forward-looking statements should not be regarded as a representation by the Company or any other person that such expectations, estimates, and projections will be achieved. Accordingly, the Company cautions shareholders and investors that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, and uncertainties that are difficult to predict. Actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. A number of factors could cause actual results to differ materially from those contemplated by the forward-looking statements including, without limitation, (1) current and future economic conditions, including the effects of inflation, interest rate fluctuations, changes in the economy or global supply chain, supply-demand imbalances affecting local real estate prices, and high unemployment rates in the local or regional economies in which the Company operates and/or the US economy generally, (2) changes in government interest rate policies and its impact on the Company’s business, net interest margin, and mortgage operations, (3) any continuation of the recent turmoil in the banking industry, including the associated impact to the Company and other financial institutions of any regulatory changes or other mitigation efforts taken by government agencies in response, (4) increased competition for deposits, (5) the Company’s ability to effectively manage problem credits, (6) any deterioration in commercial real estate market fundamentals, (7) the Company’s ability to identify potential candidates for, consummate, and achieve synergies from, potential future acquisitions, (8) the Company’s ability to successfully execute its various business strategies, (9) changes in state and federal legislation, regulations or policies applicable to banks and other financial service providers, including legislative developments, (10) the potential impact of the phase-out of the London Interbank Offered Rate ("LIBOR") or other changes involving LIBOR, (11) the effectiveness of the Company’s cybersecurity controls and procedures to prevent and mitigate attempted intrusions, (12)(11) the Company's dependence on information technology systems of third party service providers and the risk of systems failures, interruptions, or breaches of security, and (13)(12) the impact of natural disasters, pandemics, and/or acts of war or terrorism, (14)(13) events giving rise to international or regional 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 toof such events on financial markets and theand/or global macroeconomic and geopolitical environments, and (15)(14) general competitive, economic, political, and market conditions. Further information regarding the Company and factors which could affect the forward-looking statements contained herein can be found in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022,2023, and in any of the Company’s subsequent filings with the SEC. Many of these factors are beyond the Company’s ability to control or predict. If one or more events related to these or other risks or uncertainties materialize, or if the underlying assumptions prove to be incorrect, actual results may differ materially from the forward-looking statements. Accordingly, shareholders and investors should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date of this Report, and the Company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. New risks and uncertainties may emerge from time to time, and it is not possible for the Company to predict their occurrence or how they will affect the Company. The Company qualifies all forward-looking statements by these cautionary statements.
Critical accounting policies
Our financial statements are prepared in accordance with U.S. GAAP and general practices within the banking industry. Within our financial statements, certain financial information contains approximate measurements of financial effects of transactions and impacts at the consolidated balance sheet dates and our results of operations for the reporting periods. We monitor the status of proposed and newly issued accounting standards to evaluate the impact on our financial condition and results of operations. Our accounting policies, including the impact of any newly issued accounting standards if applicable, are discussed in further detail in Note 1, "Basis of presentation," in the notes to our consolidated financial statements in our Annual Report.
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Financial highlights The following table presents certain selected historical consolidated income statement and balance sheet data and key performance indicators and other measures as of the dates or for the periods indicated. Our historical results for any prior period are not necessarily indicative of results to be expected in any future period. |
| | | | As of or for the three months ended | | As of or for the year-ended |
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| | | | March 31, | | December 31, |
(dollars in thousands, except share data) | | | | | | 2024 | | | 2023 | | | 2023 | |
Selected Balance Sheet Data | | | | | | | | | | |
Cash and cash equivalents | | | | | | $ | 870,730 | | | $ | 1,319,951 | | | $ | 810,932 | |
Loans HFI | | | | | | 9,288,909 | | | 9,365,996 | | | 9,408,783 | |
Allowance for credit losses on loans HFI | | | | | | (151,667) | | | (138,809) | | | (150,326) | |
Loans held for sale | | | | | | 82,704 | | | 82,515 | | | 67,847 | |
Investment securities, at fair value | | | | | | 1,464,682 | | | 1,474,064 | | | 1,471,973 | |
Total assets | | | | | | 12,548,320 | | | 13,101,147 | | | 12,604,403 | |
Interest-bearing deposits (non-brokered) | | | | | | 8,191,962 | | | 8,693,515 | | | 8,179,430 | |
Brokered deposits | | | | | | 130,845 | | | 251 | | | 150,475 | |
Noninterest-bearing deposits | | | | | | 2,182,121 | | | 2,489,149 | | | 2,218,382 | |
Total deposits | | | | | | 10,504,928 | | | 11,182,915 | | | 10,548,287 | |
Borrowings | | | | | | 360,821 | | | 312,131 | | | 390,964 | |
Allowance for credit losses on unfunded commitments | | | | | | 7,700 | | | 18,463 | | | 8,770 | |
Total common shareholders' equity | | | | | | 1,479,526 | | | 1,369,696 | | | 1,454,794 | |
Selected Statement of Income Data | | | | | | | | | | |
Total interest income | | | | | | $ | 176,128 | | | $ | 159,480 | | | $ | 678,410 | |
Total interest expense | | | | | | 76,638 | | | 55,820 | | | 271,193 | |
Net interest income | | | | | | 99,490 | | | 103,660 | | | 407,217 | |
Provisions for credit losses | | | | | | 782 | | | 491 | | | 2,539 | |
Total noninterest income | | | | | | 7,962 | | | 23,349 | | | 70,543 | |
Total noninterest expense | | | | | | 72,420 | | | 80,440 | | | 324,929 | |
Income before income taxes | | | | | | 34,250 | | | 46,078 | | | 150,292 | |
Income tax expense | | | | | | 6,300 | | | 9,697 | | | 30,052 | |
Net income applicable to noncontrolling interest | | | | | | — | | | — | | | 16 | |
Net income applicable to FB Financial Corporation | | | | | | $ | 27,950 | | | $ | 36,381 | | | $ | 120,224 | |
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Net interest income (tax-equivalent basis) | | | | | | $ | 100,199 | | | $ | 104,493 | | | $ | 410,562 | |
Per Common Share | | | | | | | | | | |
Basic net income | | | | | | $ | 0.60 | | | $ | 0.78 | | | $ | 2.57 | |
Diluted net income | | | | | | 0.59 | | | 0.78 | | | 2.57 | |
Book value(1) | | | | | | 31.55 | | | 29.29 | | | 31.05 | |
Tangible book value(2) | | | | | | 26.21 | | | 23.86 | | | 25.69 | |
Cash dividends declared | | | | | | 0.17 | | | 0.15 | | | 0.60 | |
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Selected Ratios | | | | | | | | | | |
Return on average: | | | | | | | | | | |
Assets(3) | | | | | | 0.89 | % | | 1.15 | % | | 0.95 | % |
Common shareholders' equity(3) | | | | | | 7.70 | % | | 11.0 | % | | 8.74 | % |
Tangible common equity(2) | | | | | | 9.29 | % | | 13.6 | % | | 10.7 | % |
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Efficiency ratio | | | | | | 67.4 | % | | 63.3 | % | | 68.0 | % |
Core efficiency ratio (tax-equivalent basis)(2) | | | | | | 58.1 | % | | 63.4 | % | | 62.9 | % |
Loans HFI to deposit ratio | | | | | | 88.4 | % | | 83.8 | % | | 89.2 | % |
Noninterest-bearing deposits to total deposits | | | | | | 20.8 | % | | 22.3 | % | | 21.0 | % |
Net interest margin (tax-equivalent basis) | | | | | | 3.42 | % | | 3.51 | % | | 3.44 | % |
Yield on interest-earning assets | | | | | | 6.03 | % | | 5.38 | % | | 5.72 | % |
Cost of interest-bearing liabilities | | | | | | 3.56 | % | | 2.61 | % | | 3.16 | % |
Cost of total deposits | | | | | | 2.76 | % | | 1.94 | % | | 2.39 | % |
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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.
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| | | | As of or for the three months ended, | | As of or for the year-ended |
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| | | | March 31, | | December 31, |
(dollars in thousands, except per share data and %) | | | | | | 2023 | | | 2022 | | | 2022 | |
Selected Statement of Income Data | | | | | | | | | | |
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Net interest income | | | | | | $ | 103,660 | | | $ | 88,182 | | | $ | 412,235 | |
Provisions for credit losses | | | | | | 491 | | | (4,247) | | | 18,982 | |
Total noninterest income | | | | | | 23,349 | | | 41,392 | | | 114,667 | |
Total noninterest expense | | | | | | 80,440 | | | 89,272 | | | 348,346 | |
Income before income taxes | | | | | | 46,078 | | | 44,549 | | | 159,574 | |
Income tax expense | | | | | | 9,697 | | | 9,313 | | | 35,003 | |
Net income applicable to noncontrolling interest | | | | | | — | | | — | | | 16 | |
Net income applicable to FB Financial Corporation | | | | | | $ | 36,381 | | | $ | 35,236 | | | $ | 124,555 | |
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Net interest income (tax-equivalent basis) | | | | | | $ | 104,493 | | | $ | 88,932 | | | $ | 415,282 | |
Per Common Share | | | | | | | | | | |
Basic net income | | | | | | $ | 0.78 | | | $ | 0.74 | | | $ | 2.64 | |
Diluted net income | | | | | | 0.78 | | | 0.74 | | | 2.64 | |
Book value(1) | | | | | | 29.29 | | | 29.06 | | | 28.36 | |
Tangible book value(2) | | | | | | 23.86 | | | 23.62 | | | 22.90 | |
Cash dividends declared | | | | | | 0.15 | | | 0.13 | | | 0.52 | |
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Selected Balance Sheet Data | | | | | | | | | | |
Cash and cash equivalents | | | | | | $ | 1,319,951 | | | $ | 1,743,311 | | | $ | 1,027,052 | |
Loans HFI | | | | | | 9,365,996 | | | 8,004,976 | | | 9,298,212 | |
Allowance for credit losses(4) | | | | | | (138,809) | | | (120,049) | | | (134,192) | |
Loans held for sale | | | | | | 82,515 | | | 396,728 | | | 139,451 | |
Investment securities, at fair value | | | | | | 1,474,064 | | | 1,686,738 | | | 1,474,176 | |
Other real estate owned, net | | | | | | 4,085 | | | 9,721 | | | 5,794 | |
Total assets | | | | | | 13,101,147 | | | 12,674,191 | | | 12,847,756 | |
Interest-bearing deposits | | | | | | 8,693,766 | | | 8,208,580 | | | 8,179,203 | |
Noninterest-bearing deposits | | | | | | 2,489,149 | | | 2,787,698 | | | 2,676,631 | |
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Total deposits | | | | | | 11,182,915 | | | 10,996,278 | | | 10,855,834 | |
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Estimated insured or collateralized deposits | | | | | | 7,926,537 | | | 7,631,005 | | | 7,288,641 | |
Borrowings | | | | | | 312,131 | | | 155,733 | | | 415,677 | |
Total common shareholders' equity | | | | | | 1,369,696 | | | 1,379,776 | | | 1,325,425 | |
Selected Ratios | | | | | | | | | | |
Return on average: | | | | | | | | | | |
Assets(3) | | | | | | 1.15 | % | | 1.13 | % | | 1.01 | % |
Common shareholders' equity(3) | | | | | | 11.0 | % | | 10.1 | % | | 9.23 | % |
Tangible common equity(2) | | | | | | 13.6 | % | | 12.4 | % | | 11.4 | % |
Average shareholders' equity to average assets | | | | | | 10.4 | % | | 11.2 | % | | 10.9 | % |
Net interest margin (tax-equivalent basis) | | | | | | 3.51 | % | | 3.04 | % | | 3.57 | % |
Efficiency ratio | | | | | | 63.3 | % | | 68.9 | % | | 66.1 | % |
Adjusted efficiency ratio (tax-equivalent basis)(2) | | | | | | 63.3 | % | | 68.1 | % | | 62.7 | % |
Loans HFI to deposit ratio | | | | | | 83.8 | % | | 72.8 | % | | 85.7 | % |
Yield on interest-earning assets | | | | | | 5.38 | % | | 3.28 | % | | 4.16 | % |
Cost of interest-bearing liabilities | | | | | | 2.61 | % | | 0.34 | % | | 0.87 | % |
Cost of total deposits | | | | | | 1.94 | % | | 0.20 | % | | 0.54 | % |
Estimated uninsured and uncollateralized deposits as a percentage of total deposits(5) | | | | | | 29.1 | % | | 30.6 | % | | 32.9 | % |
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| | | | As of or for the three months ended, | | As of or for the year ended |
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| | | | 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) | % |
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Nonperforming assets as a percentage of total assets(6) | | | | | | 0.61 | % | | 0.44 | % | | 0.68 | % |
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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 | % |
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| | | | As of or for the three months ended | | As of or for the year ended |
| | | | March 31, | | December 31, |
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Credit Quality Ratios | | | | | | | | | | |
Allowance for credit losses on loans HFI as a percentage of loans HFI | | | | | | 1.63 | % | | 1.48 | % | | 1.60 | % |
Net charge-offs as a percentage of average loans HFI | | | | | | (0.02) | % | | (0.02) | % | | (0.01) | % |
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Nonperforming loans HFI as a percentage of loans HFI | | | | | | 0.73 | % | | 0.49 | % | | 0.65 | % |
Nonperforming assets as a percentage of total assets(4) | | | | | | 0.75 | % | | 0.61 | % | | 0.69 | % |
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Capital Ratios (Company) | | | | | | | | | | |
Total common shareholders' equity to assets | | | | | | 11.8 | % | | 10.5 | % | | 11.5 | % |
Tangible common equity to tangible assets(2) | | | | | | 9.99 | % | | 8.68 | % | | 9.74 | % |
Tier 1 leverage | | | | | | 11.3 | % | | 10.4 | % | | 11.3 | % |
Tier 1 risk-based capital | | | | | | 12.8 | % | | 11.6 | % | | 12.5 | % |
Total risk-based capital | | | | | | 15.0 | % | | 13.6 | % | | 14.5 | % |
Common Equity Tier 1 | | | | | | 12.6 | % | | 11.3 | % | | 12.2 | % |
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(1)Book value per share equals our total common shareholders’ equity as of the date presented divided by the number of shares of our common stock outstanding as of the date presented. The number of shares of our common stock outstanding was 46,762,626, 47,487,874 and 46,737,912 as of March 31, 2023, March 31, 2022 and December 31, 2022, respectively.
(2)These measures are not measures recognized under GAAP, and are therefore considered to be non-GAAPNon-GAAP financial measures.measure; See “GAAP"GAAP reconciliation and management explanation of non-GAAP financial measures” in this Report for a reconciliation of these measures to their most comparable GAAP measures.and non-GAAP reconciliations herein.
(3)We haveROAA and ROAE is calculated our return on average assets and return on average common equity for a period by dividing annualized net income or loss for that period by our average assets andor average equity asfor the case may be, for that period. We calculate our average assets and average common equity for a period by dividing the sum of our total asset balance or total common shareholders' equity balance, as the case may be, as of the close of business on each day in the relevant period and dividing by the number of days in thesame period.
(4)Excludes reserve for credit losses on unfunded commitments.
(5)Amounts are shown on a fully consolidated basisIncludes $20,876, $20,528 and exclude deposits$21,229 of affiliates that are eliminated in consolidation.
(6)Includes optional rightrights to repurchase government guaranteeddelinquent GNMA mortgage loans previously sold that have become past due greater than 90 days as of March 31, 2024, March 31, 2023 and December 31, 2022. See 'Nonperforming assets' under the subheading 'Asset quality' included within this management's discussion and analysis for further discussion.
(7)We calculate our risk-weighted assets using the standardized method of the Basel III Framework and reflect the election to opt-out of including accumulated other comprehensive income.2023, respectively.
GAAP reconciliation and management explanation of non-GAAP financial measures
We identify certain financial measures discussed in this Report as being "non-GAAP“non-GAAP financial measures."” The non-GAAP financial measures presented in this Report are adjusted efficiency ratio (tax equivalent(tax-equivalent basis), tangible book value per common share, tangible common equity to tangible assets and return on average tangible common equity.
In accordance with the SEC's rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the United States in our consolidated statements of income, balance sheets or statements of cash flows.
The non-GAAP financial measures that we discuss in this Report should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we discuss in our selected historical consolidated financial highlightsdata may differ from that of other companies reporting measures with similar names. As a result of differences inYou should understand how companies report non-GAAP measures, presentations bysuch other banking organizations may not be comparablecalculate their financial measures similar or with ours.names similar to the non-GAAP financial measures we have discussed in our selected historical consolidated financial data when comparing such non-GAAP financial measures. The following reconciliation tables provide a more detailed analysis of these, and reconciliationsreconciliation for, each of these non-GAAP financial measures.
Adjusted EfficiencyCore efficiency ratio (tax-equivalent basis)
The adjustedcore efficiency ratio (tax-equivalent basis) is a non-GAAP measure that excludes certain gains, (losses), Mortgage restructuring expenses,losses 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.charges. 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 adjustedcore efficiency ratio (tax-equivalent basis) to our efficiency ratio:ratio for the periods below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in thousands, except %) | | | | Three Months Ended March 31, | | Year Ended December 31, | | |
| | | | | 2023 | | | 2022 | | | 2022 | | | | | | | | | |
Adjusted efficiency ratio (tax-equivalent basis) | | | | | | | | | | | | | | | | | | |
Total noninterest expense | | | | | | $ | 80,440 | | | $ | 89,272 | | | $ | 348,346 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Less mortgage restructuring expenses | | | | | | — | | | — | | | 12,458 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Adjusted noninterest expense | | | | | | $ | 80,440 | | | $ | 89,272 | | | $ | 335,888 | | | | | | | | | |
Net interest income (tax-equivalent basis) | | | | | | $ | 104,493 | | | $ | 88,932 | | | $ | 415,282 | | | | | | | | | |
Total noninterest income | | | | | | 23,349 | | | 41,392 | | | 114,667 | | | | | | | | | |
Less gain (loss) on change in fair value of commercial loans held for sale | | | | | | 910 | | | (174) | | | (5,133) | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Less loss on sales or write-downs of other real estate owned and other assets | | | | | | (183) | | | (434) | | | (265) | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Less gain (loss) from securities, net | | | | | | 69 | | | (152) | | | (376) | | | | | | | | | |
Adjusted noninterest income | | | | | | $ | 22,553 | | | $ | 42,152 | | | $ | 120,441 | | | | | | | | | |
Adjusted operating revenue | | | | | | $ | 127,046 | | | $ | 131,084 | | | $ | 535,723 | | | | | | | | | |
Efficiency ratio (GAAP) | | | | | | 63.3 | % | | 68.9 | % | | 66.1 | % | | | | | | | | |
Adjusted efficiency ratio (tax-equivalent basis) | | | | | | 63.3 | % | | 68.1 | % | | 62.7 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(dollars in thousands) | | | | Three Months Ended March 31, | | Year Ended December 31, | | |
| | | | | 2024 | | | 2023 | | | 2023 | | | | | | | | | |
Core efficiency ratio (tax-equivalent basis) | | | | | | | | | | | | | | | | | | |
Total noninterest expense | | | | | | $ | 72,420 | | | $ | 80,440 | | | $ | 324,929 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Less early retirement and severance costs | | | | | | — | | | — | | | 8,449 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Less (gain) loss on lease terminations | | | | | | — | | | (72) | | | 1,770 | | | | | | | | | |
Less FDIC special assessment | | | | | | 500 | | | — | | | 1,788 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Core noninterest expense | | | | | | $ | 71,920 | | | $ | 80,512 | | | $ | 312,922 | | | | | | | | | |
Net interest income | | | | | | $ | 99,490 | | | $ | 103,660 | | | $ | 407,217 | | | | | | | | | |
Net interest income (tax-equivalent basis) | | | | | | 100,199 | | | 104,493 | | | 410,562 | | | | | | | | | |
Total noninterest income | | | | | | 7,962 | | | 23,349 | | | 70,543 | | | | | | | | | |
Less (loss) gain from securities, net | | | | | | (16,213) | | | 69 | | | (13,973) | | | | | | | | | |
Less gain (loss) on sales or write-downs of other real estate owned and other assets | | | | | | 565 | | | (183) | | | (27) | | | | | | | | | |
Less gain (loss) on change in fair value of commercial loans held for sale acquired in previous business combination | | | | | | — | | | 910 | | | (2,114) | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Core noninterest income | | | | | | 23,610 | | | 22,553 | | | 86,657 | | | | | | | | | |
Total revenue | | | | | | $ | 107,452 | | | $ | 127,009 | | | $ | 477,760 | | | | | | | | | |
Core revenue (tax-equivalent basis) | | | | | | $ | 123,809 | | | $ | 127,046 | | | $ | 497,219 | | | | | | | | | |
Efficiency ratio | | | | | | 67.4 | % | | 63.3 | % | | 68.0 | % | | | | | | | | |
Core efficiency ratio (tax-equivalent basis) | | | | | | 58.1 | % | | 63.4 | % | | 62.9 | % | | | | | | | | |
Tangible book value per common share and tangible common equity to tangible assets
Tangible book value per common share and tangible common equity to tangible assets are non-GAAP measures that exclude the impact of goodwill and other intangibles used by our management to evaluate capital adequacy. Because intangible assets such as goodwill and other intangibles vary extensively from company to company, we believe that the presentation of this information allows investors to more easily compare the Company's capital position to other companies. The most directly comparable financial measure calculated in accordance with GAAP is book value per common share and our total common shareholders' equity to total assets.
The following table presents, as of the dates set forth below, tangible common equity compared with total common shareholders' equity, tangible book value per common share compared with our book value per common share and common equity to tangible assets compared to total common shareholders' equity to total assets:
| | As of March 31, | | As of December 31, |
(dollars in thousands, except share data and %) | | 2023 | | | 2022 | | | 2022 | |
Tangible Assets | | | |
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 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 our capital position to other companies. The most directly comparable financial measure calculated in accordance with GAAP is book value per common share and our total shareholders’ equity to total assets. 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: | | 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 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 our capital position to other companies. The most directly comparable financial measure calculated in accordance with GAAP is book value per common share and our total shareholders’ equity to total assets. 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: |
| | March 31, | | | | March 31, | | December 31, |
(dollars in thousands, except share data) | |
Tangible assets | |
Total assets | |
Total assets | |
Total assets | Total assets | | $ | 13,101,147 | | | $ | 12,674,191 | | | $ | 12,847,756 | |
Adjustments: | Adjustments: | |
Goodwill | Goodwill | | (242,561) | | | (242,561) | | | (242,561) | |
Core deposit and other intangibles | | (11,378) | | | (15,709) | | | (12,368) | |
Goodwill | |
Goodwill | |
Intangibles, net | |
Tangible assets | Tangible assets | | $ | 12,847,208 | | | $ | 12,415,921 | | | $ | 12,592,827 | |
Tangible Common Equity | | | | |
Tangible common equity | |
Total common shareholders' equity | |
Total common shareholders' equity | |
Total common shareholders' equity | Total common shareholders' equity | | $ | 1,369,696 | | | $ | 1,379,776 | | | $ | 1,325,425 | |
Adjustments: | Adjustments: | |
Goodwill | Goodwill | | (242,561) | | | (242,561) | | | (242,561) | |
Core deposit and other intangibles | | (11,378) | | | (15,709) | | | (12,368) | |
Goodwill | |
Goodwill | |
Intangibles, net | |
Tangible common equity | Tangible common equity | | $ | 1,115,757 | | | $ | 1,121,506 | | | $ | 1,070,496 | |
Common shares outstanding | Common shares outstanding | | 46,762,626 | | | 47,487,874 | | | 46,737,912 | |
Book value per common share | Book value per common share | | $ | 29.29 | | | $ | 29.06 | | | $ | 28.36 | |
Tangible book value per common share | 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 | % | | 10.9 | % | | 10.3 | % | Total common shareholders' equity to total assets | | 11.8 | % | | 10.5 | % | | 11.5 | % |
Tangible common equity to tangible assets | Tangible common equity to tangible assets | | 8.68 | % | | 9.03 | % | | 8.50 | % | Tangible common equity to tangible assets | | 9.99 | % | | 8.68 | % | | 9.74 | % |
|
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.provide a depiction of the our profitability without being impacted by its intangible assets, as intangible assets are not directly managed to generate earnings. The following table presents, as of the dates set forth below, reconciliations of total average tangible common equity to average shareholders' equity and return on average tangible common equity to return on average shareholders' equity:
| | | Three Months Ended March 31, | | Year Ended December 31, |
(dollars in thousands, except %) | | | 2023 | | | 2022 | | | 2022 | |
| | | | Three Months Ended March 31, | |
| | | | Three Months Ended March 31, | |
| | | | Three Months Ended March 31, | | | Year Ended December 31, |
(dollars in thousands) | |
Return on average tangible common equity | Return on average tangible common equity | | | | | |
Total average common shareholders' equity | Total average common shareholders' equity | | | $ | 1,343,227 | | | $ | 1,415,985 | | | $ | 1,349,583 | |
Total average common shareholders' equity | |
Total average common shareholders' equity | |
Adjustments: | Adjustments: | | | |
Average goodwill | |
Average goodwill | |
Average goodwill | Average goodwill | | | (242,561) | | | (242,561) | | | (242,561) | |
Average intangibles, net | Average intangibles, net | | | (11,862) | | | (16,376) | | | (14,573) | |
Average tangible common equity | 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 | | | $ | 36,381 | | | $ | 35,236 | | | $ | 124,555 | |
Return on average common shareholders' equity | Return on average common shareholders' equity | | | 11.0 | % | | 10.1 | % | | 9.23 | % | Return on average common shareholders' equity | | | | | | 7.70 | % | | 11.0 | % | | 8.74 | % |
Return on average tangible common equity | Return on average tangible common equity | | | 13.6 | % | | 12.4 | % | | 11.4 | % | Return on average tangible common equity | | | | | | 9.29 | % | | 13.6 | % | | 10.7 | % |
Company overview
We are a financial holding company headquartered in Nashville, Tennessee. We operate primarily through our wholly-owned subsidiary bank, subsidiary, FirstBank.FirstBank, and its subsidiaries. FirstBank provides a comprehensive suite of commercial and consumer banking services to clients in select markets in Tennessee, Kentucky, Alabama and North Georgia. As of March 31, 2023,2024, our footprint included 8276 full-service branches serving the following Tennessee Metropolitan Statistical Areas: Nashville, Chattanooga (including North Georgia), Knoxville, Memphis, and Jackson in addition to Bowling Green, Kentucky and Birmingham, Florence and Huntsville, Alabama. Our banking services extend to 1617 community markets throughout Tennessee and North Georgia. FirstBank also provides retail mortgage banking services utilizing its bank branch network and mortgage banking offices strategically located throughout the southeastern United States.
We operate through two segments, Banking and Mortgage. We generate most of our revenue in our Banking segment from interest on loans and investments, loan-related fees, trust and investment services and deposit-related fees. Our primary source of funding for our loans is customer deposits, however we have other sources of funds including unsecured credit lines, brokered CDs, and other borrowings. We generate most of our revenue in our Mortgage segment from origination fees and gains on sales in the secondary mortgage loan market, as well as from mortgage servicing revenues.
Recent developments
Recent banking events
In light of recent events in the banking sector, including recent bank failures, continuing interest rate hikes and recessionary concerns, we have proactively positioned the balance sheet to mitigate the risks affecting the Company and the overall banking industry in order to serve our clients and communities.
As of March 31, 2023, we carried on-balance sheet liquidity of $1.61 billion. We maintain the ability to access $6.78 billion of contingent liquidity from the FHLB, Federal Reserve, untapped brokered CDs, and unsecured lines of credit. Our available-for-sale debt securities portfolio is 11.2% of total assets and we do not maintain any held-to-maturity investment securities. Management considers our current liquidity position to be more than adequate to meet both short-term and long-term liquidity needs. Refer to the section 'Liquidity and capital resources' for additional information.
Further, our capital ratios of the Company, and its subsidiary bank are well above the standards to be considered well-capitalized under regulatory requirements. Refer to Note 12, "Minimum capital requirements," in the notes to our consolidated financial statements for additional details.
Non-performing assets were 0.61% of total assets as of March 31, 2023 and net charge-offs during the three months ended March 31, 2023 were 0.02%, reflecting our disciplined underwriting and conservative lending philosophy. Refer to the section 'Asset quality' for additional information.
While the recent bank failures have impacted the entire banking industry and future events cannot be predicted, we remain committed to safe and sound community banking practices that have been a cornerstone of the Company's values and historical performance.
Overview of recent financial performance
Results of operations
Three months ended March 31, 20232024 compared to the three months ended March 31, 20222023
Our net income increaseddecreased during the three months ended March 31, 20232024 to $36.4$28.0 million from $35.2$36.4 million for the three months ended March 31, 2022.2023. Diluted earnings per common share were $0.78$0.59 and $0.74$0.78 for the three months ended March 31, 20232024 and 2022,2023, respectively. Our net income represented a return on average assetsROAA of 1.15%0.89% and 1.13%1.15% for the three months ended March 31, 20232024 and 2022,2023, respectively, and a return on average equityROAE of 11.0%7.70% and 10.1%11.0% for the same periods. Our return on average tangible common equityROATCE for the three months ended March 31, 2024 and 2023 were 9.29% and 2022 were 13.6% and 12.4%, respectively. See “GAAP reconciliation and management explanation of non-GAAP financial measures” in this Report for a discussion of tangible common equity and return on average tangible common equity.
During the three months ended March 31, 2023,2024, our net interest income before provision for credit losses increaseddecreased to $103.7$99.5 million compared with $88.2$103.7 million in the three months ended March 31, 2022.2023. Our net interest margin, on a tax-equivalent basis, increaseddecreased to 3.42% for the three months ended March 31, 2024 as compared to 3.51% for the three months ended March 31, 2023 as compared to 3.04% for the three
months ended March 31, 2022.2023. The increasedecrease in net interest margin was primarily driven by our volume of interest-earnings assets decreasing compared to an increase in interest rates on loans HFI, which wasour interest-bearing liabilities partially offset by the impact of increasing costs of funds as competition over customer deposits has risen in the industry.higher interest rates.
Noninterest income for the three months ended March 31, 20232024 decreased by $18.0$15.4 million to $23.3$8.0 million, down from $41.4$23.3 million infor the same period in the prior year.three months ended March 31, 2023. The decrease in noninterest income was primarily due to a $17.4$16.2 million decrease in mortgage banking incomenet loss on investment securities primarily related to the sale of $207.9 million of available-for-sale securities. Refer to the section “Other earnings assets” for additional information on the sale of the available-for sale securities.
Noninterest expense decreased to $72.4 million for the three months ended March 31, 20232024, compared to the three months ended March 31, 2022. These results were impacted by increasing interest rates, compressing margins, and a decrease in demand for residential mortgages during the three months ended March 31, 2023 compared with the three months ended March 31, 2022. The change also reflects the closure of our direct-to-consumer mortgage internet delivery channel in the second quarter of 2022. Refer to the section "Business segment highlights" for additional information on the restructuring of our Mortgage segment.
Noninterest expense decreased to $80.4 million for the three months ended March 31, 2023, compared with $89.3 million for the three months ended March 31, 2022.2023. The decrease in noninterest expense is reflective of the $12.5 million decreasedue to decreases in salaries, commissions and employee-related costs in the Mortgage segmentemployee benefits of $4.2 million primarily related to the restructuringCompany's efficiency and scalability initiatives and updated methodology of our Mortgage segmentdeferrals for loan fees and reduced headcountloan origination expenses. Additionally, the decrease is reflective of decreases in legal and mortgage production.professional expenses, advertising and franchise tax expense.
Business segment highlights
We operate our business in two business segments: Banking and Mortgage. See Note 11, “Segment reporting” in the notes to our unaudited consolidated financial statements contained herein for a description of these business segments.
Banking
Three months ended March 31, 20232024 compared to the three months ended March 31, 20222023
Income before taxes from the Banking segment increaseddecreased for the three months ended March 31, 20232024 to $46.3$31.1 million, compared to $44.8$45.8 million for the three months ended March 31, 2022.2023. Net interest income increaseddecreased by $15.5$4.2 million to $103.7$97.1 million during the three months ended March 31, 20232024 compared to $88.2$101.3 million during the three months ended March 31, 2022. Our provisions2023. Provisions for credit losses on loans HFI and unfunded loan commitments resulted in $0.5$0.8 million of expense during the three months ended March 31, 2023 compared to a $4.2 million net reversal of
provision expense during the three months ended March 31, 2022.2024 compared to $0.2 million during the three months ended March 31, 2023. Noninterest income decreased slightly to a loss of $4.8 million in the three months ended March 31, 2024 as compared to income of $11.5 million in the three months ended March 31, 2023 as compared2023. Similar to $12.0 million in the three months ended March 31, 2022. Thediscussion above, the decrease includes a $2.7net loss on investment securities of $16.2 million decrease in ATM and interchange fee income partially offset by a $1.1primarily associated with the sale of $207.9 million increase in the change in fair value of the commercial loans held for sale portfolioavailable-for-sale securities during the three months ended March 31, 2024 compared with a net gain on investment securities of $0.1 million for the three months ended March 31, 2023. Noninterest expense decreased to $60.3 million for three months ended March 31, 2024 compared to $66.8 million for the three months ended March 31, 2023 due to decreases in salaries, legal and professional fees, advertising and franchise tax expense.
Mortgage
Three months ended March 31, 2024 compared to the three months ended March 31, 2022. Noninterest expense increased to $68.4 million for three months ended March 31, 2023 compared to $59.6 million for the three months ended March 31, 2022 due to increases in regulatory fees, advertising, occupancy, and legal and professional fees.
Mortgage
Three months ended March 31, 2023 compared to the three months ended March 31, 2022
Activity in our Mortgage segment resulted in a pre-tax net losscontribution of $0.2$3.1 million for the three months ended March 31, 20232024 compared to a pre-tax net loss of $0.3 million for the three months ended March 31, 2022.2023. Net interest income was $2.4 million for both the three months ended March 31, 2024 and 2023. Provisions for credit losses on loans HFI and unfunded loan commitments resulted in a reversal of $0.1 million of provision expense during the three months ended March 31, 2024 compared to $0.3 million of provision expense during the three months ended March 31, 2023. Mortgage banking income decreased $17.4increased $0.5 million to $12.1$12.6 million during the three months ended March 31, 20232024 compared to $29.5$12.1 million for the three months ended March 31, 2022. Interest rate increases, compressing margins,2023. Mortgage banking income primarily includes origination fees and a decreaserealized gains and losses on the sale of mortgage loans, unrealized change in demand for residential mortgages contributed to a 71.4% decreasefair 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 volume duringcommitments 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.
The components of mortgage banking income for the three months ended March 31, 2024 and 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 hereinwere as "Mortgage restructuring"), including the exit of our direct-to-consumer internet delivery channel during the second quarter of 2022. follows:
| | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
(dollars in thousands) | | 2024 | | | 2023 | | | |
Mortgage banking income | | | | | | |
Gains and fees from origination and sale of mortgage loans held for sale | | $ | 6,458 | | | $ | 8,146 | | | |
Net change in fair value of loans held for sale and derivatives | | 1,821 | | | (421) | | | |
Change in fair value on MSRs, net of hedging | | (3,041) | | | (3,407) | | | |
Mortgage servicing income | | 7,347 | | | 7,768 | | | |
Total mortgage banking income | | $ | 12,585 | | | $ | 12,086 | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Interest rate lock commitment volume | | $ | 377,166 | | | $ | 375,042 | | | |
Interest rate lock commitment volume by purpose (%): | | | | | | |
Purchase | | 84.9 | % | | 86.2 | % | | |
Refinance | | 15.1 | % | | 13.8 | % | | |
| | | | | | |
Mortgage sales | | $ | 243,461 | | | $ | 332,307 | | | |
Mortgage sale margin | | 2.65 | % | | 2.45 | % | | |
Closing volume | | $ | 258,352 | | | $ | 295,760 | | | |
Outstanding principal balance of mortgage loans serviced | | $ | 10,651,075 | | | $ | 11,028,420 | | | |
Noninterest expense for the three months ended March 31, 20232024 and 20222023 was $12.1 million and $29.7$13.7 million, respectively, reflecting decreasesrespectively. This decrease is reflective of a decrease in advertising, salaries commissions and incentive costs associated with the decrease in production volumeour efficiency and headcount reduction from the Mortgage restructuring.scalability initiatives.
Further discussion on the components of mortgage banking income is included under the subheading 'Noninterest income' included within this management's discussion and analysis.
Results of operations
Throughout the following discussion of our operating results, we present our net interest income, net interest margin and efficiency ratio on a fully tax-equivalent basis. The fully tax-equivalent basis adjusts for the tax-favored status of net interest income from certain loans and investments. We believe this measure to be the preferred industry measurement of net interest
Our tax-exempt income which enhances comparability of net interest income arising from taxable and tax-exempt sources.
The adjustment to convert certain incomeis converted to a tax-equivalent basis consists of dividing tax exempt income by one minusadjusting for the combined federal and blended state statutory income tax rate of 26.06% for the three months ended March 31, 20232024 and 2022.2023.
Net interest income
Three months ended March 31, 2023 compared to the three months ended March 31, 2022
Net interest income is the most significant component of our earnings, generally comprising over 50% of our total revenues in a given period. Net interest income and margin are shaped by many factors, primarily the volume, term structure and mix of earning assets, funding mechanisms, and interest rate fluctuations. Other factors include accretion or amortization of discounts or premiums on purchased loans, prepayment risk on mortgage and investment–related assets, and the composition and maturity of earning assets and interest-bearing liabilities. Loans typically generate more interest income than investment securities with similar maturities. Funding from client deposits generally costs less than wholesale funding sources. Factors such as general economic activity, Federal Reserve monetary policy, and price volatility of competing alternative investments, can also exert significant influence on our ability to optimize the mix of assets and funding, net interest income and margin.
During the three months ended March 31, 2023,2024, the USU.S. Treasury yield curve became less inverted as long-term note and bond rates increased at a faster pace than shorter-term note rates. The curve remained inverted as long-term rates increased at a slower pace than short-term rates. This comparesof March 31, 2024, which is in contrast to the more normalized upward sloping U.S. Treasury yield curve exhibited during the three months ended March 31, 2022, when the US Treasury yield curve steepened as long-term rates rose and short-term rates remained constant.2023. The Federal Funds Target Rate range was 4.75%5.25% - 5.00% and 4.25% - 4.50%5.50% as of both March 31, 20232024 and December 31, 2022, respectively.
2023. The target range for the federal funds rate has remained at 5.25% to 5.50% since the Federal Open Market Committee’s July 26, 2023 meeting.
On a tax-equivalent basis, net interest income increased $15.6decreased $4.3 million to $100.2 million for the three months ended March 31, 2024 as compared to $104.5 million for the three months ended March 31, 2023 as compared to $88.92023. Interest income, on a tax-equivalent basis, was $176.8 million for the three months ended March 31, 2022. The increase in tax-equivalent net interest income for the three months ended March 31, 2023 was primarily driven by an increase in interest rates and volume of loans HFI partially offset by increases in deposit interest expense resulting primarily from interest rate increases.
Interest income, on a tax-equivalent basis, was2024, compared to $160.3 million for the three months ended March 31, 2023, compared to $95.9 million for the three months ended March 31, 2022, an increase of $64.4 million. This$16.5 million, which was primarily driven by increases in interest rates on loans HFI, taxable investment securities and interest-bearing deposits with other financial institutions, partially offset by a decrease in average interest-bearing deposits with other financial institutions. Total interest income represents an increase in yield on interest-earning assets to 6.03% for the three months ended March 31, 2024 compared with 5.38% for the three months ended March 31, 2023 compared with 3.28%2023.
Interest income on loans HFI, on a tax-equivalent basis, increased $15.5 million to $155.0 million for the three months ended March 31, 2022. Interest income on loans held for investment, on a tax-equivalent basis, increased $57.0 million to2024 from $139.5 million for the three months ended March 31, 2023 from $82.5 million for the three months ended March 31, 2022 due primarily to increasedincreasing interest rates. The average yield on loans HFI increased by 17459 basis points period-over-period to 6.64% for the three months ended March 31, 2024 from 6.05% for the three months ended March 31, 2023. ContractualOur estimated contractual loan interest rates yieldedyield was 6.55% in the three months ended March 31, 2024 compared with 5.90% in the three months ended March 31, 2023 compared with 4.12% in the three months ended March 31, 2022. Additionally, average loans HFI increased to $9.35 billion for the three months ended March 31, 2023 compared to $7.76 billion for the three months ended March 31, 2022. The increase in average loans HFI is due to strong demand in our primary markets during the three months ended March 31, 2023.
The components of our loan yield for the three months ended March 31, 20232024 and 20222023 were as follows:
| | Three Months Ended March 31, |
| 2023 | | | 2022 | | |
(dollars in thousands, except %) | | Interest income | | Average yield | | Interest income | | Average yield | |
| | Three Months Ended March 31, | |
| | Three Months Ended March 31, | |
| | Three Months Ended March 31, | |
| | 2024 | |
(dollars in thousands) | |
(dollars in thousands) | |
(dollars in thousands) | |
Loans HFI yield components: | |
Loans HFI yield components: | |
Loans HFI yield components: | Loans HFI yield components: | | | | |
Contractual interest rate on loans HFI (1) | Contractual interest rate on loans HFI (1) | | $ | 135,872 | | | 5.90 | % | | $ | 78,789 | | | 4.12 | % | |
Contractual interest rate on loans HFI(1) | |
Contractual interest rate on loans HFI(1) | |
Origination and other loan fee income | 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) | % | |
Origination and other loan fee income | |
Origination and other loan fee income | |
Accretion on purchased loans | |
Accretion on purchased loans | |
Accretion on purchased loans | |
Nonaccrual interest collections | |
Nonaccrual interest collections | |
Nonaccrual interest collections | Nonaccrual interest collections | | 175 | | | 0.01 | % | | 1,044 | | | 0.05 | % | |
| Total loans HFI yield | Total loans HFI yield | | $ | 139,467 | | | 6.05 | % | | $ | 82,463 | | | 4.31 | % | |
| Total loans HFI yield | |
| Total loans HFI yield | |
(1)Includes tax equivalent adjustment using combined marginal tax rate of 26.06%. | |
(1)Includes tax equivalent adjustment using combined marginal tax rate of 26.06%. | |
(1)Includes tax equivalent adjustment using combined marginal tax rate of 26.06%. | |
Origination and other loan fees impacted our NIM by 5 basis points and 10 basis points for the three months ended March 31, 2024 and 2023, respectively. The decrease was due to an updated methodology for deferrals.
(1)Interest income on taxable investment securities increased $2.5 million to $9.1 millionIncludes tax equivalent adjustment using combined marginal tax rate of 26.06%.
Forfor the three months ended March 31, 2024 from $6.6 million for the three months ended March 31, 2023 and 2022, net accretion on purchased loans increased the NIM by 1 basis point and net amortization on purchased loans decreased the NIM by 8 basis points, respectively. Net accretion/amortization is due to the continued impactreinvestment of purchase accounting resultingproceeds from our previously-completed business combinations, which can fluctuate basedthe sale of AFS debt securities that were sold during the second half of 2023 to higher yielding U.S. government agency securities. The yield on volume of early pay-offs. As oftaxable investment securities increased 72 basis points to 2.62% for the three months ended March 31, 2024 compared to 1.90% for the three months ended March 31, 2023.
Interest income on interest-bearing deposits with other financial institutions decreased to $7.1 million for the three months ended March 31, 2024 from $8.0 million for the three months ended March 31, 2023 and Decemberdue to a decrease in volume of
interest-bearing deposits with other financial institutions partially offset by higher interest rates. The average balance of interest-bearing deposits with other financial institutions decreased $198.2 million to $530.4 million for the three months ended March 31, 2022,2024 from $728.6 million for the remaining net discountthree months ended March 31, 2023. The yield on all acquired loans amountedinterest-bearing deposits with other financial institutions increased 90 basis points to $3.0 million and $3.3 million, respectively.5.36% for the three months ended March 31, 2024 compared to 4.46% for the three months ended March 31, 2023.
Interest expense was $76.6 million for the three months ended March 31, 2024, an increase of $20.8 million as compared to $55.8 million for the three months ended March 31, 2023, an increase of $48.9 million as compared to the three months ended March 31, 2022.2023. The increase was largely attributed to a rise in interest rates in interest-bearing deposit accounts, and specifically on money market and interest-bearing checkingcustomer time deposit products. Interest expense on money market deposits increased $22.9$13.1 million to $37.6 million for the three months ended March 31, 2024 compared to $24.5 million for the three months ended March 31, 2023 compared2023. Interest expense on customer time deposits increased $4.9 million to $1.6$14.1 million for the three months ended March 31, 2022 and interest expense on interest-bearing checking deposits increased $16.6 million to $19.12024 from $9.2 million for the three months ended March 31, 2023 from $2.5 million for the three months ended March 31, 2022.2023. The average rate on money market deposits increased 27498 basis points from 0.21% for the three months ended March 31, 2022 to 2.95% for the three months ended March 31, 2023 and the average rate on interest-bearing checking deposits increased 216 basis points from 0.28%to 3.93% for the three months ended March 31, 20222024. The average rate on customer time deposits increased 136 basis points from 2.54% for the three months ended March 31, 2023 to 2.44%3.90% for the three months ended March 31, 2024. Total cost of interest-bearing deposits was 3.49% for the three months ended March 31, 2024 compared to 2.53% for the three months ended March 31, 2023.
Overall,The average balance of other borrowings increased $129.6 million to $131.3 million for the three months ended March 31, 2024 compared to $1.7 millionfor the three months ended March 31, 2023. As a result, interest expense on other borrowings increased to 4.83% for the three months ended March 31, 2024 compared to for the three months ended March 31, 2023. The increase is due primarily of borrowings from the Bank Term Funding Program. Refer to the section “Borrowings” for additional information on the BTFP.
The volume of our interest-earning assets decreased compared to an increase in our interest-bearing liabilities which resulted in our NIM, on a tax-equivalent basis, increaseddecreasing to 3.42% for the three months ended March 31, 2024 from 3.51% for the three months ended March 31, 2023 from 3.04% for the three months ended March 31, 2022, driven2023. The shift in volume was partially offset by the effect of interest rate increases previously discussed along with a shift in balance sheet composition, including a decline in excess liquidity, which we estimate to be interest-bearing deposits with other financial institutions in excess of 5% of average tangible assets. Excess liquidity is estimated to have negatively impactedrates rising faster within our NIM by approximately 1 basis point for the three months ended March 31, 2023interest-earning assets compared to approximately 29 basis points for the three months ended March 31, 2022.our interest-bearing liabilities.
Average balance average yield earned and average interest yield/rate paidanalysis
The table below shows the average balances, income and expense and yield and rates of each of our interest-earning assets and interest-bearing liabilities on a tax equivalent basis, if applicable, for the periods indicated.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2023 | | | 2022 | | | |
(dollars in thousands on a tax-equivalent basis) | | Average balances(1) | | Interest income/ expense | | Average yield/ rate | | Average balances(1) | | Interest income/ expense | | Average yield/ rate | | | | | | |
Interest-earning assets: | | | | | | | | | | | | | | | | | | |
Loans HFI (2)(3) | | $ | 9,346,708 | | | $ | 139,467 | | | 6.05 | % | | $ | 7,762,566 | | | $ | 82,463 | | | 4.31 | % | | | | | | |
Mortgage loans held for sale | | 56,204 | | | 927 | | | 6.69 | % | | 470,005 | | | 3,566 | | | 3.08 | % | | | | | | |
Commercial loans held for sale | | 16,608 | | | 159 | | | 3.88 | % | | 78,567 | | | 928 | | | 4.79 | % | | | | | | |
Securities: | | | | | | | | | | | | | | | | | | |
Taxable | | 1,402,535 | | | 6,570 | | | 1.90 | % | | 1,380,897 | | | 5,420 | | | 1.59 | % | | | | | | |
Tax-exempt (3) | | 294,652 | | | 2,440 | | | 3.36 | % | | 318,849 | | | 2,523 | | | 3.21 | % | | | | | | |
Total securities (3) | | 1,697,187 | | | 9,010 | | | 2.15 | % | | 1,699,746 | | | 7,943 | | | 1.90 | % | | | | | | |
Federal funds sold and reverse repurchase agreements | | 188,013 | | | 1,855 | | | 4.00 | % | | 206,829 | | | 192 | | | 0.38 | % | | | | | | |
Interest-bearing deposits with other financial institutions | | 728,576 | | | 8,008 | | | 4.46 | % | | 1,599,991 | | | 638 | | | 0.16 | % | | | | | | |
FHLB stock | | 47,094 | | | 887 | | | 7.64 | % | | 32,894 | | | 147 | | | 1.81 | % | | | | | | |
Total interest earning assets (3) | | 12,080,390 | | | 160,313 | | | 5.38 | % | | 11,850,598 | | | 95,877 | | | 3.28 | % | | | | | | |
Noninterest Earning Assets: | | | | | | | | | | | | | | | | | | |
Cash and due from banks | | 154,270 | | | | | | | 93,419 | | | | | | | | | | | |
Allowance for credit losses | | (134,803) | | | | | | | (125,980) | | | | | | | | | | | |
Other assets (4)(5)(6) | | 761,757 | | | | | | | 823,452 | | | | | | | | | | | |
Total noninterest earning assets | | 781,224 | | | | | | | 790,891 | | | | | | | | | | | |
Total assets | | $ | 12,861,614 | | | | | | | $ | 12,641,489 | | | | | | | | | | | |
Interest-bearing liabilities: | | | | | | | | | | | | | | | | | | |
Interest-bearing deposits: | | | | | | | | | | | | | | | | | | |
Interest-bearing checking | | $ | 3,165,058 | | | $ | 19,060 | | | 2.44 | % | | $ | 3,559,755 | | | $ | 2,457 | | | 0.28 | % | | | | | | |
Money market deposits(7) | | 3,369,953 | | | 24,510 | | | 2.95 | % | | 3,017,746 | | | 1,572 | | | 0.21 | % | | | | | | |
Savings deposits | | 458,023 | | | 64 | | | 0.06 | % | | 487,945 | | | 64 | | | 0.05 | % | | | | | | |
Customer time deposits(7) | | 1,472,221 | | | 9,221 | | | 2.54 | % | | 1,077,386 | | | 1,320 | | | 0.50 | % | | | | | | |
Brokered and internet time deposits | | 1,607 | | | 8 | | | 2.02 | % | | 16,065 | | | 49 | | | 1.24 | % | | | | | | |
Time deposits | | 1,473,828 | | | 9,229 | | | 2.54 | % | | 1,093,451 | | | 1,369 | | | 0.51 | % | | | | | | |
Total interest-bearing deposits | | 8,466,862 | | | 52,863 | | | 2.53 | % | | 8,158,897 | | | 5,462 | | | 0.27 | % | | | | | | |
Other interest-bearing liabilities: | | | | | | | | | | | | | | | | | | |
Securities sold under agreements to repurchase and federal funds purchased | | 27,139 | | | 46 | | | 0.69 | % | | 30,056 | | | 14 | | | 0.19 | % | | | | | | |
Federal Home Loan Bank advances | | 41,389 | | | 499 | | | 4.89 | % | | — | | | — | | | — | % | | | | | | |
Subordinated debt(8) | | 126,161 | | | 2,402 | | | 7.72 | % | | 129,578 | | | 1,460 | | | 4.57 | % | | | | | | |
Other borrowings | | 1,688 | | | 10 | | | 2.40 | % | | 1,502 | | | 9 | | | 2.43 | % | | | | | | |
Total other interest-bearing liabilities | | 196,377 | | | 2,957 | | | 6.11 | % | | 161,136 | | | 1,483 | | | 3.73 | % | | | | | | |
Total interest-bearing liabilities | | 8,663,239 | | | 55,820 | | | 2.61 | % | | 8,320,033 | | | 6,945 | | | 0.34 | % | | | | | | |
Noninterest-bearing liabilities: | | | | | | | | | | | | | | | | | | |
Demand deposits | | 2,588,756 | | | | | | | 2,767,087 | | | | | | | | | | | |
Other liabilities(6) | | 266,299 | | | | | | | 138,291 | | | | | | | | | | | |
Total noninterest-bearing liabilities | | 2,855,055 | | | | | | | 2,905,378 | | | | | | | | | | | |
Total liabilities | | 11,518,294 | | | | | | | 11,225,411 | | | | | | | | | | | |
FB Financial Corporation common shareholders' equity | | 1,343,227 | | | | | | | 1,415,985 | | | | | | | | | | | |
Noncontrolling interest | | 93 | | | | | | | 93 | | | | | | | | | | | |
Shareholders' equity | | 1,343,320 | | | | | | | 1,416,078 | | | | | | | | | | | |
Total liabilities and shareholders' equity | | $ | 12,861,614 | | | | | | | $ | 12,641,489 | | | | | | | | | | | |
Net interest income (tax-equivalent basis) | | | | $ | 104,493 | | | | | | | $ | 88,932 | | | | | | | | | |
Interest rate spread (tax-equivalent basis) | | | | | | 2.77 | % | | | | | | 2.94 | % | | | | | | |
Net interest margin (tax-equivalent basis) (9) | | | | | | 3.51 | % | | | | | | 3.04 | % | | | | | | |
Cost of total deposits | | | | | | 1.94 | % | | | | | | 0.20 | % | | | | | | |
Average interest-earning assets to average interest-bearing liabilities | | | | | | 139.4 | % | | | | | | 142.4 | % | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2024 | | | 2023 | | | |
(dollars in thousands on a tax-equivalent basis) | | Average balances | | Interest income/ expense | | Average yield/ rate | | Average balances | | Interest income/ expense | | Average yield/ rate | | | | | | |
Interest-earning assets: | | | | | | | | | | | | | | | | | | |
Loans HFI (1)(2) | | $ | 9,386,794 | | | $ | 154,956 | | | 6.64 | % | | $ | 9,346,708 | | | $ | 139,467 | | | 6.05 | % | | | | | | |
Mortgage loans held for sale | | 48,566 | | | 851 | | | 7.05 | % | | 56,204 | | | 927 | | | 6.69 | % | | | | | | |
Commercial loans held for sale | | — | | | — | | | — | % | | 16,608 | | | 159 | | | 3.88 | % | | | | | | |
Investment securities: | | | | | | | | | | | | | | | | | | |
Taxable | | 1,399,237 | | | 9,105 | | | 2.62 | % | | 1,402,535 | | | 6,570 | | | 1.90 | % | | | | | | |
Tax-exempt (2) | | 241,379 | | | 1,950 | | | 3.25 | % | | 294,652 | | | 2,440 | | | 3.36 | % | | | | | | |
Total investment securities (2) | | 1,640,616 | | | 11,055 | | | 2.71 | % | | 1,697,187 | | | 9,010 | | | 2.15 | % | | | | | | |
Federal funds sold and reverse repurchase agreements | | 155,380 | | | 2,126 | | | 5.50 | % | | 188,013 | | | 1,855 | | | 4.00 | % | | | | | | |
Interest-bearing deposits with other financial institutions | | 530,390 | | | 7,066 | | | 5.36 | % | | 728,576 | | | 8,008 | | | 4.46 | % | | | | | | |
FHLB stock | | 34,051 | | | 783 | | | 9.25 | % | | 47,094 | | | 887 | | | 7.64 | % | | | | | | |
Total interest earning assets (2) | | 11,795,797 | | | 176,837 | | | 6.03 | % | | 12,080,390 | | | 160,313 | | | 5.38 | % | | | | | | |
Noninterest Earning Assets: | | | | | | | | | | | | | | | | | | |
Cash and due from banks | | 167,732 | | | | | | | 154,270 | | | | | | | | | | | |
Allowance for credit losses on loans HFI | | (150,605) | | | | | | | (134,803) | | | | | | | | | | | |
Other assets (3)(4) | | 777,155 | | | | | | | 761,757 | | | | | | | | | | | |
Total noninterest earning assets | | 794,282 | | | | | | | 781,224 | | | | | | | | | | | |
Total assets | | $ | 12,590,079 | | | | | | | $ | 12,861,614 | | | | | | | | | | | |
Interest-bearing liabilities: | | | | | | | | | | | | | | | | | | |
Interest-bearing deposits: | | | | | | | | | | | | | | | | | | |
Interest-bearing checking | | $ | 2,539,084 | | | $ | 19,016 | | | 3.01 | % | | $ | 3,165,058 | | | $ | 19,060 | | | 2.44 | % | | | | | | |
Money market deposits | | 3,849,080 | | | 37,570 | | | 3.93 | % | | 3,369,953 | | | 24,510 | | | 2.95 | % | | | | | | |
Savings deposits | | 377,963 | | | 62 | | | 0.07 | % | | 458,023 | | | 64 | | | 0.06 | % | | | | | | |
Customer time deposits | | 1,457,377 | | | 14,124 | | | 3.90 | % | | 1,472,221 | | | 9,221 | | | 2.54 | % | | | | | | |
Brokered and internet time deposits | | 140,292 | | | 1,853 | | | 5.31 | % | | 1,607 | | | 8 | | | 2.02 | % | | | | | | |
Time deposits | | 1,597,669 | | | 15,977 | | | 4.02 | % | | 1,473,828 | | | 9,229 | | | 2.54 | % | | | | | | |
Total interest-bearing deposits | | 8,363,796 | | | 72,625 | | | 3.49 | % | | 8,466,862 | | | 52,863 | | | 2.53 | % | | | | | | |
Other interest-bearing liabilities: | | | | | | | | | | | | | | | | | | |
Securities sold under agreements to repurchase and federal funds purchased | | 24,219 | | | 149 | | | 2.47 | % | | 27,139 | | | 46 | | | 0.69 | % | | | | | | |
Federal Home Loan Bank advances | | — | | | — | | | — | % | | 41,389 | | | 499 | | | 4.89 | % | | | | | | |
Subordinated debt | | 129,718 | | | 2,286 | | | 7.09 | % | | 126,161 | | | 2,402 | | | 7.72 | % | | | | | | |
Other borrowings | | 131,318 | | | 1,578 | | | 4.83 | % | | 1,688 | | | 10 | | | 2.40 | % | | | | | | |
Total other interest-bearing liabilities | | 285,255 | | | 4,013 | | | 5.66 | % | | 196,377 | | | 2,957 | | | 6.11 | % | | | | | | |
Total interest-bearing liabilities | | 8,649,051 | | | 76,638 | | | 3.56 | % | | 8,663,239 | | | 55,820 | | | 2.61 | % | | | | | | |
Noninterest-bearing liabilities: | | | | | | | | | | | | | | | | | | |
Demand deposits | | 2,227,175 | | | | | | | 2,588,756 | | | | | | | | | | | |
Other liabilities(4) | | 253,024 | | | | | | | 266,299 | | | | | | | | | | | |
Total noninterest-bearing liabilities | | 2,480,199 | | | | | | | 2,855,055 | | | | | | | | | | | |
Total liabilities | | 11,129,250 | | | | | | | 11,518,294 | | | | | | | | | | | |
FB Financial Corporation common shareholders' equity | | 1,460,736 | | | | | | | 1,343,227 | | | | | | | | | | | |
Noncontrolling interest | | 93 | | | | | | | 93 | | | | | | | | | | | |
Shareholders' equity | | 1,460,829 | | | | | | | 1,343,320 | | | | | | | | | | | |
Total liabilities and shareholders' equity | | $ | 12,590,079 | | | | | | | $ | 12,861,614 | | | | | | | | | | | |
Net interest income (tax-equivalent basis)(2) | | | | $ | 100,199 | | | | | | | $ | 104,493 | | | | | | | | | |
Interest rate spread (tax-equivalent basis)(2) | | | | | | 2.47 | % | | | | | | 2.77 | % | | | | | | |
Net interest margin (tax-equivalent basis) (2)(5) | | | | | | 3.42 | % | | | | | | 3.51 | % | | | | | | |
Cost of total deposits | | | | | | 2.76 | % | | | | | | 1.94 | % | | | | | | |
Average interest-earning assets to average interest-bearing liabilities | | | | | | 136.4 | % | | | | | | 139.4 | % | | | | | | |
(1)Calculated using daily averages.
(2)Average balances of nonaccrual loans and overdrafts (before deduction of ACL) are included in average loan balances. Origination and other loan fee income of $3.1 million and $5.0 million, net accretion (amortization) of $0.3 million and $(2.4) million, and nonaccrual interest collections of $0.2 million and $1.0 million are included in interest income for the three months ended March 31, 2023 and 2022, respectively.
(3)(2)IncludesInterest 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 tax-equivalent adjustment amounts included in income were $0.8$0.7 million and $0.8 million for three months ended March 31, 20232024 and 2022,2023, respectively.
(4)(3)Includes average net unrealized losses on investment securities available for sale of $222.8$194.1 million and $24.0$222.8 million for the three months ended March 31, 20232024 and 2022,2023, respectively.
(5)(4)Includes average of optional rights to repurchase government guaranteed GNMA mortgage loans previously sold that have become past due greater than 90 days of $23,180$20.8 million and $23.2 million for the three months ended March 31, 2023.
(6)Includes investments in premises2024 and equipment, OREO, interest receivable, mortgage servicing rights, core deposit and other intangibles, goodwill, and other miscellaneous assets.
(7)Includes $0.9 million and $0.9 million of interest rate premium accretion on money market deposits, $1.5 million of interest expense and $0.3 million of interest income from fair value hedging instruments on money market deposits,and $0.1 million and $0.2 million on customer time deposits for the three months ended March 31, 2023, and 2022, respectively.
(8)Includes $0.8 million of interest expense and $0.2 million of interest income from fair value hedging for the three months ended March 31, 2023 and 2022, respectively.
(9)(5)The NIM is calculated by dividing annualized net interest income, on a tax-equivalent basis, by average total earning assets.
Yield/rate and volume analysis
The tables below present the components of the changes in net interest income for the three months ended March 31, 20232024 and 2022.2023. For each major category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes due to average volumesvolume and changes due to interest rates, with the changes in both volumesvolume and interest rates allocated to these two categories based on the proportionate absolute changes in each category.
Three months ended March 31, 2023 compared to three months ended March 31, 2022
| | Three months ended March 31, 2023 compared to three months ended March 31, 2022 due to changes in |
| | Three months ended March 31, 2024 compared to three months ended March 31, 2023 due to changes in | | | | Three months ended March 31, 2024 compared to three months ended March 31, 2023 due to changes in |
(dollars in thousands on a tax-equivalent basis) | (dollars in thousands on a tax-equivalent basis) | | Volume | | Yield/ rate | | Net increase (decrease) | (dollars in thousands on a tax-equivalent basis) | | Volume | | Yield/rate | | Net increase (decrease) |
Interest-earning assets: | Interest-earning assets: | |
Loans(1)(2) | | $ | 23,638 | | | $ | 33,366 | | | $ | 57,004 | |
Loans HFI(1)(2) | |
Loans HFI(1)(2) | |
Loans HFI(1)(2) | |
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 | | (593) | | | (176) | | | (769) | |
Securities available-for-sale and other securities: | |
Investment securities: | |
Taxable | Taxable | | 101 | | | 1,049 | | | 1,150 | |
Tax Exempt(2) | | (200) | | | 117 | | | (83) | |
Taxable | |
Taxable | |
Tax-exempt(2) | |
Federal funds sold and reverse repurchase agreements | Federal funds sold and reverse repurchase agreements | | (186) | | | 1,849 | | | 1,663 | |
Interest-bearing deposits with other financial institutions | Interest-bearing deposits with other financial institutions | | (9,578) | | | 16,948 | | | 7,370 | |
FHLB stock | FHLB stock | | 267 | | | 473 | | | 740 | |
Total interest income(2) | Total interest income(2) | | 6,624 | | | 57,812 | | | 64,436 | |
Interest-bearing liabilities: | Interest-bearing liabilities: | |
Interest-bearing checking deposits | Interest-bearing checking deposits | | (2,377) | | | 18,980 | | | 16,603 | |
Money market deposits(3) | | 2,562 | | | 20,376 | | | 22,938 | |
Interest-bearing checking deposits | |
Interest-bearing checking deposits | |
Money market deposits | |
Savings deposits | Savings deposits | | (4) | | | 4 | | | — | |
Customer time deposits(3) | | 2,473 | | | 5,428 | | | 7,901 | |
Customer time deposits | |
Brokered and internet time deposits | Brokered and internet time deposits | | (72) | | | 31 | | | (41) | |
Securities sold under agreements to repurchase and federal funds purchased | Securities sold under agreements to repurchase and federal funds purchased | | (5) | | | 37 | | | 32 | |
Federal Home Loan Bank advances | Federal Home Loan Bank advances | | 499 | | | — | | | 499 | |
Subordinated debt(4) | | (65) | | | 1,007 | | | 942 | |
Subordinated debt | |
Other borrowings | Other borrowings | | 1 | | | — | | | 1 | |
Total interest expense | Total interest expense | | 3,012 | | | 45,863 | | | 48,875 | |
Change in net interest income(2) | Change in net interest income(2) | | $ | 3,612 | | | $ | 11,949 | | | $ | 15,561 | |
|
(1)OriginationAverage loans are presented gross, including nonaccrual loans and other loan fee income of $3.1 million and $5.0 million, net accretion (amortization) of $0.3 million and $(2.4) million, and nonaccrual interest collections of $0.2 million and $1.0 million are included in interest income for the three months ended March 31, 2023 and 2022, respectively.overdrafts.
(2)IncludesInterest income includes the effects of taxable-equivalentthe tax-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$0.7 million and $0.8 million for three months ended March 31, 2023 and 2022, respectively.
(3)Includes $0.9 million and $0.9 million of interest rate premium accretion on money market deposits, $1.5 million of interest expense and $0.3 million of interest income from fair value hedging instruments on money market deposits, and $0.1 million and $0.2 million on customer time deposits for the three months ended March 31, 20232024 and 2022, respectively.
(4)Includes $0.8 million of interest expense and $0.2 million of interest income from fair value hedging instrument for the three months ended March 31, 2023, and 2022, respectively.
Provision for credit losses
The provision for credit losses charged to operating expense is an amount which, in the judgment of management, is necessary to maintain the allowance for credit losses at an appropriate level under the current expected credit loss model. The determination of the amount of the allowance is complex and involves a high degree of judgment and subjectivity. Refer to Note 1, "Basis“Basis of presentation"presentation” in the notes to our consolidated financial statements in ourCompany's Annual Report on Form 10-K for the year ended December 31, 20222023 for a detailed discussion regarding ACL methodology.
Our allowance for credit losses calculation as of March 31, 20232024 resulted from management’s best estimate of losses over the life of loans and unfunded commitments in our portfolio in accordance with the CECL approach. Our calculation included qualitative adjustments for projected slower GDP growth over the next two to three years and expected elevated unemployment levels, and expected interest rate increases from the Federal Reserve.levels. 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 potentialgeopolitical turmoil and its impact and hardship
on the U.S. economy. The qualitative evaluations above include considered projections that the economy may be nearing a recession. These factors may continue to lead to increased volatility in forecasted macroeconomic variables, a key input to our calculated level of allowance for credit losses.
Three months ended March 31, 2023 compared to three months ended March 31, 2022
We recognized a provision for credit losses on loans HFI for the three months ended March 31, 2024 and 2023 of $1.9 million and $5.0 million. This compares to a reversal in provision for credit losses on loans HFI of $6.1 million, recorded for the three months ended March 31, 2022.respectively. The current period provision on loans HFI resulted from management’s best estimate of losses over the life of loans in our portfolio in accordance with the CECL approach drivenand was impacted by an $67.8 million increaseprojected deterioration in loans HFI outstanding from December 31, 2022 to March 31, 2023 and the deteriorating economic forecasts as discussed in further detail above.CRE portfolio which was adjusted qualitatively. For the three months ended March 31, 2022,2023, the reversalincrease in totalthe provision for credit losses on loans HFI was primarilydriven by an increase in loans HFI outstanding period-over-period and the resultincreased possibility of improving economic forecasts allowing for a reduction of our reserves.future recession and inflationary pressures.
We also estimate expected credit losses on off-balance sheet loan commitments under the CECL methodology.that are not accounted for as derivatives. When applying the CECL methodology to estimate expected credit loss, we consider the likelihood that funding will occur, the contractual period of exposure to credit loss, the risk of loss, historical loss experience, and current conditions along with expectations of future economic conditions. For the three months ended March 31, 2023,2024, we recorded a reversal inof provision for credit losses on unfunded commitments of $4.5$1.1 million compared to provision expense of $1.9$4.5 million during the three months ended March 31, 2022.2023. The decrease in thereversal of provision for credit losses on unfunded commitments for the three months ended March 31, 2024 and 2023 is primarily due to an intentionalmanagement's concentrated effort to reduce unfunded loan commitments during the periods indicated including a $135.3 million and a $298.8 million decrease in our construction category as these projects moved to permanent financing for the total loan commitments.three months ended March 31, 2024 and 2023. As such, this resulted in a $1.0 million and $4.5 million decrease in required ACL related to the unfunded commitments in our construction portfolio for the three months ended March 31, 2024 and 2023.
During the three months ended March 31, 2023, the unrealized value in our available-for-sale debt securities portfolio improved to an unrealized loss position of $207.3 million from $234.4 million as of December 31, 2022. During the three months ended March 31, 2022, our available-for-sale debt securities portfolio unrealized value declined $105.6 million from an unrealized gain position of $4.7 million as of December 31, 2021. The majority of the investment portfolio was either government guaranteed or an issuance of a government sponsored entity or highly rated by major credit rating agencies2024 and we historically have not realized any losses associated with these investments. As such,2023, it was determined that all available-for-saleAFS debt securities that experienced a decline in fair value below amortized cost basis were due to noncredit-related factors. The Company does not intend to sell those available-for-sale securities that have an unrealized loss as of March 31, 2023, and it is unlikely that the Company will be required to sell the securities before recovery to amortized cost basis at maturity due to our liquidity position and access to other sources of funds. Based on our evaluation of potential credit risk in the portfolio,Therefore, there was no provision for credit losses recognized on available-for-saleAFS debt securities was required during the three months ended March 31, 20232024 or 2022.2023.
Noninterest income
The following table sets forth the components of noninterest income for the periods indicated:
| | |
| | | | | Three Months Ended March 31, | | | | Three Months Ended March 31, |
(dollars in thousands) | (dollars in thousands) | | | 2023 | | | 2022 | | |
Mortgage banking income | Mortgage banking income | | | $ | 12,086 | | | $ | 29,531 | | |
Mortgage banking income | |
Mortgage banking income | |
Service charges on deposit accounts | Service charges on deposit accounts | | | 3,053 | | | 2,914 | | |
Service charges on deposit accounts | |
Service charges on deposit accounts | |
Investment services and trust income | |
Investment services and trust income | |
Investment services and trust income | |
ATM and interchange fees | ATM and interchange fees | | | 2,396 | | | 5,087 | | |
Investment services and trust income | | | 2,378 | | | 2,132 | | |
Gain (loss) from securities, net | | | 69 | | | (152) | | |
Loss on sales or write-downs of other real estate owned and other assets | | | (183) | | | (434) | | |
ATM and interchange fees | |
ATM and interchange fees | |
(Loss) gain from investment securities, net | |
(Loss) gain from investment securities, net | |
(Loss) gain from investment securities, net | |
Gain (loss) on sales or write-downs of other real estate owned and other assets | |
Gain (loss) on sales or write-downs of other real estate owned and other assets | |
Gain (loss) on sales or write-downs of other real estate owned and other assets | |
| Other income | |
| Other income | |
| Other income | Other income | | | 3,550 | | | 2,314 | | |
Total noninterest income | Total noninterest income | | | $ | 23,349 | | | $ | 41,392 | | |
Total noninterest income | |
Total noninterest income | |
Three months ended March 31, 2023 comparedNoninterest income amounted to $8.0 million for the three months ended March 31, 2022
Noninterest income amounted2024, a decrease of $15.4 million, or 66%, as compared to $23.3 million for the three months ended March 31, 2023, a decrease of $18.0 million, or 43.6%, as compared to $41.4 million for the three months ended March 31, 2022.2023. 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 incomeNet loss from investment securities was $12.1 million and $29.5$16.2 million for the three months ended March 31, 2023 and 2022, respectively, representing2024 compared to a $17.4$0.1 million or 59.1% decrease year-over-year.
During the second quarter of 2022, we exited our direct-to-consumer internet delivery channel within our Mortgage segment. Our direct-to-consumer channel was particularly dependent on the support of a strong refinance market and the unfavorable interest rate environment resulted in lack of demand and profitability in this delivery channel. For the three months ended March 31, 2022, direct-to-consumer comprised 43.4% our total interest rate lock volume and 50.7% of our sales volume, respectively.
During the three months ended March 31, 2023, our mortgage operations had sales of $0.33 billion which generated anet gain on sales margin of 2.45%. This compares to $1.28 billion and 2.29% for the three months ended March 31, 2022. Sales of mortgage loans slowed as interest rates continue to rise and affordability constraints hinder many of our markets.2023. The decrease in gain on salesnet loss from investment securities during the three months ended March 31, 2024 is athe result of over-capacity inmanagement's election to sell $207.9 million of AFS debt securities to reinvest the industry and compressing margins. Mortgage bankingproceeds into higher yielding AFS securities. Refer to the section “Other earning assets” for additional information on the sale of the AFS debt securities.
Other income from gains on sale and related fair value changes decreased $1.8 million to $7.7$1.7 million during the three months ended March 31, 2023 compared to $21.8 million for the three months ended March 31, 2022. Total interest rate lock volume decreased $0.93 billion, or 71.4%, during the three months ended March 31, 2023 compared to the three months ended March 31, 2022. Market conditions during the three months ended March 31, 2023, including declining consumer demand for mortgages and increased interest rates, have also shifted the mix of interest rate lock commitments by purpose down to 13.8% refinance volume for the three months ended March 31, 2023 compared with 43.0% refinance interest rate lock volume for the previous year.
Our mortgage business is directly impacted by the interest rate environment, increased regulations, consumer demand, economic conditions, and investor demand for mortgage production. As interest rates have increased, we continue to see margin compression and reduced volumes due to excess capacity in the industry, refinance fatigue and affordability constraints in our markets. Interest rate lock volume and consequently, mortgage banking income, can be materially and adversely impacted by rising interest rates, slow downs in consumer purchase activity, seasonality and excess market capacity.
Income from mortgage servicing was $7.8 million and $7.4 million for three months ended March 31, 2023 and 2022, respectively. During the three months ended March 31, 2023, the changes in fair value of MSRs and related hedging activity resulted in a loss of $3.4 million. This compares to a $0.3 million benefit from the changes in fair value of MSRs and related hedging activity for three months ended March 31, 2022.
The components of mortgage banking income for the three months ended March 31, 2023 and 2022 were as follows:
| | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
(dollars in thousands) | | 2023 | | | 2022 | | | |
Mortgage banking income | | | | | | |
Gains and fees from origination and sale of mortgage loans held for sale | | $ | 8,146 | | | $ | 29,397 | | | |
Net change in fair value of loans held for sale and derivatives | | (421) | | | (7,548) | | | |
Change in fair value on MSRs | | (3,407) | | | 253 | | | |
Mortgage servicing income | | 7,768 | | | 7,429 | | | |
Total mortgage banking income | | $ | 12,086 | | | $ | 29,531 | | | |
Interest rate lock commitment volume by delivery channel: | | | | | | |
Direct-to-consumer | | $ | — | | | $ | 568,092 | | | |
| | | | | | |
Retail | | 375,042 | | | 741,015 | | | |
| | | | | | |
Total | | $ | 375,042 | | | $ | 1,309,107 | | | |
Interest rate lock commitment volume by purpose (%): | | | | | | |
Purchase | | 86.2 | % | | 57.0 | % | | |
Refinance | | 13.8 | % | | 43.0 | % | | |
Mortgage sales | | $ | 332,307 | | | $ | 1,284,482 | | | |
Mortgage sale margin | | 2.45 | % | | 2.29 | % | | |
Closing volume | | $ | 295,760 | | | $ | 993,733 | | | |
Outstanding principal balance of mortgage loans serviced | | $ | 11,028,420 | | | $ | 11,150,118 | | | |
ATM and interchange fees decreased $2.7 million to $2.4 million during the three months ended March 31, 20232024 as compared to $5.1 million for the three months ended March 31, 2022. The decrease was primarily attributable to the expiration of our temporary exemption from the Durbin amendment during the second half of 2022. The Durbin amendment limits the amount of interchange transaction fees that banks with asset sizes greater than $10 billion are permitted to charge retailers for debit card processing. Interchange fee income varies with size and volume of transactions, which can fluctuate with seasonality, consumer spending habits and economic conditions. While our volume of interchange transactions increased approximately 9.00% during the three months ended March 31, 2023 from the previous year, interchange fee income declined by 54.9%, the majority of which related to the application of the fee cap imposed by the Durbin amendment impacting the current period.
Other income increased $1.2 million to $3.6 million during the three months ended March 31, 2023 as compared to $2.3 million during the three months ended March 31, 2022.2023. This increasedecrease is primarily related to a $0.9 million gain associated with the change in fair value of the commercial loans held for sale portfolio during the three months ended March 31, 2023 compared to a $0.2 million2023. No such gain or loss forwas recorded during the three months ended March 31, 2022. Additional information on our commercial loans held for sale portfolio is included under2024 as the subheading 'Loans held for sale' included within this management's discussion and analysis.final relationship was exited during the year ended December 31, 2023. Additionally, swap fees decreased $0.4 million during the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to fewer swap trades in the current year due most notably to the conversion to SOFR during the three months ended March 31, 2023.
Noninterest expense
The following table sets forth the components of noninterest expense for the periods indicated:
| | |
| | | | | Three Months Ended March 31, | | | | Three Months Ended March 31, |
(dollars in thousands) | (dollars in thousands) | | | 2023 | | | 2022 | | |
Salaries, commissions and employee benefits | Salaries, commissions and employee benefits | | | $ | 48,788 | | | $ | 59,443 | | |
Salaries, commissions and employee benefits | |
Salaries, commissions and employee benefits | |
Occupancy and equipment expense | Occupancy and equipment expense | | | 5,909 | | | 5,403 | | |
Occupancy and equipment expense | |
Occupancy and equipment expense | |
Data processing | |
Data processing | |
Data processing | |
Legal and professional fees | Legal and professional fees | | | 3,108 | | | 2,607 | | |
Data processing | | | 2,113 | | | 2,481 | | |
Legal and professional fees | |
Legal and professional fees | |
| Advertising | |
| Advertising | |
| Advertising | |
Amortization of core deposit and other intangibles | |
Amortization of core deposit and other intangibles | |
Amortization of core deposit and other intangibles | Amortization of core deposit and other intangibles | | | 990 | | | 1,244 | | |
| Advertising | | | 2,133 | | | 4,033 | | |
| Other expense | |
| Other expense | |
| | Other expense | Other expense | | | 17,399 | | | 14,061 | | |
Total noninterest expense | Total noninterest expense | | | $ | 80,440 | | | $ | 89,272 | | |
Total noninterest expense | |
Total noninterest expense | |
Three months ended March 31, 2023 compared to three months ended March 31, 2022
Noninterest expense decreased by $8.8$8.0 million during the three months ended March 31, 20232024 to $80.4$72.4 million as compared to $89.3$80.4 million in the three months ended March 31, 2022.2023. 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 expensesexpense representing 60.7%62% and 66.6%61% of total noninterest expense infor the three months ended March 31, 2024 and 2023, and 2022, respectively. DuringFor the three months ended March 31, 2023,2024, salaries, commissions and employee benefits expense decreased $10.7$4.2 million, or 17.9%9%, to $48.8$44.6 million as compared to $59.4$48.8 million for the three months ended March 31, 2022. The decrease2023. This change was attributable to a $5.2$2.5 million decrease in salaries due to the impact of the reduction in headcountstemming from the Mortgage restructuring. Additionally, the decrease includedCompany's efficiency and scalability initiatives, as well as a $5.1$2.1 million decrease from the Company applying an updated deferral methodology for loan fees and loan origination expenses.
Legal and professional expense decreased by $1.2 million during the three months ended March 31, 2024 to $1.9 million as compared to $3.1 million during the three months ended March 31, 2023. The decrease in incentivelegal and commission-based compensationprofessional expenses was caused by decreases in consulting and other professional fees as these were increased during the three months ended March 31, 2023 which was driven by the decrease in mortgage production volume and decline in profitability during the period.due to internal projects.
Advertising expense includes expenses related to sponsorships, advertising, marketing, customer relations and business development, and public relations. During the three months ended March 31, 2023,2024, advertising expense decreased $1.9$1.0 million to $2.1$1.2 million compared to $4.0$2.1 million during the three months ended March 31, 2022.2023. This decrease is primarily attributable to realigning our expenses aftermarketing rebate activity with partners earned through higher transaction volumes during the Mortgage restructuringthree months ended March 31, 2024 compared to reflect the decrease in production.three months ended March 31, 2023.
Other noninterest expense primarily includes mortgage servicing expenses, regulatory fees and deposit insurance assessments, software license and maintenance fees and various other miscellaneous expenses. Other noninterest expense increased $3.3decreased $2.5 million during the three months ended March 31, 20232024 to $17.4$14.9 million compared to $14.1$17.4 million during the three months ended March 31, 2022. This increase includes2023. The decrease was primarily related to a $1.1$2.8 million increasedecrease in regulatory fees and assessments and other costs associated with our growth.franchise tax expense which was partially offset by $0.5 million expense related to the FDIC special assessment.
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 thisThis ratio is calculated by dividing noninterest expense by the sum of net interest income and noninterest income. For an adjusteda core efficiency ratio, we exclude certain gains, losses and expenses we do not consider core to our business.
Our efficiency ratio was 63.3%67.4% and 68.9%63.3% for the three months ended March 31, 20232024 and 2022,2023, respectively. Our adjustedcore efficiency ratio, on a tax-equivalent basis, was 63.3%58.1% and 68.1%63.4% for the three months ended March 31, 2024 and 2023, and 2022, respectively. The decrease was primarily attributable to our focus on reducing unnecessary expenses and the restructuring of the Mortgage segment. See “GAAP reconciliation and management explanation of non-GAAP financial measures” in this Report for the calculation anda discussion of the adjustedcore efficiency ratio.
Income taxes
Income tax expense was $9.7$6.3 million and $9.3$9.7 million for the three months ended March 31, 20232024 and 2022,2023, respectively. This represents effective tax rates of 21.0%18.4% and 20.9%21.0% for the three months ended March 31, 20232024 and 2022,2023, 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 adjustmentsdeductions for equity-based compensation upon vesting of restricted stock units. State taxes, net of federal benefits, increased ourRefer to Note 7 “Income taxes” in the notes to the consolidated financial statements for additional information regarding the Company's income tax expense and effective tax rate by 0.6% and 2.1% for the three months ended March 31, 2023 and 2022, respectively.rates.
On August 16, 2022, the Inflation Reduction Act (IRA) was signed into law in the United States. Among other provisions, the IRA imposes a 1% excise tax on the fair market value of net stock repurchases made after December 31, 2022. The impact of this provision will be dependent on the extent of share repurchases made in future periods.
Financial condition
The following discussion of our financial condition compares balances as of March 31, 20232024 and December 31, 2022.2023.
Loan portfolio
The following table sets forth the balance and associated percentage of each class of financing receivable in our loan portfolio as of the dates indicated:
| | | March 31, | |
| | March 31, | |
| | March 31, | |
| | |
| | | | March 31, | | December 31, | |
| | | 2023 | | | | 2022 | | |
(dollars in thousands) | (dollars in thousands) | | Committed | | Amount Outstanding | | % of total outstanding | | Committed | | Amount Outstanding | | % of total outstanding | |
(dollars in thousands) | |
(dollars in thousands) | |
Loan Type: | |
Loan Type: | |
Loan Type: | Loan Type: | | | | | | | | | | |
Commercial and industrial
| Commercial and industrial
| | $ | 2,797,208 | | | $ | 1,671,398 | | | 18 | % | | $ | 2,671,861 | | | $ | 1,645,783 | | | 18 | % | |
Commercial and industrial
| |
Commercial and industrial
| |
Construction | |
Construction | |
Construction | Construction | | 3,037,706 | | | 1,697,513 | | | 18 | % | | 3,296,503 | | | 1,657,488 | | | 18 | % | |
Residential real estate: | Residential real estate: | | |
Residential real estate: | |
Residential real estate: | |
1-to-4 family mortgage | |
1-to-4 family mortgage | |
1-to-4 family mortgage | 1-to-4 family mortgage | | 1,563,173 | | | 1,562,503 | | | 17 | % | | 1,573,950 | | | 1,573,121 | | | 17 | % | |
Residential line of credit | Residential line of credit | | 1,160,682 | | | 497,391 | | | 5 | % | | 1,151,750 | | | 496,660 | | | 5 | % | |
Residential line of credit | |
Residential line of credit | |
Multi-family mortgage | |
Multi-family mortgage | |
Multi-family mortgage | Multi-family mortgage | | 495,689 | | | 489,379 | | | 5 | % | | 496,664 | | | 479,572 | | | 5 | % | |
Commercial real estate: | Commercial real estate: | | |
Commercial real estate: | |
Commercial real estate: | |
Owner-occupied | |
Owner-occupied | |
Owner-occupied | Owner-occupied | | 1,185,041 | | | 1,136,978 | | | 12 | % | | 1,156,534 | | | 1,114,580 | | | 12 | % | |
Non-owner occupied | Non-owner occupied | | 2,058,756 | | | 1,939,517 | | | 21 | % | | 2,109,218 | | | 1,964,010 | | | 21 | % | |
Non-owner occupied | |
Non-owner occupied | |
Consumer and other | |
Consumer and other | |
Consumer and other | Consumer and other | | 397,104 | | | 371,317 | | | 4 | % | | 393,632 | | | 366,998 | | | 4 | % | |
Total loans | Total loans | | $ | 12,695,359 | | | $ | 9,365,996 | | | 100 | % | | $ | 12,850,112 | | | $ | 9,298,212 | | | 100 | % | |
Total loans | |
Total loans | |
Our loans HFI portfolio is our most significant earning asset, comprising 71.5%74% and 72.4%75% of our total assets as ofat March 31, 20232024 and December 31, 2022,2023, respectively. Our strategy is to grow our loan portfolio by originating quality commercial and consumer type loans that comply with our credit policies and that produce revenues consistent with our financial objectives. Our overall lending approach is primarily focused on providing credit to our customers directly in the markets we serve, but we are also party to loan syndications and participations from other banks (collectively, “participated loans”). As of March 31, 20232024 and December 31, 2022,2023, loans held for investment included approximately $300.0$217.1 million and $280.5$254.6 million, respectively, related to participated loans. We also sell loan participations to unaffiliated third partiesthird-parties as part of our credit risk management and balance sheet management strategy. During the three months ended March 31, 20232024 and 2022,2023, we sold $8.0 million and $4.4 million and $0.3 millionin 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 the highest concentration in Tennessee. This geographic concentration subjects our loan portfolio to the general economic conditions within the state. The risks created by this concentration have been considered by management in the determination of the appropriateness of the allowance for credit losses.losses on loans HFI. As of March 31, 20232024 and December 31, 2022,2023, there were no concentrations of loans exceeding 10% of total loans other than our exposure to Tennessee, Alabama and the categories of loans disclosed in the table above. We believe our loan portfolio is diversified relative to industry concentrations across the various loan portfolio categories.
Banking regulators have established guidelines of less than 100% of tier 1 capital plus allowance for credit losses in construction lending and less than 300% of tier 1 capital plus allowance for credit losses in commercial real estate lending that management monitors as part of the risk management process. The construction concentration ratio is a percentage
of the outstanding construction and land development loans to total tier 1 capital plus allowance for credit losses. The commercial real estate concentration ratio is a percentage of the outstanding balance of non-owner occupied commercial real estate, multifamily, and construction and land development loans to tier 1 capital plus allowance for credit losses. Management strives to operate within the thresholds set forth above.
When our ratios are in excess of one or both of these guidelines, banking regulators generally require an increased level of monitoring in these lending areas by management.
The table below shows concentration ratios for the Bank and Company as of March 31, 20232024 and December 31, 2022.2023.
| | As a percentage (%) of tier 1 capital plus allowance for credit losses |
| FirstBank | | FB Financial Corporation |
March 31, 2023 | |
| | 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 | | | | FirstBank | | FB Financial Corporation |
March 31, 2024 | |
Construction | |
Construction | |
Construction | Construction | | 120.0 | % | | 117.3 | % | | 83.2 | % | | 81.4 | % |
Commercial real estate | Commercial real estate | | 293.7 | % | | 287.1 | % | Commercial real estate | | 255.3 | % | | 249.6 | % |
December 31, 2022 | |
December 31, 2023 | |
Construction | |
Construction | |
Construction | Construction | | 119.0 | % | | 117.2 | % | | 93.3 | % | | 91.2 | % |
Commercial real estate | Commercial real estate | | 296.5 | % | | 291.9 | % | Commercial real estate | | 265.1 | % | | 259.0 | % |
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Loan categories: The principal categories of our loans held for investment portfolio are discussed below: | | | | | | Commercial and industrial loans. | We provide a mix of variable and fixed rate commercial and industrial loans. Our commercialCommercial and industrial loans are typically made to small and medium-sized manufacturing, wholesale, retail and service businesses, and farmers for working capital and operating needs and business expansions, including the purchase of capital equipment and loans made to farmers relating to their operations.expansions. This category also includes loans secured by manufactured housing receivables.receivables made primarily to manufactured housing communities. Commercial and industrial loans generally include lines of credit and loans with maturities of five years or less. Commercial and industrial loans are generally made with operating cash flows as the primary source of repayment, but may also include collateralization by inventory, accounts receivable, equipment and personal guarantees. We plan to continue to make commercial and industrial loans an area of emphasis in our lending portfolio in the future. | | | | | | | | | | Construction loans. | Our constructionConstruction loans include commercial construction, land acquisition and land development loans and single-family interim construction loans to small-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 riskbasis and repayment depends upon project completion and sale, refinancing, or operation of repayment when projects incur cost overruns, have an increase in the price of building materials, encounter zoning and environmental issues, or encounter other factors that may affect the completion of a project on time and on budget. Additionally, repayment risk may be negatively impacted when the market experiences a deterioration in the value of real estate. We continue to focus on decreasing these commitments. While commitments made in 2021 and the first quarter of 2022 have continued to fund up, commitments to extend additional funds in this category have slowed and the unfunded commitments in our construction portfolio have declined $298.8 million or 18.2% compared to December 31, 2022. We expect our outstanding balances in the construction portfolio to decrease over the coming quarters as loans mature and unfunded commitments continue to decrease. | | | | | | | | | | | | | 1-4 family mortgage loans. | Our residential real estate 1-4 family mortgage loans are primarily made with respect to and secured by single family homes, including manufactured homes with real estate, which are both owner-occupied and investor owned. Our future origination volume could be impacted by any deteriorationRepayment depends primarily upon the cash flow of housing values in our markets and increased unemployment or underemployment.the borrower as well as the value of the real estate collateral. | | | | | | Residential line of credit loans. | Our residential line of credit loans are primarily revolving, open-end lines of credit secured by 1-4 family residential properties. We intend to continue to make residential lineRepayment depends primarily upon the cash flow of credit loans if housing values in our markets do not deteriorate from current prevailing levels and we are able to make such loans consistent with our current credit and underwriting standards. Residential linethe borrower as well as the value of credit loans may also be affected by unemployment or underemployment and deteriorating market values ofthe real estate.estate collateral. | | | | | Multi-family residential loans. | Our multi-family residential loans are primarily secured by multi-family properties, such as apartments and condominium buildings. TheRepayment depends primarily upon the cash flow of the borrower as well as the value of these loans may be affected by unemployment or underemployment, and market values ofthe real estate among other factors. We plan to continue to make multifamily loans an area of emphasis for our loan portfolio as demand in our markets for housing increases and 1-4 family mortgages become more difficult to obtain.collateral. | | | |
| | | | | | Commercial real estate owner-occupied loans. | Our commercial real estate owner-occupied loans include loans to finance commercial real estate owner occupied properties for various purposes including use as offices, warehouses, production facilities, health care facilities, retail centers, restaurants, churches and agricultural based facilities. Commercial real estate owner-occupied loans are typically repaid through the ongoing business operations of the borrower, and hence are dependent on the success of the underlying business for repayment and are more exposed to general economic conditions. Due to current market conditions and macroeconomic forecasts, we expect growth in commercial real estate owner-occupied loans to be moderated compared to historical growth.borrower. | | | | | | | | Commercial real estate non-owner occupied loans. | Our commercial real estate non-owner occupied loans include loans to finance commercial real estate non-owner occupied investment properties for various purposes including use as offices, warehouses, health care facilities, hotels, mixed-use residential/commercial, manufactured housing communities, retail centers, multifamily properties, assisted living facilities and agricultural based facilities. Commercial real estate non-owner occupied loans are typically repaid with the funds received from the sale or refinancing of the completed property or rental proceedsincome from such property, and are therefore more sensitive to adverse conditions in the real estate market, which can also be affected by general economic conditions. We expect growth in commercial real estate non-owner occupied loans to be reduced in comparison to historical growth due to our current macroeconomic outlook.property. | | | | | | | | | | Consumer and other loans. | Consumer and other loans include consumer loans made to individuals for personal, family and household purposes, including car, boat and other recreational vehicle loans, manufactured homes (without real estate) and other recreational vehicle loans and personal lines of credit. TheseConsumer loans are generally secured by vehicles manufactured homes, and other household goods. The collateral securing consumer loans may depreciate over time. We seek to minimize these risks through its underwriting standards.goods, with repayment depending primarily on the cash flow of the borrower. Other loans also include loans to states and political subdivisions in the U.S. These loansand are generally subject to the risk that the borrowing municipalityrepaid through tax revenues or political subdivision may lose a significant portion of its tax base or that the project for which the loan was made may produce inadequate revenue. None of these categories of loans represent a significant portion of our loan portfolio.refinancing.
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As part of our lending policy and risk management activities, we track lending exposure of commercial and industrial and owner-occupied commercial real estate by industry classification (as defined by the North American Industry Classification System) and type to determine potential risks associated with industry concentrations, and if any risk issues could lead to additional credit loss exposure. The table below provides a summary of our commercial and industrial and owner-occupied commercial real estate portfolios by industry classification. | | | | | | | | | | | | | | | | | | | | | | | March 31, 2024 | (dollars in thousands) | | Committed | | Amount Outstanding | | Nonperforming | Commercial and industrial | | | | | | | Real estate rental and leasing | | $ | 539,837 | | | $ | 320,040 | | | $ | 163 | | Finance and insurance | | 473,762 | | | 326,585 | | | 53 | | Construction | | 399,154 | | | 112,145 | | | 4,899 | | Manufacturing | | 258,171 | | | 172,763 | | | 4,479 | | Wholesale trade | | 162,511 | | | 91,737 | | | 189 | | Professional, scientific and technical services | | 162,051 | | | 92,749 | | | 2,332 | | Information | | 153,478 | | | 64,878 | | | — | | Retail trade | | 104,926 | | | 65,643 | | | 9,146 | | Other services (except public administration) | | 99,885 | | | 60,412 | | | — | | Administrative and support and waste management and remediation services | | 94,555 | | | 56,621 | | | 2,313 | | Health care and social assistance | | 90,024 | | | 56,614 | | | 554 | | Transportation and warehousing | | 89,537 | | | 77,029 | | | 136 | | Educational services | | 66,010 | | | 29,328 | | | — | | Arts, entertainment and recreation | | 40,068 | | | 29,268 | | | — | | Accommodation and food services | | 27,292 | | | 19,906 | | | 50 | | Agriculture, forestry, fishing and hunting | | 24,316 | | | 16,794 | | | 315 | | Other | | 91,443 | | | 29,099 | | | 14 | | Total | | $ | 2,877,020 | | | $ | 1,621,611 | | | $ | 24,643 | | | | | | | | | Commercial real estate owner-occupied | | | | | | | Real estate rental and leasing | | $ | 243,473 | | | $ | 231,380 | | | $ | — | | Other services (except public administration) | | 192,527 | | | 188,429 | | | 126 | | Retail trade | | 158,327 | | | 153,250 | | | — | | Health care and social assistance | | 127,183 | | | 125,808 | | | 237 | | Accommodation and food services | | 109,422 | | | 108,358 | | | — | | Manufacturing | | 86,451 | | | 83,047 | | | 75 | | Construction | | 69,407 | | | 63,152 | | | — | | Wholesale trade | | 64,765 | | | 61,597 | | | — | | Transportation and warehousing | | 62,632 | | | 34,734 | | | — | | Professional, scientific and technical services | | 39,954 | | | 38,027 | | | 199 | | Arts, entertainment and recreation | | 36,669 | | | 35,093 | | | — | | Agriculture, forestry, fishing and hunting | | 27,743 | | | 25,527 | | | 989 | | Educational services | | 23,193 | | | 21,352 | | | — | | Finance and insurance | | 17,934 | | | 17,668 | | | — | | Management of companies and enterprises | | 16,375 | | | 14,505 | | | — | | Information | | 16,041 | | | 14,165 | | | 883 | | Other | | 21,311 | | | 19,915 | | | 560 | | Total | | $ | 1,313,407 | | | $ | 1,236,007 | | | $ | 3,069 | |
Additionally, we track our lending exposure of non-owner occupied commercial real estate and construction by collateral property type to determine potential risks associated with collateral types, and if any risk issues could lead to additional credit loss exposure. The following table provides a summary of our non-owner occupied commercial real estate and construction loan portfolios by collateral property type: | | | | | | | | | | | | | | | | | | | | | | | March 31, 2024 | (dollars in thousands) | | Committed | | Amount Outstanding | | Nonperforming | Commercial real estate non-owner occupied | | | | | | | Retail | | $ | 505,335 | | | $ | 494,932 | | | $ | 368 | | Office | | 378,401 | | | 355,977 | | | 31 | | Warehouse and industrial | | 332,295 | | | 304,516 | | | — | | Hotel | | 317,053 | | | 315,435 | | | 2,851 | | Self-storage | | 141,051 | | | 134,022 | | | — | | Land-mobile home park | | 108,353 | | | 102,419 | | | — | | Assisted living and special care facilities | | 89,714 | | | 89,295 | | | — | | Healthcare facility | | 74,125 | | | 73,454 | | | — | | Restaurants, bars and event venues | | 38,417 | | | 36,552 | | | — | | Recreation, sports and entertainment | | 29,842 | | | 29,842 | | | — | | Other | | 59,310 | | | 55,082 | | | — | | Total | | $ | 2,073,896 | | | $ | 1,991,526 | | | $ | 3,250 | | | | | | | | | Construction | | | | | | | Consumer: | | | | | | | Construction | | $ | 190,832 | | | $ | 133,034 | | | $ | 2,436 | | Land | | 38,102 | | | 36,172 | | | 75 | | Commercial: | | | | | | | Multi-family | | 346,380 | | | 162,305 | | | — | | Land | | 276,234 | | | 238,255 | | | — | | Retail | | 25,936 | | | 20,191 | | | — | | Convenience store and gas station | | 19,523 | | | 14,787 | | | — | | Recreation, sports and entertainment | | 18,252 | | | 3,013 | | | — | | Office | | 15,380 | | | 12,876 | | | — | | Self-storage | | 13,393 | | | 5,379 | | | — | | Car wash | | 10,309 | | | 8,119 | | | — | | Healthcare facility | | 9,300 | | | 9,074 | | | — | | Other | | 26,739 | | | 12,075 | | | — | | | | | | | | | Residential Development: | | | | | | | Construction | | 698,016 | | | 484,705 | | | — | | Land | | 127,881 | | | 91,686 | | | 3,151 | | Lots | | 43,181 | | | 37,212 | | | — | | Total | | $ | 1,859,458 | | | $ | 1,268,883 | | | $ | 5,662 | |
Loan maturity and sensitivities The following table presents the contractual maturities of our loan portfolio as of March 31, 2023.2024. Loans with scheduled maturities are reported in the maturity category in which the payment is due. Demand loans with no stated maturity and overdrafts are reported in the “due in 1 year or less” category. Loans that have adjustable rates are shown as amortizing to final maturity rather than when the interest rates are next subject to change. The tables do not include prepayment assumptions or scheduled repayments. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | March 31, 2023 | Loan type (dollars in thousands) | | Maturing in one year or less | | Maturing in one to five years | | Maturing in five to fifteen years | | Maturing after fifteen years | | Total | Commercial and industrial | | $ | 658,527 | | | $ | 817,286 | | | $ | 194,600 | | | $ | 985 | | | $ | 1,671,398 | | Commercial real estate: | | | | | | | | | | | Owner-occupied | | 116,227 | | | 564,532 | | | 429,717 | | | 26,502 | | | 1,136,978 | | Non-owner occupied | | 165,618 | | | 887,871 | | | 866,862 | | | 19,166 | | | 1,939,517 | | Residential real estate: | | | | | | | | | | | 1-to-4 family mortgage | | 83,614 | | | 420,287 | | | 285,082 | | | 773,520 | | | 1,562,503 | | Residential line of credit | | 33,577 | | | 94,987 | | | 368,440 | | | 387 | | | 497,391 | | Multi-family mortgage | | 57,835 | | | 287,093 | | | 128,812 | | | 15,639 | | | 489,379 | | Construction | | 938,585 | | | 573,838 | | | 179,523 | | | 5,567 | | | 1,697,513 | | Consumer and other | | 38,350 | | | 66,070 | | | 69,561 | | | 197,336 | | | 371,317 | | Total ($) | | $ | 2,092,333 | | | $ | 3,711,964 | | | $ | 2,522,597 | | | $ | 1,039,102 | | | $ | 9,365,996 | | Total (%) | | 22.3 | % | | 39.6 | % | | 26.9 | % | | 11.2 | % | | 100.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | March 31, 2024 | Loan type (dollars in thousands) | | Maturing in one year or less | | Maturing in one to five years | | Maturing in five to fifteen years | | Maturing after fifteen years | | Total | Commercial and industrial | | $ | 748,303 | | | $ | 763,058 | | | $ | 109,285 | | | $ | 965 | | | $ | 1,621,611 | | Construction | | 808,279 | | | 390,654 | | | 61,427 | | | 8,523 | | | 1,268,883 | | Residential real estate: | | | | | | | | | | | 1-to-4 family mortgage | | 66,691 | | | 444,912 | | | 230,419 | | | 835,802 | | | 1,577,824 | | Residential line of credit | | 47,730 | | | 97,403 | | | 403,917 | | | 256 | | | 549,306 | | Multi-family mortgage | | 50,308 | | | 420,460 | | | 124,714 | | | 19,599 | | | 615,081 | | Commercial real estate: | | | | | | | | | | | Owner-occupied | | 129,691 | | | 685,765 | | | 396,763 | | | 23,788 | | | 1,236,007 | | Non-owner occupied | | 195,992 | | | 1,032,690 | | | 746,649 | | | 16,195 | | | 1,991,526 | | Consumer and other | | 21,908 | | | 72,428 | | | 75,499 | | | 258,836 | | | 428,671 | | Total ($) | | $ | 2,068,902 | | | $ | 3,907,370 | | | $ | 2,148,673 | | | $ | 1,163,964 | | | $ | 9,288,909 | | Total (%) | | 22.3 | % | | 42.1 | % | | 23.1 | % | | 12.5 | % | | 100.0 | % |
For loans due after one year or more, the following table presents the interest rate composition for loans outstanding as of March 31, 2023.2024. | | March 31, 2023 | | | March 31, 2024 | | | | March 31, 2024 | 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 | Commercial and industrial | Commercial and industrial | | $ | 502,457 | | | $ | 510,414 | | | $ | 1,012,871 | | Commercial real estate: | | Owner-occupied | | 784,961 | | | 235,790 | | | 1,020,751 | | Non-owner occupied | | 977,567 | | | 796,332 | | | 1,773,899 | | Construction | | Residential real estate: | Residential real estate: | | 1-to-4 family mortgage | | 1-to-4 family mortgage | | 1-to-4 family mortgage | 1-to-4 family mortgage | | 1,161,189 | | | 317,700 | | | 1,478,889 | | Residential line of credit | Residential line of credit | | 4,328 | | | 459,486 | | | 463,814 | | Multi-family mortgage | Multi-family mortgage | | 327,557 | | | 103,987 | | | 431,544 | | Construction | | 276,203 | | | 482,725 | | | 758,928 | | Commercial real estate: | | Owner-occupied | | Owner-occupied | | Owner-occupied | | Non-owner occupied | | Consumer and other | Consumer and other | | 319,043 | | | 13,924 | | | 332,967 | | Total ($) | Total ($) | | $ | 4,353,305 | | | $ | 2,920,358 | | | $ | 7,273,663 | | Total (%) | Total (%) | | 59.9 | % | | 40.1 | % | | 100.0 | % | Total (%) | | 57.6 | % | | 42.4 | % | | 100.0 | % |
The following table presents the contractual maturities of our loan portfolio segregated into fixed and floating interest rate loans as of March 31, 2023. As of March 31, 2023 and December 31, 2022, we had $17.2 million and $17.4 million, respectively, in fixed-rate loans in which we have entered into variable rate swap contracts.2024. | | | | | | | | | | | | | | | | | | | | | | | 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 | % |
| | | | | | | | | | | | | | | | | | | | | | | March 31, 2024 | Contractual maturity (dollars in thousands) | | Fixed interest rate | | Floating interest rate | | Total | One year or less | | $ | 578,700 | | $ | 1,490,202 | | $ | 2,068,902 | One to five years | | 2,278,333 | | 1,629,037 | | 3,907,370 | Five to fifteen years | | 1,064,045 | | 1,084,628 | | 2,148,673 | Over fifteen years | | 812,784 | | 351,180 | | 1,163,964 | Total ($) | | $ | 4,733,862 | | $ | 4,555,047 | | $ | 9,288,909 | Total (%) | | 51.0 | % | | 49.0 | % | | 100.0 | % |
Of the loans shown above with floating interest rates as of March 31, 2023,2024, many have interest rate floors as follows: | Loans with interest rate floors (dollars in thousands) | Loans with interest rate floors (dollars in thousands) | | Maturing in one year or less | Weighted average level of support (bps) | Maturing in one to five years | Weighted average level of support (bps) | Maturing in five years to fifteen years | Weighted average level of support (bps) | Maturing after fifteen years | Weighted average level of support (bps) | Total | Weighted average level of support (bps) | Loans with interest rate floors (dollars in thousands) | | Maturing in one year or less | Weighted average level of support (bps) | Maturing in one to five years | Weighted average level of support (bps) | Maturing in five years to fifteen years | Weighted average level of support (bps) | Maturing after fifteen years | Weighted average level of support (bps) | Total | Weighted average level of support (bps) | Loans with current rates above floors: | Loans with current rates above floors: | | | 1-25 bps | | | 1-25 bps | | | 1-25 bps | 1-25 bps | | $ | 2,112 | | 24.92 | | $ | — | | — | | $ | — | | — | | $ | — | | — | | $ | 2,112 | | 24.92 | | 26-50 bps | 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 | | 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 | | 816 | | 100.00 | | 13,711 | | 89.53 | | 4,875 | | 84.12 | | 3,239 | | 79.79 | | 22,641 | | 87.35 | | 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 | | $ | 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: | | | | | | | | | | | | 1-25 bps | | $ | — | | — | | $ | 1,250 | | 22.00 | | $ | — | | — | | $ | — | | — | | $ | 1,250 | | 22.00 | | | 26-50 bps | 26-50 bps | | — | | — | | — | | — | | 428 | | 47.00 | | 138 | | 47.00 | | 566 | | 47.00 | | | 26-50 bps | | | 101-200 bps | | — | | — | | 39 | | 162.00 | | 281 | | 147.00 | | — | | — | | 320 | | 148.85 | | 26-50 bps | | 51-75 bps | | 76-100 bps | | | | Total loans at interest rate floors providing support | Total loans at interest rate floors providing support | | $ | — | | — | | $ | 1,289 | | 26.28 | | $ | 709 | | 86.61 | | $ | 138 | | 47.00 | | $ | 2,136 | | 47.64 | | | Total loans at interest rate floors providing support | | | Total loans at interest rate floors providing support | |
Asset quality In order to operate with a sound risk profile, we focus on originating loans that we believe to be of high quality. We have established loan approval policies and procedures to assist us in maintaining the overall quality of our loan portfolio. When delinquencies in our loans exist, we rigorously monitor the levels of such delinquencies for any negative or adverse trends. From time to time, we may modify loans to extend the term or make other concessions, including extensions or interest rate modifications,reduction, a term extension, principal forgiveness, payment deferral, or a combination thereof, to help a borrower with a deteriorating financial condition stay current on their loan and to avoid foreclosure. Furthermore, we are committed to collecting on all of our loans, which can result in us carrying higher nonperforming assets. We believe thisloans. This practice leads to higher recoveries in the long-term. Nonperforming assets Our nonperforming assets consist of nonperforming loans, other real estate owned and other repossessed non-earning assets. As of March 31, 20232024 and December 31, 2022,2023, we had $79.9$94.1 million and $87.5$86.5 million, respectively, in nonperforming assets. Nonperforming loans are those on which the accrual of interest has stopped, as well as loans that are contractually 90 days past due on which interest continues to accrue. Generally, the accrual of interest is discontinued when the full collection of principal or interest is in doubt or when the payment of principal or interest has been contractually 90 days past due, unless the obligation is both well secured and in the process of collection. In our loan review process, we seek to identify and proactively address nonperforming loans. Accrued interest receivable written off as an adjustment to interest income amounted to $0.2 million for both the three months ended March 31, 20232024 and 2022.2023. Additionally, we had net interest recoveries on nonperforming assets previously charged off of $0.2$0.3 million and $1.0$0.2 million for the three months ended March 31, 20232024 and 2022,2023, respectively. Nonperforming loans HFI increased by $6.8 million to $67.8 million as of March 31, 2024 compared to $60.9 million as of December 31, 2023. The increase in nonperforming loans primarily occurred in our commercial and construction portfolios.
In addition to loans HFI, we also include loans HFS that have stopped accruing interest or become 90 days or more past due. Our nonperforming commercial loans HFS represent a pool of institutional healthcare loans acquired in our 2020 merger with Franklin Financial Network, Inc. that amounted to $9.3 million as of both March 31, 2023 and December 31, 2022, respectively.
As of March 31, 20232024 and December 31, 2022,2023, we had $20.5$20.9 million and $26.2$21.2 million, respectively, of delinquent GNMA optional repurchase loans previously sold included on our consolidated balance sheets in loans held for sale. These are considered nonperforming assets as we do not earn any interest on the unexercised option to repurchase these loans. As of both March 31, 20232024 and December 31, 2022,2023, other real estate owned included $0.5$0.1 million and $2.1 million, respectively, of excess land and facilities held for sale resulting from our prior acquisitions. Other nonperformingrepossessed assets also included other repossessed non-real estate amounting to $0.5$1.8 million and $0.4$1.1 million as of March 31, 20232024 and December 31, 2022,2023, respectively. The following table provides details of our nonperforming assets, the ratio of such loans and other nonperforming assets to total assets, and certain other related information as of the dates presented: | | March 31, | | December 31, | | | | March 31, | | | | March 31, | | | | March 31, | | (dollars in thousands) | (dollars in thousands) | | 2023 | | 2022 | | 2022 | | | Loan Type | | | | | | | (dollars in thousands) | | (dollars in thousands) | | Loan Type: | | Loan Type: | | Loan Type: | | Commercial and industrial | | Commercial and industrial | | Commercial and industrial | Commercial and industrial | | $ | 2,455 | | $ | 3,940 | | | $ | 1,443 | | | Construction | Construction | | 382 | | 679 | | | 389 | | | Construction | | Construction | | Residential real estate: | | Residential real estate: | | Residential real estate: | Residential real estate: | | | 1-to-4 family mortgage | 1-to-4 family mortgage | | 20,593 | | 15,023 | | | 23,115 | | | 1-to-4 family mortgage | | 1-to-4 family mortgage | | Residential line of credit | | Residential line of credit | | Residential line of credit | Residential line of credit | | 1,082 | | 1,577 | | | 1,531 | | | Multi-family mortgage | Multi-family mortgage | | 39 | | 48 | | | 42 | | | Multi-family mortgage | | Multi-family mortgage | | Commercial real estate: | | Commercial real estate: | | Commercial real estate: | Commercial real estate: | | | Owner-occupied | Owner-occupied | | 7,211 | | 6,989 | | | 5,410 | | | Owner-occupied | | Owner-occupied | | Non-owner occupied | | Non-owner occupied | | Non-owner occupied | Non-owner occupied | | 5,802 | | 7,185 | | | 5,956 | | | Consumer and other | Consumer and other | | 7,916 | | 5,258 | | | 7,960 | | | Total nonperforming loans held for investment | | $ | 45,480 | | $ | 40,699 | | | $ | 45,846 | | | Consumer and other | | Consumer and other | | Total nonperforming loans HFI | | Total nonperforming loans HFI | | Total nonperforming loans HFI | | Commercial loans held for sale | | Commercial loans held for sale | | Commercial loans held for sale | Commercial loans held for sale | | 9,278 | | 5,087 | | | 9,289 | | | Mortgage loans held for sale(1) | Mortgage loans held for sale(1) | | 20,528 | | — | | | 26,211 | | | Mortgage loans held for sale(1) | | Mortgage loans held for sale(1) | | Other real estate owned | Other real estate owned | | 4,085 | | 9,721 | | | 5,794 | | | Other | | 498 | | 453 | | | 351 | | | Other real estate owned | | Other real estate owned | | Other repossessed assets | | Other repossessed assets | | Other repossessed assets | | Total nonperforming assets | | Total nonperforming assets | | Total nonperforming assets | Total nonperforming assets | | $ | 79,869 | | $ | 55,960 | | | $ | 87,491 | | | 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 loans held for investment as a percentage of total loans HFI | | Nonperforming loans held for investment as a percentage of total loans HFI | | Nonperforming assets as a percentage of total assets | Nonperforming assets as a percentage of total assets | | 0.61 | % | 0.44 | % | | 0.68 | % | | Nonperforming assets as a percentage of total assets | | Nonperforming assets as a percentage of total assets | | Nonaccrual loans HFI as a percentage of loans HFI | | Nonaccrual loans HFI as a percentage of loans HFI | | 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. | | | (1) Represents optional right to repurchase government guaranteed GNMA mortgage loans previously sold that have become past due greater than 90 days. | | | (1) Represents optional right to repurchase government guaranteed GNMA mortgage loans previously sold that have become past due greater than 90 days. | |
We have evaluated our loans held for investmentHFI classified as nonperforming and believe all nonperforming loans have been adequately reserved for in the allowance for credit losses on loans HFI as of March 31, 20232024 and December 31, 2022.2023. Management also continually monitors past due loans for potential credit quality deterioration. Loans not considered nonperforming include loans 30-89 days past due that continue to accrue interest amounting to $25.1$37.5 million at March 31, 20232024 as compared to $31.3$47.0 million at December 31, 2022.2023. The decrease from December 31, 2023 to March 31, 2024 primarily occurred within our construction and 1-to-4 family mortgage portfolios.
Allowance for credit losses We calculate our expected credit loss using a lifetime loss rate methodology. We utilize probability-weighted forecasts, which consider multiple macroeconomic variables from a third-party vendor that are applicable to the type of loan. Each of our loss rate models incorporate forward-looking macroeconomic projections throughout the reasonable and supportable forecast period and the subsequent historical reversion at the macroeconomic variable input level. In order to estimate the life of a loan, the contractual term of the loan is adjusted for estimated prepayments based on market information and our prepayment history.
The allowance for credit losses represents the portion of the loan's amortized cost basis that we do not expect to collect due to credit losses over the loan's life, considering past events, current conditions, and reasonable and supportable
forecasts of future economic conditions considering macroeconomic forecasts.conditions. Loan losses are charged against the allowance when we believe the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance for credit losses is based on the loan's amortized cost basis, excluding accrued interest receivable, as we promptly charge off uncollectible accrued interest receivable determinedreceivable. We calculate our expected credit loss using a lifetime loss rate methodology. We utilize probability-weighted forecasts, which consider multiple macroeconomic variables from Moody's that are applicable to be uncollectible. We determine the appropriatenesseach type of the allowance through periodic evaluationloan. See Note 1, "Basis 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“presentation," in the notes to theour consolidated financial statements in this reportour Annual Report that was filed with the SEC on February 27, 2024 for additional information regarding our methodology. The following table presents the allocation of the allowance for credit losses on loans HFI by loan category as well as the ratio of loans by loan category compared to the total loan portfolio as of the dates indicated: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | March 31, | | December 31, | | | 2023 | | 2022 | (dollars in thousands) | | Amount | | | | ACL as a % of loans HFI category | | Amount | | | | ACL as a % of loans HFI category | | | | | | | | | | | | | | Loan Type: | | | | | | | | | | | | | Commercial and industrial | | $ | 11,117 | | | | | 0.67 | % | | $ | 11,106 | | | | | 0.67 | % | Construction | | 41,025 | | | | | 2.42 | % | | 39,808 | | | | | 2.40 | % | Residential real estate: | | | | | | | | | | | | | 1-to-4 family mortgage | | 27,213 | | | | | 1.74 | % | | 26,141 | | | | | 1.66 | % | Residential line of credit | | 9,034 | | | | | 1.82 | % | | 7,494 | | | | | 1.51 | % | Multi-family mortgage | | 6,619 | | | | | 1.35 | % | | 6,490 | | | | | 1.35 | % | Commercial real estate: | | | | | | | | | | | | | Owner occupied | | 7,952 | | | | | 0.70 | % | | 7,783 | | | | | 0.70 | % | Non-owner occupied | | 21,868 | | | | | 1.13 | % | | 21,916 | | | | | 1.12 | % | Consumer and other | | 13,981 | | | | | 3.77 | % | | 13,454 | | | | | 3.67 | % | Total allowance | | $ | 138,809 | | | | | 1.48 | % | | $ | 134,192 | | | | | 1.44 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | March 31, | | December 31, | | | | | | 2024 | | 2023 | (dollars in thousands) | | Amount | | | | ACL as a % of loans HFI category | | Amount | | | | ACL as a % of loans HFI category | | | | | | | | | | | | | | Loan Type: | | | | | | | | | | | | | Commercial and industrial | | $ | 17,272 | | | | | 1.07 | % | | $ | 19,599 | | | | | 1.14 | % | Construction | | 37,308 | | | | | 2.94 | % | | 35,372 | | | | | 2.53 | % | Residential real estate: | | | | | | | | | | | | | 1-to-4 family mortgage | | 26,128 | | | | | 1.66 | % | | 26,505 | | | | | 1.69 | % | Residential line of credit | | 9,918 | | | | | 1.81 | % | | 9,468 | | | | | 1.78 | % | Multi-family mortgage | | 8,973 | | | | | 1.46 | % | | 8,842 | | | | | 1.46 | % | Commercial real estate: | | | | | | | | | | | | | Owner-occupied | | 10,749 | | | | | 0.87 | % | | 10,653 | | | | | 0.86 | % | Non-owner occupied | | 23,949 | | | | | 1.20 | % | | 22,965 | | | | | 1.18 | % | Consumer and other | | 17,370 | | | | | 4.05 | % | | 16,922 | | | | | 4.11 | % | Total allowance for credit losses on loans HFI | | $ | 151,667 | | | | | 1.63 | % | | $ | 150,326 | | | | | 1.60 | % |
The following table summarizes activity in our allowance for credit losses on loans HFI during the periods indicated: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended March 31, | | Year Ended December 31, | | | | | | | | | | | | | | | (dollars in thousands) | | | | | | 2023 | | | 2022 | | | 2022 | | | | | | | | | | | | | | | | Allowance for credit losses at beginning of period | | | | | | $ | 134,192 | | | $ | 125,559 | | | $ | 125,559 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Charge-offs: | | | | | | | | | | | | | | | | | | | | | | | | | Commercial and industrial | | | | | | (46) | | | (4) | | | (2,087) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Residential real estate: | | | | | | | | | | | | | | | | | | | | | | | | | 1-to-4 family mortgage | | | | | | (16) | | | — | | | (77) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | | | | Owner occupied | | | | | | — | | | — | | | (15) | | | | | | | | | | | | | | | | Non-owner occupied | | | | | | — | | | — | | | (268) | | | | | | | | | | | | | | | | Consumer and other | | | | | | (705) | | | (575) | | | (2,254) | | | | | | | | | | | | | | | | Total charge-offs | | | | | | $ | (767) | | | $ | (579) | | | $ | (4,701) | | | | | | | | | | | | | | | | Recoveries: | | | | | | | | | | | | | | | | | | | | | | | | | Commercial and industrial | | | | | | $ | 67 | | | $ | 958 | | | $ | 2,005 | | | | | | | | | | | | | | | | Construction | | | | | | — | | | — | | | 11 | | | | | | | | | | | | | | | | Residential real estate: | | | | | | | | | | | | | | | | | | | | | | | | | 1-to-4 family mortgage | | | | | | 15 | | | 12 | | | 54 | | | | | | | | | | | | | | | | Residential line of credit | | | | | | — | | | 1 | | | 17 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | | | | Owner-occupied | | | | | | 66 | | | 10 | | | 88 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Consumer and other | | | | | | 239 | | | 217 | | | 766 | | | | | | | | | | | | | | | | Total recoveries | | | | | | $ | 387 | | | $ | 1,198 | | | $ | 2,941 | | | | | | | | | | | | | | | | Net (charge-offs) recoveries | | | | | | (380) | | | 619 | | | (1,760) | | | | | | | | | | | | | | | | Provision for credit losses | | | | | | 4,997 | | | (6,129) | | | 10,393 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Allowance for credit losses at the end of period(1) | | | | | | $ | 138,809 | | | $ | 120,049 | | | $ | 134,192 | | | | | | | | | | | | | | | | Ratio of net (charge-offs) recoveries during the period to average loans outstanding during the period | | | | | | (0.02) | % | | 0.03 | % | | (0.02) | % | | | | | | | | | | | | | | | Allowance for credit losses as a percentage of loans at end of period(1) | | | | | | 1.48 | % | | 1.50 | % | | 1.44 | % | | | | | | | | | | | | | | | Allowance for credit losses as a percentage of nonaccrual loans HFI(1) | | | | | | 421.9 | % | | 431.4 | % | | 489.2 | % | | | | | | | | | | | | | | | Allowance for credit losses as a percentage of nonperforming loans at end of period(1) | | | | | | 305.2 | % | | 295.0 | % | | 292.7 | % | | | | | | | | | | | | | | | (1) Excludes reserve for credit losses on unfunded commitments of $18.5 million,$16.3 million, and $23.0 million recorded in accrued expenses and other liabilities on our consolidated balance sheets as of March 31, 2023, March 31, 2022, and December 31, 2022, respectively. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended March 31, | | | | | Year Ended December 31, | | | | | | | | | | | | | (dollars in thousands) | | 2024 | | | 2023 | | | | | | | 2023 | | | | | | | | | | | | | | | | Allowance for credit losses on loans HFI at beginning of period | | $ | 150,326 | | | $ | 134,192 | | | | | | | $ | 134,192 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Charge-offs: | | | | | | | | | | | | | | | | | | | | | | | | | Commercial and industrial | | (43) | | | (46) | | | | | | | (462) | | | | | | | | | | | | | | | | Construction | | (92) | | | — | | | | | | | — | | | | | | | | | | | | | | | | Residential real estate: | | | | | | | | | | | | | | | | | | | | | | | | | 1-to-4 family mortgage | | — | | | (16) | | | | | | | (46) | | | | | | | | | | | | | | | | Residential line of credit | | (20) | | | — | | | | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | | | | Owner-occupied | | — | | | — | | | | | | | (144) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Consumer and other | | (772) | | | (705) | | | | | | | (2,851) | | | | | | | | | | | | | | | | Total charge-offs | | $ | (927) | | | $ | (767) | | | | | | | $ | (3,503) | | | | | | | | | | | | | | | | Recoveries: | | | | | | | | | | | | | | | | | | | | | | | | | Commercial and industrial | | $ | 14 | | | $ | 67 | | | | | | | $ | 273 | | | | | | | | | | | | | | | | Construction | | — | | | — | | | | | | | 10 | | | | | | | | | | | | | | | | Residential real estate: | | | | | | | | | | | | | | | | | | | | | | | | | 1-to-4 family mortgage | | 56 | | | 15 | | | | | | | 100 | | | | | | | | | | | | | | | | Residential line of credit | | — | | | — | | | | | | | 1 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Commercial real estate: | | | | | | | | | | | | | | | | | | | | | | | | | Owner-occupied | | 40 | | | 66 | | | | | | | 109 | | | | | | | | | | | | | | | | Non-owner occupied | | — | | | — | | | | | | | 1,833 | | | | | | | | | | | | | | | | Consumer and other | | 306 | | | 239 | | | | | | | 573 | | | | | | | | | | | | | | | | Total recoveries | | $ | 416 | | | $ | 387 | | | | | | | $ | 2,899 | | | | | | | | | | | | | | | | Net charge-offs | | (511) | | | (380) | | | | | | | (604) | | | | | | | | | | | | | | | | Provision for credit losses on loans HFI | | 1,852 | | | 4,997 | | | | | | | 16,738 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Allowance for credit losses on loans HFI at the end of period | | $ | 151,667 | | | $ | 138,809 | | | | | | | $ | 150,326 | | | | | | | | | | | | | | | | Ratio of annualized net charge-offs during the period to average loans outstanding during the period | | (0.02) | % | | (0.02) | % | | | | | | (0.01) | % | | | | | | | | | | | | | | | Allowance for credit losses on loans HFI as a percentage of loans | | 1.63 | % | | 1.48 | % | | | | | | 1.60 | % | | | | | | | | | | | | | | | Allowance for credit losses on loans HFI as a percentage of nonaccrual loans HFI | | 276.3 | % | | 421.9 | % | | | | | | 311.7 | % | | | | | | | | | | | | | | | Allowance for credit losses on loans HFI as a percentage of nonperforming loans | | 223.9 | % | | 305.2 | % | | | | | | 246.7 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following tables details our (reversal of)provision for credit losses on loans HFI and net (charge-offs) recoveries to average loans HFI outstanding by loan category during the periods indicated: | | Provision for credit losses(1) | | Net (charge-offs) recoveries | | Average loans HFI | | Ratio of annualized net (charge-offs) recoveries to average loans HFI | | | (Reversal of) provision for credit losses on loans HFI | | | | (Reversal of) provision for credit losses on loans HFI | | Net (charge-offs) recoveries | | Average loans HFI | | Ratio of annualized net (charge-offs) recoveries to average loans HFI | (dollars in thousands) | (dollars in thousands) | | Provision for credit losses(1) | | Net (charge-offs) recoveries | | Average loans HFI | | Ratio of annualized net (charge-offs) recoveries to average loans HFI | | | Three Months Ended March 31, 2023 | | Three Months Ended March 31, 2024 | | | Three Months Ended March 31, 2024 | | | Three Months Ended March 31, 2024 | | Commercial and industrial | | Commercial and industrial | | Commercial and industrial | Commercial and industrial | | $ | (10) | | | $ | 21 | | | $ | 1,663,572 | | | 0.01 | % | | $ | (2,298) | | | $ | | $ | (29) | | | $ | | $ | 1,709,052 | | | (0.01) | | (0.01) | % | Construction | Construction | | 1,217 | | | — | | | 1,687,980 | | | — | % | Construction | | 2,028 | | | (92) | | (92) | | | 1,323,850 | | 1,323,850 | | | (0.03) | | (0.03) | % | Residential real estate: | Residential real estate: | | 1-to-4 family mortgage | | 1-to-4 family mortgage | | 1-to-4 family mortgage | 1-to-4 family mortgage | | 1,073 | | | (1) | | | 1,567,471 | | | — | % | | (433) | | | 56 | | 56 | | | 1,574,970 | | 1,574,970 | | | 0.01 | | 0.01 | % | Residential line of credit | Residential line of credit | | 1,540 | | | — | | | 497,047 | | | — | % | Residential line of credit | | 470 | | | (20) | | (20) | | | 533,924 | | 533,924 | | | (0.02) | | (0.02) | % | Multi-family mortgage | Multi-family mortgage | | 129 | | | — | | | 487,394 | | | — | % | Multi-family mortgage | | 131 | | | — | | — | | | 614,019 | | 614,019 | | | — | | — | % | Commercial real estate: | Commercial real estate: | | Owner-occupied | Owner-occupied | | 103 | | | 66 | | | 1,127,738 | | | 0.02 | % | Owner-occupied | | Owner-occupied | | | 56 | | | 40 | | | 1,235,782 | | | 0.01 | % | Non-owner occupied | Non-owner occupied | | (48) | | | — | | | 1,951,024 | | | — | % | Non-owner occupied | | 984 | | | — | | — | | | 1,976,451 | | 1,976,451 | | | — | | — | % | Consumer and other | Consumer and other | | 993 | | | (466) | | | 364,482 | | | (0.52) | % | Consumer and other | | 914 | | | (466) | | (466) | | | 418,746 | | 418,746 | | | (0.45) | | (0.45) | % | Total | Total | | $ | 4,997 | | | $ | (380) | | | $ | 9,346,708 | | | (0.02) | % | Total | | $ | 1,852 | | | $ | | $ | (511) | | | $ | | $ | 9,386,794 | | | (0.02) | | (0.02) | % | Three Months Ended March 31, 2022 | | | | Three months ended March 31, 2023 | | Commercial and industrial | | Commercial and industrial | | Commercial and industrial | Commercial and industrial | | $ | (4,006) | | | $ | 954 | | | $ | 1,314,862 | | | 0.29 | % | | $ | (10) | | | $ | | $ | 21 | | | $ | | $ | 1,663,572 | | | 0.01 | | 0.01 | % | Construction | Construction | | 3,206 | | | — | | | 1,373,379 | | | — | % | Construction | | 1,217 | | | — | | — | | | 1,687,980 | | 1,687,980 | | | — | | — | % | Residential real estate: | Residential real estate: | | 1-to-4 family mortgage | | 1-to-4 family mortgage | | 1-to-4 family mortgage | | | 1,073 | | | (1) | | | 1,567,471 | | | — | % | Residential line of credit | | Residential line of credit | | 1,540 | | | — | | | 497,047 | | | — | % | Multi-family mortgage | | Multi-family mortgage | | 129 | | | — | | | 487,394 | | | — | % | Commercial real estate: | | Owner-occupied | | Owner-occupied | | Owner-occupied | | | 103 | | | 66 | | | 1,127,738 | | | 0.02 | % | Non-owner occupied | | Non-owner occupied | | (48) | | | — | | | 1,951,024 | | | — | % | Consumer and other | | Consumer and other | | 993 | | | (466) | | | 364,482 | | | (0.52) | % | Total | | Total | | $ | 4,997 | | | $ | (380) | | | $ | 9,346,708 | | | (0.02) | % | Year Ended December 31, 2023 | | Commercial and industrial | | Commercial and industrial | | Commercial and industrial | | | $ | 8,682 | | | $ | (189) | | | $ | 1,678,832 | | | (0.01) | % | Construction | | Construction | | (4,446) | | | 10 | | | 1,594,317 | | | — | % | Residential real estate: | | 1-to-4 family mortgage | | 1-to-4 family mortgage | | 1-to-4 family mortgage | 1-to-4 family mortgage | | 1,908 | | | 12 | | | 1,296,550 | | | — | % | | 310 | | | 54 | | 54 | | | 1,558,477 | | 1,558,477 | | | — | | — | % | Residential line of credit | Residential line of credit | | 641 | | | 1 | | | 384,592 | | | — | % | Residential line of credit | | 1,973 | | | 1 | | 1 | | | 507,884 | | 507,884 | | | — | | — | % | Multi-family mortgage | Multi-family mortgage | | (578) | | | — | | | 358,449 | | | — | % | Multi-family mortgage | | 2,352 | | | — | | — | | | 519,554 | | 519,554 | | | — | | — | % | Commercial real estate: | Commercial real estate: | | Owner occupied | Owner occupied | | (4,187) | | | 10 | | | 974,227 | | | — | % | Non-owner occupied | | (4,478) | | | — | | | 1,691,268 | | | — | % | Consumer and other | | 1,365 | | | (358) | | | 369,239 | | | (0.39) | % | Total | | $ | (6,129) | | | $ | 619 | | | $ | 7,762,566 | | | 0.03 | % | Year Ended December 31, 2022 | | | Commercial and industrial | | $ | (4,563) | | | $ | (82) | | | $ | 1,466,685 | | | (0.01) | % | Construction | | 11,221 | | | 11 | | | 1,549,622 | | | — | % | Residential real estate: | | 1-to-4 family mortgage | | 7,060 | | | (23) | | | 1,438,801 | | | — | % | Residential line of credit | | 1,574 | | | 17 | | | 431,826 | | | — | % | Multi-family mortgage | | (486) | | | — | | | 411,509 | | | — | % | Commercial real estate: | | Owner occupied | | Owner occupied | Owner occupied | | (4,883) | | | 73 | | | 1,060,523 | | | 0.01 | % | | 2,905 | | | (35) | | (35) | | | 1,169,680 | | 1,169,680 | | | — | | — | % | Non-owner occupied | Non-owner occupied | | (3,584) | | | (268) | | | 1,839,577 | | | (0.01) | % | Non-owner occupied | | (784) | | | 1,833 | | 1,833 | | | 1,925,759 | | 1,925,759 | | | 0.10 | | 0.10 | % | Consumer and other | Consumer and other | | 4,054 | | | (1,488) | | | 343,107 | | | (0.43) | % | Consumer and other | | 5,746 | | | (2,278) | | (2,278) | | | 381,474 | | 381,474 | | | (0.60) | | (0.60) | % | Total | Total | | $ | 10,393 | | | $ | (1,760) | | | $ | 8,541,650 | | | (0.02) | % | Total | | $ | 16,738 | | | $ | | $ | (604) | | | $ | | $ | 9,335,977 | | | (0.01) | | (0.01) | % |
1) Excludes (reversal of) provisionThe ACL on loans HFI was $151.7 million and $150.3 million and represented 1.63% and 1.60% of loans HFI as of March 31, 2024 and December 31, 2023, respectively. For further information related to the change in the ACL refer to “Provision for credit losses” section herein and Note 3, “Loans and allowance for credit losses on unfunded commitments of $(4.5) million, $1.9 million and $8.6 million recorded forloans HFI” in the three months ended March 31, 2023 and 2022 and for the year ended December 31, 2022, respectively.notes to our consolidated financial statements.The allowance for credit losses was $138.8 million and $134.2 million and represented 1.48% and 1.44% of loans held for investment as of March 31, 2023 and December 31, 2022, respectively. For the three months ended March 31, 2023,2024, we experienced net charge-offs of $0.4$0.5 million, or 0.02% of average loans HFI, compared to net recoveriescharge-offs of $0.6$0.4 million, or 0.03%0.02% for the three months ended March 31, 2022.2023. Our ratio of total nonperforming loans HFI as a percentage of total loans HFI remained constant at 0.49%increased by 8 basis points to 0.73% as of March 31, 20232024 compared to December 31, 2022.2023.
The primary reason for the increase in the allowance for credit losses is due to loan growth and a tightening monetary policy environment during the three months ended March 31, 2023. Specifically, we performed qualitative evaluations within our established qualitative framework, weighting the impact uncertainty due to inflation, negative economic forecasts, predicted Federal Reserve rate increases, status of federal government stimulus programs, supply chain disruptions for our customers, recent bank failures and other considerations. Further, the increase in estimated required reserve was attributable to forecasted deterioration in asset quality projected over life of the loan portfolio. As a ratio of
ACL to loans HFI by loan type, our construction consumer and other, residential 1-4 family mortgage and HELOC portfoliosportfolio incurred the largest increases year-over-year due to weighted projections that the economy may be nearing a recession. These portfolios areperiod-over-period. Our construction portfolio is heavily reliant on the strength of the economy; and therefore, they areit is adversely affected by inflation supply chain disruptions, and unemployment.high interest rates.
We also maintain an allowance for credit losses on unfunded commitments, which decreased to $18.5$7.7 million as of March 31, 20232024 from $23.0$8.8 million as of December 31, 20222023 due to a 6.27%an 18.7% annualized or $222.5$134.4 million decrease in unfunded loan commitments during the period. Notably, there was a $298.8$135.3 million decrease in unfunded loan commitments in our construction loan category pipeline which resulted in a $4.5$1.0 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 quartersyear to reduce commitments in specific categories judged to be inherently higher risk considering the current and projected economic conditions. Loans held for sale Commercial loans held for sale
Our loans held for sale includes a previously acquired portfolio of commercial loans, including syndicated national credits and institutional healthcare loans that are accounted for as held for sale. The loans had a fair value of $9.5 million as of March 31, 2023 compared to $30.5 million as of December 31, 2022. The change is primarily attributable to loans within the portfolio being paid off through external refinancing and pay-downs. As of March 31, 2023, the remaining outstanding balance was made up of only two relationships.
As a result of the payoff of two syndicated national credits and other net changes in fair value of commercial loans held for sale during three months ended March 31, 2023, we recorded a gain of $0.9 million, compared to a loss of $0.2 million for the three months ended March 31, 2022, both of which are included in 'other noninterest income' on the consolidated statement of income.
Mortgage loans held for sale
Mortgage loans held for sale consisted of $52.5$61.8 million of residential real estate mortgage loans in the process of being sold to third partiesthird-party private investors or government sponsored agencies and $20.5$20.9 million of GNMA optional repurchase loans. This compares to $82.8$46.6 million of residential real estate mortgage loans in the process of being sold to third partiesthird-party private investors or government sponsored agencies and $26.2$21.2 million of GNMA optional repurchase loans as of December 31, 2022.2023. Generally, mortgage volume decreases in rising interest rate environments and slower housing markets and increases in lower interest rate environments and robust housing markets. Interest rate lock volume for the three months ended March 31, 2023 and 2022 totaled $0.38 billion and $1.31 billion, respectively. The decrease in interest rate lock volume during the three months ended March 31, 2023 reflects the slow down experienced across the industry compared with the three months ended March 31, 2022, which benefited from historically low interest rates pre-empted by the COVID-19 Pandemic. The decrease also reflects the exit from our direct-to-consumer internet delivery channel completed during 2022. Interest rate lock volume within our direct-to-consumer internet delivery channel for the three months ended March 31, 2022 totaled $0.57 billion. Interest rate lock commitments in the pipeline were $157.2 million as of March 31, 2023 compared with $118.3 million as of December 31, 2022
Mortgage loans to be sold are sold either on a “best efforts” basis or under a mandatory delivery sales agreement. Under a “best efforts” sales agreement, residential real estate originations are locked in at a contractual rate with third party private investors or directly with government sponsored agencies, and we are obligated to sell the mortgages to such investors only if the mortgages are closed and funded. The risk we assume is conditioned upon loan underwriting and market conditions in the national mortgage market. Under a mandatory delivery sales agreement, we commit to deliver a certain principal amount of mortgage loans to an investor at a specified price and delivery date. Penalties are paid to the investor if we fail to satisfy the contract. Gains and losses are realized at the time consideration is received and all other criteria for sales treatment have been met. These loans are typically sold within fifteen to twenty-five days after the loan is funded, depending on the economic environment and competition in the market. Although loan fees and some interest income are derived from mortgage loans held for sale, the main source of income is gains from the sale of these loans in the secondary market.
Other earning assets
Securities purchased under agreements to resell ("reverse repurchase agreements")
We enter into agreements with certain customers to purchase investment securities under agreements to resell at specific dates in the future. This investment deploys some of our liquidity position into an instrument that improves the return on those funds in low interest rate environments. Additionally, we believe it positions us more favorably for a rising interest rate environment. Securities purchased under agreements to resell totaled $26.3 million and $75.4 million at March 31, 2023 and December 31, 2022, respectively.
Available-for-sale debt securities portfolio
Our investment portfolio objectives include maximizing total return after other primary objectives are achieved such as, but not limited to, providing liquidity, capital preservation, and pledging collateral for various lines of credit and other borrowings. The investment objectives guide the portfolio allocation among security types, maturities, and other attributes.
The fair value of our available-for-sale debt securities portfolio was $1.47 billion as of both March 31, 2023 and December 31, 2022.
During the three months ended March 31, 2023 and 2022, we purchased $0.9 million and $170.1 million in investment securities, respectively. There were no sales of securities sold during the three months ended March 31, 2023 or 2022. During the three months ended March 31, 2023 and 2022, maturities and calls of securities totaled $26.8 million and $57.4 million, respectively.
Included in the fair value of available-for-sale debt securities were net unrealized losses of $207.3 million and $234.4 million at March 31, 2023 and December 31, 2022, respectively. Current net unrealized losses are due to interest rate increases. We believe we are well positioned to mitigate the impact of future rate increases due to the shorter duration of our portfolio.
The following table sets forth the fair value, scheduled maturities and weighted average yields for our available-for-sale debt securities portfolio as of the dates indicated below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of March 31, | | As of December 31, | | | 2023 | | | 2022 | | (dollars in thousands) | | Fair value | | % of total investment securities | | Weighted average yield (1) | | Fair value | | % of total investment securities | | Weighted average yield (1) | Treasury securities: | | | | | | | | | | | | | Maturing within one year | | $ | 31,102 | | | 2.1 | % | | 2.25 | % | | $ | 729 | | | — | % | | 2.40 | % | Maturing in one to five years | | 77,721 | | | 5.3 | % | | 2.04 | % | | 106,951 | | | 7.3 | % | | 2.10 | % | Maturing in five to ten years | | — | | | — | % | | — | % | | — | | | — | % | | — | % | Maturing after ten years | | — | | | — | % | | — | % | | — | | | — | % | | — | % | Total Treasury securities | | 108,823 | | | 7.4 | % | | 2.10 | % | | 107,680 | | | 7.3 | % | | 2.10 | % | Government agency securities: | | | | | | | | | | | | | Maturing within one year | | — | | | — | % | | — | % | | — | | | — | % | | — | % | Maturing in one to five years | | 33,934 | | | 2.3 | % | | 1.56 | % | | 27,082 | | | 1.8 | % | | 1.50 | % | Maturing in five to ten years | | 6,032 | | | 0.4 | % | | 1.58 | % | | 12,011 | | | 0.8 | % | | 1.70 | % | Maturing after ten years | | 962 | | | 0.1 | % | | 4.55 | % | | 969 | | | 0.1 | % | | 3.32 | % | Total government agency securities | | 40,928 | | | 2.8 | % | | 1.63 | % | | 40,062 | | | 2.7 | % | | 1.60 | % | Municipal securities: | | | | | | | | | | | | | Maturing within one year | | 3,168 | | | 0.2 | % | | 2.03 | % | | 3,496 | | | 0.2 | % | | 2.18 | % | Maturing in one to five years | | 18,930 | | | 1.3 | % | | 2.67 | % | | 17,775 | | | 1.2 | % | | 2.38 | % | Maturing in five to ten years | | 43,801 | | | 3.0 | % | | 3.13 | % | | 39,034 | | | 2.7 | % | | 3.12 | % | Maturing after ten years | | 205,095 | | | 13.9 | % | | 2.93 | % | | 204,115 | | | 13.9 | % | | 3.18 | % | Total obligations of state and municipal subdivisions | | 270,994 | | | 18.4 | % | | 2.91 | % | | 264,420 | | | 18.0 | % | | 3.10 | % | Residential and commercial mortgage-backed securities guaranteed by FNMA, GNMA and FHLMC: | | | | | | | | | | | | | Maturing within one year | | — | | | — | % | | — | % | | — | | | — | % | | — | % | Maturing in one to five years | | 3,758 | | | 0.3 | % | | 2.76 | % | | 3,834 | | | 0.3 | % | | 2.73 | % | Maturing in five to ten years | | 25,725 | | | 1.7 | % | | 2.68 | % | | 23,683 | | | 1.6 | % | | 2.65 | % | Maturing after ten years | | 1,013,628 | | | 68.9 | % | | 1.85 | % | | 1,024,320 | | | 69.6 | % | | 1.84 | % | Total residential and commercial mortgage- backed securities guaranteed by FNMA, GNMA and FHLMC | | 1,043,111 | | | 70.9 | % | | 1.87 | % | | 1,051,837 | | | 71.5 | % | | 1.86 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Corporate securities: | | | | | | | | | | | | | Maturing within one year | | — | | | — | % | | — | % | | — | | | — | % | | — | % | Maturing in one to five years | | — | | | — | % | | — | % | | 373 | | | — | % | | 5.00 | % | Maturing in five to ten years | | 7,149 | | | 0.5 | % | | 3.94 | % | | 6,814 | | | 0.5 | % | | 3.87 | % | Maturing after ten years | | — | | | — | % | | — | % | | — | | | — | % | | — | % | Total Corporate securities | | 7,149 | | | 0.5 | % | | 3.94 | % | | 7,187 | | | 0.5 | % | | 3.94 | % | Total available-for-sale debt securities | | $ | 1,471,005 | | | 100.0 | % | | 2.08 | % | | $ | 1,471,186 | | | 100.0 | % | | 2.10 | % |
(1)Yields on a tax-equivalent basis.
Equity Securities
As of March 31, 2023 and December 31, 2022, we had $3.1 million and $3.0 million, respectively, in marketable equity securities recorded at fair value that primarily consisted of mutual funds. During the three months ended March 31, 2023, the change in the fair value of equity securities resulted in a net gain of $69 thousand. During the three months ended March 31, 2022, the change in the fair value of equity securities resulted in a net loss of $154 thousand.
Deposits Deposits represent the Bank’s primary source of funds.funding. We continue to focus on growing core customer deposits through our relationship driven banking philosophy, community-focused marketing programs and initiatives such as the development of our treasury management services. Total deposits were $11.18$10.50 billion and $10.86$10.55 billion as of March 31, 20232024 and December 31, 2022, respectively, which represents a 12.2% annualized increase quarter-over-quarter.2023, respectively. Noninterest-bearing deposits at March 31, 20232024 and December 31, 20222023 were $2.49$2.18 billion and $2.68$2.22 billion, respectively, while interest-bearing deposits were $8.69$8.32 billion and $8.18$8.33 billion at March 31, 20232024 and December 31, 2022,2023, respectively. Included The decrease in noninterest-bearing deposits of $36.3 million from December 31, 2023 to March 31, 2024 is attributable to migration to interest-yielding products such as money market and savings deposits, which increased by $94.1 million from December 31, 2023. Also included in noninterest-bearing deposits are certain mortgage escrow deposits from our third-party mortgage servicing provider, amountingwhich amounted to $92.9$92.4 million and $75.6$63.6 million atas of March 31, 20232024 and December 31, 2022,2023, respectively. Interest-bearing checking deposits and money market increaseddecreased by $232.9$82.9 million and $230.9 million during the three months ended Marchfrom December 31, 2023 respectively. These increases were primarily driven by increasesdue largely to decreases in our deposits from municipal and governmental entities, (i.e. "public deposits")also known as public funds, which increaseddecreased by $313.2$44.1 million during the period. These increases were partially offsetThe decrease in public funds was due to management's decision to not renew certain maturing public deposits due to rising costs of these deposits. Additionally, brokered and internet time deposits decreased by decreases$19.6 million to $131.2 million as of March 31, 2024 compared to December 31, 2023, which was a result of our balance sheet and liquidity management strategy in non-interest bearing deposits of $187.5 million during the same period. Our deposit composition continuesorder to shift as banks are competing for customers who are searching fordecrease our exposure to higher yields.cost deposits. As a result of the rising interest rate environment and the shift in our deposit composition, we have experienced an increase in our total cost of deposits increased during the three months ended March 31, 2023 from the three months ended March 31, 2022 by 174 basis points to 1.94%, and the cost of interest-bearing deposits increased to 2.53% from 0.27%and total deposits. Average deposit balances by type, together with the average rates per period are reflected in the same period for the prior year. We utilize designated fair value hedges to mitigateaverage balance sheet amounts, interest paid, and rate exposure associated with certain fixed-rate money market deposits. The aggregate fair value of these hedgesanalysis tables included in this management's discussion and analysis under the carrying amountsubheading “Results of total money market deposits as of March 31, 2023 and December 31, 2022 was $8.7 million and $9.8 million, respectively.operations” discussion.
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“Related party transactions"transactions” in the notes to our consolidated financial statements included in this Report. Average deposit balances
The following table sets forth the distribution by type together withof our deposit accounts as of the averagedates indicated: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | March 31, | | December 31, | | | | | 2024 | | | 2023 | | | | (dollars in thousands) | | Amount | | % of total deposits | | Average rate(1) | | Amount | | % of total deposits | | Average rate(1) | | | | | | | Deposit Type | | | | | | | | | | | | | | | | | | | Noninterest-bearing demand | | $ | 2,182,121 | | | 21 | % | | — | % | | $ | 2,218,382 | | | 21 | % | | — | % | | | | | | | Interest-bearing demand | | 2,421,487 | | | 23 | % | | 3.01 | % | | 2,504,421 | | | 24 | % | | 2.86 | % | | | | | | | Money market | | 3,923,571 | | | 37 | % | | 3.93 | % | | 3,819,814 | | | 36 | % | | 3.53 | % | | | | | | | Savings deposits | | 375,367 | | | 4 | % | | 0.07 | % | | 385,037 | | | 4 | % | | 0.06 | % | | | | | | | Customer time deposits | | 1,471,190 | | | 14 | % | | 3.90 | % | | 1,469,811 | | | 14 | % | | 3.15 | % | | | | | | | Brokered and internet time deposits | | 131,192 | | | 1 | % | | 5.31 | % | | 150,822 | | | 1 | % | | 5.27 | % | | | | | | | Total deposits | | $ | 10,504,928 | | | 100 | % | | 2.76 | % | | $ | 10,548,287 | | | 100 | % | | 2.39 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Customer Time Deposits(2) | | | | | | | | | | | | | | | | | | | 0.00-1.00% | | $ | 53,059 | | | 4 | % | | | | $ | 62,464 | | | 4 | % | | | | | | | | | 1.01-2.00% | | 100,296 | | | 7 | % | | | | 114,521 | | | 8 | % | | | | | | | | | 2.01-3.00% | | 48,604 | | | 3 | % | | | | 51,346 | | | 4 | % | | | | | | | | | 3.01-4.00% | | 221,790 | | | 15 | % | | | | 268,550 | | | 18 | % | | | | | | | | | 4.01-5.00% | | 893,113 | | | 61 | % | | | | 812,781 | | | 55 | % | | | | | | | | | Above 5.00% | | 154,328 | | | 10 | % | | | | 160,149 | | | 11 | % | | | | | | | | | Total customer time deposits | | $ | 1,471,190 | | | 100 | % | | | | $ | 1,469,811 | | | 100 | % | | | | | | | | | Brokered and Internet Time Deposits(2) | | | | | | | | | | | | | | | | | | | 0.00-1.00% | | $ | 99 | | | — | % | | | | $ | 99 | | | — | % | | | | | | | | | 1.01-2.00% | | — | | | — | % | | | | — | | | — | % | | | | | | | | | 2.01-3.00% | | 248 | | | — | % | | | | 248 | | | — | % | | | | | | | | | 3.01-4.00% | | — | | | — | % | | | | — | | | — | % | | | | | | | | | 4.01-5.00% | | — | | | — | % | | | | — | | | — | % | | | | | | | | | Above 5.00% | | 130,845 | | | 100 | % | | | | 150,475 | | | 100 | % | | | | | | | | | Total brokered and internet time deposits | | $ | 131,192 | | | 100 | % | | | | $ | 150,822 | | | 100 | % | | | | | | | | | Total time deposits | | $ | 1,602,382 | | | | | | | $ | 1,620,633 | | | | | | | | | | | |
(1) Average rates per period are reflected inpresented for the average balance sheet amounts, interest paidthree months ended March 31, 2024 and rate analysis tables included in this management's discussion and analysis under the subheading "Resultsyear ended December 31, 2023, respectively. (2) Rates are presented as of operations" discussion.period-end.
The following table sets forth the distribution by type ofFurther details related to our deposit accountscustomer base is presented below as of the dates indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of March 31, | | As of December 31, | | | | | | | | | 2023 | | | 2022 | | | | (dollars in thousands) | | Amount | | % of total deposits | | Average rate | | Amount | | % of total deposits | | Average rate | | | | | | | | | | | | | | | | | | | | | | | | | | Deposit Type | | | | | | | | | | | | | | | | | | | Noninterest-bearing demand | | $ | 2,489,149 | | | 23 | % | | — | % | | $ | 2,676,631 | | | 25 | % | | — | % | | | | | | | Interest-bearing demand | | 3,292,883 | | | 29 | % | | 2.44 | % | | 3,059,984 | | | 28 | % | | 0.70 | % | | | | | | | Money market | | 3,457,032 | | | 31 | % | | 2.95 | % | | 3,226,102 | | | 30 | % | | 0.80 | % | | | | | | | Savings deposits | | 446,981 | | | 4 | % | | 0.06 | % | | 471,143 | | | 4 | % | | 0.05 | % | | | | | | | Customer time deposits | | 1,496,024 | | | 13 | % | | 2.54 | % | | 1,420,131 | | | 13 | % | | 0.99 | % | | | | | | | Brokered and internet time deposits | | 846 | | | — | % | | 2.02 | % | | 1,843 | | | — | % | | 1.36 | % | | | | | | | Total deposits | | $ | 11,182,915 | | | 100 | % | | 1.94 | % | | $ | 10,855,834 | | | 100 | % | | 0.54 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Customer Time Deposits | | | | | | | | | | | | | | | | | | | 0.00-1.00% | | $ | 227,624 | | | 15 | % | | | | $ | 387,739 | | | 27 | % | | | | | | | | | 1.01-2.00% | | 341,232 | | | 23 | % | | | | 341,721 | | | 24 | % | | | | | | | | | 2.01-3.00% | | 78,959 | | | 5 | % | | | | 89,916 | | | 6 | % | | | | | | | | | 3.01-4.00% | | 382,690 | | | 26 | % | | | | 342,576 | | | 24 | % | | | | | | | | | 4.01-5.00% | | 431,231 | | | 29 | % | | | | 224,308 | | | 16 | % | | | | | | | | | Above 5.00% | | 34,288 | | | 2 | % | | | | 33,871 | | | 3 | % | | | | | | | | | Total customer time deposits | | $ | 1,496,024 | | | 100 | % | | | | $ | 1,420,131 | | | 100 | % | | | | | | | | | Brokered and Internet Time Deposits | | | | | | | | | | | | | | | | | | | 0.00-1.00% | | $ | 99 | | | 12 | % | | | | $ | 99 | | | 5 | % | | | | | | | | | 1.01-2.00% | | — | | | — | % | | | | 747 | | | 41 | % | | | | | | | | | 2.01-3.00% | | 497 | | | 59 | % | | | | 747 | | | 41 | % | | | | | | | | | 3.01-4.00% | | 250 | | | 29 | % | | | | 250 | | | 13 | % | | | | | | | | | 4.01-5.00% | | — | | | — | % | | | | — | | | — | % | | | | | | | | | Above 5.00% | | — | | | — | % | | | | — | | | — | % | | | | | | | | | Total brokered and internet time deposits | | $ | 846 | | | 100 | % | | | | $ | 1,843 | | | 100 | % | | | | | | | | | Total time deposits | | $ | 1,496,870 | | | | | | | $ | 1,421,974 | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | March 31, | | December 31, | | | | | | 2024 | | | 2023 | | (dollars in thousands) | | Amount | | % of total deposits | | Amount | | % of total deposits | Deposits by customer segment(1) | | | | | | | | | Consumer | | $ | 4,866,099 | | | 46 | % | | $ | 4,880,890 | | | 46 | % | Commercial | | 4,085,282 | | | 39 | % | | 4,069,724 | | | 39 | % | Public | | 1,553,547 | | | 15 | % | | 1,597,673 | | | 15 | % | Total deposits | | $ | 10,504,928 | | | 100 | % | | $ | 10,548,287 | | | 100 | % | (1) Segments are determined based on the customer account level.The tables below setsset forth maturity information on time deposits below and amounts in excess of the FDIC insurance limit as of March 31, 2023:2024: | | | March 31, 2023 | (dollars in thousands) | (dollars in thousands) | | Amount | | Weighted average interest rate at period end | (dollars in thousands) | | (dollars in thousands) | | | Amount | | Weighted average interest rate at period end | Time deposits of $250 and less | Time deposits of $250 and less | | Months to maturity: | Months to maturity: | | Months to maturity: | | Months to maturity: | | Three or less | | Three or less | | Three or less | Three or less | | $ | 100,791 | | | 0.91 | % | | $ | 256,159 | | | 3.84 | | 3.84 | % | Over Three to Six | Over Three to Six | | 101,432 | | | 1.79 | % | Over Three to Six | | 183,215 | | | 4.05 | | 4.05 | % | Over Six to Twelve | Over Six to Twelve | | 274,520 | | | 2.75 | % | Over Six to Twelve | | 361,826 | | | 3.78 | | 3.78 | % | Over Twelve | Over Twelve | | 450,498 | | | 3.35 | % | Over Twelve | | 147,937 | | | 3.18 | | 3.18 | % | Total | Total | | $ | 927,241 | | | 2.73 | % | Total | | $ | 949,137 | | | 3.75 | | 3.75 | % | | Time deposits of greater than $250 | Time deposits of greater than $250 | | Time deposits of greater than $250 | | Time deposits of greater than $250 | | Months to maturity: | Months to maturity: | | Months to maturity: | | Months to maturity: | | Three or less | | Three or less | | Three or less | Three or less | | $ | 216,394 | | | 1.96 | % | | $ | 249,317 | | | 4.75 | | 4.75 | % | Over Three to Six | Over Three to Six | | 49,489 | | | 2.53 | % | Over Three to Six | | 91,362 | | | 4.32 | | 4.32 | % | Over Six to Twelve | Over Six to Twelve | | 134,315 | | | 3.41 | % | Over Six to Twelve | | 230,004 | | | 4.55 | | 4.55 | % | Over Twelve | Over Twelve | | 169,431 | | | 3.69 | % | Over Twelve | | 82,562 | | | 4.02 | | 4.02 | % | Total | Total | | $ | 569,629 | | | 2.87 | % | Total | | $ | 653,245 | | | 4.53 | | 4.53 | % |
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 insured or collateralized deposits and uninsured and uncollateralized and estimated insured deposits outstanding is presented below:below as of the dates indicated:
| | | | | | | | | | | | | | | | | 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 | % |
| | | | | | | | | | | | | | | | | March 31, | | December 31, | | | | | | 2024 | | | 2023 | | Estimated insured or collateralized deposits(1) | | $ | 7,372,728 | | | $ | 7,414,224 | | Estimated uninsured and uncollateralized deposits(1) | | $ | 3,132,200 | | | $ | 3,134,063 | | Estimated uninsured and uncollateralized deposits as a % of total deposits(1) | | 29.8 | % | | 29.7 | % | Estimated uninsured deposits(2) | | $ | 4,718,036 | | | $ | 4,899,349 | |
(1) Amounts are shown on an unconsolidated basis consistent with regulatory reporting requirements. (2) Amounts are shown on a fully consolidated basis and exclude deposits of affiliates that are eliminated in consolidation.
(2) Amounts are shown on an unconsolidated basis consistent with regulatory reporting requirements.
Other earning assets Securities purchased under agreements to resell (“reverse repurchase agreements”) We enter into agreements with certain customers to purchase investment securities under agreements to resell at specific dates in the future. This investment deploys some of our liquidity position into an instrument that improves the return on those funds. Securities purchased under agreements to resell totaled $58.5 million and $47.8 million at March 31, 2024 and December 31, 2023, respectively. Federal Funds Sold Federal funds may fluctuate from period to period depending upon our liquidity position at the time and our strategy for deploying liquidity. Federal funds sold totaled $42.3 million and $35.5 million at March 31, 2024 and December 31, 2023, respectively. AFS debt securities portfolio Our investment portfolio objectives include maximizing total return after other primary objectives are achieved such as, but not limited to, providing liquidity, capital preservation, and pledging collateral for certain deposit types, various lines of credit and other borrowings. The investment objectives guide the portfolio allocation among security types, maturities, and other attributes. The fair value of our AFS debt securities portfolio was $1.46 billion and $1.47 billion as of March 31, 2024 and December 31, 2023, respectively. Included in the fair value of AFS debt securities were net unrealized losses of $183.6 million and $186.8 million as of March 31, 2024 and December 31, 2023, respectively. Current net unrealized losses are due to interest rate increases. During the three months ended March 31, 2024, we sold $207.9 million of AFS debt securities with a weighted average yield of 2.14% and reinvested the proceeds of the sales into available-for-sale securities with a weighted average yield of 5.94%. The sales resulted in a pre-tax loss on securities of $16.2 million. We primarily sold agency collateralized mortgage obligations, agency mortgage-backed securities, U.S. Treasury and municipal securities. We reinvested the proceeds from the sales primarily into U.S. government agency AFS debt securities in order increase the effective yield of our portfolio. Including the reinvestment of these proceeds, we purchased $281.6 million of AFS debt securities. Maturities, prepayments and calls of securities totaled $66.6 million for the three months ended March 31, 2024. During the three months ended March 31, 2023, there were no sales of AFS debt securities. During the same period, we purchased $0.9 million of AFS debt securities. Maturities, prepayments and calls of securities totaled $26.8 million for the three months ended March 31, 2023.
The following table sets forth the fair value, scheduled maturities and weighted average yields for our AFS debt securities portfolio as of the dates indicated below: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | March 31, | | December 31, | | | | | | 2024 | | | 2023 | | (dollars in thousands) | | Fair value | | % of total investment securities | | Weighted average yield (1) | | Fair value | | % of total investment securities | | Weighted average yield (1) | U.S. Treasury securities: | | | | | | | | | | | | | Maturing within one year | | $ | 30,857 | | | 2.1 | % | | 2.76 | % | | $ | 61,466 | | | 4.2 | % | | 2.50 | % | Maturing in one to five years | | — | | | — | % | | — | % | | 47,030 | | | 3.2 | % | | 1.59 | % | Maturing in five to ten years | | — | | | — | % | | — | % | | — | | | — | % | | — | % | Maturing after ten years | | — | | | — | % | | — | % | | — | | | — | % | | — | % | Total U.S. Treasury securities | | 30,857 | | | 2.1 | % | | 2.76 | % | | 108,496 | | | 7.4 | % | | 2.10 | % | U.S. government agency securities: | | | | | | | | | | | | | Maturing within one year | | — | | | — | % | | — | % | | — | | | — | % | | — | % | Maturing in one to five years | | 6,312 | | | 0.4 | % | | 1.82 | % | | 13,094 | | | 0.9 | % | | 1.96 | % | Maturing in five to ten years | | 23,724 | | | 1.6 | % | | 6.11 | % | | 6,000 | | | 0.4 | % | | 6.40 | % | Maturing after ten years | | 385,891 | | | 26.3 | % | | 6.02 | % | | 184,862 | | | 12.6 | % | | 6.23 | % | Total U.S. government agency securities | | 415,927 | | | 28.3 | % | | 5.96 | % | | 203,956 | | | 13.9 | % | | 5.96 | % | Municipal securities: | | | | | | | | | | | | | Maturing within one year | | 3,053 | | | 0.2 | % | | 2.48 | % | | 2,813 | | | 0.2 | % | | 2.23 | % | Maturing in one to five years | | 3,768 | | | 0.3 | % | | 3.39 | % | | 11,677 | | | 0.8 | % | | 5.85 | % | Maturing in five to ten years | | 12,811 | | | 0.9 | % | | 3.18 | % | | 40,304 | | | 2.7 | % | | 3.60 | % | Maturing after ten years | | 152,040 | | | 10.4 | % | | 2.79 | % | | 187,469 | | | 12.7 | % | | 2.94 | % | Total municipal securities | | 171,672 | | | 11.8 | % | | 2.82 | % | | 242,263 | | | 16.4 | % | | 3.00 | % | Mortgage-backed securities - residential and commercial: | | | | | | | | | | | | | Maturing within one year | | 61 | | | — | % | | 1.27 | % | | 126 | | | — | % | | 1.57 | % | Maturing in one to five years | | 2,518 | | | 0.2 | % | | 3.18 | % | | 3,239 | | | 0.2 | % | | 2.91 | % | Maturing in five to ten years | | 17,874 | | | 1.2 | % | | 2.89 | % | | 33,121 | | | 2.3 | % | | 2.97 | % | Maturing after ten years | | 822,376 | | | 56.2 | % | | 2.13 | % | | 877,446 | | | 59.6 | % | | 1.86 | % | Total mortgage-backed securities - residential and commercial | | 842,829 | | | 57.6 | % | | 2.14 | % | | 913,932 | | | 62.1 | % | | 1.90 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Corporate securities: | | | | | | | | | | | | | Maturing within one year | | — | | | — | % | | — | % | | — | | | — | % | | — | % | Maturing in one to five years | | — | | | — | % | | — | % | | — | | | — | % | | — | % | Maturing in five to ten years | | 3,397 | | | 0.2 | % | | 4.33 | % | | 3,326 | | | 0.2 | % | | 4.33 | % | Maturing after ten years | | — | | | — | % | | — | % | | — | | | — | % | | — | % | Total corporate securities | | 3,397 | | | 0.2 | % | | 4.33 | % | | 3,326 | | | 0.2 | % | | 4.33 | % | Total AFS debt securities | | $ | 1,464,682 | | | 100.0 | % | | 3.32 | % | | $ | 1,471,973 | | | 100.0 | % | | 2.66 | % |
(1)Yields on a tax-equivalent basis.
Borrowed funds Deposits and investment securities available-for-sale are the primary source of funds for our lending activities and general business purposes. However, we may also obtain advances from the FHLB, borrow from the Federal Reserve’s Discount Window, one-off borrowing programs from the Federal Reserve, purchase federal funds and engage in overnight borrowing from the Federal Reserve,with correspondent banks, or enter into client repurchase agreements. We also use these sources of funds as part of our asset liability management process to control our long-term interest rate risk exposure, even if it may increase our short-term cost of funds. Our level of short-term borrowing can fluctuate on a daily basis depending on funding needs and the sourcesources of funds to satisfy those needs, in addition to the overall interest rate environment and cost of public funds. 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 products
as a short-term return for their excess funds. Securities sold under agreements to repurchase totaled $26.7$23.2 million and $21.9$19.3 million at March 31, 20232024 and December 31, 2022,2023, respectively. We also maintain lines with certain correspondent banks that provide borrowing capacity in the form of federal funds purchased. Federal funds purchased are short-term borrowings that typically mature within one to ninety days. Borrowings against these lines (i.e., federal funds purchased) totaled $11.5$55.0 million and $65.0$89.4 million as of March 31, 20232024 and December 31, 2022,2023, respectively. FHLB short-term borrowingsadvances As a member of the FHLB Cincinnati,system, we may utilize advances from the FHLB in order to provide additional liquidity and funding. Under these short-term agreements, we maintain a line of credit that as of March 31, 20232024 and December 31, 20222023 and had total borrowing capacity of $1.20$1.47 billion and $1.27$1.76 billion, respectively. As of March 31, 20232024 and December 31, 2022,2023, we had qualifying loans pledged as collateral securing these lines amounting to $2.56$2.51 billion and $2.67$3.01 billion, respectively. Overnight cashThere were no FHLB advances against this line totaled $125.0 million and $175.0 millionoutstanding as of December 31, 2023 or March 31, 2024. Bank Term Funding Program In March 2023, the Federal Reserve established the Bank Term Funding Program to make available funding to eligible depository institutions in order to help assure they have the ability to meet the needs of their depositors following the March 2023 high-profile bank failures. The program allows for advances for up to one year secured by eligible high-quality securities at par value extended at the one-year overnight index swap rate, plus 10 basis points, as of the day the advance is made. The interest rate is fixed for the term of the advance and there are no prepayment penalties. The BTFP ceased extending new borrowings on March 11, 2024. At both March 31, 2024 and December 31, 2022, respectively. The2023, we had outstanding borrowings of $130.0 million under the BTFP at a borrowing rate on our FHLB short-term borrowings was 4.89% and 3.89% as of March 31, 2023 and4.85% with a maturity date of December 31, 2022, respectively.26, 2024. Subordinated debt During the year-endedyear ended December 31, 2003, we formed two separate trusts which issued $9.0 million (“Trust I”) and $21.0 million (“Trust II”) of floating rate trust preferred securities as part of a pooled offering of such securities. We issued junior subordinated debentures of $9.3 million, which included proceeds of common securities which we purchased for $0.3 million, and junior subordinated debentures of $21.7 million which included proceeds of common securities of $0.7 million. The Truststrusts were created for the sole purpose of issuing 30-year capital trust preferred securities to fund the purchase of junior subordinated debentures issued by us. Both issuances were to the trusts in exchange for the proceeds of the securities offerings, which represent the sole asset of the trusts. Additionally, during the year ended December 31, 2020, we placed $100.0 million of ten year fixed-to-floating rate subordinated notes, maturing September 1, 2030. During the three months ended March 31, 2022, we began mitigating our interest rate exposure associated with these notes through the use of fair value hedging instruments. See Note 9, "Derivatives" in the notes to the consolidated financial statements for additional details related to these instruments.
Further information related to the our subordinated debt as of March 31, 20232024 is detailed below: | (dollars in thousands, except %) | Year established | Maturity | Call date | Total debt outstanding | Interest rate | Coupon structure | (dollars in thousands) | | (dollars in thousands) | Year established | Maturity | Call date | Total debt outstanding | Interest rate | Coupon structure | Subordinated debt issued by trust preferred securities: | Subordinated debt issued by trust preferred securities: | | FBK Trust I (1) | | FBK Trust I (1) | | FBK Trust I (1) | FBK Trust I (1) | 2003 | 06/09/2033 | 6/09/2008(2) | $ | 9,280 | | 8.41% | 3-month LIBOR plus 3.25% | 2003 | 06/09/2033 | 6/09/2008 | $ | 9,280 | | 8.81% | 8.81% | 3-month SOFR plus 3.51% | FBK Trust II (1) | FBK Trust II (1) | 2003 | 06/26/2033 | 6/26/2008(3) | 21,650 | | 8.28% | 3-month LIBOR plus 3.15% | FBK Trust II (1) | 2003 | 06/26/2033 | 6/26/2008 | 21,650 | | 8.72% | 8.72% | 3-month SOFR plus 3.41% | Additional subordinated debt: | Additional subordinated debt: | | FBK subordinated debt I(4) | 2020 | 09/01/2030 | 9/1/2025 (5) | 100,000 | | 4.50% | Semi-annual fixed (6) | FBK subordinated debt I(2) | | FBK subordinated debt I(2) | | FBK subordinated debt I(2) | | 2020 | 09/01/2030 | 9/1/2025 | 100,000 | | 4.50% | Semi-annual fixed(3) | Unamortized debt issuance costs | Unamortized debt issuance costs | (902) | | | Fair value hedge (See Note 9, "Derivatives" ) | (2,952) | | | | Total subordinated debt, net | 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. | | Total subordinated debt, net | | | Total subordinated debt, net | | (1)The Company classifies $30.0 million of the Trusts' subordinated debt as Tier 1 capital. (2)The Company classified the issuance, net of unamortized issuance costs and the associated fair value hedge as Tier 2 capital, which will be phased out 20% per year in the final five years before maturity. (3)Beginning on September 1, 2025 the coupon structure migrates to the 3-month SOFR plus a spread of 439 basis points through the end of the term of the debenture. | | (1)The Company classifies $30.0 million of the Trusts' subordinated debt as Tier 1 capital. (2)The Company classified the issuance, net of unamortized issuance costs and the associated fair value hedge as Tier 2 capital, which will be phased out 20% per year in the final five years before maturity. (3)Beginning on September 1, 2025 the coupon structure migrates to the 3-month SOFR plus a spread of 439 basis points through the end of the term of the debenture. | | (1)The Company classifies $30.0 million of the Trusts' subordinated debt as Tier 1 capital. (2)The Company classified the issuance, net of unamortized issuance costs and the associated fair value hedge as Tier 2 capital, which will be phased out 20% per year in the final five years before maturity. (3)Beginning on September 1, 2025 the coupon structure migrates to the 3-month SOFR plus a spread of 439 basis points through the end of the term of the debenture. | |
Other borrowings Other borrowings on our consolidated balance sheets includes our finance lease liability totaling $1.3 million and $1.4 million as of both March 31, 20232024 and December 31, 2022, respectively.2023. In addition, other borrowings on our consolidated balance sheets includesinclude guaranteed rebooked GNMA loans previously sold that have become past due over 90 days and are eligible for repurchase totaling $20.5$20.9 million and $26.2$21.2 million as of March 31, 20232024 and December 31, 2022,2023, respectively. See Note 5, "Leases"“Leases” and Note 10, "Fair“Fair value of financial instruments"instruments” within the Notesnotes to our consolidated financial statements herein for additional information regarding our finance lease and guaranteed GNMA loans eligible for repurchase, respectively. Liquidity and capital resources Bank liquidity management
We are expected to maintain adequate liquidity at the Bank to meet the cash flow requirements of clients who may be either depositors wishing to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs. Our Liquidity Policy is intended to cause the Bank to maintain adequate liquidity and, therefore, enhance our ability to raise funds to support asset growth, meet deposit withdrawals and lending needs maintain reserve requirements and otherwise sustain our operations. We accomplish this through management of the maturities of our interest-earning assets and interest-bearing liabilities. We believe that our present position is adequate to meet our current and future liquidity needs. We continuously monitor our liquidity position to ensure that assets and liabilities are managed in a manner that will meet all of our short-term and long-term cash requirements. We manage our liquidity position to meet the daily cash flow needs of clients, while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives ofoptimize our shareholders.net interest margin. We also monitor our liquidity requirements in light of interest rate trends, changes in the economy and the scheduled maturity and interest rate sensitivity of the investment and loan portfolios and deposits. As part of our liquidity management strategy, we focus on minimizing our costs of liquidity and attempt to decrease these costs by growing our noninterest-bearing and other low-cost deposits, while replacing higher cost funding sources including borrowed funds.sources. While we do not control the types of deposit instruments our clients choose, we do influence those choices with the rates and the deposit specials we offer. As of both March 31, 2023 and December 31, 2022, we also had $50.0 million available through the IntraFi network, which allows usIncreasing interest rates generally attracts customers to offer banking customers accesshigher cost interest-bearing deposit products as they seek to FDIC insurance protection on deposits through our Bank which exceed FDIC insurance limits.maximize their yield. Our investment portfolio is another alternative for meeting liquidity needs. These assets generally have readily available markets that offer conversions to cash as needed. Available-for-saleAFS debt securities within our investment portfolio are
used to secure government, public, trust and other deposits and as collateral for short-term borrowings, letters of credit and derivative instruments. As of March 31, 20232024 and December 31, 2022,2023, we had pledged securities related to these items with carrying values of $1.18 billion$950.0 million and $1.19 billion,$929.5 million, respectively. Additional sources of liquidity include federal funds purchased, repurchase agreements, FHLB borrowings, and lines of credit. Interest is charged at the prevailing market rate on federal funds purchased, reverse repurchase agreements and FHLB advances. Overnight advances obtained from the FHLB are used primarily to meet day to day liquidity needs, particularly when the cost of such borrowing compares favorably to the rates that we would be required to pay to attract deposits. There were no FHLB advances outstanding as of March 31, 2024 or December 31, 2023. As of March 31, 2023 and December 31, 2022, we had outstanding overnight cash advances from the FHLB totaling $125.0 million and $175.0 million, respectively. As of March 31, 2023,2024, there was $1.20$1.47 billion available to borrow against with a remaining capacity of $473.2 million.$1.24 billion. As of December 31, 2022,2023, there was $1.27$1.76 billion available to borrow against with a remaining capacity of $830.0 million.$1.30 billion. We also maintained unsecured lines of credit with other commercial banks totaling $350.0$370.0 million as of both March 31, 20232024 and December 31, 2022.2023. These are unsecured, uncommitted lines of credit typically maturing at various times within the next twelve months. Borrowings against these lines (i.e., federal funds purchased) totaled $11.5$55.0 million and $65.0$89.4 million as of March 31, 20232024 and December 31, 2022,2023, respectively. As of both March 31, 2024 and December 31, 2023, 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 current on-balance sheet liquidity and available sources of liquidity are summarized in the table below: | | | March 31, | | | | March 31, | | December 31, | | | As of March 31, | | As of December 31, | (dollars in thousands) | | (dollars in thousands) | | (dollars in thousands) | (dollars in thousands) | | 2023 | | | 2022 | | Current on-balance sheet liquidity: | Current on-balance sheet liquidity: | | Cash and cash equivalents | 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 | | Cash and cash equivalents | | Cash and cash equivalents | | Unpledged AFS debt securities | | | Total on-balance sheet liquidity | | Total on-balance sheet liquidity | | Total on-balance sheet liquidity | Total on-balance sheet liquidity | | $ | 1,609,179 | | | $ | 1,310,207 | | | Available sources of liquidity: | Available sources of liquidity: | | Unsecured borrowing capacity(a) | | $ | 3,755,059 | | | $ | 3,595,812 | | Available sources of liquidity: | | Available sources of liquidity: | | Unsecured borrowing capacity(1) | | Unsecured borrowing capacity(1) | | Unsecured borrowing capacity(1) | | FHLB remaining borrowing capacity | FHLB remaining borrowing capacity | | 473,160 | | | 829,959 | | Federal Reserve discount window | Federal Reserve discount window | | 2,548,886 | | | 2,470,000 | | Total available sources of liquidity | Total available sources of liquidity | | $ | 6,777,105 | | | $ | 6,895,771 | | | On-balance sheet liquidity as a percentage of total assets | 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 | % | On-balance sheet liquidity as a percentage of total assets | | On-balance sheet liquidity as a percentage of total assets | | | 11.0 | % | | 10.7 | % | On-balance sheet liquidity and available sources of liquidity as a percentage of estimated uninsured and uncollateralized deposits(2) | | On-balance sheet liquidity and available sources of liquidity as a percentage of estimated uninsured and uncollateralized deposits(2) | | 268.1 | % | | 269.0 | % | |
((1)a) BorrowingIncludes capacity cappedavailable per internal policy; includes untappedpolicy in the form of brokered CD’sdeposits and unsecured lines of credit.credit.
Holding company(2)Amounts are shown on a fully consolidated basis and exclude deposits of affiliates that are eliminated in consolidation.
The Company also maintains the ability to access capital markets to meet its liquidity managementneeds. The Company may utilize various methods to raise capital, including through the sale of common stock, preferred stock, depository shares, AFS debt securities, rights, warrants and units. Specific terms and prices would be determined at the time of any such offering. In the past, the Company has utilized capital markets to generate liquidity in the form of common stock and subordinated debt primarily for the purpose of funding acquisitions. The Company is a corporation separate and apart from the Bank and, therefore, it must provide for its own liquidity. The Company’s main source of funding is dividends declared and paid to it by the Bank.Bank to the Company. Statutory and regulatory limitations exist that affect the ability of the Bank to pay dividends to the Company. Management believes that these limitations will not impact the Company’s ability to meet its ongoing short-term cash obligations. For additional information regarding dividend restrictions, see the “Item 1. Business - Supervision and regulation,” "Item“Item 1A. Risk Factors - Risks related to our business"business” and " Item“Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Dividend Policy,"Dividends,” each of which is set forth in our Annual Report. Due to state banking laws, the Bank may not declare dividends in any calendar year in an amount exceeding the total of its net income for that year combined with its retained net income of the preceding two years, without the prior approval of the Tennessee Department of Financial Institutions.TDFI. Based upon this regulation, as of March 31, 20232024 and December 31, 2022, $158.22023, $170.2 million and $161.3$218.4 million of the Bank’s retained earnings were available for the payment of dividends without such prior approval. In addition, dividends paid by the Bank to the Company would be prohibited if the effect thereof would cause the Bank’s capital to be reduced below applicable minimum capital requirements. During the three months ended March 31, 2023,2024, there were $23.5$8.5 million in cash dividends approved by the boardBoard for payment from the Bank to the holding company. During the three months ended March 31, 2022,2023, there were $17.3$23.5 million in cash dividends approved by the boardBoard for payment from the Bank to the holding company. None of these required approval from the
TDFI. Subsequent to March 31, 2023,2024, the boardBoard approved a dividend from the Bank to the holding company to be paid in the second quarter for $8.5$20.0 million that also did not require approval from the TDFI. During the three months ended March 31, 2024, the Company declared shareholder dividends of $0.17 per share, or $8.1 million. During the three months ended March 31, 2023, the Company declared and paid shareholder dividends of $0.15 per share, or $7.0 million, respectively. During the three months ended March 31, 2022, the Company declared and paid dividends of $0.13 per share, or $6.2 million, respectively.million. Subsequent to March 31, 2023,2024, the Company declared a quarterly dividend in the amount of $0.15$0.17 per share, payable on May 23, 2023,28, 2024, to stockholders of record as of May 9, 2023.14, 2024.
Shareholders’ equity and capital management Our total shareholders’ equity was $1.37$1.48 billion atas of March 31, 20232024 and $1.33$1.45 billion atas of December 31, 2022.2023. Book value per common share was $29.29 at$31.55 as of March 31, 20232024 and $28.36 at$31.05 as of December 31, 2022, respectively.2023. The increase in shareholders’ equity was primarily attributable to an increase in retained net income, net of dividends declared by dividends. In addition, theand paid and unrealized loss reclassification adjustment for loss on sale of securities included in net income of $12.0 million (net of tax benefit) from December 31, 2023. The increase in shareholders’ equity was driven by a $27.1 million unrealized gain within our available-for-sale debt securities portfolio during the three months endedas of March 31, 2023.2024 was partially off-set by dividends declared and paid of $8.1 million. Our capital management consists of providing adequate equity to support our current and future operations. We are subject to various regulatory capital requirements administered by state and federal banking agencies, including the TDFI, Federal Reserve and the FDIC. Failure to meet minimum capital requirements may prompt certain actions by regulators that, if undertaken, could have a direct material adverse effect on our financial condition and results of operations. The Federal Reserve and the FDIC have issued guidelines governing the levels of capital that banks must maintain. As of March 31, 20232024 and December 31, 2022,2023, we met all capital adequacy requirements for which we arewere subject. See additional discussion regarding our capital adequacy and ratios at within Note 12, "Minimum“Minimum capital requirements"requirements” in the notes to our consolidated financial statements contained herein. | | | | | | | | | | | | | | | | | | | | | March 31, 2024 | | FB Financial Corporation | | FirstBank | |
To be Well-Capitalized(1) | Total risk-based capital | | 15.0 | % | | 14.7 | % | | 10.0 | % | Tier 1 risk-based capital | | 12.8 | % | | 12.5 | % | | 8.0 | % | Common Equity Tier 1 ratio | | 12.6 | % | | 12.5 | % | | 6.5 | % | Tier 1 leverage | | 11.3 | % | | 11.1 | % | | 5.0 | % |
(1) Applicable to Bank level capital. Capital ratios are well above regulatory requirements for well-capitalized institutions. Management uses risk-based capital ratios in its analysis of the measures to assess the quality of capital and believes that investors may find it useful in their analysis of the Company. ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKQuantitative and Qualitative Disclosures About Market Risk Interest rate sensitivity Our market risk arises primarily from interest rate risk inherent in the normal course of lending and deposit-taking activities. Management believes that our ability to successfully respond to changes in interest rates will have a significant impact on our financial results. To that end, management actively monitors and manages our interest rate risk exposure. The Asset Liability Management Committee,ALCO, which is authorized by our boardBoard of directors,Directors, monitors our interest rate sensitivity and makes decisions relating to that process. The ALCO’s goal is to structure our asset/liability composition to maximize net interest income while managing interest rate risk so as to minimize the adverse impact of changes in interest rates on net interest income and capital in either a rising or declining interest rate environment. Profitability is affected by fluctuations in interest rates. A sudden and substantial change in interest rates may adversely impact our earnings because the interest rates borne by assets and liabilities do not change at the same speed, to the same extent or on the same basis. We monitor the impact of changes in interest rates on our net interest income and economic value of equity using rate shock analysis. Net interest income simulations measure the short-term earnings exposure from changes in market rates of interest in a rigorous and explicit fashion. Our current financial position is combined with assumptions regarding future business to calculate net interest income under varying hypothetical rate scenarios. Economic Value of EquityEVE measures our long-term earnings exposure from changes in market rates of interest. EVE is defined as the present value of assets minus the present value of liabilities at a point in time. A decrease in EVE due to a specified rate change indicates a decline in the long-term earnings capacity of the balance sheet assuming that the rate change remains in affecteffect over the life of the current balance sheet. For purposes of calculating EVE, a zero percent floor is assumed on discount factors.
The following analysis depicts the estimated impact on net interest income and EVE of immediate changes in interest rates at the specified levels for the periods presented: | | Percentage change in: | | | Net interest income (1) | | | | Percentage change in: | | | | Percentage change in: | | | | Percentage change in: | | | | Net interest income (1) | | | | Net interest income (1) | | | | Net interest income (1) | | | Change in interest rates | Change in interest rates | | March 31, | | December 31, | | | Change in interest rates | | | Change in interest rates | | | (in basis points) | | | (in basis points) | | | (in basis points) | (in basis points) | | 2023 | | | 2022 | | | +400 | +400 | | 17.9 | % | | 20.6 | % | | +400 | | +400 | | +300 | | +300 | | +300 | +300 | | 13.5 | % | | 15.1 | % | | +200 | +200 | | 10.3 | % | | 10.8 | % | | +200 | | +200 | | +100 | | +100 | | +100 | +100 | | 5.82 | % | | 5.98 | % | | -100 | -100 | | (6.20) | % | | (6.32) | % | | -100 | | -100 | | -200 | -200 | | (12.5) | % | | (13.2) | % | | -200 | | -200 | |
| | | | Percentage change in: | | | Percentage change in: | | | Economic value of equity (2) | | | | Economic value of equity (2) | Change in interest rates | | Change in interest rates | | March 31, | | December 31, | | | Economic value of equity (2) | Change in interest rates | | March 31, | | December 31, | (in basis points) | | (in basis points) | | (in basis points) | (in basis points) | | 2023 | | | 2022 | | +400 | +400 | | (12.8) | % | | (9.90) | % | +400 | | (9.66) | % | | (16.6) | % | +300 | +300 | | (8.42) | % | | (7.00) | % | +300 | | (8.50) | % | | (13.6) | % | +200 | +200 | | (4.07) | % | | (4.00) | % | +200 | | (5.18) | % | | (8.05) | % | +100 | +100 | | (1.09) | % | | (1.66) | % | +100 | | (2.23) | % | | (3.29) | % | -100 | -100 | | (0.79) | % | | 0.99 | % | -100 | | 1.20 | % | | 1.03 | % | -200 | -200 | | (3.46) | % | | 1.07 | % | -200 | | 1.14 | % | | (0.63) | % |
(1)The percentage change represents the projected net interest income for 12 months on a flat balance sheet in a stable interest rate environment versus the projected net interest income in the various rate scenarios. (2)The percentage change in this column represents our EVE in a stable interest rate environment versus EVE in the various rate scenarios. The results for the net interest income simulations as of March 31, 20232024 and December 31, 20222023 resulted in an asset sensitive position. The primary influence of our asset sensitivity is the floating rate structure in many of our loans held for investment as well as the composition of our liabilities which is primarily customer deposits. Our variable ratefloating-rate loan portfolio is indexed to market rates and timing of repricing of loans and deposits varies in proportion to market rate fluctuations. We actively monitor and perform stress tests on our deposit beta'sbetas as part of our overall management of interest rate risk. This requires the use of various assumptions based on historical relationships of these variables in reaching any conclusion. Since these correlations are based on competitive pricing in the market, we anticipate that our future results will likely be different from the scenario results presented above and such differences could be material. The preceding measures assume no change in the size or asset/liability compositions of the balance sheet. Thus, the measures do not reflect the actions the ALCO may undertake in response to such changes in interest rates. The scenarios assume instantaneous movements in interest rates in increments of 100, 200, 300 and 400 basis points. As interest rates are adjusted over a period of time, it is our strategy to proactively change the volume and mix of our balance sheet in order to mitigate our interest rate risk. The computation of the prospective effects of hypothetical interest rate changes requires numerous assumptions regarding characteristics of new business and the behavior of existing positions. These business assumptions are based upon our experience, business plans and published industry experience. Key assumptions employed in the model include asset prepayment speeds, competitive factors, the relative price sensitivity of certain assets and liabilities and the expected life of non-maturity deposits. Because these assumptions are inherently uncertain, actual results may differ from simulated results. We may utilize derivative financial instruments as part of an ongoing effort to mitigate interest rate risk exposure to interest rate fluctuations and facilitate the needs of our customers. For more information about our derivative financial instruments, see Note 9, “Derivatives” in the notes to our consolidated financial statements.
ITEM 4 — Controls and ProceduresCONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures An evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this Report was carried out under the supervision and with the participation of the Company’s Chief Executive Officer, Chief Financial Officer and other members of the Company’s senior management. The Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Report, the Company’s disclosure controls and procedures were effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is: (i) accumulated and communicated to the Company’s management (including the Chief Executive Officer and Chief Financial Officer) to allow timely decisions regarding required disclosure; and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2023,2024, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company does not expect that its disclosure controls and procedures and internal control over financial reporting will prevent all errors and fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.
PART II ITEM 1—LEGAL PROCEEDINGS Various legal proceedings to which we or our subsidiaries are party arise from time to time in the normal course of business. As of the date of this Report, there are no material pending legal proceedings to which we or any of our subsidiaries is a party or of which any of our or our subsidiaries’ properties are subject. ITEM 1A—RISK FACTORS The following risk factor supplements and should be read in conjunction withThere have been no material changes to the risk factors set forth in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 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.2023.
ITEM 2—UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS The following table provides information about repurchases of common stock by the Company during the quarter ended March 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | Period | | (a) Total number of shares purchased(1) | | (b) Average price paid per share | | (c) Total number of shares purchased as part of publicly announced plans or programs | | (d) Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs(2) | January 1 - January 31, 2023 | | 136,262 | | | $ | 36.29 | | | 136,262 | | | $ | 61,249,538 | | February 1 - February 28, 2023 | | — | | | — | | | — | | | 61,249,538 | | March 1 - March 31, 2023 | | — | | | — | | | — | | | 61,249,538 | | Total | | 136,262 | | | $ | — | | | 136,262 | | | $ | 61,249,538 | |
(1) On March 14, 2022,21, 2024, the Company announced thethat its board of directors’ authorization of a sharedirectors re-authorized the Company's stock 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 newprior stock repurchase plan expired on January 31, 2024. The current 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, 2024,2026, 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. The Company did not complete any share repurchases during the three months ended March 31, 2024. Subsequent to March 31, 2024 through May 3, 2024, the Company has bought back 209,737 shares of common stock under this agreement at an average share price of $35.54 and total repurchase amount of $7.5 million.
(2) Amounts are inclusive
ITEM 5 — OTHER INFORMATION Rule 10b5-1 Trading Plans During the quarter ended March 31, 2024, none of commissions and fees relatedthe Company’s directors or executive officers adopted, modified, or terminated any contract, instruction, or written plan for the purchase or sale of Company securities that was intended to satisfy the stock repurchases.affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”
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 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 101.INS | Inline XBRL Instance Document* | 101.SCH | Inline XBRL Taxonomy Extension Schema Document* | 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document* | 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document* | 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document* | 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document* | 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
| | | | | | * | Filed herewith. | ** | Furnished herewith. | | | † | Represents a management contract or a compensatory plan or arrangement. |
Signatures
Pursuant to the requirements of the section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. | | | | | | | | | | | FB Financial Corporation | | | | | | | | | | | | | | | | | | /s/ Michael M. Mettee | May 8, 20236, 2024 | | Michael M. Mettee Chief Financial Officer (Principal Financial Officer) | | | | | | /s/ Jonathan Pennington | May 8, 20236, 2024 | | Jonathan Pennington Chief Accounting Officer (Principal Accounting Officer) |
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